Monday, October 3, 2011

UPDATED: Nomura's Bob Janjuah: "We are in a secular bear market"

Update follow the jump.
Original post:
Ummm...yes, yes we are.*
From FT Alphaville:
For someone who hasn’t got much to add about the current state of the market, Bob Janjuah still manages to crank out 1,500 words in his latest piece for Nomura.

Bob firmly believes we are in a third stage of a secular bear market, which is about to get nasty.
Basic problems
The key basic problems remain weak trend growth in the DM world, which we think will continue for another three to five years, the policy errors (in our view) of the current set of policymakers, and the existing set of inadequate ‘old world’ policy institutions.
Still bearish
In or within a year from now I expect global equities to be 25% to 30% lower. My S&P500 target for the low in 2012 remains 800/900, and I think an ‘undershoot’ into the 700s is entirely possible. For the valuation-focused, assume S&P 500 EPS in 2012 of $90/$100, and P/Es in the 8 to 9 area – I see this kind of P/E as the new norm in the kind of world we are in. In this bearish outcome I would expect 10-year bund yields at 1% to 1.25%, 10 year UST yields at 1.25% to 1.5%, and 10-year gilts below 2%. The USD should do well, credit and commodities should not.
Here I have to insert an important caveat regarding Germany and bunds. My core assumption remains that in the euro zone policymakers do not attempt to fix an excess leverage and low growth problem with more leverage. This type of plan obviously appeals to Tim Geithner, but the core euro zone should be extremely concerned by the suggestion that leveraging the EFSF is a supposed “solution‟
Echoes of Albert Edwards in there. He too thinks the S&P should trade on a single digit PE and expects the yield on US treasuries to fall further.

In the short-term, Bob expects the S&P 500 to bottom in the low 1,000′s later this month, by which time he expects to see 10-year bund yields below 1.5 per cent and US Treasuries under1.75 per cent....MORE
Update: ZeroHedge has more:
Bob Janjuah: "In One Year I Expect Global Equities To Be 25%/30% Lower; The S&P Will Reach Low 1000s In October"
*On secular bear markets:

October 2008 
Julian Robertson: US To Face Poor Economy for 10-15 Years (And Warren Buffett Stops By)
November 2008
Of Bulls, Bears and Rallies
February 2009 
Where in the Bear are We?
March 11, 2009 (2 days after the bottom) 
Death of the American Dream? (nah)
April 2009 
Best strategy for long bear market 2010-2020
Mr. Farrell may be more bearish than necessary. We date the beginning of the secular bear* market to the first quarter of 2000 and use the DJIA's 11,722 close on Jan. 14 of that year. The Nasdaq hit it's all-time high on March 10.

We consider all of the time the market spent above that figure, starting with the Oct. 30, 2006 close at 11,727 through the all-time closing high 14,164.53 on Oct. 9,2007 (coincidentally, five years to the day* from the low of the bust) and back down, to be an anomaly caused by Greenspan's loose-as-a-goose Fed policy. You could probably make the same argument for a portion of the 2004-2006 gains. One more factoid, the 2007 high did not exceed the 2000 high, on an inflation adjusted basis.

The last secular bear is dated 1966 to 1982, eighteen years, roughly equal in length to the 1902-1921 secular bear. For reasons I'll get into in a few months, we believe this cycle will be a bit shorter, call it approximately 15 years, which gets us to 2015 or so.

The big caveat is that the politicians don't screw up the economy. The recently passed stimulus bill is estimated by the CBO to decrease future economic growth by 0.2% per year beginning in 2014. We couldn't take any more of this kind of stimulus without seriously harming future GDP growth....

April 2009
Why Stocks Won't Come Out of the SECULAR Bear Market Any Time Soon
May 2009 
Gail Dudack on What's Ahead for the Stock Market
June 2009 
Markets: Is This Bull Cyclical or Secular?
July 2009 
Stock markets – secondary or primary bull?

August 2009 
Four Stages of a Secular Bear Market
March 2010 
Markets: Of Bulls and Bears, Secular and Observant
October 2010 
Yes Virginia, it is a Secular Bear Market: "Peak Earnings Versus Stock Peaks"

July 2011 
Crestmont Research on Current P/E Multiples and 2011-12 Market Decline Risk
August 2011 
This is What a Bear Market Looks Like Folks (now with Voodoo Beach Bunnies)

And on Bob the Bear:

June 2008
Royal Bank of Scotland: Global Stock and Credit Crash Alert
Sept. 2009 
"Eat your heart out Albert Edwards": Royal Bank of Scotland Calls for 550 S&P (and: "South Sea Bubble Redux")
Feb. 2011 
Nomura's Bob Janjuah: QE2 Has Run It's Course, "Time to Fade Jackson Hole"
 I think he's early on the call.
The Fed's open market purchases of treasuries are scheduled to run through June and equity market participants are fully aware that they are playing a game of Chicken with each other. The problem the punters face is the miserable returns offered elsewhere, a half-point picked up in a Netflix scalp can equal the interest earned on T-bills in 100 days. So they stay at the market.

It is going to take one of those collective Wile E Coyote moments...
July 2011
***Alert*** Bob "the Bear" Janjuah is About to Become Bullish ***Alert*** (before returning to his ursine lair)
July 2011 
Coming into the Far Turn Russell Napier and Albert Edwards Lead the Gloomster Stakes But Felix Zulauf is Making a Move With an S&P at 500 Prediction
Napier is at 400
Albert says 450
Bob Janjuah trails at 550.
See "Take That Albert Edwards: "The Bear Market Bottom Will Be S&P 400"--Russell Napier