From FT Alphaville:
Roar of the permabear
Albert Edwards, the SocGen strategist who first began advocating a big holding of long government bonds seventeen years ago, would like to bring to your attention news overlooked during the Easter break by giddy investors.All in all I'd have to say he sounds better than he did in February's "Société Générale's Albert Edwards Descends Into A Nightmare World of Dream Demons and Market Depravity" .
China’s Q1 GDP was highly significant, not for the headline slowdown in GDP growth to 7.4%, but because economy-wide inflation slumped further towards outright deflation. The continuing deterioration in Chinese economic data significantly increases the odds of global deflation being unleashed via an unavoidable Chinese devaluation. No wonder the markets prefer to look elsewhere!More on that momentarily, but Albert would like to clarify his view on long bonds, that 17 year overweight.
I believe that on a 3-5 year view they will prove to be a toxic investment. I believe on that timescale QE will result in a rapid rise in inflation, with Japan probably leading the way. But it is not the QE to date that will cause an uncontrolled break-out of inflation, but what is to come in the years ahead (and incidentally, we fully acknowledge that QE has already produced rampant inflation, but in the financial markets rather than at the CPI level).As he acknowledges, there’s no sign of price inflation yet and the hyper-inflation crowd have been dead wrong for five years now. Indeed, we are not there yet. What Albert expects is that over the next 6 to 18 months the global economy will slide into deflation, unable to tolerate the merest of monetary tightening and accompanied by financial bubbles bursting....MORE
See also:
Jan. 15
More on The Mind of Société Générale's Albert Edwards
Jan. 14
"Live: The Albert Edwards Experience!"
