Thursday, October 11, 2018

Société Générale's Albert Edwards: "And I looked, and behold a pale horse: and his name that sat on him was Death, and Hell followed with him"

In other news...
Albert wasn't actually quoting Revelation 6:8, just analogizing.

From ZeroHedge: 
Albert Edwards: "Equity Investors Are Facing The Four Horsemen Of The Apocalypse"
Even SocGen's Albert Edwards was surprised at how quickly his latest predication was validated.
Recall that 3 weeks ago with the 10Y yield at 3.10%, with Edwards looking at the surge higher in 10Y Yields the SocGen strategist pointed out that the break in the 10y above 2.8% was not the key level that could mark the end of the secular bull market, but rather it was the 3.05% zone as shown in the chart below
Commenting on this breakout, he said that rates might surge further and addressed whether this would mean the end his "Ice Age" thesis. As he noted, if investors “get the wrong side of a new multi-year bear market in government bonds, all investment  portfolios will be shredded to ribbons as bonds are the cornerstone of most equity valuation models”.

Fast forward to today when in his latest note he writes "let me be totally honest: I was most surprised that the US 10y yield managed to smash through its multi-decade downtrend last week, mainly due to the fact that the CFTC data showed that speculators had already built unprecedented large short positions. It seemed that every man, woman and child was already bearish and so who was left to sell? Well clearly someone was! One thing that helped tip bond prices over the edge and take yields up to 3¼% was the fundamental support from stronger than expected economic data (see chart below). "
Another factor for the latest breakout in yields which pushed the 10Y interest rate to fresh 7 years highs was the previously discussed economic exuberance by Fed Chair Powell who managed to convince markets that they were still too sanguine on their expectations on interest rates, "and the futures strip ratcheted up another notch towards the Fed dots.".

We haven't linked much to Mr. Edwards this year.
The Financial Times' Paul Murphy had an article in the paper in June but we got to it too late and it languished in the link-vault. Here's "Albert Edwards says his ‘Ice Age Thesis’ is coming ".

Our last piece was in April where I got to riff of of Game of Thrones again and recall some previous headlines:

Société Générale's Albert Edwards Says "My Reputation For Calling Stocks Is In Tatters"
Well duh. He's been stubbornly fighting the central banks for a decade, a trait he shared with fellow bear David Rosenberg until Rosie flipped a few years ago and caught the last 35% or so of the up move.
But it isn't for the equity calls that Albert gets paid, and they're not why pros still listen to him:
The House Fed has thwarted his House Stark at every turn.
Now he's getting ready to roll but it may be too late for him.
"I fought. I lost. Now I rest. But you, Lord Snow… you'll be fighting their battles forever."
Albert addressing another standing room only investment conference crowd

Last seen in "Société Générale's Albert Edwards: Winter Is Coming".

Albert's twenty-year bullishness on bonds and what declining yields tell us about the underlying economy is why SocGen keeps him around....

...Over the years we've had some fun at Albert's expense. As noted in a 2017 post:

Every time I am asked why we post on Mr. Edwards "when he's been wrong so often" I debate whether to explain or just give a glib answer.
The flippant rationale would be we get to go with headlines such as:

Société Générale's Albert Edwards Descends Into A Nightmare World of Dream Demons and Market Depravity
Société Générale's Albert Edwards: "Many Think I am Mad..."  
Société Générale's Albert Edwards Sees Blue Skies, Sunshine, the Lame Shall Walk Again
Of course it's possible I have misinterpreted the meaning of
"the US economy is on crutches, and they are about to be kicked away"

Société Générale's Albert Edwards Has Some Troubling News He Reluctantly Shares
Société Générale's Albert Edwards Not His Usual Jolly Self (II)
Société Générale's Albert Edwards: "I Have Been Wrong – I’ve Been Too Bullish"
It May Be Time To Put Société Générale's Albert Edwards On Suicide Watch
Société Générale's Albert Edwards: Cry Havoc and Let Slip the...Ah Screw it

And many, many more.
The straight-up answer is: I can't think of anyone else who nailed the deflationary bias in credit markets as well as he has for as long as he has, pretty much the last 15-20 years.
And as far as equities go, absent the extraordinary measures of the world's central banks the landscape would look very, very different.

The biggest criticism you can lay on the guy is he didn't realize what he was up against re: the powers that be.
Plus that whole Albert-in-the-bathtub period was just stupid.
You do have to be careful you don't personally get into a David Koresh/Jim Jones-Drink-the-Kool-Aid frame of mind when gazing upon the dark side, whether Albert or Ambrose Evans-Pritchard or Jim Chanos. I mean it's okay to play around with melancholy:

Music For Albert Edwards. On A Cold Day. In February
In F flat minor.* 
And it's raining.

Season's Greetings From Société Générale's Albert Edwards (Nov. 14, 2012)
 Expect the New Year to bring nothing but disappointment....

But be attuned to when to take Mr. Edwards with utmost seriousness. 
UPDATED *****Alert***** Société Générale's Albert Edwards Bearish *****Alert***** (Sept. 6, 2011)
We passed a three year anniversary yesterday.
On September 5, 2008 we posted "Meltdown"-Société Générale" which linked to Albert's research note of a couple days earlier:

***Alert****Economic and equity market meltdown imminent****Alert***

A good call.

On September 7, 2008 Fannie Mae and Freddie Mac were placed into conservatorship.
On September 14, 2008 Merrill Lynch agreed to be acquired by Bank of America to avoid a Reg. T shut-down when markets re-opened.
On September 15 Lehman filed their bankruptcy petition.
On September 16 AIG became a 79.9% subsidiary of the U.S. Treasury.

Within 10 more days the Nation's largest thrift, WaMu was seized and five days later Wachovia gobbled up.

Good times, good times.

So take what you can use and make dumb headlines with the rest