Wednesday, May 25, 2011

Société Générale's Albert Edwards: "Many Think I am Mad..." (sub 2% Treasuries, S&P at 400 etc.) May 25, 2011

From our last (May 4) post on Albert:
Albert does not wear the devil-may-care look well:

Our Hero

In fact he appears a bit deranged when he tries to smile.
Regardless, we are fans. and so is FT Alphaville* Here's the latest...
Here's today's installment, via ZeroHedge:
We knew it was only a matter of time before Albert Edwards would follow up to Russell Napier's call for S&P 400 with his own rejoinder. Sure enough, the SocGen strategist (who previously called for an S&P target in the same neighborhood) has just released the following:
"Let me re-emphasise our 400 S&P forecast with sub-2% US bond yields" in which he says: 
"Amid the equity market enjoying yet another Fed induced mega-rally, many commentators have been left grasping (gasping?) for explanations for the continued low level of global bond yields despite the ruination of the public sector balance sheet. Most have latched onto QE2 as the explanation and hence expect a sharp rise in yields from June onwards as the Fed’s buying programme ends. We expect new lows in bond yields."
The reason for that per Edwards, is an imminent bout of deflation, which is precisely what the Fed is hoping to create, in order to get the green light for the Jim Grant defined "QE 3 - QE N". Edwards, naturally recognizes this too: "Despite fully acknowledging the ruination of the government balance sheets as years of excess private sector debt are transferred to the public sector, we still expect to suffer another deflationary bust that will take government bond yields to new lows BEFORE government profligacy and the Fed's printing presses take us back to both double-digit inflation and bond yields. For now, we remain heavily overweight government bonds." In other words, just as we have been claiming for a long time courtesy of the Fed's so predictable Pavlovian reaction to always print more in response to deflation, enjoy 2% bond yields... just before they hit 20%.
More from Edwards:
Many think I am mad. But I am not the only commentator expecting a deflationary bust - the sort of bust that will take the S&P down to 400 from the current 1300. I recently watched John Authers of the FT Lex and Long View columns interview Russell Napier, formally of CSLA and a leading stockmarket historian. Russell's views are as interesting as ever and well worth 11 minutes of watching time. His views are similar to mine, although he articulates his thoughts far more clearly than I - Long View: Historian sees S&P fall to 400 - 16 May....MUCH MORE
Here's FT Alphaville's take on things:

Albert Edwards and an afternoon tea-party with the Vestal Virgins
Albert Edwards is bullish.

Bullish on US Treasuries that is, which the SocGen strategist expects to hit record levels before before government profligacy and the Fed’’s printing presses take the world back to both double-digit inflation and bond yields....MORE
We have many many posts on Mr. Edwards, use the search blog box, keywords Albert, despair etc.

From May 17ths Take That Albert Edwards: "The Bear Market Bottom Will Be S&P 400"--Russell Napier:

Albert's reaction to being bested (worsted?):