Thursday, August 28, 2014

UPDATED--Société Générale's Albert Edwards Is ALIVE!

Update below.
Original post:
We hadn't heard from Albert since April's "In Which Izabella Kaminska Takes the Knife to Société Générale's Albert Edwards":
Like a Canadian fishing guide gutting walleyes.
Or something.

Two quick points up front. There is only one reason to pay attention to Mr. Edwards. He has been right about interest rates. You could make an argument he has been right for the wrong reason; he firmly believed the world economy was going into a nuclear winter but even that probably would have happened if the Fed hadn't done the balance sheet expansion.

Second, kudos to Izabella for avoiding the pedantry of  "asset inflation is not inflation".
I know that, she knows that, our readers know that and I'm sure Mr. Edwards knows that....MORE
And now he's back.
I know you could have found him last week lumped in with the other prognosticators at Die Welt's
"Börsen-Prognosen : Das grandiose Scheitern der Crash-Propheten"
But now we get him without Faber or Roubini to detract from the essence of that which is Albert.

From CityWire's Wealth Manager: 

Albert Edwards: 'I can hear the hissing of the stock market bubble bursting'
SocGen’s Albert Edwards says the ‘share buyback party’ that has been driving the stock market is over and he can hear the ‘hissing’ of the stock market bubble starting to burst.

In his latest research note, the well known bear, pointed out that the level of share buy backs fell by 20% in the second quarter, compared to the first three months of the year, and warned of the new threat of a ‘gargantuan’ funding gap emerging.

‘Companies themselves have been the only substantive buyers of equity, but the most recent data suggests that this party is over and as profits also stall out, the equity market is now running on fumes,’ Edwards said.
He said that the companies have been issuing cheap debt to help fuel the share buyback binge, which has seen them reinvest this money in expensive equity.

‘The equity bubble has disguised the mountain of net debt piling up on US corporate balance sheets. This is hitting home now QE has ended. The end of the buyback bonanza may well prove to be decisive for this bubble,’ Edwards said.

'Is that a hissing I can hear?'
Update: "Much, Much More From Société Générale's Albert Edwards (28Aug2014)"

And back to the previous program:
We aren't even close in our outlook.
We're betting on a quick dip back to ~1900 S&P before new highs. See:

Aug. 15
The Peak-to-Trough Magnitude of the Recent Decline Was 4.3%
I'd expect the next one to be deeper but also reward "Buy-the-dips" setting up a nasty little experience on the next-next one for folks coming in at down 10% who watch in horror as the drop doubles to 20%....

Aug. 19
Equities: Another 7% Higher on the Nasdaq 100 (NDX)
Aug. 19
Equities: The Short Term Prognosticator of the Day Award Goes To....
Aug. 22
In Rainy Jackson Hole, Yellen Ponders Labor Market Mojo
There are signs that the current up move is not strong enough to take and hold the 2000 level on the S&P 500.
What may be required is a trip back to ~1900 or so to flush out any remaining weak hands/hot money. This could begin as soon as Monday, meaning lightening positions ahead of the weekend--something we are usually loathe to babble about on the blog--may be the better-safe-than-sorry tactic.

I'm writing about this on this particular post because Jackson Hole may be a catalyst, or at least be perceived to be by the explainers....
Aug. 25
Equities: "Some Retracement Imminent ….. Probably"