While US equity indexes have been relatively stable despite the recent spike in volatility, what is going below the surface is sheer turmoil.
Take the Nasdaq: while the index remains just shy of all time highs, this is entirely thanks to the five or so gigacaps, the GAMMA (fka FAAMG) stocks, which has found solid support in recent days. Alas, the same can not be said for the rest of the tech-heavy Nasdaq where as the chart below shows, we have just seek the biggest spike in new 52-week lows since the March 2020 crash.
This, when coupled with the recent bloodbath observed in the median stock (as measured by the Value Line Geometric), is why yesterday we rhetorically noted that "they better not start selling the generals" or else everything will come crashing down.
They better not start selling the generals pic.twitter.com/3RHZsrn4QI
— zerohedge (@zerohedge) December 1, 2021So cue SocGen's in house grizzly bear, Albert Edwards, who - never lacking for a scenario which ends in fire and brimstone - writes this morning that hope is not a strategy and that unfortunately for the bulls, "FAANGs will end up sinking like a BRIC."
Reminding his readers that Inflation and Covid remain the main focus of the markets (they hardly need reminding in light of the explosion in vol in the past week), Edwards said that he feels compelled "to flag up two important BRIC-related anniversaries that might be relevant for the dominant FAANG stocks."
First, the SocGen strategist notes that it is the 20th anniversary of the invention of the BRIC acronym. (BRICs, for those who need reminding, was dreamed up by Goldman's former Chief Economist, Jim (now Lord) O’Neil, who predicted that the emerging economies of Brazil, Russia, India and China would enjoy superior economic growth and investment returns relative to the developed economies. A few days ago Jim O’Neil marked this anniversary with an update in the FT).
Second, it is also exactly the 10th anniversary of Edwards' note that ridiculed ‘BRICs’ as an investment idea entitled “BRIC = Bloody Ridiculous Investment Concept."
Back then, Edwards wrote that in an Ice Age world of low nominal growth, “investors are desperate to believe the EM and BRIC growth story, for they have so little alternative. The story of superior growth for the EM universe is as entirely plausible as it is entirely misleading. Valuation is what matters for investing in EM, not their superior growth story and certainly, EM equities are not relatively cheap. Yet investors persist in the BRIC superior growth fantasy. But it is no different from many of the other investment fantasies I have witnessed over the last 25 years only to see them end in severe disappointment.” BRICs have indeed been terrible investments over the past decade, underperforming both MSCI World and even the EAFE index by a very wide margin.....
....MORE, including a couple interesting charts
Keeping in mind that Mr. Edwards has been brilliant on the debt markets while going opposite the Federal Reserve caused him to say in 2018:
Société Générale's Albert Edwards Says "My Reputation For Calling Stocks Is In Tatters"
Which we dressed up a little bit:
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.
