RBS analyst Bob Janjuah called both the 2007 and 2008 crashes to within weeks of the actual occurrence. Pretty much every trading desk in the world reads him. Today he’s warning his clients again.
“Quite a few important global markets are now deep in official Bear territory – China is the obvious big bad one, but many other are there/nearly there.”
“I am deeply troubled by the world and markets. THIS IS AN UBER BEAR EARLY WARNING ALERT:…I know its not what folks in general want to hear but hopefully you’ll understand that I am trying to do my little bit to help….”
Bob Janjuah of Royal Bank of Scotland predicted both the 2007 and 2008 crashes to within weeks of the actual occurrence.
Janjuah is being followed closely by most European market professionals.
Here’s more from today’s letter to clients:
First please refer back to my last comment, dd 26th April (Bob’s World: What an idiot!)….2 takeaways from this note in particular – 1) my bearish trading call on risk assets, looking for a 10%/10%+ S&P selloff over late Apr and May from the 1220 level, driven by sovereign concerns, was spot on – maybe not bearish enough!, and 2) the point of market and taxpayer revulsion with the horrendous Keynesian/monetarist nightmare forced upon us by policymakers has come to bear. Sovereign limits and sovereign credibility concerns are not now a future risk – they are HERE. The enormous failure here is that the private sector has barely had time to catch a breath, let alone develop any form of self sustaining private sector recovery, before these limits have already begun to hit home.
Before reading on the other item that needs to be highlighted upfront is the whole Inflation/Deflation debate. As I have been saying for many months, the TRUE underlying private sector trend is one of DEFLATION (balance sheet repair thru reduction of nominal debt levels). In my comment of the 26th, I capitulated in that I gave up on the idea of policymakers worldwide shifting to voluntary/pre-emptive tightening, and went with Kevin’s long held view – that policymakers would keep pumping and dumping in order to try and create inflation until the point of bond market and/or taxpayer revulsion, or until the point that inflation fears themselves become the major problem. As you will read below we now seem, at the global level, to be at or close to the point of bond market (Europe) and/or taxpayer revulsion (US). Alongside which the UK and China seem to be ‘voluntarily’/pre-emptively tightening, although in both these zones one could easily argue that INFLATION concerns are causing this tightening. Either way, the point here is that for now and for the next 6 months or so it looks like deflation will have the Upper Hand in the battle vs. inflation.
I still expect policymakers to come back – not yet, more likely in 6/9 months time – with NEW even more aggressive attempts to INFLATE likely thru fiscal policy (NEW China stimulus package by y/e?) and/or via a massive new Fed QE programme (see below). Thus – and whilst I have admittedly been wavering a little here – the outlook for govvies over the next 6 months IS bullish (USTs in the low 2s), but it is also clear that the Western world is NOT yet ready for multi-yr deflation and therefore the next huge attempt to reflate (around y/e?) could end up in a disastrous outcome for inflation and bond yields. But we can worry about this later – for now the winner seems to be deflation. Now, in no particular order:
A – Quite a few important global markets are now deep in official Bear territory – China is the obvious big bad one, but many other are there/nearly there.
B – Global Growth IS slowing and will slow hard into Y/E as stimuli impacts fade/are reversed…the street/market consensus is 4.5% globally, the reality is that the annualised run rate will be 2.5%ish into next yr and beyond…developed growth will be 1%ish, developing will be 4%ish (too many officials keep talking to me about a target of around 5%ish growth rates for China over the next few yrs but the street/market seems to ignore this)…Btw, China reval? R U joking??? Even a 1%/2% token would be a huge surprise to me.
C – We have policy tightening all over the world – fiscal (UK, Europe), monetary/credit/currency (China, US), regulatory (EVERYWHERE)…the market and taxpayer revulsion with Government recklessness is HERE! Europe in particular has signed off from the growth path and is now firmly placing itself in the Japan style multi-decade deflation/despair path.
D – For the EURO and Europe to regain ANY credibility and hopes for growth, Greece should be put into restructuring asap, maybe others too. The alternative is a black hole whereby wealth is destroyed in Northern Europe as it is sent to bailout unviable countries in the South. This grotesque misallocation of capital is a disastrous move for Europe/European growth. My HOPE is that the error of these ways is addressed asap. My FEAR – as seemingly supported by the political noises out of Europe over the last few days – is that when, come Sept/Oct, once we all realize Greece is badly failing its budget austerity targets, the politicians in Europe again usurp the sane eco based voices and keep pumping money/wealth into a bottomless pit. The UTTER NONSENSE that is now consensus is that the EURO fails if its weakest leg is allowed to fail. I’m sorry but this is RUBBISH. The EURO and euro zone will fail if the ECB is made a tool of politicians (maybe already too late on this front – all ECB credibility & independence is seemingly LOST). And the EURO and euro zone will fail if ECB and euro zone policy is dictated by the weakest link (Greece) rather than the strongest link (Germany). Again, maybe its too late on this front too. Lets see what happens when Greece is seen to be running an annualized deficit/GDP ratio closer to 20% than 10% come Sept/Oct, once we all see little progress on cuts and huge shortfalls of (tourist based) revenues. For now, the euro zone has joined the club currently only occupied by Japan since the late 80s/early 90’s.
Read the full post at Zero Hedge.
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