Albert Edwards Goes All Out: Sees New Recession By End Of Year, Market Collapsing "Like Pack Of Cards"

Tyler Durden's picture

Albert Edwards, one of the most prominent uber-bears just got even more bearish: "Our view that this economic and market recovery will collapse like a pack of cards as soon as the steroid-like stimulus is reduced is gaining ground. Most forward-looking leading indicators now signal some sort of second-half slowdown. The only area of debate now seems to be in its magnitude. By the end of this year, I believe we will be back in recession." Albert's vision of a deflationary collapse, following by a reactionary episode in which the Fed (in typical reactive fashion) ends up printing tens trillions in one last attempt to restimulate the economy, resulting in hyperinflation, is well-known, and conforms with our view. As for the turning point, it is still anyone's guess: as today's Freddie record low mortgage rates demonstrates, deflation has now firmly gotten the upper hand. The Fed has can not afford to wait and see how this plays out. Obviously, with ZIRP here at least through 2013, if not much longer, the only true recourse is another failed monetary stimulus. However, with the president's rating in shambles, and any form if stimulus, monetary or fiscal, likely guaranteed to bite another 10% at least from his plunging popularity rating (see latest Gallup numbers here), Bernanke likely has his hands tied at least until 2011. Which is why deflationists are likely safe for at least 6 months, assuming of course the forward looking credit market (not stocks, stocks no longer reflect anything except for the latest latency arbitrage available to those rich enough to afford the latest and greatest Routers) does not begin to price in the hyperinflationary episode sooner. With 30 Day Bills near zero, there is little to worry about... for now.

Edwards agrees with this:

Although our deflationary arguments are gaining some traction in the bond market, investors have yet to fully acknowledge we are now walking on the deflationary quicksand that will inevitably suck us towards total fiscal and financial ruin - you ain?t seen nothing yet. With core inflation rates now sub-1% in the eurozone and the US, we are only one recession away from Japanese-style deflation. Recent fiscal tightening will hasten the speed of our descent into this quagmire. The market reaction to the acknowledgement of that fact is likely to be unprecedented in its savagery. The response to the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant. The super-inflationary end result will become obvious to all.

As the SocGen strategist further observes, is that while financials have rished to deleverage (not surprising, considering if they were to mark their assets to market even after the last year of debt to equity conversion, all banks would still be undercapitalized by trillions), a glimpse at the economy which excludes financials indicates that there has been no economic deleveraging yet.

Edwards goes on to demonstrate the painfully obvious double dip in housing, whose collapse was only prevented by ongoing stimulus. Sure enough, he completely agrees with Meredith Whitney that housing is in a double dip, and is yet another argument for the Fed's imminent reinvolvement.

And another critical note regarding the "massive" build up in cash by the corporate sector- it turns out the bulk of the cash retention was purely a function of inventory liquidation as presented by the most recent Z.1. Further, as we pointed out previously, the only differential from the cash and cash equivalents trendline is due to an identical and opposite contraction in corporate taxes. Now that the administration will have no choice but to extract as much cash as possible, especially through repatriation of money held by offshore subs of corporations, and much increased corporate tax rates, we anticipate this last bastion of the "money on the sidelines" brigade to promptly be gone with the double dip wind.

Edwards notes:

Many see USA Inc generating huge surplus cash which they conjecture can be spent either to boost capital investment directly, or alternatively to buy other companies? productive capacity via mergers and acquisitions. We looked at this back in January and offered a word of caution. The newly released Federal Reserve Flow of Funds data suggest that on their version of this important measure, no such surplus now exists and to the extent there was one recently, it was due to the inventory liquidation that has now ended (see chart below). We acknowledge that we are indeed far better placed than when we saw 3%+ deficits, but on the Fed?s measure there is no compelling evidence that an investment/M&A boom is imminent.

Little by little every arrow in the bullish quiver is taken away. The only thing remaining, is the last recourse of the Keynesian radioactive fall out: more money borrowed from the future. Alas, as John Taylor pointed out earlier, there is no growth. The global death spiral is complete. We disagree with Edwards - the next recession is not coming by the end of 2010 - we never left it in the first place. We would agree with Rosenberg, however, that the second coming of the Second Great Depression is now upon us, after the brief Fed-moderated extension, which merely allowed Wall Street to extract yet another record round of bonuses on the backs of the middle class.




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doomandbloom's picture

is this why the rats are leaving Obama's sinking ship?

Oso's picture

wow, u got flagged twice!  are there really people out there that actually believe Obama has even the slightest clue...?? wow.... all of you deserve a round of applause!

Dr. Sandi's picture

Obama knows exactly what he's doing. And he's so good at it that you don't have to bend over.

One does NOT get to be the first black president by making waves for the people who own and operate America.

And by the same token, one does not keep being president unless one understands the rules of engagement. This is where JFK and Lincoln screwed up.

I'm pretty sure BO is smart enough to keep the back of his head exactly where it is.

bugs_'s picture

52 card pickup.

schoolsout's picture

I'm pretty sure there are a few jokers in the mix, too

superman07's picture

We elected a fool, then elected another, and another. We allow ourselves to be "managed" and ruled by idiots. I guess we deserve it.

Where did i put that pitchfork? Oh there it is under my 1911.


DosZap's picture


Right on,a handgun is only used to fight your way to a rifle,and do you know how to use one?.

Past 100-200yds?.

If not, best get a move on..........let another 30-40 million lose jobs, and homes, and we're in a world of shit.(not that we're not now).

To paraphrase Celente,

"When people lose it all, they LOSE it".



Cathartes Aura's picture

Genuine question:

When all you boys get out your guns, rifles, whatever, who do you plan on shooting?  Because you never really spell that out. 

When you "lose it" who are you going to kill??

potatomafia's picture

Anyone who tries to steal what I have already earned, or tries to bring harm to myself or my family.. 

Muir's picture

Well, baby, me so horny. Me so HORNY. Me love you long time. You party?

Son, all I've ever asked of my marines is that they obey my orders as they would the word of God. We are here to help the Vietnamese, because inside every gook there is an American trying to get out. It's a hardball world, son. We've gotta keep our heads until this peace craze blows over.

Cathartes Aura's picture

double-post ala page refresh.


Walt Whitman's picture

I would tend to agree that "we deserve it," BUT...


As the media is owned by only 6 corporations, the info that gets disseminated to common-folk usually is full of obfuscation, shallowness and set narratives that do not tell the full story that people need to hear to make fully informed decisions.

IrishSamurai's picture

Although freepress correctly identifies our national information problem in that link, they do not advocate the appropriate solution ...

If they truly were for "free" press, I'd support their efforts, but as it is they only support their "version" of the truth.

That said, we DEFINITELY deserve it ... the last 30 years has been a self-interest orgy the likes of which the world has not seen since the Roman empire.  Anyone who hasn't caught onto the "truth" yet is either blind, stupid (not ignorant mind you), mentally impaired, or in most cases, "agenda-challenged" ...  they don't want the truth because it does not meld with their agenda.

Forbes's picture

>Owned by only 6 corporations...


NYTimes/BostonGlobe, WaPo, USAToday/Gannett, WSJ/FOX/News Corp., CBS, NBC/GE/Comcast, ABC/Disney, CNN/Time-Warner--well there's 8.


Don't make me take my shoes and socks off...


Did you have anything more than a bogus talking point?

Red Neck Repugnicant's picture


YOU may have elected a fool, but I didn't.  I voted for Bush, which is a vote for Jesus. Bush governed the right way - with the full guidance of a "higher father."

Then I voted for Palin, who also is in close communication with Jesus.

I have done significant research on the matter, and it is obvious that everything began to unravel in this country on January 20, 2009.  The credit markets where really bad that day, and that was Jesus telling us that he won't give us money since we put a Kenyan Muslim in the "white" house.  

Glenn Beck (my hero!..that guy is super-brilliant!) had some arrows on this chalk board the other day, and they all pointed to this recession being entirely Obama's fault.  It's true.  The closer that Obama became president, the worse the recession got.  Then when he got elected - KABAM! - big-time recession.  Glenn Becks charts prove it.  If it's on a chalk board, it's probably true.  

We need to immediately impeach Obama, and immediately bring back George Bush to clean up this mess. A vote for George Bush and/or Sarah Palin is a vote for Jesus, and there is no better economist than Jesus Christ.  

The end. 



Cathartes Aura's picture

hilarious troll is hilarious.


+ a dozen vuvuzelas.

Oso's picture

wait, is this a serious post...?

akak's picture

Red Neck,

Yes, I agree with you, George Bush Jr. was the second coming of Christ, who sacrificed himself (oh, and a few thousand lives, and a few trillion dollars) to redeem us from our sins of peace and frugality.  As for Obama, I have no doubt that the only reason he hides behind those teleprompters is because their polarized filters hide the "666" on his forehead.  As for Sarah and her marching mental midget minions, God bless her, you betcha!

SteveNYC's picture

That is actually fuckin hilarious. Whoever junked that is a clown, based on humor value alone. Something tells me Red Neck doesn't necessarily like Obama and the Dems as much as the "junkers" may think he does..... does bring to bear, however, the hilarity in humans bringing "Jesus" and "God" into debates about war etc. Fuckin brilliant.

Sudden Debt's picture

and no one can pass the game and has to play each hand to the end.

Also the common consumer is also hearing the rumors about the second dip and that's going to create a lock on their wallets yet again.

Obama will soon lose all the colour in his hair so it seems :)

LoneStarHog's picture

John Williams at ShadowStats has put his reputation on the line and stated that 2010 will end in a hyperinflationary depression.  No mincing of words, just flat stated it.


Cindy_Dies_In_The_End's picture

Lone--Do you have a link? Last interview I heard (which was early in the Spring) He said it could fall apart tomorrow or 2 years, it depended on other factors.


Do you know if he changed his mind and where we could hear that interview?


fearsomepirate's picture

Good analysis.  To throw more gasoline on this fire, don't forget that capital gains taxes are scheduled to skyrocket at the end of the year, so even the algos will get lower returns.  Everyone's trading is going to slow down, even the vampire squid's.  And *everyone's* income taxes are going up.  Consumers will have even less money to spend.  Small business owners will make less profit.  Real dividends are going to go down (and we all know what marvels low dividends do for stock prices).

This is where I pimp my blog, where I've written a bit more extensively about it:

Muir's picture



That's great, this is really fuckin' great, man. Now, what the fuck are we supposed to do? We're in some pretty shit now, man. 
That's it, man. Game over, man. Game over, what the fuck are we supposed to now, huh, what are we gonna do?



Village Idiot's picture

Paxton in his finest hour.

Double down's picture

Typecast forever.  A fine death 

FranSix's picture

Don't like ZIRP?  Get ready for NIRP.  Negative Interest Rate Policy.

Unless of course, printing money nirps it in the bud.  *snork*

Wynn's picture

Never underestimate the tenacity of governments to do whatever it takes to preserve their power. I imagine Bernanke, Geithner and Summers have a few arrows in their quivers that none of us would suspect. They will eventually fail, of course, but this isn't over, not by a long shot. 


IBelieveInMagic's picture

It is depressing to see ZHers appear to be rejoicing that the system is failing just because of investment in PMs/guns. It is going to be a pyrrhic victory.

Yes, the current government has no choice but to take desperate measures -- it is not like it has caused every single disaster, it is just happening on their clock while the bigger player responsible is clearing brush at his ranch in TX -- I am not an apologist, just a concerned citizen.

Anton LaVey's picture

I agree with you the biggest culprit is clearing brush in Texas, but the elected replacement promised "Change we can believe in"... And the least that can be said about that is that he has been a HUGE disappointment.

Agreed on the "Pyrrhic Victory": it is going to be very, very ugly in the near future, and I, for one, does not rejoice in that, despite a certain amount of, shall we say, "Schadenfreude". Especially when it comes to bankers.

Village Idiot's picture

"It is depressing to see ZHers appear to be rejoicing that the system is failing just because of investment in PMs/guns"


And don't forget sovereign cds and currency trades, among others.  I'm using this site as a support group while the hedge fund I'm in works it's magic, hopefully.  I was a buy and hold sucker, and paid a price.  My turn for revenge. As far as destroying the country - the more I learn, the more I see how this country and it's people have been in a virtual screw job for god knows how long.  Count me in as a patriot that is looking to replenish wealth, and, get rid of the scourge.  And save the bullshit about me being part of the problem because I am betting against or using the same financial tools that are part of the root cause.  Just know that I will be around when/if the shooting starts and in the meantime, I'll just enjoy the show.  btw, ZH is like watching it in 3D.  Awesome.

trav7777's picture

the system is doomed to fail.  What kind of a system was it, anyhow?  One that enshrined the rentier class and a bunch of plutocrats into aristocracy?

who WOULDN'T rejoice at the destruction of that?  This is not the system we had before CEO pay multiples blew vertical

desgust's picture

Pretty much the whole world is waiting for the "system to fail and not only for schadenfreude but cos we are fed up with the American hegemony, American Wars against the World, American Robbery, American Lies !!! The sooner the bettter! Sorry for all decent people out there is life!

RRA_223's picture

"Bush's Fault?"   Good thing we've moved on.   Unfortunately this is the dumbest response I've read on ZH all day.

Bush holds his share of the blame, but we're shamelessly ignoring decades of contributions from both parties: Clinton, Bush, Obama - Pelosi, Reid and every sesson of Congress since Carter.  

Some planted the seeds, some fertilized them, some talked them into blooming, some helped those seeds grow - but ALL of them played important parts in growing the wild brush that's burning in front of us now.

"Blame Bush" is as myopic and simple an excuse as modern politics has known. 

fearsomepirate's picture

Don't forget Woodrow Wilson, FDR, and Hubert Humphrey, while you're at it.  It's taken nearly a century for them to take down America; shows just how tough it was built to begin with.

-Michelle-'s picture

This goes back way further than 2000...

ToddGak's picture

Indeed....the seeds were sown with the closing of the gold window in 1971...this allowed us to start settling our debts with dollars instead of gold, and of course we can always issue more dollars...thus leading to our massive trade imbalance, destruction of the manufacturing sector as we could use credit to purchase more foreign goods than we export, etc. etc.

Cindy_Dies_In_The_End's picture

Obviously you are a newbie. You'll figure it out um, concerned citizen.

fearsomepirate's picture

When our masters in Washington and New York have conspired* to destroy us all for their own gain, there's little we can do except rejoice in being able to say, "I told you so."

*Not a real conspiracy of course, merely an emergent conspiracy caused by each Nice Government Man acting in his personal interests, like plans and orders emerge in economies when we each act in our own interests.

Freebird's picture

And when he has finished in Texas there is always Paraguay...

buzzsaw99's picture

Does this mean Ann Margaret is not coming?


Seriously, Bennie B. can fix this, he has a hella-printer.

MGA_1's picture

Deflation for sure with all the bad debt out there.  The question is: "Will the Fed Print?".  If we look at past actions, then the answer is yes.


I think a deflationary depression would be slightly better than inflationary in that at least the dollars you hold would be worth something.  Right now, purchasing precious metals seems to be a pretty darn good idea.

fearsomepirate's picture

Well, yeah.  Destroying the dollar doesn't help anyone except the vampire squid and its minions.  It doesn't prevent the real economic phenomena associated with deflation, like contracting credit.  And it makes people feel like they're profiting when they're actually taking on huge losses, so we consume ourselves that much faster.  It's like economic leprosy.