Albert Edwards On The Market: "I Do Not Really Have One Scintilla Of Doubt That This Will All End In Tears - Again"

Tyler Durden's picture

Sometime we wonder if we are the only ones who are stunned by the ridiculousness coming out of the stock market on what seems a daily basis. Luckily, there is at least one other person out there who, like us, take a bemused approach to the endless insanity. As Albert Edwards says in his latest note: "I’ve been doing this job long enough to recognise when the markets are entering a new phase of madness that leaves me scratching my head with  bemusement. The notion that we are in a sustainable economic recovery is as ludicrous as it was in 2005-2007. But investors are back on the dance floor, waltzing their way towards the next, inevitable implosion – yet another they will no doubt claim in retrospect was totally unpredictable!"

In that vein, it is not surprising that Edwards shares our disdain toward the Chairman:

Very little surprises me anymore in this business. But even I was surprised by Ben Bernanke's comment on CBS's "60 minutes" that he has "100% confidence" that he can act quickly to stop inflation getting out of control. Surely if there is one thing Ben Bernanke should be 100% confident about, it is his own fallibility. Remember this is the man who was not only adamant that US house prices would not decline, but refuted the very notion that there was even a house price bubble in the first place! I realise these guys have to pretend that they know what they are doing, but you would have thought that, having been at the epicentre of the biggest economic and financial crash since the 1930s, he would show a little humility and uncertainty. Apparently not.

But when the entire system, the whole global ponzi pyramid, knows it has no choice but to continue ploughing ahead, as otherwise the consequences would lead to the end of the financial system as we know it, what can one do but join the banks...

In July 2007, the then CEO of Citigroup, Chuck Prince, told the Financial Times that global liquidity was enormous and only a significant disruptive  event could create difficulty in the leveraged buyout market. "As long as the music is playing, you've got to get up and dance," he said. "We're still dancing?. This of course was a variant on the Japanese saying "When the fools are dancing, the greater fools are watching." Well, I suppose if  Bernanke is specifically targeting the equity market with QE, who but the most curmudgeonly bear would not be gyrating their hips in time to the music?

Unlike Ben Bernake, I like to retain some sense of humility. And it?s at times like these that I really start to think I haven?t got a clue what is going on anymore. It really is a mad, mad, mad world. Although on the sell-side I think I remain a lone voice of bearishness, there are other commentators who share my extreme scepticism of the current situation.

You are correct Albert, even though in this case you refer to another Zero Hedge long time favorite, Fred Hickey of the High-Tech Strategist.

In his last missive he makes the very simple point that we have seen the current pattern of behaviour before. We saw it in 2005-2007 and in 1999-2000. In both cases easy money conditions led to asset bubbles and reckless investor behaviour. Now we are seeing it again even more blatantly, egged on openly by the Fed. Without wanting to sound as over-confident as Ben Bernanke, I do not really have one scintilla of doubt that this will all end in tears ?- again.

What is the primary driver of Albert's scepticism? Deleveraging, deleveraging, deleveraging.

We keep making the point that while the private sector de-levers, continual growth disappointments are almost inevitable -? as seen in the wake of the 1991 recession (see chart below). History suggests growth jitters of this autumn will come back again and again.

Far more important is the correlation between bond yields and equity valuations, for the period that Edwards has coined the trademark phrase of "The Ice Age" (i.e., the time over the past 12 or so years in which equities have gone exactly nowhere even as cost of credit has plunged):

In the 1990s, we were still in the midst of a secular equity valuation bull market where equity and bond yields enjoyed a tight positive correlation. In a post-bubble, Ice Age world, lower bond yields go hand in hand with higher equity yields. So, in contrast with the early 1990s, we are locked in a secular bear market for equity valuations.

Edwards also has some amusing observations on the plight of a bears in an environment in which the market spends far more time going up than down... but when it does go down, the move is savage and instantaneous:

Having been underweight equities in our model portfolio now since the end of 1996, I am used to the derision that starts to be heaped upon my dogged views at these times. Since I turned structurally bearish, equities have spent far longer rising than they have falling. Bear markets tend to be quicker and more violent than bull phases so I tend to appear totally wrong most of the time. But let?s put the recent equity rally and bond sell-off into some sort of longer-term context. Can you see any break in the uptrend of government bonds? Not yet, I can?t.

Albert's target for the next equity "challenge point": 4.25% on the 10 Year, which is the upward bound on the historical 10Y channel.

Despite the savagery of the recent rise in yields, again let?s put this into some sort of longer-term, bull market context. Yields would have to rise above 4¼% before the bond bull market was to be seriously challenged. For the moment I remain a structural bond bull. I see yet another attempt from the authorities to levitate the equity markets to boost economic activity as I have always done; as an ultimately fruitless endeavour that merely produces bubble upon bubble and inevitably bust upon bust ? each one bigger and more dangerous than the last.

Since the 10 Year has moved by 100 bps in about a month, this means that should the move continue, we may get an advance look on what stock performance in 2011 will look like just around the corner...

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Spitzer's picture

The real tears will be in the US debt market.

Its the only real bubble in the world right now.

SheepDog-One's picture

Those damned bond traders....just like in Europe, the REAL trouble comes when bonds explode. Empty stock market indexes can be easily manipulated with banksters pets like Apple and NFLX, bond vigilantes are a far tougher bunch though. Let the 10 yr go over 4% and we are in a shitstorm. .5 from here.

Spitzer's picture

Yes but the thing is, eventually higher interest rates create margin compression in stocks. Throw in inflation and that is when we will wee the $100 up days in gold.Just like the first depression, bonds and equities will crash and gold will get revalued.

Also, the first world war was known as the great war until world war 2. I suspect that the great depression will be known as world depression one after this is over.

ATG's picture

Since I turned structurally bearish, equities have spent far longer rising than they have falling

True confession exactly right

SPX went from 666 to 1246 so far, targeting 1590, ouch

Remember, my son, that any man who is a bear on the future of this country will go broke


tmosley's picture

The rise in the SPX isn't even half the rise of gold, and less than 20% that of silver.

Who is it that is going broke now?  Certainly not this bear.

Red Neck Repugnicant's picture


Yesterday, you told everyone that you had virtually no gold positions, and 95% of your money in silver.  

Four questions:

1.  Do you think it's fucking stupid to put 95% of your money into a single investment?

2.  Are you trying to tell everyone here that you put 95% of your money into silver before this parabolic run-up that occurred almost instantaneously? When you're staring into the rectum of a mouse (you do colorectal research on mice), what would have suddenly prompted you to put down the mice butt plugs and run to the silver dealer with 95% of your money?

3.  Why are you so obsessed with telling everyone a bunch of lies regarding your investments?  

4. You brag endlessly about becoming rich from investments that no one believes.  Is there a correlation between the inferiority complex one must have when they stare into the rectum of a mouse for several years, and your need to tell complete strangers how successful you are?  

I know that's several questions, but if you could choose just one or two it would be warmly appreciated. 

Bring the Gold's picture


Am I to understand that you can't believe that anyone would have invested heavily in silver prior to 09/2010? Perhaps entranced paper bugs such as yourself consider it beyond the realm of possibility.

Some of us posted our trades on various websites (I did) LONG before the most recent run up in price. Those of us that did saw REAL returns. Paper bugs have seen nominal increases that have NOT kept up with tangible assets unless they were nimble enough to get in and out of Chinese Pump and Dump IPO's and the like.

Some of us are aware of monetary and world history and chuckle at American exceptionalism. All empires fall, and when they do many (such as yourself) are impoverished and a small few with vision, are able to catapult ahead of the herd (flock?) by understanding how to leverage systemic failure. I can point to my calls in advance of this run (Back to 2009 in fact when I started posting my calls on another forum).

I don't know about Tmosley, but I believe he has been a metal bug for quite some time if I recall correctly. Regardless, even if Tmosley himself didn't do as he has said, some of us did.


I look forward to seeing you in the title role of Zombie-land II: Fall of the American empire.


Red Neck Repugnicant's picture

Am I to understand that you can't believe that anyone would have invested heavily in silver prior to 09/2010? Perhaps entranced paper bugs such as yourself consider it beyond the realm of possibility.

No.  That is NOT what I'm implying.  It is perfectly reasonable for an investor to have invested in gold/silver for many, many years. A diversified portfolio with gold and silver is normal.

It is NOT reasonable to believe that someone would have put 95% of their investments into a single position. And that claim is immeasurably more suspect after that investment suddenly goes parabolic.

In short, that's bullshit. It's like telling a bunch of strangers that you put 95% of your capital into Volkswagen stock right before the mother squeeze. 

I'm just trying to flush out the unabombers, GI Joes wannabes, Gunsmoke dreamers , pending millionaires and douche bags that slither through these pages. That's all.   

Bring the Gold's picture

A reasonable reply. Sorry for my snarkiness at the end.

As it happens I've put the vast majority of my savings (approximately 80%) into physical gold and silver since 12/2007 as I saw the shitstorm coming. It's not a strategy I reccomend for others (it is not without risk obviously), but it has paid off very well indeed for me. I also bought when there was blood in the streets in 2008 and didn't sell my equities. I had zero doubt of PM's rebounding in a big way when I bought silver in 2008. What was hard was waiting 6 to 8 weeks for delivery as non-commercial sized silver was hard to come by in a timely fashion due to supply chain bottlenecks.

Thanks for your reply sorry for my snarkiness.



chopper read's picture

diversification is a myth.  long PMs, short 30-year T-bonds.  some cash for both working capital and to continue averaging into the two easiest trades of a decade. 

anyone who is not long PMs and short 30-year T-bonds is a fool.  Yes, I'm referring to RNR, a worse trader than Glenn Beck.  our village idiot.

Bring the Gold's picture

I'm mildly diversified in physical metals, small cash position, PM miners/explorers and various Rare Earth equities (just wait until January more fireworks coming especially for HREE heavy deposits).

I do question shorting treasuries. I agree of course that the 30 year will fall in value due to QE etc. The reason I question shorting it is you are paid back in depreciating currency and not in a leveraged fashion. If you are shorting it on a Canadian exchange and can be paid back in CAD it's a doubly great trade. Likewise, if you are using leveraged short that would work I suppose, but you also have decay then so you lose some there.

I just like PM related investments as a proxy to short T-bills and as being essentially denominated in the only currency (real money) that is appreciating against all others. I also will favor silver until the GSR contracts to around 25 or so to 1. I swapped gold at 66 to 1 and current GSR is in the high 40's. When it narrows more I might swap some silver for gold, we'll see.

chopper read's picture

shorting 30-year Treasury Bond futures contracts offers the profitable leverage to offset the depreciating currency.  Its a case of a favorable return-on-margin-equity.  The mutiples far exceed the captial requirements, especially if the same money is being used to go long paper PMs as a compliment to physical.  In other words, leverage offered by the exchange is our friend when we are right (or until they raise margin requirements to 100%). 

I stalked this 30-year bond trade for months until I got the right position.  If The Fed is listening, my stop is slightly above the 2010 high.  good luck getting it there, especially since the black swan of 2008 eventually sent T-Bonds downward; I highly doubt there will be a 'flight to quality' into lending the U.S. government money for 30 years at 3%.  My point is, I'm short with leverage, its well in my favor, and I ain't getting out until 6am sometime 10 years from now or so.

As for trading back and forth between long gold vs. long silver, I'll leave it to you; although I do like your style.  It seems like a bit of sport for you more than anything else.  The transaction costs can, however, get pricey if you are doing this with physical (which is where I hope the bulk of your PMs are given the risk of currency collapse). 

Me?  I'll begin trading back to fiat when it appears The Fed is raising rates to a point higher than the rate of inflation (and, by doing so, protecting the brand-name of the fiat by making it more scarce).  ...I expect it will be a while, if ever.

Bring the Gold's picture

Thanks for your knowledge. I'm probably in the bottom 1/3rd on this forum for Market experience/expertise. It helps keep me from insider group think, but I also don't know nearly as much as many on here.

I am mostly in physical PM's as far as my liquid assets go for fear of currency crash as you outlined. I also believe in the CB scam you outlined (enslavement via debt, push for world currency). Furthermore, my stock portfolio is primarily a retirment account I cannot break right now. It's primarily PM miners/royalty companies with a fair amount of Rare Earth equities that I plan on selling into the next leg up and then re-assessing. I also manage my mother's estate and have given her roughly a 50% return since June (my retirement account has doubled and then some this year).

I swapped physical gold for physical silver awhile back and even with the premiums I'm ahead 20 free pieces of silver on that trade. I didn't go big, because I wanted to test it and mostly my physical PM's are core holdings that I don't mess with much.

Thanks for your info. I don't know enough I guess about appropriate vehicles for shorting the T-bills and not risking the things I've said. I will stick with what I understand as that has given me excellent returns and I can sleep at night. The bond market (both sides) scares me to be honest.



chopper read's picture

good stuff.  sounds like you're doing great.  stay vigilant.  take care.

Red Neck Repugnicant's picture

especially since the black swan of 2008 eventually sent T-Bonds downward..

You're dumb.

The black swan event of 2008 sent bonds through the fucking roof, which was the exact opposite of what everyone was predicting, including Peter Schiff, Marc Faber and Jim Rogers - all of whom are respected around here.  Just take a look at the three year chart of the TLT, then tape your fucking mouth shut. 

After a little bouncing around, 20+ Treasury bonds returned to a range where they've been for 5 years.  

Basically, the EXACT opposite of what you stated happened.  

I highly doubt there will be a 'flight to quality' into lending the U.S. government money for 30 years at 3%.

If there is one bond theme over the past 3 years, it is that they have held up better than anyone ever predicted. If you can't comprehend the market movements of the past, there is no reason why anyone should lend any credibility to your future outlook.  

The TBT short has been discussed ad nauseam by everyone ever since the fall of 2008 - and everyone has been wrong. While it has reversed since August, there is no chance you timed that perfectly.  None.  Your rationale for shorting the 30-year was to provide profitable leverage to offset the depreciating currency [your words].  If you were looking to hedge that fear, your gold/silver positions would have taken care of it.  The only reason you're mentioning a TBT position is because you're just following current momentum, which anyone can do. 

Don't try to fool me.  

chopper read's picture

ha, ha.  I do not own the TBT.  I'm short the Treasury Bond futures contract.  Its a huge winner.  It will continue to be.  With any luck it will retrace from here on a panic buy and I'll short more.  mate, I do this for a living.  I do not need to prove myself to you.  this is how I pay my bills.  Its been my job since 2003.  I've become a multi-millionaire in the process.  Whether you believe me or not is irrelevant. happy trading.  

tmosley's picture

RNR does not believe anything he reads on the internet unless believing it gives him the ability to form an insult against someone he doesn't like.

He ignores everything else.

chopper read's picture

agreed.  he's a hater.

also, i must add the correction: i mispoke about the 30-year bond; it did go 'through the roof' at the end of 2008 on DEFLATIONARY fears, and it came down aggressively in early 2009 with all of the rate cuts.  Importantly, stocks and bond where moving down together when 'diversification' was needed most.  Anyway, The Bernanke has made it clear that he will print away any deflation over and over again, so the thesis still stands.  If i'm wrong, I'll get stopped out and look for another place to short.  no big deal.

Red Neck Repugnicant's picture

also, i must add the correction: i mispoke about the 30-year bond; it did go 'through the roof' at the end of 2008 on DEFLATIONARY fears..

No. No. No. Fuck No. !!

You simply had no fucking idea what you were talking about, and now you're trying to back peddle with some lame synopsis of the 08/09 events, as if trying to show everyone that you know something about this subject.  

To say that bonds collapsed in 2008 is not some innocent misunderstanding.  It's solid, indisputable proof that you truly have no fucking clue what you're saying. 

The fact that you would tell everyone that you're a multi-millionaire from trading (see post above) is out-of-this-cosmos douche baggery.  Go to your wife's cabinet, steal her Summer's Eve and pour it over your head, FORTHWITH!  

Douche Bag!  Douche Bag!  Douche Bag!  

tmosley's picture

Yes, we know you are a douche bag.  You don't need to remind us.

chopper read's picture

ha, ha.  i don't need to be right.  i just need to make money.  i'm wrong all the time.  i take my loser and move on.  i'd rather be lucky than good.  i'm sure i make money all the time for the wrong reasons.  what's the difference if its going my way?  

for example, it is my understanding that sometime in the next 6 months the supplies of natural gas will be tightening.  I also understand that The Fed is printing money.  As a result, I am constantly trial-and-error'ing into long natural gas positions.  at some point, it will move in my favor.  As the fundamental news begins to confirm my thesis, then i'll twist the knife and average in further.  Of course, having seen a million chart patterns, I have points on the chart where i feel others may follow me into the trade.  Importantly, these are typically before highs and lows so that i can ignore the noise that surrounds them.

I say this because this is exactly how i got into my long precious metals positions.  now that we are around our highs I can watch idiots like you go back and forth about whether or not you should be in or out.

by the way, futures contracts DO offer leverage.  Importantly, the SAME MONEY can be used with a long position in precious metals futures AND a short position in Treasury Bond futures.  The exchange gives the leverage and simply requires margin equity via a Futures Clearing Merchant.  Nobody "invests" in a futures contract in a way that the notional amount is tied up; we simply enter as a buyer or seller in an agreement with a counterparty as it relates to the underlying asset.  For example, 15 contracts in gold futures gives me control of 1500 ounces of gold, but I do not have to bring in $2.1 mm.  I only have to have a good relationship with my FCM and keep a couple hundred grand for margin capital.  If it moves too far against me then I bring in more money.  If it goes my way then I'm laughing.  Additionally, I can use this SAME MONEY to be short Treasury Bond futures.  It is simply margin capital for the total net-net value of my combined positions.  

Your welcome for the education.  I may not know everything, but I do know how to trade.  its what i do!  :) 

you really are an asshole, RNR, and that is your punishment.  :)

akak's picture

It's a shame that disingenuous idiot trolls such as RedNeckRepugnicant manage to taunt honest and intelligent posters such as yourself into having to take the time to respond to and rebut their nonsense and lies.

chopper read's picture

i actually respond for the benefit of everyone else here so that we can all learn together.  Helping bring RNR up-to-speed is just an unintended consequence in my efforts to make a contribution back to the ZH community.   

i get a lot out of reading these message boards.

Calmyourself's picture

 Exactly, if he cannot be incredibly smug and insulting he soon todders off to continue looking for Bammys college transcripts.  All this while loudly berating anyone who has more than three cans of tuna and half a loaf of moldy bread in the house as goldamn survivalist wackos.. ha..

IQ 145's picture

 This is a very interesting theme; diversification. I once owned a small book, a paper-back actually, called trading secrets of the Swiss Gnomes. It was organized into chapters that each treated one of the important concepts of trading; and one of them was; "put all your eggs in one basket, and then watch that basket carefully". This can be arrived at from logical analysis; there is always one best investment, everything not in the one best investment costs you lost profit. As far as I know diversfication was invented by the american retail brokerage industry in order to churn customer accounts. Now, of course, it's "settled science"; like global warming; in other words, the propaganda worked. Thinking carefully and slowly about the basic issues usually gives a better result than adopting the memes of the mass culture.

Bring the Gold's picture

I will look into that book. I was able to figure out that diversification (beyond a certain point) will not make you any money. I'm more in PM's then anything else and may increase my position depending on how things look for my other main sector (REE's) after what I expect to be an explosive January month due to Chinese export quotas/taxes.

chopper read's picture

rule #1:  know exactly where your stop loss is BEFORE applying the trade.  Then be true to yourself by honoring the stop.

...if you take too many losers in a row then lower the amount you place at risk until the money does not matter.  when you experience some consistency again, then dial it up with profits. 

some PhDs cannot figure that one out. 

Spitzer's picture



listen to this guy. I have been in more then 100% for 3 years

tmosley's picture

Yeah right, just like every word that I said about my research was bullshit until I mentioned that we were getting some grant funding, then you suddenly believed everything I said because it meant you could label me as a hypocrite.

Don't you see what you are doing?  Everything you believe is 100% flexible based on personal vendetta.

You serve no purpose here, and your mind is closed to anything that you don't already "know".  Why don't you just get out?

Spitzer's picture

hey dumb ass

I have more then 100% invested in basically one sector. I have borrowed money to invest and Im not talking about margin.

You don't get rich by diversifying

chopper read's picture

thats why RNR is a piker, Spitzer.  ...and he always will be.

IQ 145's picture

 "You don't get rich by diversifying"; this is so true; reading biographies of the very successful investor / speculator demonstrates this; and yet it is almost never mentioned; I'm surprised to see it here, actually.

chopper read's picture

diversification is a sales pitch to America.  it works in a declining interest rate environment (the past 30 years) because everything rises together.  Now, its a knife fight and the wheels are coming of "modern portfolio theory" in an 'absolute return' environment. 

delacroix's picture

gold and silver, with a few guns, and a lot of food, is that diversification? oh and good friends. a little afraid, but i'm not worried.

tmosley's picture

No-one ever got rich by diversifying.  Buy the ticket, take the ride.  Diversity is for equities and bonds.  When you are holding metals, it is like holding an index fund, but without the fees.

I went all into metals shortly after QE1 started.  The fake money flowing into the market blew my shorts out of the water, and I took a huge loss.  Prior to QE1 I was 50% in PMs (I don't recall the ratio, but I think it was heavy silver), with the rest in mining stocks and financial shorts.  When QE was announced, and I saw the results, I pulled every penny from the market and went all in metals.  I went heavy silver after reading about the problems that are now coming to light, courtesy of Ted Butler. 

Why are you so obsessed with me?  Mancrush?  I tell people about my investments because my thesis has proven to be mostly correct, and I want good people to make a lot of money so we can free this country.  You, on the other hand, want everyone to be poor, apparently.  You hate people who want to make money, and label them as hypocrites even as you go out for $500 dinners in Las Vegas.

I don't brag about becoming rich.  I simply believe that silver is the trade of the millennium.  Honestly, I am glad you don't believe me.  I want you to lose all purchasing power, because you are a monster.  You should join the ranks of the poverty stricken where you will do the least damage.  Further, you should know by now that I am a chemist, not an animal technician.  I've seen a lot of surgery, but I have never done any myself.

But seriously, why are you so obsessed with me?  I'm just a stupid redneck liar who makes toothpaste for a living.  Why waste your time?  Why don't you just get out, and go someplace where your towering intellect and rapier wit are appreciated?  Why don't you just get out?  Just get out.  Go.  Leave.  It's not that hard.  I've left many forums when I felt I had outgrown them, or when they were invaded by idiots.  You can to, because I'm not leaving this one.

chopper read's picture

RNR does not own precious metals.  could you imagine?  Even worse, he says he will "buy gold when it gets down to $1000".  ha, ha.  could you imagine?  Its obviously tearing him up inside.  he's lashing out.  You've been long and strong PMs, so he targets you.  ...pathetic.

tmosley's picture

Apparently Tyler likes the lashing going on here, as he re-stickied the post.


SheepDog-One's picture

Price SPX rise in gold, its a loss. Gold YTD up 23%, silver up 65%, SPX up 11%, ouch.

Strider52's picture

I used to be a goldbug. Now I'm a goldsilverbug.

chopper read's picture

i agree with this level of diversification. :)

IQ 145's picture

 Yes. that's about as diversified as I want to be; in the presnt "state of play".

High Plains Drifter's picture

I have been a silver/gold bug since 2004. It is a easy thing to do. How many times has Tyler posted the gross profit margins on PM investments on this blog?  Still they laugh and call me a fool. Oh come on plains. This old world will just keep on going. Nothing is ever going to change. The government is not trying to hurt anyone. Come on plains , quit being so negative. I for one have absolutely no faith in the system. It is perpetual war, and that is the only way this system can sustain itself.  With perpetual war, comes chaos and finally financial ruin.

Bring the Gold's picture

Exactly. REAL returns on the vast majority of equities have been negative when priced in a stable money (eg gold). The leverage one gets from PM stocks against the underlying PM is where you can find real returns. Or you can just enjoy accumulating vastly underpriced physical metal to eliminate counterparty risk. Either one is enjoyable, and profitable. I also like other commodity equities as well. There are some stocks outside of that area that will do well, but they are few and far between by comparison.

angela5503's picture

Sounds great.!!! In Dec. 2000 spx was at 1300, 10 years later it's at 1246. Now adjust that "return" for inflation. Early retirement here I come.!!!

Lucius Cornelius Sulla's picture

The real tears will be in the US debt market.

I think this will be true for junk bonds.  High quality debt will probably do okay.

hedgeless_horseman's picture

(Nearly) free shipping just in time for the holidays!!!

BDIY -1.063% VALUE: 2,047.000 USD
TexDenim's picture

I love this guy. Get some shorts before the end of the year! This won't be pretty.