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Tactical Update From Bob Janjuah: "2008 Will Seem Like The Good Old Days"
From RBS' Bob Janjuah
Plse refer to my most recent comments, from 24th May, and 26th April. Things are playing out nicely. This is just a 'tactical' update. In my cmmt of the 24th May I set out 2 possible paths for the new bear market we are in, and I want to clarify a little:
1 - 1st, the bigger strategic theme is clear and unchanged - global growth HAS peaked and the deflation trend is clear for the next 3/6mths. This is strategically bullish the USD and USTs (think 1 vs the EURO, and low 2% 10yr yields). And this is strategically BEARISH risk assets (think mid-800s S&P in 3/6mths, and the iTraxx XO index up above 750bps). The strategic asset allocation outlook STRONGLY favours QUALITY as defined by balance sheet strength, balance sheet transparency (which therefore excludes most financials), market position, AND the ability to be a price setter (not taker).
The game changers are: A) a massive turnaround in China towards new stimulus & a new credit creation binge etc - for now very unlikely IMHO; B) a massive turnaround in corporate behaviour resulting in a leverage, capex, investment, hiring & spending binge - extremely unlike for now and for the rest of this yr; C) a new US fiscal package (pretty impossible now), so the most likely and only really viable remaining option is a MASSIVE DEBASEMENT/MONETISATION move led by the Fed (but no doubt globally co-coordinated) thru the announcement of a NEW (say) USD5trn QE package, aided/abetted by maybe another USD5trn of funny money printing by the BoE, the ECB, ther BoJ, the PBOC, the SNB etc etc.........HOWEVER, I don't expect this last bullet to be used until things get REAL UGLY (see above para for levels). If u know u have only 1 bullet left in the rifle - and unless you are amazingly stupid - u don't try to shoot the charging grizzly bear when its 50 yards away. No, you wait till its 5/10yards away...WHEN we get this final bullet out of the rifle it had BETTER not miss, as if it 'misses' we would then have the mother of stagflationnary busts in history where bonds get crushed due to debasement, taking risk assets out with them too. If this is the outcome - and this is really I think a late 2010/2011 story - then trust me, 2008 really will seem like the Good Old Days.....lets hope Uncle Ben not only has the rifle ready, but also that his scope is well lined up and that he has been practising hard...
2 - In terms of the shrter term tactical outlook, of the 2 scenarios laid out in my last piece, I now marginally favour the 'bullish June, disastrous July/Aug/Sept/Oct' outcome. This is a marginal call - the KEY trend for H2 2010 is BEARISH and HIGHER VOL - but I do think we can see the S&P (as a global risk proxy) up at 1150/1180 in June. This seems to me to be the next and an excellent place to get short risk/get long deflation. A move above 1180 IS possible but unlikely, with 1220 even more remote. However, I would be inclined to rethink a little the precise tactical timing/routemap IF we can get to and close above 1180 for 3 or so consecutive days. A break below 1020 on S&P would indicate that 800s S&P is coming sooner rather than later, but as mentioned, I think this is now business for JULY onwards, not for June.
It is important not to forget that we now have a pretty cool series of lower lows & lower highs on stks whereby we have taken out the early Feb lows. And if u like this sort of thing, a very powerful and ultimately deeply bearish Head & Shoulders is clear too.
So there u have it. Expect policymakers, the sell side consensus and the media to be Rah Rah over the next few days & weeks (its already begun). But don't get too sucked in - use any bull trap to OFFLOAD risk/to get liquid. JUNE can be a decent bullish month, but I really do think it is the eye of the storm ahead of a super nasty Q3/early Q4.
Cheers, Bob
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Bulls are really putting up a strong defense at /ES 1090. Could be a turning point if they win or could cause a big spiral down if they lose it as Europe closes.
Don't waver Harry. Pick a side. We're at an inflection point among many inflection points. Are you trading or investing? If your investing, what is your time frame? Do you commit all you capital or half or a quarter?
I think one of the reasons you get treated so roughly here is because you often speak using specifics regarding how your dealing with this. Anyone who speaks often in specifics must explain their style or the specifics are useless and simply come off as bragging or taunting.
I said the other day that I was in cash right now, except for a large precious metals holding. I figured we'd see a technical bounce back to the 200 dma and possibly all the way up to 1150. I won't play that long though. If it hits there, short all you can in my book. If we turn below /ES 1090 later today, I will probably grab an SDS position.
NO HARRY!!!
A few days ago you were crowing that you were SHORT! You make this shit up as you go along you lying loser.
Pegged! +1211.
+10
Trading or investing? Heh. Neither. He's gambling. He's wondering if he can hit 7 Blackjacks in a row again..
2008 -> good ol' days? Not news here. My concern is this crisis might make 1930's look like good ol' days as well.
dlmaniac,
Our Elliot Wave friend is predicting this exact same thing.........
This is the killer, don't know whether to shit of go blind....
However, CASH was king in the 30's, but CASH was valuable.
Our's (on the real) is asswipe...............
It was backed by PM's, and we were likely the strongest nation economically on earth.................
The unemployed were 25%, hell we're at 22% now...............
Either way, Hyper Inflation, Deflation..............both suck badly.
However, I would rather see inflation, than deflation...........that's a mongo.
The S&P going down to 865 is not all out bearish in my opinion. It would be fair value by historical valuation means. Thus, I dont think we'll get the $5t in QE then.
its not so much the market but the economy they will watch...specifically, peoples ability to banksters interest on their debts...
Nothing is bearish to the raging bulls . . . until its all gone. Then you get to s ign up for gablers anonymous.
oooo anyone see the May Fed KC Manufacturers report? came in at a whopping 5...down from 24. That worry anyone or am I just being paranoid?
I think that would qualify as "good for the market" but bad for the economy. So it's bullish.
if Q1 GDP was 3%, with more inventory and less consumption in the revisions, and leading indicators have already rolled over and are rolling further into may, and then on top of that housing is about to suffer the stimulus hangover, how is full year GDP not best case 3%?
You obviously haven't study Hopiumonomics. The cliff notes version up=down, down=up, everything=green shoots.
umm, that's a lagging indicator. (at least it will be now)
pretty cool!
if i was ben and had one bullet id save it for myself
ZH needs a "best comment of the day" feature. I would nominate you the first ever recipient of such an honor.
+1
I love your attitude...
brilliant
Better hope BB's hand isn't covered in sweat, with a few beads rolling off his forehead into his eyes at just the moment he fires.
Put the rifle down, Ben. You're going to need a howitzer to kill this bear.
He has the safety on. We're all lunch now.
Actually Ben, why don't you borrow Hank's "bazooka", it's in his pocket. What do you mean there's nothing there?
To roughly paraphrase Field of Dreams:
"what is that?"
"What do you mean, its a gun?"
"Why don't you show it?"
"Show it? I'm not gonna show you my gun."
Ben's hand may be in Hank's pocket, but I don't think he's looking for bazookas.
Last year, and early this year, Roubini predicted an inventory bounce in Q1 and Q2, unwinding of the carry trade, appreciation of the USD against every other currency, followed by a bearish Q3 and Q4.
He's on track. It would be a perfect score if he had recommended Gold.
He's a college prof, for gosh sakes. He'd get fired for recommending gold.
A guy I know was bear hunting with a revolver once. The bear he was stalking charged him but he hit in dead between the eyes at about 7 yrds. BUT he also shit his pants, literally before regrouping himself to make the shot.
What happens if that metaphor plays out? We're saved from a deflationary spiral but have a load of shit in our collective pants? That can't be it because we're already there. Maybe the middle class evaporates? Help me out here.
We have a middle class?
Why not just look at some of the other currency crises, say like Argentina 2001 to get a feel for what it might look like here.
Every Algo/Igor/Robo program is hot-wired to the EUR/USD.
Short squeeze?
Or will it fail once again?
oh, you're back. my money is on fail, but who knows what'll happen at this point. Anyone who says they've been on the right said of this comedy fest for the last few weeks is blowing smoke up their own ass.
Dude where the f are u these days, pls post some eod articles...
Yes, Robo, and please bring your charts (and avatar) with you.
On Eur/USD looks like around 1.2450 is tredline resistance. It needs to get above that and hold for me to consider a change in trend for a week or two. My gut is it fails to break above that and starts heading for its destiny with 1.18.
Where's Turd? I want a MoASS out of him!
Because every Algo/Igor/Robo program is hot-wired to the Eur/USD it's fun for every central bank to cool "it" down a bit...:=)))
Excuse me, it's Ben's bear, and he's sikking him on us. He has no intention of protecting us. Maybe you noticed that.
I now marginally favour the 'bullish June, disastrous July/Aug/Sept/Oct' outcome
With all the layoffs coming by July (1.6m), this is a great call. It's all downward from then on.
If Ben has been sighting in his Bear Rifle his grouping sucks. I don't even think he nicked the outer edge of the target.
iTraxx XO should be a good trade; but IMHO, if you have the means, buy a customized basket of single name corporates below A- [preferably HY]. Focus on lower CDO2 tranches dating from 2007/2008 [or older, but not older than 05] which were mainly structured of BBB- or lower tranches. CDX.NA.HY 5y, 7y and 10y also, iTraxx Europe non-financials should also put some weight to said basket. Buy lower tranches of CDO2 of PE issued HY debt from the same period as mentioned before. The components, if picked properly, should not contradict each other trends. Trade the spread; do not wait on CE. Bob recommended a good trade [ although a simplistic one; but the liquidity is good] recommending iTraxx XO, but there are better and easier trades out there. If you check out aforementioned components, the spread has exploded. The problem with customized basket is the lack of liquidity; there may be those willing to structure the basket and take the other side of that trade, but unwinding the basket should be more problematic if the components are arcane or bought with a too high CPD.
Hope you find this useful.
I think the dimension of game theory was missing from the article. I get the charging bear, Ben and the other CBs.
One bullet and charging bear to most mortals = drop gun run for the hills.
Try to outrun your CB colleagues
The one that panic first wins, let others do the shooting.
Also the attribute of "amazing stupidity" is within the horizon of the monetarily insane, thus a fair bet.
Agreed. You don't have to be faster than the bear, simply faster than the slowest camper............
"Heavy is good, heavy is reliable. If it doesn't work you can always hit him with it..."
I think Ben's been outta ammo for awhile at this point.
http://www.youtube.com/watch?v=lX0MB7pJtKs
Hey, is it just me or does Boris the Blade look a lot like Mr. Burnhackey, but with a bit more undyed hair?
Regards
We all know Ben has more then one bullet, he has trillions of bullets. He has made it very clear that he will stop at nothing to keep this dream alive. He will just take us from from -13T to -20T to infinity. Better yet he doesn't need any bullets, remember he is Ben, the fearless one that can take on anything. Show us oh fearless Ben....
...
http://www.youtube.com/watch?v=f94WI-0chv4
"Use the force Ben..."
That ongoing buying support I detected has morphed into a rally...
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
How long you think the Chinese Towing and Salvage Company will keep bailing out the Yuro?
For the investors, not traders, out there...
Here's my problem with Bob's advice:
Debt is deflating relative to gold, not relative to fiat because debt = fiat. This trend will continue and could get worse unless we (USA) suddenly stop saving banks and stop spending money we don't have. Since debt is payable in fiat, debt becomes easier to service. Over time, as prices for commodities and products inflate, corporations find it even easier to service and pay down debt. Over years, since, as stated above, fiat becomes "asswipe", corporations that have pricing power can now completely pay their debts.
So, my problem with Bob's advice is that owning debt equals owning fiat. You will get your asswipe given back to you with interest. But owning equity is not owning fiat but owing brands, a means of production, etc. etc. If MoASS on paper hits quickly, which it seems like it could, even short term debt could lose value very quickly. Better to be in those "risky" equities. And, of course, gold.
I welcome your thoughts?
The problem with that analysis is in deflation equities get crushed by the fund withdrawls, de-risking and margin calls. Your point is well taken if you can time the market for after the bear phase. Buy dividend paying brand leaders - price makers not price takers.
"2008 will seem like the good old days"
Okay, he stole that one from me.