Bob Janjuah: "In One Year I Expect Global Equities To Be 25%/30% Lower; The S&P Will Reach Low 1000s In October"Submitted by Tyler Durden on 10/03/2011 06:56 -0500
Nomura Bob is back with another hotly anticipated if, unfortunately, grammatically flawless, market strategy piece. Short and sweet, Bob as usual cuts right to the point. "My secular view remains bearish. In or within a year from now I expect global equities to be 25% to 30% lower. My S&P500 target for the low in 2012 remains 800/900, and I think an 'undershoot' into the 700s is entirely possible. In this bearish outcome I would expect 10-year bund yields at 1% to 1.25%, 10 year UST yields at 1.25% to 1.5%, and 10-year gilts below 2%. The USD should do well, credit and commodities should not....On a secular basis, investors should remain cautious, and focus on strong balance sheets and strong/robust business models. I expect the next year to be about capital and job preservation. Any counter-trend rally should be tradable but short lived - it should be viewed opportunistically."
- German conservative MP says "Greece is bankrupt" (Reuters)
- Eurogroup to discuss EFSF leveraging, Greek reforms (Reuters)
- Europe Aims to Dodge ‘Scapegoat’ Label (BBG)
- UK Treasury Fears Effects of a Euro Break-up (FT)
- Dollar Beating All Assets in September Undermines S&P Downgrade (BBG)
- Japan Tankan Sentiment Below Pre-Quake Level on Global Slump (BBG)
- Osborne Reaches for Middle Ground (FT)
- Hong Kong Banks Face Higher Credit Risks in Midterm, KPMG Says (BBG)
- Greece to Miss Deficit Targets Despite Austerity (Reuters)
- US Congress Presses China on Currency (FT)
On the policy front, a series of critical EFSF votes went through last week without any hiccup, including the German, Finnish, and Slovenian decisions. Though the clearing of these hurdles provided some support to markets in the earlier part of the week, renewed Greek headlines pushed risky assets lower. In FX, a similar pattern persisted as in other asset classes, with most Dollar crosses matching the round trip during the week, including in EM. Only a few currencies marked notable new lows last week, in particular the Canadian Dollar. Positioning has continued to move in favour of defensive currencies, in particular the USD. The latest IMM report hints at very stretched short positioning in currencies like the EUR, AUD, and CAD. The upcoming week will provide more detail on both key subjects. Firstly, we will get the latest round of PMIs, though regional US surveys and preliminary readings in Europe suggest that macro data will continue to stabilise at relatively low levels, as mentioned earlier. The second important issue is the upcoming ECB meeting.
Presenting some deeply philosophical observations from the man who has been wrong about pretty much everything, and to whom the jarring return of reality and its relentless destruction of the ivory towers he has carefully erected his entire career, can only be described as "surreal." No Jim - it's not surreal. It is all too real. The only surreal thing will be the response when GSAM's LP get their year end performance statement.
In David Kostin's latest weekly chart book, in addition to the plethora of useful charts (if materially incorrect when it comes to fund flow data - never before have we seen such as disconnect between Lipper/AMG and ICI flow data, allowing one to pick and chose which data set to use depending on their point), and market statistics, the Goldman head strategist observes a rather curious psychological schism, notably as pertains to investor sentiment regarding the financial powderkeg known as Europe. Namely that while US investors just need to read a Euro-negative headline to sell everything, in Europe Goldman's clients are largely oblivious of any and all adverse developments. To wit: "Our meetings with clients in Europe and the US during the past two weeks showed investors in continental Europe to be more composed about the direction and pace of policy decisions. US and UK investors are far more anxious about potential policy solutions and the cumulative impact of a drawn out resolution." We wish we could recreate the European nonchalance, in no small part predicated by the general mindset of a socialist backstop to another global collapse, which in case of failure, will simply mean the activation of US-based FX swap lines, and thus America would have to bail out Europe once again like it did back in 2008. In retrospect we can see why nobody in Europe is too worried. Also, perhaps Goldman should do a better job at distributing the report by its own Alan Brazil saying Europe is doomed...
We are going to hear several carefully fashioned talking points concerning the economic collapse over the course of the final quarter of 2011, especially in light of the dismal end of the stimulus driven bull market that sustained public optimism since the derivatives implosion in 2008. Let’s not forget, three years ago mainstream economists and the Obama administration were calling for a near full recovery by 2011. Obviously this never materialized, and so, the game has to shift to a new dynamic to keep us all guessing. The deflationary boogieman will be resurrected to frighten taxpayers into taking on even more debt in order to feed the fiat machine, but this is going to meet extraordinary resistance. If you think the protests on Wall Street today are gaining momentum, just wait until Helicopter Ben announces QE3! The next logical step in the progression of banker planning is the call for “Globally Coordinated Action”; global initiatives tying numerous countries together in a unified effort to whitewash the crisis and solidify their real purpose of economic centralization.
All you need to read. (a little late today)
Today’s session has been a quiet one so far as markets digest yesterdays German EFSF vote and trading has seen light volumes heading into the month and quarter end. Weakening in the Euro currency was observed after higher than expected Eurozone CPI, which led to market participants further questioning whether the ECB will now be cutting interest rates in their monthly Governing Council meeting next week. As European bank fragility has remained in focus in recent times, news came from the EU Commission that they have temporarily approved state aid worth EUR 4.75bln to recapitalize three Spanish savings banks, although little reaction was seen in the markets. The largest moves have been seen in crude futures today with WTI and Brent trade down around USD 1, extending their quarter losses which remain on track for their biggest drop in 15 months. We’ve also seen the German upper house now approve EFSF expansion, and are awaiting final approval from Austria at today, although no time has been given. Looking ahead to the US cash open, focus will be on the US Chicago PMI data which is expected to show a slightly lower than previous reading at 55.0, plus the final University of Michigan Confidence number 10 minutes later. Hope will be that these readings add to yesterday’s indication of some recovery in the US economy.
While all eyes this morning are on Chinese CDS (with about an 18 month delay: about par for a centrally planned market), which has finally blown out, the shifting of attention has done nothing to fix the situation in Europe, where CDS is once again wider across the board.
- The German lower house passed the EFSF amendment bill with a leading conservative lawmaker noting that the coalition did not need to rely on opposition votes.
- Fed’s Bernanke said the central bank might need to ease monetary policy further if inflation or inflation expectations fall significantly.
- German BDB confirms that the 90% target rate for private sector involvement in the second Greek bailout has been met adding that the ECB is well prepared to assist EU banks.
- Greek PM will travel to Paris on Friday to discuss debt crisis with French president Sarkozy according to a source.
- Banks and other private sector bondholders are resisting the idea of taking larger haircuts on Greek debt by lobbying countries such as Germany and the Netherlands.
Citi's Economics team downgraded global growth expectations once again, expecting 3.0% this year (versus 4.0% last year) with more aggressive downgrades next year to only 2.9% (from 3.2% expectations last month and 3.7% two months ago). Growth revisions were downgraded for every major global economy as expectations move with Goldman's coincidentally-timed discussion of stagnation (also tonight) with advanced economies cut more than developed though Eastern Europe saw the most significant reductions. They note that 'the recent pace of GDP forecast downgrades is among the greatest of the last ten years' and extends the recent run of lower forecasts to four months-in-a-row. In a secondary note, Willem Buiter and team also pour cold water on market expectations for the EFSF pointing out, as we have done for a few weeks now at every suggestion, that all the different options have their shortcomings and are unlikely to be implemented quickly.
A short time ago, the financial relevance of the UK seemed in jeopardy, but two events announced only yesterday suggest the Square Mile will remain a major player in international trading, at least for the time being.
Step Aside BBC "Trader": Head Of UniCredit Securities Predicts Imminent End Of The Eurozone And A Global Financial ApocalypseSubmitted by Tyler Durden on 09/28/2011 08:05 -0500
Either the YesMen have infiltrated Italy's biggest, and most undercapitalied, bank, or the stress of constant, repeated lying and prevarication has finally gotten to the very people who know their livelihoods hang by a thread, and the second the great ponzi is unwound their jobs, careers, and entire way of life will be gone. Such as the head of UniCredit global securities Attila Szalay-Berzeviczy, and former Chairman of the Hungarian stock exchange, who has written an unbelievable oped in the Hungarian portal Index.hu which, frankly, make Alessio "BBC Trader" Rastani's provocative speech seem like a bedtime story. Only this time one can't scapegoat Szalay-Berzeviczy "naivete" on inexperience or the desire to gain public prominence. If someone knows the truth, it is the guy at the top of UniCredit, which we expect to promptly trade limit down once we hit print. Among the stunning allegations (stunning in that an actual banker dares to tell the truth) are the following: "the euro is “practically dead” and Europe faces a financial earthquake from a Greek default"... “The euro is beyond rescue”... “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”...."A Greek default will trigger an immediate “magnitude 10” earthquake across Europe."..."Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes.” In other words: welcome to the Apocalypse...