Janjuah Stopped Out

Tyler Durden's picture

While Nomura's Bob Janjuah remains 100% correct in his diagnosis and prognosis of the current 'grossest misallocation and mispricing of capital in the history of mankind', his tactical short was stopped out last week. The modest loss on the position though provided clarity on the importance of the 1450 level for the S&P 500 and he remains confident that on a multi-month timeframe he expects 800 to be hit with only a muted 10% possible upside in global equities due to underlying growth, debt and policy-maker concerns. Critically, he suggests it is premature to go aggressively short risk at this precise moment, urges traders to stay nimble, and warns "...risk assets are in a bubble which of course can extend, but which can reverse sharply and suddenly. Up here, 'valuation metrics' are not going to help much... this bubble could extend for maybe a few months and by up to 10%, ...but that we could see global equity markets 10/15% lower in virtually a 'heartbeat'."


Bob Janjuah, Nomura: Bob's World

I refer to my most recent note 'Bob's World: When Money Dies', released on 18 September. As discussed in that note, based on weekly closing levels at the end of last week, my stop loss on my risk-off 'short S&P500' trade, initiated last month on 21 August at an S&P500 level of 1425, has been triggered.

Notwithstanding the triggering of the stop loss, which has resulted in a very minor 35 point 'loss' (relative to the 300 point gain we have enjoyed since early April), the stop loss was only just triggered, with upside/bullish price action and momentum at surprisingly soft levels over the last 5/10 days. It was extremely informative to see that post the QEinfinity announcement, which drove the S&P above 1450 on the day of the Fed action on 13 September, and after an opening high of 1475 on 14 September, the S&P sold-off and got down to a 1450 low last week! And then – confirming that 1450 was an important level, and is now a critical pivot point for the S&P – mutedly bullish price action on last Friday activated the stop loss.

From here, I would currently be flat or neutrally positioned. On a multi-month timeframe – and before the next major multi-quarter bear market phase starts and which I still expect to result in an 800 S&P - the upside in global equities is in my view pretty modest, around 10 %, based on underlying growth, debt and policymaker credibility concerns. However, until and unless the S&P index demonstrates a weekly close below 1450, I believe it is premature to go aggressively short risk – tactically at least – at this precise moment. That opportunity is unlikely to be more than a few months away, and could even present itself in the next fortnight or so. Data, news flow, price action/volumes/market leadership and abrupt changes in market sentiment and belief in policy/policymakers will be the drivers.

For readers able to be very tactical I would recommend a flat/neutral position in risk between 1450 and 1475 on the S&P500. A single weekly close above 1475 would suggest more short-term upside momentum is possible, and as mentioned above a weekly close below 1450 would suggest more bearish price action. In any case, the important message now is to accept that, in my view, risk assets are in a bubble which of course can extend, but which can reverse sharply and suddenly. Up here, 'valuation metrics' are not going to help much.

So stay nimble, focus on tactical trading, and for now be as flat or as close to benchmark as possible. Readers need to be open to the idea that this bubble could extend for maybe a few months and by up to 10%, and to the idea that we could see global equity markets 10/15% lower in virtually a 'heartbeat'. Also of course we could well see both outcomes, where we end up with the market in a (wide) trading range with numerous mini risk-on/risk-off phases that result in no overall directional move. The next few weeks and months are going to be challenging for tactical trading, but we will endeavour to do our best to provide forward-looking guidance as themes and trends become clear.

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PivotalTrades's picture

The economy will get weaker and asset prices will go higher. They are destroying the unit used to purchase all things. 

As I pondered how an economist such as Krugman could be awarded the Nobel Prize I remembered that Obama was also awarded one for peace. With the storming of our embassy in Libya and murder of our ambassador and now with the whole world (China vs Japan), (Iran vs Israel) (Syria) seemingly on course to world war III I realized how political and meaningless the prize has become. Then last night I was flipping through the channels and stumbled upon some show I think was called Strange but True. This episode was about a Dr. Moniz of Lisbon. He was awarded the Nobel Prize for administering Lobotomies to some of his patients.  At first hailed as a magical cure it was latter discredited and found to be barbaric and ineffectual. It basically caused more permanent damage than any good it provided. Imagine that a Nobel prize awarded for a procedure that rendered those that received it worse off.  Krugman and his Keynesian cronies, and for that matter all Democrats and Socialist, those that believe there is a free lunch, or that the government is entitled to the product of one mans labor and effort so that it can redistribute that product to another man; those that believe that more debt will solve a debt problem and that more spending above your income will cure what ails this country will be the cause of severe damage. Maybe its time for some selective lobotomies starting with the Keynesians and the Socialist adherents.

GetZeeGold's picture



lobotomies starting with the Keynesians and the Socialist adherents.


We tried it on the Zombies Doctor.....it had no effect.


Boeing Boy's picture

Where are we on gold stocks?  Same outlook or different?

BaBaBouy's picture

SACKS talking down GOLD again...


Goldman Sachs Forecasts 18.2% Return on Commodities in 12 Months BloombergBy Claudia Carpenter | Bloomberg – 5 hours ago

Goldman Sachs Group Inc. forecasts an 18.2 percent return on commodities in the next 12 months, with energy and industrial metals leading the way. The Standard & Poor's GSCI Enhanced Commodity Index gain of 18.2 percent will compare with 26.5 percent in energy, 10 percent in industrial metals and 6 percent in precious metals, Jeffrey Currie, an analyst at Goldman Sachs, said in a report dated Sept. 21. Agriculture will be down 5 percent over the same period and livestock up 4.5 percent, according to the report. The Federal Reserve's third round of quantitative easing will help boost copper in the 2013 first half, he said.

JPM Hater001's picture

So it may go up...slowly, or down quickly.

Need more meat on that bone.

DavidC's picture

Smame Bob Janjuah got stopped out, he's been right about what's been happening. Still, 35 point loss against 300 point gain is good.


asteroids's picture

Even if the market drops 50 points this week I would still cheer him. It's discipline that keeps you in the game for the long run.

Monkeyfister's picture

I am still of the mind that the Suburban sprawl model of "development" was the 'grossest misallocation of capital in the history of mankind'. Everything happening now is the end result of that misallocation. The recent crisis started with the collapse of the Housing market, which had over-extended to exurban tracts that no-one could afford to commute from. Get to the root. The rest of all this is just to save the Banksters. They don't want to fix the cause.

slaughterer's picture

Bob caught the upswing, but timed the crash wrongly.  He got out of his short with good money management, rather than wait for more losses.  Nothing wrong here. 

helping_friendly_book's picture

I'm not so smart/lucky. I didn't use a stop loss when I bought spxu last Oct.3rd and it's been kicking my ass ever since. I would just sell but, what's the point? I'm still waiting for Shaloms levetating powers to fail. It might pay off still. It sucks to be pissed for a year. I would like to break that commie in  two.

JustObserving's picture

How can you apply logic and reason to manipulated "markets"?  They are not amenable to them.  You will lose if you do.

The Fed controls all asset prices.

vinayjha's picture

Dumb fed 


Fed increased balance sheet to 2.9 trillion since 08. Instead if they had given 1 million USD to 2.9 million people,economy w'ld be shinning



eigenvalue's picture

Bob Janjuah is stopped out. David Rosenberg has turned bullish (because he believes with QE markets will never fall). We haven't heard from other uber-bears, like Dylan Grice or Albert Edwards. Are they still OK and not fired? 

JawsMusic's picture

You can't fight the printer... 

AynRandFan's picture

This is the unshortable market.

Grand Supercycle's picture


Due to recent central bank intervention and short covering spikes, these daily charts are extremely overextended and significant correction expected very soon:




Ted K's picture

So Mr. Janjuah, what you're saying is the market could go up by 10% at any moment, or down 10% at any moment. Wow, way to grab the tiger by the balls Bob.

Obnoxio's picture

The Stock markets and the economy have clearly separated. The Central banks are providing a liquidity drip to keep markets buoyant. I don't see an S&P crash unless there is forced selling to meet obligations or everyone tries to take their profits at the same time. There may be some pull backs but not nearly to 800 S&P in my opinion. That would require deflation to be allowed to take hold. There could also be external shocks such as several London Whale type losses hitting at the same time causing some panic.

Colonel Klink's picture

This market is a balloon floating in a pin factory.