Albert Edwards' Bleak Crystal Ball Reveals Gold Above $10,000; S&P At 450 ; And Sub-1% Bond Yields

Tyler Durden's picture




 

Just because some of the C-grade financial "pundits" out there may have been confused that Albert Edwards was turning bullish in recent months, this should help clear all confusion.

We still forecast 450 S&P, sub-1% US 10y yields, and gold above $10,000

 

My working experience of the last 30 years has convinced me that policymakers’ efforts to manage the economic cycle have actually made things far more volatile. Their repeated interventions have, much to their surprise, blown up in their faces a few years later. The current round of QE will be no different. We have written previously, quoting Marc Faber, that “The Fed Will Destroy the World” through their money printing. Rapid inflation surely beckons. But that will not occur without firstly a Japanese-style loss of confidence in policymakers as we dive back into recession and produce dislocative market moves.

 

Andrew Lapthorne passed me a great chart the other day of bond strategists? forecasts. It reminded me of similar charts for analysts? earnings forecasts from my former colleague, James Montier. There are some ever-present truths in this business. Economists usually forecast a return to trend growth and will never forecast a recession. Equity strategists tend to forecast the market will rise 10% each year and will never forecast bear markets. And since the equity bubble burst in 2000, bond strategists, in a discernible break in behaviour, now only ever forecast that bond yields will rise (see chart below).

 

I agree that bond yields will indeed be heading higher in the next 3-5 years ? much, much higher. But the consensus has still not accepted that we remain locked in an Ice Age environment that will see US (and UK and German) yields converge to Japanese sub-1%.

 

The late Margaret Thatcher had a strong view about consensus. She called
it: “The process of abandoning all beliefs, principles, values, and
policies in search of something in which no one believes, but to which
no one objects
.” The same applies to most market forecasts. With some
rare exceptions (like our commodity analysts? recent prescient call for a
slump in the gold price), analysts don?t like to stand out from the
crowd. It is dangerous and career-challenging. In that vein, we repeat
our key forecasts of the S&P Composite to bottom around 450,
accompanied by sub-1% US 10y yields and gold above $10,000.

Some other thoughts from Albert on 10 Year bonds:

US 10y nominal yields have been edging down recently to 1.70% and the gap with real yields has closed ever so slightly, but the gap itself (implied inflation expectations) remains high.

There is much more, but the most amusing is where SocGen (Edwards) disagrees with SocGen (Legland) on gold:

We have been asked extensively about the slump in the gold price,
especially in the context of our commodity strategist?s prescient report
calling for just such a decline ? link. My own view is that the reasons
for owning gold have not changed. I expect imminent recession to be
more likely than imminent takeoff and hence the real yield (a key gold
driver) should remain low.

 

 

Gold corrected 47% from 1974-1976 before rising more than 8x to US$887/oz in 1980. A steep correction is normal before the parabolic move. As Dylan said in his note of Sept. 2011, The market for honesty: is $10,000 gold fair value?, holding gold is a bet against central banks competency and given their track record that?s certainly a bet I?d be happy to still take.

 

* * *

Hopefully this should eliminate any confusion where Albert stands: certainly not with the rest of the fair-weather, momentum chasing pneguins.

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Thu, 04/25/2013 - 07:57 | 3496801 Bazinga
Bazinga's picture

My only analysts are Ms. Silver and Mr. Gold...

Thu, 04/25/2013 - 07:59 | 3496808 GetZeeGold
GetZeeGold's picture

 

 

I'm heavy Mediterranean paper.....gotta believe those guys are due for a break.

Thu, 04/25/2013 - 08:45 | 3496912 monkeyboy
monkeyboy's picture

Gold @ $10,000.

 

Good times well and truly over for the mass population of the planet if Gold hits $10,000.

 

Fun times, unlikely. Defintely not a pretty picture.

 

Thu, 04/25/2013 - 08:55 | 3496959 GetZeeGold
GetZeeGold's picture

 

 

Ten years ago they told me $1000 would be lights out. I didn't pay any attention to them then either.

Thu, 04/25/2013 - 09:14 | 3497039 francis_sawyer
francis_sawyer's picture

Ms. Silver and Mr. Gold...

~~~

They sound jewish

Thu, 04/25/2013 - 13:17 | 3498558 LaoTzu60606
LaoTzu60606's picture

In reading the "Jew" comments here, it occurs that many do not know from history why Jewish people became bankers.

Simply, the Europeans misstrusted each other and needed someone to trust to hand over the Yayo (see Scarface)...

When an Englishman bought goods from an Italian, the Jewish banker in England (until circa 1300 when all Jews were kicked out of England) would settle with the Jewish banker in Italy, trusted him to hand over the briefcase as it were when the goods changed hands...

So, the Jewish banker, broker, trader, etc...

 

 

Fri, 04/26/2013 - 11:44 | 3502558 mackeyreport
mackeyreport's picture

Reading too much into the comment. Silver and Gold are commonly Jewish last names.

Thu, 04/25/2013 - 08:06 | 3496822 jimmytorpedo
jimmytorpedo's picture

But who will want to trade their gold for a wheelbarrow full of useless paper.

The higher the price goes, the less likely people who hold gold will want to trade it.

Thu, 04/25/2013 - 08:23 | 3496863 azzhatter
azzhatter's picture

That's the funny thing about my stacks- there is no price in fiat that I would sell them for right now. I wouldn't take $100 oz for my silver and wouldn't take $5,000 an oz for my gold becuase all I would have is toilet paper

Thu, 04/25/2013 - 08:35 | 3496879 BobPaulson
BobPaulson's picture

With respect, that is clearly hyperbole. I assume you buy things to sell it later, not to line your coffin. I bought mine as an insurance against a once in a lifetime event, not against a never in a lifetime event. I would argue if you don't know under what conditions you would eventually sell, then you shouldn't buy something, unless you use it every day, like land.

For example, if there was some kind of currency rout and real shortages on the streets for consumables and I had a once in a lifetime opportunity to buy a big farm or a section of forest with my gold, I would buy it and crystalize the win. I don't own gold so I can put it over my eyes one day.

Thu, 04/25/2013 - 08:50 | 3496937 BeerBrewer09
BeerBrewer09's picture

Great post.

In theory, we would each like to ride each bubble up to its peak and unload onto the next one, exponentially increasing our investment. Land is the best thing to own (ok, so a bunch of people say you never truly own land, but what in life do you truly own, your thoughts/actions?) and if gold becomes so highly valued that people will trade their land for it, then I would certainly trade the shiny stuff for it.

Thu, 04/25/2013 - 11:16 | 3497848 Harlequin001
Harlequin001's picture

True, the most important aspect of any investment is the exit...

Thu, 04/25/2013 - 13:28 | 3498625 LaoTzu60606
LaoTzu60606's picture

your grandchildren may not like that statement

Thu, 04/25/2013 - 09:34 | 3497138 venturen
venturen's picture

Ah but when to sell...you didn't sell in at $500, $1000, $1500...what about $2000, $3000, $4000? Would you sell at $20000? Paper currency, well the US Dollar is in the process of killing itself....I have some nice 100,000 Turkish lira bills I could sell you? How much would you pay? Oh wait is that pre or post revaluation?

Thu, 04/25/2013 - 23:19 | 3500874 Jam Akin
Jam Akin's picture

Will need to average out at an escalating profit like anything else.

Thu, 04/25/2013 - 09:36 | 3497148 ReactionToClose...
ReactionToClosedMinds's picture

 ....all true ... under the assumption you live in a place where you have confidence that your land or farm would never be taken.  Yet not too long ago some of the most brilliant minds in modern humanity did (and justified) that in over one-third of the world under 'collectivist' rationales.

Gold, can actuall 'move' if you think it through ..... land ... not so much

 

Thu, 04/25/2013 - 13:26 | 3498617 LaoTzu60606
LaoTzu60606's picture

with equal respect, disagree with your disagree...

the reason for owning assets is the connectionto our DNA requirement for safety and security...

the settled mind is aided by assets that one feels protects him, 

so real intrinsic value to the ownership

I disagreed as I read it, but then in thinking, understand...if I sold all PM tomorrow, what would I do with the cash?

 

 

Thu, 04/25/2013 - 09:23 | 3497069 markettime
markettime's picture

I would take it if I knew for sure I could go and get some more at todays prices :)

Thu, 04/25/2013 - 10:45 | 3497631 Parabox
Parabox's picture

unless maybe I could pay off my mortgage and school loans with it.  What is the price of being debt free? (beyond mandatory rent for the gov)

Thu, 04/25/2013 - 12:51 | 3498392 jimmytorpedo
jimmytorpedo's picture

Hey Azz, i think its funny that people down voted you for stating your preference.

Haha.

I prefer chocolate over vanilla.

Rum over tequila.

Women over girls.

Let's watch the downvotes roll in from vanilla lovers!

Thu, 04/25/2013 - 08:33 | 3496875 JPMorgan
JPMorgan's picture

If you have any outstanding loan's like a mortgage you may find you have the means to pay it off though.

They can't change the intitial loan amount nominated in a fiat currency amount, only the interest payable.

Thu, 04/25/2013 - 08:45 | 3496913 DeadFred
DeadFred's picture

With Cyprus and MFGlobal in the rear view mirror I'd be cautious in my assumptions about what they can or cannot do.

Thu, 04/25/2013 - 09:03 | 3496968 Greshams Law
Greshams Law's picture

If I recall correctly, Argentina did exactly what you say can't be done. They kept loans denominated in USD and converted deposits into another new Peso.

 Of course, that could never happen here, again. Holders of Continentals were slightly pissed.

Thu, 04/25/2013 - 14:27 | 3498905 Ratscam
Ratscam's picture

after the Weimar Republic hyperinflation ze German government decided to put on every property a mortgage of 20% that acted as collateral for their new currency. Uups, an immediate 20% increase of your LTV

Thu, 04/25/2013 - 09:37 | 3497152 Ruger556
Ruger556's picture

Just my 2 cents, well, I would sell some if I had a contract (like a mortgage) written in US dollars and then I could own my house free and clear (except for the illegal taxes) .. but it depends then too, because if gold is 10000, then that means bread is like 100$ a loaf or something.  Usually when that happens your wages inflate too.. remember the lady from Weimar Germany who wrote a journal.. she was getting paid billions a week, at that point, I wouldn't have to sell my gold I could use those billions to pay off my contract debt.   The only catch is, how much contract debt can I accumulate and then time things right?  Not so easy.. either way.. hard assets fall in price with all this printing as people are not worried about land or houses when they have no food.  So that is when you trade some of your stash for land or that sherman tank you always wanted but could not afford, or a gulf stream V??  Just dreamin'.

 

 

Thu, 04/25/2013 - 08:06 | 3496823 Fuh Querada
Fuh Querada's picture

More like Mrs Hand and her five daughters....

Thu, 04/25/2013 - 08:11 | 3496833 Its Only Rock N Roll
Its Only Rock N Roll's picture

sung by the best......

 

http://www.youtube.com/watch?v=_bV3XUh_alg

 

Tue, 05/28/2013 - 16:21 | 3604836 Remington IV
Remington IV's picture

Albert ........ never right , but never in doubt

Thu, 04/25/2013 - 07:57 | 3496804 reload
reload's picture

Suits me: soon though......?---not holding my breath

Thu, 04/25/2013 - 08:01 | 3496809 Quinvarius
Quinvarius's picture

This gives me a raging destructo-boner.

Thu, 04/25/2013 - 08:03 | 3496816 a growing concern
a growing concern's picture

"You'll shoot your eye out."

Thu, 04/25/2013 - 08:00 | 3496812 max2205
max2205's picture

We are not in Kansas Toto

Thu, 04/25/2013 - 08:03 | 3496814 The_Small_Lebowski
The_Small_Lebowski's picture

As far as i can see this aint over. Guess the indicator ?

http://www.freeimagehosting.net/c7jaf

Thu, 04/25/2013 - 08:07 | 3496824 GetZeeGold
GetZeeGold's picture

 

 

 
Biography: I want more money.

 

Would you just settle for some fiat?

Thu, 04/25/2013 - 08:17 | 3496818 ugmug
ugmug's picture

I'll take Gold for $10,000 Alex.

Answer.....Gold Helicopter Blades

 

Question? What are Ben Bernanke's Teeth.

Thu, 04/25/2013 - 15:00 | 3499088 Colonel Klink
Colonel Klink's picture

Pubes from the bankster elite he's been blowing?

Thu, 04/25/2013 - 08:05 | 3496821 justinius1969
justinius1969's picture

Timing is everything..

Thu, 04/25/2013 - 08:07 | 3496827 Archimedes
Archimedes's picture

You beat me to it. "When Albert? When?" Timing is indeed everythig and you have been making this call for many years now.

Thu, 04/25/2013 - 08:13 | 3496840 dick cheneys ghost
dick cheneys ghost's picture

when the Dollar dies...........because will the world still use the Dollar for Int. trade? What will oil be traded in? Yuan, Ruble or Euro...?

The paraidigm changes when the world uses a different trade settlement system, not before

Thu, 04/25/2013 - 08:19 | 3496857 buzzsaw99
buzzsaw99's picture

^This^

Thu, 04/25/2013 - 08:52 | 3496946 AnAnonymous
AnAnonymous's picture

How old is Edward? If born before 2000, then elements of his predictions wont be during his lifetime.

Thu, 04/25/2013 - 08:08 | 3496825 orangegeek
orangegeek's picture

If gold, priced in US Dollars, goes to $10,000, which is fine, then the value of the US Dollar will plummet - so more US Dollars would be required to buy the same ounce of gold.

 

Overlay of USD and Gold:

 

http://bullandbearmash.com/chart/gold-falls-dollar-climbs-vice-versa/

 

If the US Dollar falls, the Euro, Yen, Pound and CDN will rocket in value - not likely to occur.

 

And if the US Dollar plummet, the S&P500 will be 3000, not 450.

 

In spite of the 18% drop in gold, the largest drop ever in the history of the planet, gold prices are still going to the moon. 

 

Denial is a powerful thing.

 

Thu, 04/25/2013 - 08:11 | 3496830 JFK.4PREZ
JFK.4PREZ's picture

http://www.reuters.com/video/2013/04/24/reuters-tv-3-myths-about-gold?vi... myths about gold   <== Have you guys seen this redonkulous reuters vid.   The guy in this video should get stoned.  ...Or is he?

Thu, 04/25/2013 - 08:11 | 3496836 JFK.4PREZ
JFK.4PREZ's picture

The title is 'The 3 myths about Gold'  

Thu, 04/25/2013 - 09:02 | 3496993 Quinvarius
Quinvarius's picture

He is reaching pretty hard to twist the truth in an environment he doesn't understand.

Thu, 04/25/2013 - 08:56 | 3496963 Quinvarius
Quinvarius's picture

It all depends on how the companies navigate the mess.  A lot will go bankrupt.  A company is a living thing.  Gold is just money. 

Thu, 04/25/2013 - 09:03 | 3496986 Quinvarius
Quinvarius's picture

Duplicate

Thu, 04/25/2013 - 09:06 | 3497004 cynicalskeptic
cynicalskeptic's picture

COMEX expiration today.  Price is already headed back up nicely for both gold and silver.   Not even waitiong for the afternoon.   Anyone starting a pool on when/if theree will be a default?  Or is it simpler to go for when JPM's vault is empty (officially... odds are it has been since it opened)

 

For those intersted in such things, get your orders in for US Mint Gold Eagle Proofs before next week's price reset (seems like an increase will be in the cards after this week's reduction)

Thu, 04/25/2013 - 09:30 | 3497111 Pareto
Pareto's picture

Most logical post I've seen on this thread yet.  Competing currencies will rally aginst $USD debasement, followed by competitive devaluation inturn.  In the meantime, US, like Japan's Nikkei will see SnP 3 times its current position.

Thu, 04/25/2013 - 08:08 | 3496826 Charles Nelson ...
Charles Nelson Reilly's picture

What about Bitcoin?

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