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Albert Edwards' Bleak Crystal Ball Reveals Gold Above $10,000; S&P At 450 ; And Sub-1% Bond Yields
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.
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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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Time to take the trailing stops off my trades. We're entering the "Twilight Zone" of N.Y. and I don't want to get 'flash crashed' out of my positions.
YAWN, edwards is always bearish.
Edwards = hack
According to Credit Suisse:
Money Matters: FOMC Preview - Tapering versus Tightening
- The FOMC next meets on April 30-May 1, and we expect no significant policy changes to be announced at that time. Even if the Committee had been entertaining notions at its March 19-20 meeting of slowing its asset purchases anytime soon, the disappointing economic data released since then probably have shelved such plans for several months.
- In our view, an opportunity to scale back the asset buying may not come until later this year perhaps in September. For now, we expect the size of the Fed's monthly purchases to remain at $85bn ($40bn MBS, $45bn Treasuries).
- Looking forward, we maintain that any future decrease in the size of QE3 purchases would not be a monetary policy tightening, although the markets may initially react as though it were.
- Moreover, even if the Fed were to eventually end QE3 sometime in 2014 and start hiking interest rates in 2015 (or later), we believe monetary policy still will remain very accommodative for many years.
- The risk is that even if business cycle conditions were to allow the Fed eventually to firm up its policy stance, subsequent economic performance (or budgetary strains or financial fragilities) would force renewed easing long before the Fed reached an elusive "longer run" neutral funds rate target.
- Monetary Policy Review/Preview
- Beige Book (released on April 17).
- Fed Balance Sheet Update
- The Fed's MBS portfolio surged $55bn to $1.1tr in the week ended April 17.
- Excess reserves total $1.8tr, $159bn above their previous peak in July 2011.
- Money Supply Update
- M1 posted its largest weekly decline since just after the 2001 terrorist attacks.
- A $63bn pop in savings accounts at commercial banks limited M2's decline.
- Bank Balance Sheet Update
- Adjusted for a 2010 accounting change, commercial bank loans outstanding yesterday (April 23) are still some 5% below the Q4 2008 average.
- Cash assets held by domestically chartered banks have jumped by more so far this year than have cash assets at branches of foreign banks in the US.
Not real sure how to put this...
If the USD burns, then would that not leave the TB's in a jam and rates INCREASE, and Gold would also debase?
I would think what is going to happen is ALL currencies would tank, therefore, Gold and all commodities priced in a currency would follow suit and tank. The difference is Gold would at least have some value, and currency would be completely worthless. All paper investments would trend to zero, in that case. Lastly, the world would become barter town. Problem being how do you value the PM's henceforth? In other commodities?
When the SHTF, it will be skills and real things (water, food, nails, hammers, booze, tobacco, etc) that would have the ultimate value, no?
Reason I say this, and it may be simplistic, as I am no high financier, but once the currency burns, there will be worldwide panic/chaos, and the govts will have no power to institue a 'replacement' currency, as they will be fighting for their very lives, so will we. It wont be until the chaos dies down, how long that will take is anyone's guess, for some rule to go into effect. My guess is currency based on LAND??? After all land is the most productive resource, along with water...so land with water will be the highest premium, which brings me to Agenda 21...NDAA, etc...strip rights and guns first, then the PTB can just TAKE OVER. Fuedalsim all over again, and the darkest of ages, as so many skills have been lost since the industrial revolution came about. Manual skills, growing skills, LIFE SKILLS...sans a select few who practice it now!
Just my two common cents is all...out! Please let me know what you think, inquiring minds would like to know.
Love and regards from Sgt. Unix Crust
Methinks they will "acquire" your land too.
Read carefully re the Bass man. He might be 1 of 9 but Not a single ounce of physs changed hands.
TPTB are not going to allow their paper ponzi to be destroyed PM's going parabolic - I have a little stack of both but am amazed at what lengths they will go to in order to maintain control of the system and the sheeple. If perchance gold went to $10k then they would make it next to impossible to sell it or they will confiscate it.
if the S&P tanks by more than 60% the TBTF are wiped out and no government can bail them out.
A repeat of 2008 is just not on, either in US or in Europe.
So this Edwards prediction is spelling huge financial Armageddon. Its heresy.
And the Cbs will not accept it. The market belongs to them and they still have huge fire power as the poiticians will freeze markets and do some bail-ins to suck money back from the Oligarchs.
Gold going ballistic is the end of capitalism as we understand it. There will be war before that occurs.
Edwards = hack