"Investors Should Be Petrified" Of The Coming Ice Age: Here Are Albert Edwards' Scariest Charts

Tyler Durden's picture

Congratulations to Albert Edwards who this morning announced that he has once again placed first in the 2017 Extel Survey of analysts in the Global Strategy category, for the record 14th year in a row. As he adds "it is particularly gratifying that clients still seem to highly value our thoughts, especially during these cyclical intermissions in the Ice Age, when equities outperform government bonds." This year's victory appears to have been especially hard won because as he adds "you have to have a thick skin in this business, especially when our press office forwards our online press cuttings. Some of the reader abuse can get very, very personal. How do  they know this stuff about me? The comments surely can't all be from my former partner!"

Of course, this being Albert, not even his record victory can brighten up the mood much, and the SocGen strategist then adds that "the current QE-inflated, cyclical equity bull market may have gone on way longer than we expected, but equities have only just managed to catch back up with global 10y+ government bonds (see chart below). The secular equity bear market will inevitably reassert itself and that performance chasm will open up again."

So, inspired by the record victory, Edwards is briefly reprising some of his favourite "Ice Age" charts, traditionally a source of rationality in an otherwise insane market, and lately, world.

* * *

The macro underpinning for our Ice Age thesis is the West's slow replication of Japan's 1990s descent into outright deflation. Each cyclical recovery sees lower highs in both inflation and nominal GDP growth rates and the inevitable recession, when it comes, wreaks increasing levels of havoc in financial markets.

But when we put together our Ice Age thesis over 20 years ago, what distinguished it from other more recent similar ideas, such as Lawrence Summers' Secular Stagnation thesis, was the massive change in financial market valuations we thought would accompany the new increasingly deflationary backdrop.

The big Ice Age call was that the tight positive correlation between equity yields and bond yields that market participants had enjoyed since 1982, driven by ever-lower inflation, would break down. The "long bull market" (see chart below) had been a mirror image of the 1965- 1982 period when yields on both assets had risen together. The Ice Age thesis, drawing on our observations of Japan, predicted that while interest rates and bond yields would continue to fall, equity yields would decouple and begin to rise on a secular basis. For those with a historical perspective the Ice Age would be a mirror image of the 1950-65 period, which had been dubbed in the 1950s "the culting of the equity market" - a term popularised by George Ross-Goobey - link. In the Ice Age, government bonds would rerate relative to equities, with the latter declining in absolute as well as relative terms.

One important implication of the Ice Age thesis was that widely used metrics from the 1980s and 90s, such as the bond/equity earnings yield ratio, would break down. Hence you should no longer buy equities when this ratio fell to 0.8 as they would be undergoing a secular de-rating.

These ideas seemed mad back in 1996, but having witnessed events in Japan through the 1990s we understood that the same forces would prevail in the West. Indeed on some metrics, what happened to the US bond/equity yield relationship closely mirrors that of Japan.

So why is it then that the US equity market has raced to all-time highs? Has the Ice Age thesis broken down? To be sure we saw strong cyclical rallies in the Japanese Nikkei within Japan?s own equity Ice Age secular bear market, but nothing as explosive as this.

The counter-argument to the Ice Age thesis is not just the unusual longevity of the current equity bull market- link. The key is that equity yields have re-coupled with declining bond yields (see chart below). If this is, as we strongly believe, an aberration and the equity yield reconnects with the red dotted arrow, then investors should be petrified of the next equity bear market.

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MCDirtMigger's picture

The charts are pretty.

FreeShitter's picture

Where's the CTRL-P chart? Surely its the most important one.

Sanity Bear's picture

Any investor who takes fear porn seriously already had a stress-driven heart attack and/or stroke and is not in a position to be any further petrified.

hedgeless_horseman's picture


Speaking of forecasts...

Check out next week's amazing weather forecast for the First ZeroHedge Symposium and Live Fight Club in Marfa, Texas!

  • THU, JUN 15, Sunny, High 91° Low 61° 0% Chance of Rain, Wind SE 11 mph, 31% Humidity
  • FRI, JUN 16, Sunny, High 92° Low 61° 0% Chance of Rain, Wind SE 13 mph, 32% Humidity
  • SAT, JUN 17, Sunny, High 89° Low 61° 0% Chance of Rain, Wind SE 11 mph, 27% Humidity
  • SUN, JUN 18, Sunny, High 88° Low 61° 0% Chance of Rain, Wind SE 11 mph, 29% Humidity

There are still a couple of nice but expensive rooms left at the St George Hotel, several homes and rooms for rent on AirBnB, and camp sites at El Cosmico, but we filled all of their teepees, yurts, safari tents, and trailers, as well as all other hotels in town!!!

If you are coming, and want to attend the optional Star Party at the McDonald Observatory and/or Chinati Art Exhibits, then then be sure to buy your tickets in advance.


mrs_horseman and I are looking forward to welcoming y'all to Texas next week.  


If you are still on the fence, then get off it, and come on down!  The speakers and this party are going to be amazing and you only live once.





Tall Tom's picture

Yes they are.


As to those invested into the fraud and the corruption well they need to be petrified, both scared and petrified, as their imminent destruction is at hand..


As for me nothing can look better than the collapse of the fraud, deception, and the corruption.


Who in their right mind would be invested into this trap....this crap?


Those are beautiful charts. I agree with you. They are beautiful.  What is with the negative vibes of these others, man?

Creepy_Azz_Crackaah's picture

ACK! Made me pee my pants.


Antifaschistische's picture

Central Bank counterfeiting will ALWAYS reward the first spenders of fresh e-money/debt.  Even when you go full Zimbabwe, the first spenders still win.  So don't get your hopes up that collapse of fraud and deception is on the horizon.

Mikeyyy's picture

how can a guy who's been so wrong so long win any kind of contest?  Who TF is voting?

Silver Savior's picture

Or you could just buy bitcoin. lol.

LawsofPhysics's picture

Oh look, more technical analysis in the central bank CASINO!

LOL!!!  Not a damn thing changes so long as a mechanism for true price discovery is not allowed.

Tall Tom's picture





Relative evaluations and measurements mean squat unless there is a constant.


In Space-Time that constant is 'c'.


Current econophysics lacks that constant.

James T. Kirk's picture

The 'new normal' has given birth to the 'variable constant,' known in other circles as 'bitcoin,' the 'new gold.'

Advoc8tr's picture

A birthing star ... it will become a constant, stable reference once a large and broad enough cross-section of the worlds debt free capital is represented by it.

Kidbuck's picture

Purposeful human action is the (often assumed) main variable in any economic statement. There are no constants in human behavior. Therefore, assigning numerical values is senseless.

Nobody For President's picture

The constant is 'f', for 'fraud'.

Thus 'p' for print has no relation to 'pr' for productivity.


besnook's picture

this is true price discovery. the equity market is saying the dollar isn't really worth that much so the price is inflated in nominal terms relative to value and the bond market is saying the dollar is the last value in town in a collapsing real market. the yuan/renmimbi is propping up the value of the dollar, not the other way around.

LawsofPhysics's picture

Yes, in other words ALL FIAT ARE GOING TO ZERO...

Lorca's Novena's picture

Like looking at stinky pinky charts, useless....


OBV is all the TA I need ;-)

Bryan's picture

I'm not a-sceered o' no charts.

Thom Paine's picture

This kinda has me fucke up.

Got money - where the fuck to put it.

Gold silver yeh... but Dont get caught with too much there.

One change of govt law or tax could fuck you right up there.

LawsofPhysics's picture



"laws" that cannot be enforced are irrelevant.


Moral hazard is a real motherfucker like that.

Tall Tom's picture




And, adding to that, to think that one can change the consequences of Natural Laws is hubris.

Justin Case's picture

"One change of govt law"

Don't see that as reality today. That would just create panick buying. People back in the late 20's believed in Gov't, was acting in their best interest and pions were patriotic. Today is complete opposite, people are protecting themselves from Gov't. Not the majority but far moar than the 30's. Internet is openning people's eyes to the criminals in DC.

el buitre's picture

"in their best interest and pions were patriotic"


Pion:  a massless sub-atomic sheeple with no charm and a neutral charge

Squid Viscous's picture

two words: Tesla and Netflix 

Sick Underbelly's picture

Weapons.  Ammo. A bunker. Land somewhere. PV/electricity generation stuff.  Build a well.  Take a class in welding, blacksmithing...something practical.  Plates for a PC vest.  Live survival and/or tactical training.

Got all that down?   Send your fiat to me.  =)

Hikikomori's picture

99% of people who are looking forward to a gun fight in a prolonged and serious emergency will wind up casualties.

QQQBall's picture

but I don't want to get dirty

besnook's picture

i hedge with scrap jewelry(with gems preferrably) because they won't confiscate that. the last thing they want to do is piss off millions of pms-ing women.

gold rubeberg's picture

Gold, US Treasuries, non-US stocks.

Secret Weapon's picture

This is the ice age that we should be preparing for. 


business as stusual's picture

A word of investing advice, after 2018 food calories = currency.

Consuelo's picture






Been trying to drop the same 'warnings' here & there amidst all the hoopla over crypto-this and silver-that which seems to be so en vogue lately.


"A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil nor the wine."


A situation of food shortage along with skyrocketing prices could take place literally with a season.

surfvin's picture

They didn't account for the p.p.t. Or the e.s.f. Or various other cogs and levers.

Justin Case's picture

Maybe the Kondratiev winter, but not that bad as an ice age.

business as stusual's picture

That has yet to be determined, there is a confluence of events that could make this new mimimum into a true ice age. Those factors that could make this event a doozy are still developing. It is a kind of wait and see situation. The most important aspect of this, is that it is cyclical. It has occured over and over through history. All governments are aware of it, but no one is informing their population to prepare.

Agenda 21 anyone?

Consuelo's picture



Within (1) growing season...



Justin Case's picture

We'll be long gone. Thanks to the Japanese nuclear power plant. The cancer rates and deformed infants there after will not survive. The reactor rods are not visible and they know not what to do now. The entire west coast is already polluted.

business as stusual's picture

That line of thinking will get you permenant cold storage.

Iconoclast421's picture

Biggest rally in history is called ice age. lol. 

Bill of Rights's picture

" We don't need no stinking badges ha ha ha "

Haitian Snackout's picture

He left out the squirrel with the nut.

Atomizer's picture

Well that fucks up the intent of Paris Accord. Honestly, back in the 1970's.. we were taught about the next ice age. It's all about making money for fear.

I'll post if can find video on this device. 

gator gatlin's picture

Or....Japan's experience was limited to one country going badshit crazy by itself, whereas the current phenomenon is global in scope?

Putrid_Scum's picture

So true, it's the sheer scale of the crisis that has the elite terrified.

Hundreds of millions are going to freeze to death and starve.

Probably this year, God help us..


Atomizer's picture

Found it. Couldn't remember how it was indexed.

Please pass along, thank you. 

"If I wanted America to fail" - YouTube

Evil Liberals's picture

Why was color of bonds changed in 2nd chart?

innertrader's picture

TYLER - Remember when you put up the Live Cattle Charts and showed the apparent HUGE OVER NIGHT drop in price?  The FACT is, that OVER NIGHT drop wasn't a "drop" at all.  It was the transfer from one Futures Contract, which are determined by MONTHS, to the NEXT Futures Contract. Example:  The expiration of APRIL Live Cattle Futures Contract, transferring to the JUNE Live Cattle Futures Contract.  APRIL Expired and JUNE became the front month.  In this example, the JUNE Contract had been trading at a HUGE discount due to the FUNDAMENTAL difference in the Time Period.  I can get into a Fundamental example if you like, but it would take some time AND space!

THEREFORE, the Drop that showed in your "Future Chart" wasn't a DROP AT ALL!  What you really need to look at when charting Commodities is not necessarily the actual Futures Contract, but the CASH COMMODITY MARKET.  There is another option, which I can explain if you would like.  However, like the fundamentals, it will take longer.

THE POINT being, is that when looking at charts that seem obvious, as shown here, you had better know EXACTLY what you are looking at and FULLY UNDERSTAND IT.