Bob Janjuah: S&P At 800, Dow/Gold Ratio Will Hit 1 Before Next Real Bull Cycle

Tyler Durden's picture

Bob Janjuah, who has been quiet lately (recall his last piece in which he quite honestly told everyone that "Markets Are So Rigged By Policy Makers That I Have No Meaningful Insights To Offer"), is out with his latest, in which he gives us not only his long-term preview, "ultimately I still fear and expect the S&P500 – as the global risk-on/risk-off proxy – to trade at 800, and the Dow/Gold ratio to hit parity (currently at 8, down from an all-time high of 45 in late 1999) before we can begin the next multi-decade bull cycle", but also his checklist of 8 things to look forward to in the short-term centrally-planned future.

From Nomura's Bob Janjuah

Please sir, can I have some more?

The current monetary policy settings in the US and Europe – which in my last note I dubbed monetary anarchy – continue to drive markets. While some may feel that central bank behaviour and experimental policies designed largely to boost markets is a good and desirable thing, I have little doubt that such ‘economic policies’ are already sowing the seeds of our next economic and markets malaise. I continue to believe strongly in the view that central bankers are intentionally mispricing the cost of capital, in an attempt to push the private sector to misallocate capital into consumption and into asset purchases at the wrong time and at the wrong price. Eras of such marked misallocations of capital normally end with bubbles that burst significantly. Central banks have shown us, time and again, that they are extremely good at driving bubble formation, that they are extremely good at denying their real motivations, and that they are extremely good at denying the existence of bubbles. History of course also shows us, over and over again, that bubbles are the direct consequence of central bankers mispricing capital, and history of course shows us that central bankers are largely impotent when it comes to preventing the significant bursting of said bubbles.

I think pump-and-dump policies, which have driven the Western cycles of print/borrow/consume over the last 20 years – and in particular over the last 10 years – are an undeniable economic failure. What is even more concerning to me is that, even after everything we have been through, the policymaker solution for our current sickness is more of the same – more debt, more liquidity, and more consumption! The West is in the midst of a multi-year era of declining living standards, in large part as a direct consequence of central bankers and their bubble blowing machines. I think sometimes those focused on markets and how to make the next buck out of the Fed/ECB ‘put’ should remember that, for example, it is at least in some part as a direct consequence of the Greenspan and then the Bernanke policy ‘puts’ that tens of millions of American citizens are either homeless and/or on food stamps. When the current post-2008/09 bubbles burst, central bank ‘puts’ and the arrogance we perceive that still persists in some parts of the financial sector will hopefully be consigned to the deep freeze box for a very long time.

Moving onto the more tangible near term:

1 – The extremely bullish seasonal and weather factors that in my view have artificially boosted (US) data over the 3-4 months to end-March are now over, and over the next 3-4 months are I feel instead going to be a material drag. It has already started, and by late Q2/early Q3 the eco bulls will I feel, once again, be left scratching their heads. For 2012, trend growth in the US will, in my opinion, be closer to 1.5% than 2.5%.

2 – The US consumer is in a weak and vulnerable position. Savings have been run down, to worryingly low levels, house prices are still falling, but the jobs picture is already turning down and gasoline prices are up nearly 20% from the December lows – and rising.

3 – The earnings season, which is about to start, will in my view be average at best – and this is merely a continuation of an already weakening trend, where weakness is actually quite significant outside of a very small single handful of individual companies.

4 – Now that we have moved on from the systemic crisis in the eurozone, it is now becoming clear to an increasing number of people that we have merely swapped a dramatic V-shaped collapse-followed-by recovery for a long-drawn-out period of weak growth. In my view, the eurozone will – at best – contribute nothing to global growth, perhaps for the next 3 to 5 years. If Spain ends up as the next Greece, then the picture will, in my view, be much worse.

5 – China is definitely ‘landing’, and policy easing is well behind the street’s expectations. I continue to have little doubt that China is transitioning from a 10% growth economy to a 7% growth economy this year. And over the next 3-5 years, that growth rate could be closer to 5% or less. I remain concerned at how little focus is given to the very poor demographics in China, and I remain concerned at how little focus there is on the state of the ‘banking’ balance sheet in China, and on the true levels of underlying indebtedness that exists in the Chinese economy.

6 – Over the next quarter or two I think there is unlikely to be any more money magic from the ECB – unless of course Spain really implodes. But in my view the market seems transfixed by Bernanke and his throw away promises. I remain convinced that we will NOT see any new real QE this year. Why? Simply put, more QE in the US would merely take gasoline prices up, perhaps by another 20%. This would, in my view, guarantee an abrupt halt to growth in the US and would likely ensure an Obama electoral defeat. This is not an outcome that Bernanke would desire. So at best, either in the June or July meeting, we will get some form of TWIST.

7 – Over the next few weeks we could see the ratings agencies move towards a wholesale downgrading of the global banking sector, driven by the application of new ratings methodologies. The markets seem extremely complacent on this issue.

8 – I assume no international military conflict in Iran.

So in essence, reflecting the economic truism that is ‘MV = YP’, I still see a world and markets more driven by the ‘M’ rather than the ‘V’ – and in Q2, more shots of ‘M’ are going to be elusive and ultimately what will actually be delivered will fall well short of market expectations. Also in Q2 the data (earnings and economic) will likely be weak. And in particular, the consumer is going to struggle and will I think be forced to re-save. Put all this together and I think in Q2 we should expect a nice 10% equity sell-off, with the S&P500 falling from 1420 (+/-20) to 1280 (+/-20). Credit should continue the sell-off of the last few weeks (iTraxx Crossover up at 750/800), and rates should rally with 10-year UST yields back below 2%, perhaps even down at 1.75%.

As we get later into Q2 I think the shrill promises of more fixes of ‘M’ from Bernanke will get loud, and many investors remain underweight risk, having missed out on Q1. As such, the expected correction should not exceed 10%. Over late Q2 and Q3, we could – likely should – see another leg higher in risk, driven by TWIST. This shot of ‘M’ may have a very short half-life in terms of boosting markets – four to six months perhaps – with the presidential elections clearly being the target. Much beyond early Q4 I think things will look extremely challenging, with the lack of self-sustaining growth/end demand, the lack of growth in Europe, weakening EM growth and the US fiscal debate being the key agenda items. I continue to believe that while equity prices may surprise on the upside in Q3/into the US elections, late Q4/early 2013 and the (lack of) growth and US fiscal stories could herald the next stage of the post-2008/09 ‘M’ bubble, i.e., the next major equity bear market.

Clearly fiscal and central bank activism and experimentation have, to date, succeeded in stretching out the cycle, but ultimately I still fear and expect the S&P500 – as the global risk-on/risk-off proxy – to trade at 800, and the Dow/Gold ratio to hit parity (currently at 8, down from an all-time high of 45 in late 1999) before we can begin the next multi-decade bull cycle. I think the battle between central bank inflationist policies and the natural cycle of deflationary debt deleveraging will continue to be attritional, and it may drag well into 2013 and 2014. I do however remain hopeful that in the next 12-24 months we will see both the basis form for the next major multi-year cycle of global economic development and we will see risk asset valuations at truly ‘once in a lifetime’ cheap levels. We are not yet at this point.

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Robot Traders Mom's picture

You'll be on your knees soon enough, Blythe...

Straying from the flock's picture

We can only hope that the paper tower has enough spark beneath it to burn the whole thing to the ground.  When they start publicly denying it, they are running scared.

GetZeeGold's picture



If Spain ends up as the next Greece, then the picture will, in my view, be much worse.


Spain, Ireland, Italy, Portugal.........I really don't have a favorite. Whoever makes it first.....I'm good with it.


BoNeSxxx's picture

I think there is a broad unwritten assumption being made here with respect to the multi-decade bull cycle to follow -- namely that at some point while at or near the bottom the Goats wrangle the Sheep into dispatching the money changers and ridding the planet of their ilk forever.

goldfish1's picture

A Further Downside Run in Gold and Gold Stocks is Coming! Here’s Why -- Posted Monday, 9 April 2012 

By Nu Yu, Ph.D.

Chart looks very convincing.

Oh regional Indian's picture

Gots to be kidding. Multi-decade Bull Cycle?

Well, after a multi-decade Bullshit cycle I think we can expect a multi-decade stink!!!

I call bull-shit. try multi week bull cycle before the beeg dump.

It's all over bar the shouting and the hiss-trionics.



Koffieshop's picture

They MIGHT be able to keep inflating the pig up until 2020 but not further.
We are all going back to an agricultural society, unless some technological miracle occurs.

Oh regional Indian's picture

Thanks for the link Koffie.......Club of Rome, the name says it all. And a resource controlled techocracy is the plan. And MIT is probably in on it.

In fact, the net is a huge data-feed into the Club of Rome model, which is why they cannot kill it.


Gully Foyle's picture


"We are all going back to an agricultural society, unless some technological miracle occurs."

You mean those technological miracles kept under wraps because they either destroy profit margins or destabilize the present power structures?


duo's picture

wiithout fossil fuels, the carrying capacity of the US farmland would be about 50 million decently-fed.  25% of the land needs to be set aside to feed your draft animals.

Now you know what the 450M .40 cal hollow-points are for.

Gully Foyle's picture


Just about what organic farming would bring in.

easypoints's picture

Without fossil fuels, you won't be going to work either. That leaves enough time for organic farming on one of America's stupidest obsessions: Grass lawns.

PersonalResponsibility's picture

one of America's stupidest obsessions: Grass lawns.


DosZap's picture

one of America's stupidest obsessions: Grass lawns.

 The taxpayer is paying for the repairs, and care of the lawns, and shrubs,trees,landscaping,home interior repairs, etc, unti they find a suck, er buyer.Even more stupid is Fannie n Freddie have 200k empty homes, and the American How do you like that lil factoid, your paying for foreclosed homes repairs and lawn maintenace.............some shit is just to unreal to believe.

DosZap's picture

Now you know what the 450M .40 cal hollow-points are for.

Useless unless your a sheeple.......................

A handgun is what you use to fight your way to a rifle.

Guess they think that will take the place of several hundred billion rifle rounds purchased like a mutha since '94?.

i-dog's picture

They're for close encounters of the roadblock and riot kind...not for great plains warfare! It's DHS, not the army. How many drivers / protesters / rioters will be toting AKs and 50cals?

DosZap's picture

 How many drivers / protesters / rioters will be toting AKs and 50cals?

A ton, if they want to live.

You dont carry a AR, or a AK in your vehicles??................shame on you.

No need for .50's..............................just something with a little edge on range.

i-dog's picture


"wiithout fossil fuels, the carrying capacity of the US farmland would be about 50 million decently-fed"

Where do people dream up these numbers? The US population in 1900 (back in the days of steam locomotives, horse-drawn ploughs and less productive food strains) was 76 million, and it was exporting food to the world!!

The first diesel tractor came out in 1935 (population: 128 million).

From Wiki: " In 1892, John Froelich invented and built the first gasoline/petrol-powered tractor in Clayton County, Iowa, USA.[5][6] After receiving a patent Froelich started up the Waterloo Gasoline Engine Company, investing all of his assets which by 1895, all would be lost and his business resigned to become a failure."

Oh, and BTW, fertilizers (phosphorus, potassium, nitrogen and trace minerals) don't come from oil.

Errol's picture

i-dog wrote:

"Oh, and BTW, fertilizers (phosphorus, potassium, nitrogen and trace minerals) don't come from oil."

Where do they come from?  Nitrogen from nat gas (Haber-Bosch process), phosphorous and potassium from depleting mines.

Even 1860's US food production was not sustainable!  Literally billions of passenger pigeons were killed and eaten.  4-guage shotguns were used to kill "sitting ducks" a score at a time.  Nitrogen and phosphorous came from Chillean and Pacific island guano, now almost totally depleted.  Potassium came from burning New England forests just to harvest the ash (look it up!).

Due to topsoil erosion and depletion of guano resources, without fossil fuels the US can feed less people than it could in 1900!

As Gail Tverburg (an actuary) puts it in dry actuarial terms, "There will be excess deaths".

i-dog's picture

What have "depleting mines" or "nitrogen from nat gas" (ie. methane) got to do with my statement "from oil"?

Oil doesn't now, and never will, replace phosphates from guano resources or potassium from wood ash*...other solutions are needed. It is a common misconception that fertilizers come from petroleum.

I agree that "there will be excess deaths" -- from the 310 million bloated bottom feeders of today -- but not [just] because of oil.

What I questioned was the "50 million" estimate of a sustainable US population -- in a world where both food and luxuries are traded between nations that can produce one or the other, or both...just as the US was feeding Europe in return for luxuries a century ago.


* [edit] From wiki: 

" Potash /?p?tæ?/ is the common name for various mined and manufactured salts that contain potassium in water-soluble form.[1] In some rare cases, potash can be formed with traces of organic materials such as plant remains, and this was the major historical source for it before the industrial era."


"The main food sources of phosphorus are kinds of food containing protein, for example, milk and meat."

AustriAnnie's picture

I think maybe the point was that regardless of where the fertilizers come from, they have to be mined and then transported, which in itself is energy consuming.

The other major factor that people tend to ignore is that it doesn't matter how much we can produce going back to an oil-less production process.  It isn't about physical production, but about politics.

If anyone thinks that the government won't nationalize or at least regulate to the point of complete misallocation, all of the ag land and resources needed to farm it, you're dreaming.

We live in a different world than in the 19th century.  By executive order, the land you use to produce the food (or at least the food you produce on the land) will belong to the state, not to you.  Attempts to avoid government controls in allocation of resources will mean you discover the meaning of NDAA up close and personal.  

newworldorder's picture

Without OIL you end up at around 1830's 1860's economics. That means very localized production, storage and consumption. Your 50 million may be a bit high.

grid-b-gone's picture

Cheap oil not only allowed greater yields per acre, but also let us get affordable food from thousands of miles away.

As the price of oil climbs, fertilizer will still be used, but more local production will be needed to eliminated the transportation component of food production. 

Small, urban farms are already making it by catering to organic and heirloom market niches.

Backyard gardens eliminate even more of the oil component of food production. Don't rule out the possibility of a hybrid agri-techno solution in which tele-commuting and a home-based agrarian lifestyle merge to allow a solution without hunger, turmoil, or catastrophy.

Koffieshop's picture

This would be the best-case scenario and I really hope this happens.
Still, a lot of people are going to die before things could stabilize like this. We'll still have the peak-industry chaos.

AustriAnnie's picture

"Don't rule out the possibility of a hybrid agri-techno solution in which tele-commuting and a home-based agrarian lifestyle merge to allow a solution without hunger, turmoil, or catastrophy."

And what do TPTB get to steal from us if we are all self-sufficient?

A self-sufficient populace does not make banks rich not does it make the people "need" the politicians to save us.  Therein lies the problem.  Its never about what is good for each individual.  And the scenario you describe does not appear to be one of expanding debt/credit, which is the source of power/control for TPTB.

Koffieshop's picture

And also this: A thorough explanation of the inevitable resource depletion.
Could the person who downgraded me (and prevented me from editing the post) explain why he thinks that this is bullshit? I'm curious about counter-arguments.

Gully Foyle's picture


"Could the person who downgraded me"

Up/down voting is just another form of control. The weak care about the public perception of who they are and will correct their ways.

Meanwhile the rest of barely even recognize names.

It isn't like we will be attending the kids graduation, now is it?

Koffieshop's picture

Oh believe me, I'm not looking for public approval. I AM looking for someone to argue with.

You said there may be technological breakthroughs that are kept secret. Even if you assume this is true (and those breakthroughs drastically improve the efficiency of travel and production) we are still fucked. We will just continue to grow exponentially until we hit a new limit. As explained in the movie I posted, improving the efficiency of resource use just makes us use more of it, not less.

Gully Foyle's picture


"Even if you assume this is true (and those breakthroughs drastically improve the efficiency of travel and production) we are still fucked. We will just continue to grow exponentially until we hit a new limit."

I'm not certain it happens that way. I think new technologies arise to circumvent new limits.

I think that is one of the signs of a technologically superior society, limits are continually expanded and broken.

It's hard to tell since we are the only dominant species we know and have a very tiny window of technology.

Knowledge is ever increasing. Modern mankinds problem is we think we understand everything. When in fact we understand very little.

I'm not even being optimistic, I've just watched a lot of change over the years and a lot of assumptions shot down.

easypoints's picture

Man cannot innovate a path to infinite growth, without defeating the laws of thermodynamics. We will certainly do our best to do so, as the stakes are pretty big.

MunX's picture

The laws of thermodynamics only apply to closed systems. Earth is not a closed system. Oh and guess what, there has never been a law in science that hasn't been broken.

goldfish1's picture

a technologically superior society, limits are continually expanded and broken.

Technology is very expensive.

It's kinda like genetically engineered plants. "Gonna save so much time and feed the world." Need more equipment, herbicide, seed expense. Poisons the people, water, bees. Longer term effects create long term medical issues and expense. Increases the need for stronger herbicides. Cycle repeat.

easypoints's picture

Correct. There were some inventions, like the water-injected carburetor, that could have tripled or quodrupled our gas efficiency back in 1950. Shell killed some whistle-blowers, seccured the patent, and burried it. At this point in the game, implementing any new technology or infrastructure will be difficult, especially with an insolvent government. Localization, particularly in food production, is already baked in the cake at this point. But don't hold your breath. The Gov knows that a mob of protesters in fear of starvation is the only type of mob that changes anything.

francis_sawyer's picture

I didn't downgrade you but... 'Club of Rome'?... Seriously?? CLUB OF ROME???

Here's how a CLUB OF ROME thesis plays out...

1. Make a prediction about resource depletion & population reduction

2. Spray the atmosphere with chemtrails for a decade

3. People die off

4. Club of Rome (Rockefeller, Kissinger, Gates, Clinton, Gore, etc.) all remain as kings & custodians


Neat gig if you can get it

Koffieshop's picture

Killing people would only slightly delay the inevitable, even of they psychopathic enough to think about that it should have occurred to them that it is pointless.
The only meaningful and inevitable thing that can occur right now is the destruction of the system that depends on perpetual growth.

NewWorldOrange's picture

The only technological miracle that'll keep us from going back to an agricultural society is the "miracle" of a hundred million sheeple waking up and putting their personal weapons technology to its proper use.

smiler03's picture


Meanwhile the Worlds oil resources continue to run out. I can't see guns filling in the energy gap somehow unless said guns end up significantly reducing the population. Unless that's what you meant? Also, I thought the main protagonists of Gun Control say that "weapons" are for self defence, not killing.

goldfish1's picture

We are all going back to an agricultural society, unless some technological miracle occurs.

Is there an ap for that?


Sudden Debt's picture

After we hit rock bottom, go through that and slide deeper into the earths core, I to believe we'll start a new bull cycle. In about 15 to 20 years from now.... When we're old guys...

gaoptimize's picture

The Kurzweil Singularity is the light at the end of the very dark tunnel we approach.

Bwahaha WAGFDSMB's picture

Unless we go the way of the Mayans first.

GeezerGeek's picture

Can there really be a bull cycle - or a bear cycle - if market forces are eradicated? The current U.S. administration is doing its best to eliminate free market forces while picking 'winners' (GM, Solyndra) and forcing others (think the coal industry) into a corner. It appears that Obama and friends are intent on imposing a command economy while destroying the middle class and enslaving most of the population. Call it fascism if you will, but the question I have is this: can a stock market exist in any real sense when all is done at the behest of the government? Did Nazi Germany have a stock market? What about the Soviet Union? (Apologies to younger U.S. readers who were not told about those countries while undergoing public [re]education.)

Gully Foyle's picture

Does anyone track their predictions like Market Ticker?

I see a lot of people making predictions, but few (if any) coming to pass.

I wonder what the hot air to got it right ratio is.

Gully Foyle's picture

'The Recovery Is Here,' Reports Underemployed Man Making $20,000 Less Than He Used To

CARBONDALE, IL—Citing the fact that he's now able to make the minimum payment on his credit cards each month and is back in the workforce making $20,000 less than when he was laid off in 2009, 43-year-old Tom Baker declared Tuesday that the economy was recovering by leaps and bounds. "The tide is turning!" said the man who had to sell his four-bedroom home for less than what he owed on it and move his wife and three children to a cramped apartment 800 miles away. "My company just hired 50 skilled contract employees with a guaranteed eight months of paid employment. America is back!" Baker said that if the economic turnaround continues, he may be able to save enough money to send at least one of his children in for a dental checkup.

GeezerGeek's picture

Grabbing the tail of the elephant, the blind man proclaimed that an elephant is just like a snake.

skepticCarl's picture

Geezer, it's a freak'n satire.

realtick's picture

The Dow-Gold ratio will go way below 1:


AllWorkedUp's picture

 Well that DOW/GOLD ratio can hurry up already. I hope the whole thing crashes and burns, In the mean time AAPL and PCLN go up everyday.

realtick's picture

Both had outside days yesterday so their panic uptrends are now in question: