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Bob Janjuah: "You Have Been Warned"

Tyler Durden's picture


For a second there we almost got the impression Bob Janjuah was getting a tad bullish, if even just in the short-term. This just released note removes any fears we may have had the frmr RBS strtgst, and current Nomura Fixed Income Contributing Strategist may have lost his touch.

Bob's World: You have been warned!

Herein I provide an update with a link to my last two notes (here, here):

1 – The global growth picture is, as per our long-term contention, weak and deteriorating, pretty much everywhere – in the US, in the eurozone and in the emerging markets/BRICs. The growth weakness is driven by a shortfall in true end global demand, and in particular we still think the consensus is most off-target in its still too bullish growth expectations for the US and the EM/BRICs complex. The softness in the manufacturing/industrials and basic materials/oil and gas sectors is the most worrisome trend as Western service sectors are in any case already seeing either very weak or close to zero trend growth.

2 – We in the Global Macro Strategy team still think the market consensus is far too optimistic on policy expectations both in terms of the likelihood of seeing more (timely) fiscal and/or monetary policy assistance (globally), and in terms of any meaningful and/or lasting success of any such policy moves. In particular, we think that the period August through to November (inclusive) represents a major global policy and political vacuum. In the eurozone the political ‘impasse’, and the restrictions on (and lack of credibility of) policy are well known and central to the problem. But also in the US, the election cycle to us means no major policy initiative is likely from either Washington or the Fed until later in November at best. And in China, the leadership changes to us suggest only very minor policy inputs/assistance, most likely until the very back-end of 2012 or possibly not until March 2013.

3 – To be clear, Jackson Hole may bring a bit of MBS buying by the Fed, but this will we think have a minimal positive impact on the real economy or on markets. In fact, we would view this as a very weak move by the Fed (if it happens) and we would view such a move as a true representation of how toothless the Fed is right now – this is unlikely to change until after the presidential elections. Furthermore, before the Fed does it next major round of QE (I am looking for USD1trn in December) the market will also unfortunately be forced, in my view, to price IN the fiscal cliff into its 2013 growth and earnings forecasts. This is unlikely to be pleasant, and I would say be very wary of any messages that say that the fiscal cliff is either not important or is already priced in. The fiscal cliff issue is a substantial downside risk and is NOT priced in, according to our metrics.

4 – In the eurozone, I think full fiscal and political union is the only credible answer, but this is unlikely to happen smoothly nor anytime soon. We may be talking years, but certainly many quarters. The only likely credible ‘interim’ holding event, which I think would likely meaningfully alter the asymmetry of risk in the eurozone is full, unlimited, explicit QE by the ECB. Many people will have a view on this – for my part, I think unbounded ECB QE is an almost certain event, but NOT UNTIL the eurozone inflation data are deeply and meaningfully and consistently deflationary. When this deflation comes through, the ECB will I feel use its ‘price stability’ mandate to justify outright QE even while the politicians are arguing. HOWEVER, I think the data will not provide the ECB with the necessary air-cover until Q1 2013 at the earliest. And of course, in my view, the ECB will have to deal with the likelihood (in my opinion) that sovereign PSIs/defaults/debt restructurings are going to be seen in Portugal, Greece (again!), Spain and maybe Italy. And bank debt investors, including in some cases even senior debt bondholders, are also going to have to get used to debt default/write-offs/restructurings across large swathes (but not all) of the eurozone’s banks.

5 – As well as the political and policy vacuum, the very significant parabolic push higher in the price of soft staples (in the commodity market) such as corn, wheat, rice, potatoes and soya, due to US drought and European flooding, is likely to hamper both global growth AND the willingness and ability of policymakers to further debase, pump prime and print substantial amounts of money. I think that core CPI will deflate, especially in the eurozone, but that headline (food) CPI will we think easily offset any relief from lower gasoline/crude prices and will make central bankers very nervous about further distorting the price and supply of money, for concerns about setting off a substantial stagflationary spiral.

6 – In terms of markets, the route map I set out in early April and which I affirmed in early June continues to play out extremely well. After correctly calling the late March/early April 1420 high in the S&P500, and also the early June low, we have also now fully captured the risk-on rally in stocks and credit that began in early June and which has seen the S&P500 rally by over 100 points (8%) and which saw the iTraxx Crossover spread index tighten by over 120bp, from a peak of around 750bp in early June, to a low earlier in July of below 630bp. As Kevin Gaynor discusses in his latest report from last week the rates and FX markets have performed (recently) in a more mixed manner versus our early June expectations, which may simply be down to the ECB move on deposit rates in part forcing money out of the euro (and into USD, the JPY and maybe even GBP) and in part forcing investors into uneconomical buying of German and to some extent French and other (core) global government debt.

7 – Tactically, we have not yet hit my targets for the risk-on phase I called in early June – my S&P500 target was set at 1400/1450 by late July/early August, and my iTraxx Crossover target was set at 600bp. And as I also said in June, this risk-on phase was likely to be a struggle due to headline risk and volatility, market illiquidity, and the general lack of strong investor views/willingness to take big risks. Nevertheless, stock and credit markets have indeed climbed the wall of worry. Over the extreme short term, over the next two to four weeks, I would not be surprised to see my targets ultimately hit. However, having correctly forecast the market risk-off/risk-on moves over the last four months (in terms of direction, time and price targets), I now think the correct thing to do – as I also said in April and June – is to prepare for a serious risk-off phase between August and November (inclusive).

8 – Based on the reasons set out earlier and also covered in my two prior notes, over the August to November period I am looking for the S&P500 to trade off down from around 1400 to 1100/1000 – in other words, I expect over the next four months to see global equity markets fall by 20% to 25% from current levels and to trade at or below the lows of 2011! US equity markets, along with parts of the EM spectrum, will I think underperform eurozone equity markets, where already very little hope resides. For iTraxx crossover, this equates to a spread wide for 2012 of – in my view – 800/1000bp. NOTE however that investment grade cash corporate (non-financial) bonds remain a core (relative!) safe-haven. This four-month coming major risk-off phase will, in my view, also be very USD bullish (my expectation of Fed USD1trn QE in December should eventually alter the bullish USD trend of course) and bullish core government bonds (USTs, Gilts, Bunds) – perhaps we could see 10yr Bunds at 50bp all-in yields, with USTs and Gilts at/close to 1%. By late 2012, based on my Fed December QE view, my tactical call will likely turn bullish/risk-on – let us see about that closer to the time. And of course I still see a very clear path to 800 on the S&P500 at some point in 2013/2014, driven by market revulsion against pump-priming money printing central bankers, but this discussion is also for nearer the time.
You have been warned!

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Wed, 07/25/2012 - 09:16 | 2648740 ZippyBananaPants
ZippyBananaPants's picture

What a prick this guy is on Bloomberg!  chick should jack-slap his bald head

Wed, 07/25/2012 - 09:29 | 2648815 Muppet of the U...
Muppet of the Universe's picture

What makes him a prick?   I mean many having been noting that its 2011 all over again, despite the law of market bullshit- if its common thought then it will not happen.

He hasn't said anything fucked up, he's just been strait forward, saying what we've all been thinking...  jeeze we are setting up for a nice fall...

besides, everyone on tv should be killed.  who gives a fuck if he's mean to some stupid anchor bitch?

Wed, 07/25/2012 - 09:31 | 2648835 ZippyBananaPants
ZippyBananaPants's picture

Because if he continues to be mean she is not going to let him squeeze her tits during commercial, maybe that just makes him an idiot!

Fri, 08/03/2012 - 21:50 | 2677385 engineertheeconomy
engineertheeconomy's picture

"Everyone on TV should be killed"

that would be a good place to start...

(not sarcasm)

Wed, 07/25/2012 - 09:16 | 2648741 TwoJacks
TwoJacks's picture

wow. I concur

Wed, 07/25/2012 - 09:18 | 2648762 ZippyBananaPants
ZippyBananaPants's picture

Maybe Dom Chew could sit on him

Wed, 07/25/2012 - 09:19 | 2648768 SeverinSlade
SeverinSlade's picture

Central planning = fail.

Wed, 07/25/2012 - 09:19 | 2648771 bdc63
bdc63's picture

get out your "S&P 800" hats!!!

Wed, 07/25/2012 - 10:40 | 2649235 Randall Cabot
Randall Cabot's picture

From June 29,2012: Bob Janjuah (of Nomura) expect to see a risk-on phase that lifts the S&P - possibly climbing the wall of worry back up to the 1400s by late July or early August.

S&P at 1336 presently.



Fri, 07/27/2012 - 20:19 | 2658349 kaa1016
kaa1016's picture

Make that 1385.

Wed, 07/25/2012 - 09:20 | 2648776 Jason T
Fri, 08/03/2012 - 21:57 | 2677404 engineertheeconomy
engineertheeconomy's picture

"We the People" are no longer going to live in fear or submit to this fascist regime. We're going to take our country back, that's all.

Wed, 07/25/2012 - 09:22 | 2648785 madcows
madcows's picture

Too optimistic.  I think we'll test the March 2009 lows

Wed, 07/25/2012 - 09:28 | 2648817 JPM Hater001
JPM Hater001's picture

Tested...Like hiroshima was a test for nagazaki.

Wed, 07/25/2012 - 09:22 | 2648786 buzzsaw99
buzzsaw99's picture

The future is bleak imo.

Wed, 07/25/2012 - 09:22 | 2648787 Silver Surfer 1985
Silver Surfer 1985's picture

 l love Bob's comments. Tyler(s), did you just catch Stephen Roach 'roasting' The Fed, Jon Hilsenrath et al on Bloomberg? Its worth posting the video when its available on their website. Wow, he really let rip!

Wed, 07/25/2012 - 09:32 | 2648840 Jlmadyson
Jlmadyson's picture

Yea would like to see this video.

Wed, 07/25/2012 - 09:25 | 2648797 zero19451945
zero19451945's picture

Printing money doesn't generate wealth.

Central planners can't tell the difference between money and wealth. The Western world needs more wealth, not more money.

Wed, 07/25/2012 - 09:48 | 2648924 francis_sawyer
francis_sawyer's picture

well... get back on the treadmill & run faster then... (say your masters)... See? it was YOUR fault all along...

Wed, 07/25/2012 - 09:29 | 2648803 Jlmadyson
Jlmadyson's picture

Repeat what I said in the previous.

UK; Double dip recession longest in 50 years as the economy shrinks a shocking 0.7%.

This makes for one ugly chart let me tell ya.

Europe is screwed and clearly that is spilling over into the US numbers now.

QE all they want it will solve nothing just like all the various easing and printing they have done now for 5 years. Nothing will change this course now.

The claws of this recession/depression have taken hold worldwide at this point and there is no turning back now. Unending QE or not.

Wed, 07/25/2012 - 09:26 | 2648807 surf0766
surf0766's picture

1 trn in MBS.. That makes gas around what $7 / gallon?

Wed, 07/25/2012 - 09:26 | 2648810 eurusdog
eurusdog's picture

Great piece!

Wed, 07/25/2012 - 13:22 | 2648811 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Global breakdown bitchez!

keywords: omg doom hell shtf mama keynes bernanke war gold ammo food porn etc

Wed, 07/25/2012 - 09:28 | 2648820 collon88
collon88's picture

Markets will have crossed the Rubicon when traders start selling the blip instead of buying the dip.

Wed, 07/25/2012 - 09:28 | 2648821 NEOSERF
NEOSERF's picture

And he might be right except for that on any particular hour of any particular day in the next 4 months you just know the Fed is going to come out with that "Global Coordinated XYZ" bullshit and ramp stocks back to 1400...and this is why you won't see S&P hit 1000 this year, because it is Ben's legacy not to let this fall apart and have another Depression on his watch...the Fed 100% believes that the stock market = confidence and they will NEVER let confidence (as evidenced by the WSJ rumor leak yesterday and the ESM rumor in Europe) wain for more than a week...

Wed, 07/25/2012 - 12:56 | 2649847 viahj
viahj's picture

right now the Fed isonly concerned with two things.

1.  keep it's owners (TBTF) alive

2.  keep the US Treasury satiated with new dollars to continue the deficit spending.  If the US Treasury is not kept happy, they will turn on the Fed and throw them to the wolves to save their own skins.

Wed, 07/25/2012 - 09:29 | 2648825 jtmo3
jtmo3's picture

You know, I'm getting fucking tired of all these morons crying about the dow, s&p,etc going to drop and tank and whatever. Does anyone realize that this is NOT going to happen until the world comes to an end or the central banks are gone? If it isn't plain as the nose on your face, you ain't paying attention. The market will NOT be allowed to collapse as long as the cb's can feed it money. The world has made it's bed on the market to fund everything from retirement and pensions, to you name it. Ben has made it perfectly clear that the market will survive to his last breath. Pay attention. 

Wed, 07/25/2012 - 09:30 | 2648829 mrktwtch2
mrktwtch2's picture

should i buy some more apple puts??

Wed, 07/25/2012 - 09:39 | 2648864 DOT
DOT's picture

I'm thinking about those Homebuilders. Just think of the bump the muppets will chase when the MBS purchases kick-off.


Gonna be rich....bitchez !

Wed, 07/25/2012 - 13:01 | 2649870 viahj
viahj's picture

what?  30 year rates @ 3.250% isn't currently saving the housing industry so dropping rates by another 0.500% won't do shit either.  i don't think that the Fed will touch MBS again and those yahoos who have been frontrunning this will get their faces chewed off (but I guess you can never fully count out stupidity, desperation and greed of the Fed).

Wed, 07/25/2012 - 09:37 | 2648848 falak pema
falak pema's picture

In the eurozone, I think full fiscal and political union is the only credible answer, but this is unlikely to happen smoothly nor anytime soon. We may be talking years, but certainly many quarters

This could be the key to current German dragging their feet play. Burn the nation state structure of the recalcitrant peripherals to break down all local political will to resistance to the upcoming consolidation and fiscal union plan. In which case local governments and parliaments will be just surrogate caretakers of what has been decided in the Uber Euro circles about continental financial and economic strategy. Its the end of the european nation state.

Wed, 07/25/2012 - 13:08 | 2649891 viahj
viahj's picture

dropping nationality and sovreignty will magically save the dire fiscal situation of the core vs. periphery?  enslave? yes, but join all of Europe into a true equal union? no.  all of the "poor" nanny-state dependent will march on Brussells rather than their national capitols. in that environment, Germany's GDP won't survive, thus the entire place turns into one giant failed state.

Fri, 08/03/2012 - 21:47 | 2677378 Haager
Haager's picture

I doubt that seriously.


Anything they tell turns out to be bs - people aren't getting closer, hate grows, more and more rules come up, people are nationalising up to the extremes. And: One  thing the people aren't accepting actually is more EU. What do they win with unrest, anger and lots of lies? Actually, to me it looks like a superpower in the north with enslaved regions surrounding it.

They are grossly misleading the people, throughout the countries. 

No, I don't believe in this "plan".  And I do fear some sort of false flag attack to get the things done - could be economically, or it could be that the situation with Greece on the border with Turkey escalates.


Wed, 07/25/2012 - 09:35 | 2648852 Dr. Engali
Dr. Engali's picture

I agree with everything except for his S&P target of 1450. It will never happen.

Wed, 07/25/2012 - 09:36 | 2648854 Meesohaawnee
Meesohaawnee's picture

i think we should retire the word "markets" replace with global equity computer game/propaganda tool/wealth transformation mechanism.

Fri, 08/03/2012 - 21:36 | 2677364 Haager
Haager's picture

I prefer Economy WarGames 


Wed, 07/25/2012 - 09:36 | 2648859 RobotTrader
RobotTrader's picture

This guy is a total joke.


First time this guy appeared on ZH the S & P 500 was around 1,100, and now it is at 1,300 and the news flow is even worse than before.

Too bad he cannot tell a difference between a strong market and a weak market.

Wed, 07/25/2012 - 09:50 | 2648938 fuu
fuu's picture

"This guy is a total joke."

And you'd know!

Wed, 07/25/2012 - 09:38 | 2648862 RobotTrader
RobotTrader's picture

Actually, Janjuah is not as bad as Tim "You Have Been Warned" Wood, who has been crowing about a primary bear market, when in fact we have been in a long term secular bull market since 2009.

Wed, 07/25/2012 - 09:56 | 2648966 Quinvarius
Quinvarius's picture

It is funny watching you jerk off to dust devils which ever way the wind blows.

Wed, 07/25/2012 - 09:55 | 2648870 Muppet Pimp
Muppet Pimp's picture

WTF Bob? Reading that was like watching a dog chase its tail. Put the pipe down and back away. Let me get this straight, the market is going to somewhere between 1000/1100 and 1450 sometime within the immediate future to the next year or so, and in the past all your calls were proven correct. Perfect.

Wed, 07/25/2012 - 09:41 | 2648886 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

How is Janjuah still in business?

Wed, 07/25/2012 - 09:52 | 2648947 Quinvarius
Quinvarius's picture

Who is going to sell the S&P down to 800?  The economy stinks, but I am not stupid enough to put a number on the S&P.  As long as the banks get 0% money, a panic is not possible.  They can always meet margin.

Wed, 07/25/2012 - 09:57 | 2648977 geno-econ
geno-econ's picture

Interesting analysis for Aug. -Nov. period based more on EU developments, spreads and risks. Consider however effects after Nov when tax increases go into effect as well as mandated spending cuts. Even if Congress miraculously agrees to some form of compromise on Simpson/Bowles recommendations, it will nevertheless be deflationary and short term drag on economy. Auto sector already bracing for downterm in Europe ,and US if credit stimulus not forthcoming yet again. Traders take heed, investors watchout, Fed and bankers think twice before you ruin the capitalist system with unsustainable debt.  There will be consequences for economic folly 

Wed, 07/25/2012 - 10:21 | 2649096 lindaamick
lindaamick's picture

The last word will be had by the proles (masses).  The rich need the masses to buy their crap.  Starving the masses out like is happening everywhere and it ensures collapse of this capitalistic ponzi scheme.  The scheme always relies on an increasing number of suckers.

The suckers are being starved out. 

Fri, 08/03/2012 - 13:55 | 2676341 1Inthebeginning
1Inthebeginning's picture

Don't get me wrong.  I don't support this.  But I would like to raise attention that over time technology will supplant people.  You won't need a worker class.  Automation will replace it.


Wed, 07/25/2012 - 11:19 | 2649376 steve from virginia
steve from virginia's picture




I know a lot of people here are surprised the S&P is the current 1330.

I admit I figured the bear would run through 2009-2010.


Every recession post-WWII has been short and followed by sharp recovery. The question has been, "Why should this recession be any different?" Making this assumption, why wouldn't finance 'buy the dip' and position itself for the inevitable recovery-to-come?


The answer is that it is indeed different this time. Ours is not an ordinary post-WWII recession rather a phase-shift or non-linearity that effects the economy's  productivity.


Too much credit is given to central banks that only recycle shunned loans. If the loans are truly bad (not just mispriced by marketplace revulsion and/or liquidity squeeze) the central banks have nothing of worth to offer to the markets. Central banks are then recognized to be as insolvent as their clients: the result is no effective lender of last resort.


Market play isn't a substitute for output. It isn't a shortage demand rather the lack of return on capital and its destruction thereby. Instead of real returns there is credit: the cost to finance 'substitute returns' becomes unaffordable.


Carrying costs must be paid for with real goods (circulating money/petroleum) rather than more credit. Capital = real goods, our output is worthless junk.


Since capital cannot be printed but must be taken in diminished amounts from the earth, there is less to support an infrastructure designed to make credit profits from capital's destruction. Here is our crisis.


We all have bought for ourselves a berth on the Titanic. Bon Voyage!


Wed, 07/25/2012 - 11:23 | 2649445 JamesBond
JamesBond's picture

The only likely credible ‘interim’ holding event, which I think would likely meaningfully alter the asymmetry of risk in the eurozone is full, unlimited, explicit QE by the ECB.


there is no money left!



Wed, 07/25/2012 - 11:40 | 2649524 I should be working
I should be working's picture

If we get a global recession I think this is a very likely target.

But wasn't Bob briefly bullish calling for a revisit of Q1 highs?

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