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In his latest note, SocGen’s famously bearish Albert Edwards looks around at interest rates falling all over the place and Europe in chaos, and gives himself a good chest-beating, while mocking the equity bulls for yapping about how cheap stocks are.He’s clearly feeling pretty good about the way things are turning out, writing: “For 15 years we were told the West is nothing like Japan. We agree. It is worse!”
The whole thing is really captured here:
As 30y German Bund yields slide below 2% and rapidly converge towards Japanese rates, we have a taster of what is to come in the US and UK in the months ahead. We still see US 10y yields – even now making new all-time lows – falling below 1% as hard landings occur in China and the US. The secular equity valuation bear market began in 2000 and renewed global recession will be the trigger to catalyze the third, and hopefully final, gut-wrenching phase of valuation de-rating. Expect the S&P500 to decline decisively below its March 2009, 666 intra-day low. All hope will be crushed.
Our Ice Age thesis has been our roadmap for the macro events that we have witnessed over the last 15 years. Many have laughed at our views. But much to the chagrin of the cohorts of equity bulls in the industry, their beloved and supposedly ‘cheap’ equities have become cheaper and cheaper. They will get cheaper still before this is over. Mutatis mutandis for bond bears as yields continue to slide.
You can just hear his demonic HAHAHA reverberate through his words right now.
Clearly, the Japanification of western economies is a super-hot topic, as other charts from his fellow SocGeners note.
These were a pair that came out last night, comparing both equities and bonds in the U.S. and Europe to Japan.
Getting back to Edwards, while he thinks everything is a wreck, the one market he’s somewhat intrigued with on the long side is Italy, owing to the fact that it’s relatively under-indebted, and never had the huge bubble that plauged Spain.
Unlike other perma-bears out there, Albert Edwards deserves credit for trying to identify positive things, rather than predicting the entire world is going to collapse into smouldering rubble.