This week, Nomura’s well-known bear Bob Janjuah basically threw in the towel on being a useful analyst.
In a note called Monetary Anarchy he explained the failure of his bearish calls, which he’s been making aggressively for months, including in early January, when he said that the rally had just a few days left, and that the S&P would soon be heading to 1000.
His explanation: The world’s central banks are distorting the market beyond all reason, and therefore the market is un-analyzable.
There’s so much to find fault with here, we’re not sure where to begin.
First of all, if your job is to provide assessments of markets, it’s your fault if you failed to anticipate what the world’s central banks do to manage the economy. It’s what they do. Don’t like that they do that? Fine, but it’s absurd to let your philosophical viewpoints guide your market calls.
In Janjuah’s case, the whole frustration with the ECB is unconvincing since back in November he said he’d just reload his shorts if the ECB got aggressive about saving the euro.
Germany appears to be adamant that full political and fiscal integration over the next decade (nothing substantive will happen over the short term, in my view) is the only option, and ECB monetisation is no longer possible. I really think it is that clear and simple. And if I am wrong, and the ECB does a U-turn and agrees to unlimited monetisation, I will simply wait for the inevitable knee-jerk rally to fade before reloading my short risk positions. Even if Germany and the ECB somehow agree to unlimited monetisation I believe it will do nothing to fix the insolvency and lack of growth in the eurozone. It will just result in a major destruction of the ECB‟s balance sheet which will force an ECB recap. At that point, I think Germany and its northern partners would walk away. Markets always want short, sharp, simple solutions. This is why the begging bowl is out for ECB unlimited monetisation. But, as in the immortal words of Messrs Jagger and Richards, “you can‟t always get want you want‟.
What’s funny is, the ECB actually made a move that was far less aggressive than “unlimited monetisation” (the 3-year LTRO) and yet obviously the upside for the market is far beyond what he’d anticipated, or else he wouldn’t be throwing his hands up in disgust.
Beyond that, the idea that the market is all just central bank-driven bubble blowing is nonsense.
While the ECB almost certainly helped take the worst-case scenario off the table in Europe, in the US we continue to see steady improvement in the data, especially in the areas that really count: labour, cars, manufacturing, home construction etc. Yes, the Fed is not going to get in the way of the rally, and it has signaled that it’s hear to help, but has it done anything unfathomable and beyond the ordinary? Definitely not.
Oh, and lest you think it’s just the US where the data has been good, think again.
Citi’s economic surprise index for Europe is in solidly positive territory, with the reading at a 1-year high.
Bottom line: It’s Janjuah’s job to anticipate what central banks are going to do, the central banks haven’t done anything that bizarre, and there are fundamentals to back up the market turnaround. The idea that the market is now just such a tangled mess that it’s impossible to assess is nonsense.
And in general, this whole blaming authorities for your missing rallies is just not a good look for anyone.
It’s one thing to not like bailouts or easy money or government spending or whatnot. Fine. If your an investor, or if you write for investors, then saying that you would have been right, but for government actions, really is a horrible cop out, and one we hear all the time from multiple quarters in the financial world. Better to just cut it out.
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