Nomura’s famously bearish Bob Janjuah is still really negative, arguing that growth is really weak and that politicans continue to make errors (he calls the Geithner plan for Europe a Ponzi scheme).
Bottom line. Things are going going to be bad for a long time.
My last report (Bob’s World: It’s only just begun) was published on 23 August. A month on I have little to add as markets and data are evolving almost exactly as expected. Most commentators now seem to accept that what is happening is not an overreaction, rather the markets are at last on the way to fully pricing in the sad state of the global economy and global markets. It may sound repetitive, but I remain firmly convinced that we are in a secular bear market where stage 1 was the late 2007 to early 2009 sell-off, stage 2 was the countertrend rally from early 2009 to April 2011, and stage 3 is the current phase, where I expect the sell-off to last at least until late 2012.
It is for these reasons that my secular view remains bearish. In or within a year from now I expect global equities to be 25% to 30% lower. My S&P500 target for the low in 2012 remains 800/900, and I think an ‘undershoot’ into the 700s is entirely possible. For the valuation-focused, assume S&P 500 EPS in 2012 of $90/$100, and P/Es in the 8 to 9 area – I see this kind of P/E as the new norm in the kind of world we are in. In this bearish outcome I would expect 10-year bund yields at 1% to 1.25%, 10 year UST yields at 1.25% to 1.5%, and 10-year gilts below 2%. The USD should do well, credit and commodities should not.