In an note sent out this morning, RBS’s Bob Janjuah, who is known as quite bearish by many, warns of the next wave of bubbles brought on through government intervention, sovereign risk, and excess liquidity.
RBS: What is driving my thinking that the post-March 09 rally may well be over and that the next leg of the great bear mrkt may well have begun? Well, since mid-09 most clients I speak to regularly have gradually got more bullish, based largely on the view that Policy will remain effective AND will remain uber easy/get even easier if needed, and that there would be little/no consequence to easy policy. Well, guess what? I think that game is now over. Partly because the Market is doing/did its jobs (periph Europe). However, in the UK and US the Market seems again to have failed to do its job of seeing a delusional debt fuelled Ponzi Bubble for what it is. The real vigilante this time seems to be The People.
Once again, Janjuah, like many others, seems to be calling the Scott Brown election as a huge turning point.
Here are some key things Janjuah observes:
- The market has switched from bullish to bearish without many realising it.
- Tim Geithner and Ben Bernanke are at centre stage in this economy; how they shape policy will ultimately determine our outcomes.
- Sovereign risk is a huge concern, especially in regard to Europe.
- Obama’s budget proposals are irrelevant and will drastically change within the next year. Taxes WILL go up.