No, not from Sir Tom McKillip!
Here’s a sincere one:
But what of that technical bear market rally I was looking for back on 23 October? Has the awfulness of events given me a case of analyst amnesia? Unlike some others in the market we do not pretend we are always right, moving seamlessly from one view to another. And when I am wrong - especially on a short-term tactical call such as 23 Oct - then I will hold my hands up and James Montier usually gives me a jolly good thrashing.
Yep, Albert Edwards, the perma-bear, regrets going a little soft in the head last month when he suggested SocGen clients might edge their equity weightings upwards (albeit from the lowest of levels).
The strategist is now back on firmer ground, noting that Wednesday was World Toilet Day, that the Association of Home Builders confidence survey - down from a high of 72 to just 5 points - can’t fall much further because it can’t fall below zero, and also that after suffering a decade of depressing economic news a third of Japanese married couples simply stopped having sex.
But there’s a new softness to the prose in Edwards’ Global Strategy Weekly - a hint that he feels a bit bad that things have turned out to be just about as bad as he tirelessly told us they were going to be:
What another amazing week. Even a wizened bear, such as I am, is pretty wide-eyed at recent developments. I know last week I said I was surprised that government bond yields had not dropped further, but I didn’t expect yields to collapse as much as they have this week!..
Despite the S&P crashing below support, outside the US markets have not broken below October lows yet. This is almost certainly a function of the rock bottom absolute cheapness of Europe and Japan as well as relative to the US (see chart below). The US is now the high beta market, de-rating at a faster rate than elsewhere. Rock bottom, 8x trend EPS valuations may still be some way away for the S&P but we are much, much closer…
One landmark of note was reached this week. After 50 years, the trailing S&P500 dividend yield rose back above the 10y bond yield. As we showed last week (link), this is indeed the ‘normal’ state of affairs - if 1870-1958 is a long enough history! This is Ice Age reality. This event should begin to attract a lot of press attention and may even goad shell-shocked investors off the sidelines. Certainly it helped to mark the bottom of the UK market in 2003.
But wait!
Apparently the recent slump in equity prices has taken the MSCI World Index back to a critical long-term support level.
If we dive below this we could be in real, real trouble in the very short term.
