As a strategist, Albert Edwards, Société Générale’s über bear, doesn’t usually write about stocks. But he made an exception this week.
And guess which company pricked his interest? Why Barclays of course.
From his Global Strategy Weekly.
My goodness I laughed when I read that Barclays Bank had been given the all clear after being stress tested by the FSA. To the best of my knowledge the FSA have declined to publish how much economic stress they have put Barclays’ balance sheet under. People in the know however tell me the test was more strenuous than the early 1980s UK recession when GDP fell 6% peak to trough. But the key difference between then and now however, is that while real GDP was falling 6% yoy in the early 1980s, NOMINAL GDP continued to grow in excess of 10%! By contrast nominal GDP is now declining yoy. Hence we are now entering a debt deflation trap described by Irving Fischer. We are in a totally different world to the early 1980s.
Quite frankly, after everything that has happened, the likelihood of the FSA spotting the elephant – or even a woolly mammoth – in the room is pretty low. As Barclays share price rallied in celebration at the FSA’s laughable conclusions, our own UK banks analyst Asheefa Sarangi, having worked carefully through the numbers, downgraded her price target from 100p to 46p (current price 170p) and downgraded the stock to a Sell. We heartily agree with her and suggest that this is the sort of spunky, contrarian analysis that has been so lacking in these markets over the last few years.
All of which gives FT Alphaville the perfect excuse to reproduce this picture of Mr Edwards, who took this week’s “dress down” advice to extremes.
We are calling it ‘Riot Chic’.
Update:
More from the Soc Gen catwalk.
Related links:
Back to earth for Barclays – FT Alphaville
Barclays to Treasury: Keep yer money – FT Alphaville
Barclays to Treasury – some early reaction – FT Alphaville
Barclays to Treasury — more reaction – FT Alphaville