Tyler Durden
With the dollar surging, and with correlation momos no longer having a clue what to do courtesy of all correlations having recently broken down, here comes Albert Edwards to pour even more cold water on the rally, prophecying that the next leg of the bear market is just around the corner.
At this time of year I normally get requests for year-end forecasts. My erstwhile colleague, James Montier, always used to tell me never to offer pin-point forecasts as they are a hostage to fortune (in addition, he felt passionately that investing should not be based on what he termed the folly of forecasting).
But when I do give forecasts in a moment of weakness, often they appear extreme. Some clients have taken such umbrage that they try and get me fired! With that pressure not to stray too far from consensus, most sell-side analysts? forecasts end up as consensus mush ? and if they do deviate from consensus it is almost always on the bullish side. The industry quickly forgives a bull who is wrong whereas an erring bear must be hunted down, hung, drawn and quartered. Hence the industry gets what it deserves: economic and market forecasts that either call for mean reversion or which stick close by the current spot rate (with their usual bullish bias). But in reality the world is seldom ever like that.
Regular readers will know that many of my more extreme predictions have had an annoying habit of eventually coming true, albeit with the usual heavy dose of poor timing. Certainly when I see the current extremely low number of equity bears (the lowest since the market top of 2007 - see chart below), the likelihood is that the next leg of the long-term structural valuation bear market is closer than people might realise.
Albert Edwards: Here Comes The Next Leg Of The Bear-Market
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