{"id":10401,"date":"2009-08-12T11:23:59","date_gmt":"2009-08-12T16:23:59","guid":{"rendered":"http:\/\/leavittbrothers.com\/blog\/?p=10401"},"modified":"2009-08-12T11:23:59","modified_gmt":"2009-08-12T16:23:59","slug":"rbs-uber-bear-issues-fresh-alert-on-global-stock-markets-2","status":"publish","type":"post","link":"https:\/\/blog.leavittbrothers.com\/?p=10401","title":{"rendered":"RBS uber-bear issues fresh alert on global stock markets"},"content":{"rendered":"

by Ambrose Evans-Pritchard<\/a>, International Business Editor
\nTelegraph.co.uk
\nThree-month slide could hit record lows, Royal Bank of Scotland chief
\ncredit strategist Bob Janjuah predicts.
\nBritain’s Uber-bear is growling again. After predicting a torrid “relief
\nrally” over the early summer, Bob Janjuah at Royal Bank of Scotland is
\nadvising clients to take profits in global equity and commodity markets and
\nprepare for another storm as winter nears. …
\n“We are now in the middle of a parabolic spike up,” he said in his
\nlatest confidential note to clients.
\n“I expect this risk rally to continue into \u2013 and maybe through \u2013 a large
\npart of August. What happens after that? The next ugly leg of the bear
\nmarket begins as we get into the July through September ‘tipping zone’,
\ndriven by the failure of the data to validate the V (shaped recovery) that
\nis now fully priced into markets.”
\nThe key indicators to watch are business spending on equipment (Capex),
\nincomes, jobs, and profits. Only a “surge higher” in these gauges
\ncan justify current asset prices. Results that are merely “less bad”
\nwill not suffice.
\nHe expects global stock markets to test their March lows, and probably worse.
\nThe slide could last three months. “A move to new lows is highly likely,”
\nhe said.
\nMr Janjuah, RBS’s chief credit strategist, has a loyal following in the City.
\nHe was one of the very few analysts to speak out early about the dangerous
\nexcesses of the credit bubble. He then made waves in the summer of 2008 by
\nissuing a global crash alert, giving warning that a “very nasty period
\nis soon to be upon us” as \u2013 indeed it was. Lehman Brothers and AIG
\nimploded weeks later.
\nThis time he expects the S&P 500 index of US equities to reach the “mid
\n500s”, almost halving from current levels near 1000. Such a fall would
\ntake London’s FTSE 100 to around 2,500. The iTraxx Crossover index measuring
\nspreads on low-grade European debt will double to 1250.
\nMr Janjuah advises investors to seek safety in 10-year German bonds in late
\nAugust or early September.
\nWhile media headlines have played up the short-term bounce of corporate
\nearnings, Mr Janjuah said this is a statistical illusion. Profits were in
\nreality down 20pc in the second quarter from the year before. They cannot
\nrise much as the West slowly purges debt and adjusts to record
\nover-capacity. “Investors are again being sucked back into the game
\nwhere ‘markets make opinions’, where ‘excess liquidity’ is the driving
\ninvestment rationale.
\n“The last two Augusts proved to be pivotal turning points: August 2007
\nbeing the proverbial ‘head-fake’ when everyone wanted to believe that
\npolicy-makers had seen off the credit disaster at the pass, and August 2008
\nbeing the calm before the utter collapse of Sept\/Oct\/Nov\u2026 3rd time lucky
\nanyone?”
\nThe elephant in the room is the spiralling public debt as private losses are
\nshifted on to the taxpayer, especially in Britain and America. “Ask
\nyourself this: who bails out Government after they have bailed out everyone?”
\nMr Janjuah said governments might put off the day of reckoning into the middle
\nof next year if they resort to another shot of stimulus, but that would
\nstore yet further problems. “If what I fear plays out then I will have
\nto concede that the lunatics who ran the asylum pretty much into the ground
\nlast year are back in control.”
\nOver at Morgan Stanley, equity guru Teun Draaisma thinks we are through the
\nworst. “We were on course for a Great Depression in February, but
\nArmageddon was avoided. Governments did not repeat the policy errors of the
\n1930s.”
\n“We have seen the lows of this crisis. This is a genuine rebound rally,
\nand it has been short by historical standards so far,” he said.
\nMr Draaisma, who called the top of the bull market almost to the day in
\nmid-2007, has crunched the worldwide data on 19 major stock market crashes
\nover the last century. They show that the typical rebound rally (as opposed
\nto bear trap rallies, when markets later plunge to new lows) lasts 17 months
\nand stocks rise 71pc. The 1993 rally in the US was 170pc over 13 months.
\nFinland’s rally in 1994 was 295pc. Hong Kong rallied 159pc in 2000. This
\nrebound is only five months old. The key indexes have risen 49pc in the US
\nand 42pc in Europe. Mr Draaisma advises clients to stay in the stocks for
\nnow, but stick to telecom companies, utilities, and oil.
\nYet he too expects a nasty correction once this rally falters. The usual
\ntrigger at this stage of the cycle is when central bankers start to make
\nhawkish noises, typically a couple of months before the first turn of the
\nscrew (normally a rate rise, but in this case an end to “quantitative
\neasing”. “As long as policy-makers are talking about how fragile
\nthe recovery is, equities are unlikely to go down much.”
\nThis moment can be hard to judge. There has already been rumbling from some
\ngovernors at the US Federal Reserve and from the European Central Bank’s
\nJean-Claude Trichet. Markets are pricing in rates rises by early next year.
\nThe pattern after major financial bust-ups is that the rebound rally gives way
\nto another fall of 25pc or so, lasting a year, followed by five years of
\nhard slog as stocks bounce up and down in a trading range, going nowhere. Mr
\nDraaisma suggests taking a close look at the chart of Japan’s Nikkei index
\nfrom 1991 to 1999. Gains were zero.
\nWe are in uncharted waters, however. Monetary and fiscal stimulus has been
\nunprecedented. Russell Napier at Hong Kong brokers CLSA says a powerful bull
\nmarket is already taking shape as the American giant reawakens. Perma-bears
\nwill be left behind. He said: “It is dangerous to be in cash.”
\nWhen the finest minds in the business disagree so starkly, the rest of us can
\nonly shake our heads in confusion.<\/p>\n","protected":false},"excerpt":{"rendered":"

by Ambrose Evans-Pritchard, International Business Editor Telegraph.co.uk Three-month slide could hit record lows, Royal Bank of Scotland chief credit strategist Bob Janjuah predicts. Britain’s Uber-bear is growling again. After predicting a torrid “relief rally” over the early summer, Bob Janjuah at Royal Bank of Scotland is advising clients to take profits in global equity and […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/10401"}],"collection":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10401"}],"version-history":[{"count":0,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=\/wp\/v2\/posts\/10401\/revisions"}],"wp:attachment":[{"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10401"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10401"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.leavittbrothers.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10401"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}