You’ll be happy to know that Albert Edwards is “restored to [his] bearish best” after taking a couple of weeks off to relax in Jamaica, where he apparently stayed at a hotel haunted by the ghosts of Marilyn Monroe and Winston Churchill.
Additionally, you should know that “neither a State of Emergency being declared down the road in Montego Bay nor what locals said was the wettest January weather for decades” stopped Albert from “absorbing large quantities of sunlight,” something he says is necessary to “fight against the Seasonal Affective Disorder” which he partially attributes to being persistently bearish.
And no, I am not making any of that up. That’s from the summary bullets of his latest tri-weekly weekly note, hot off the presses on Thursday.
Albert hadn’t fully committed to writing something today because he’s got “a bit of lingering jetlag” but there would be something indecorous about everyone’s favorite bear not at least commenting on the fact that while he was warming his bones in Jamaica, the market suffered its biggest two-day decline since the James Comey fiasco on the way to snapping the longest stretch without back-to-back 50bp selloffs in history:
Of course the proximate cause for equities (very) recent and (very) relative trials and tribulations is rising bond yields and in case you were wondering whether Albert was going to in any way, shape or form change his outlook on where yields will ultimately end up, you can go ahead and stop wondering because this:
With the US 10y yield breaking above its long-term downtrend, equity prices have begun to wobble. Although I agree with the bond bears that US yields will continue to rise, causing more problems for equities, I do not believe bond yields have yet seen a secular bottom. I repeat my forecast that US 10y yields will fall below zero.
With that out of the way, he does note that according to SocGen’s tech Stephanie Aymes, it’s 3% on 10s we should all be watching:
“With yields now closing on 2¾% and the 30y closing on 3.0%, many see this as a great time to dump bonds and switch into equities,” Edwards goes on to note, before suggesting that according to Stephanie Pomboy of MacroMavens, “this might not be so wise.”
There’s a good bit more to the note, but honestly we all know why we’re reading Albert. It’s the same reason people used to watch Toronto Raptors games. You’re waiting on Vince Carter to do a 360 on a fast break. So here’s Albert with the bearish analyst equivalent of the break-away dunk:
We have written elsewhere about soaring US corporate debt, but the US Q4 GDP data revealed another shocking slump in the household saving ratio (SR) from 3.3% in Q3 to 2.6% in Q4. The Fed’s easy money policies have driven household net wealth to new highs and the SR has fallen hand in hand in the last two years.
The US has now got double bubble trouble (ie bubbles in both corporate and household debt). Just like 2007, this is another economic boom fueled by an unsustainable credit bubble that will inevitably blow up with a rooky Fed Chairman in place.
There you go. “Double bubble trouble”, “unsustainable’, “inevitably blow up”, and “rookie Fed Chair”, all in one dramatically foreboding punchline…