Albert Edwards On Stocks, ‘Hard Core’ Disinflation
"A few weeks back, I doubted US 10-year yields could reach the lofty heights of 1.50% without equity markets imploding. I was wrong," begins the latest missive from SocGen's Albert Edwards.
Albert was too hard on himself. He wasn't entirely "wrong."
Whenever you employ bombast (e.g., "implode") you're likely to be at least a little bit "wrong," but equities most assuredly weren't amused with the rapid selloff in bonds.
In fact, big-cap US tech briefly fell into correction territory, due almos
Or maybe the weak inflation should make me feel less guilty about still having 5% in cash.
I have everything in the market and basically am putting my efforts into not selling or trading.
Looks like Dems will be addressing infrastructure next, hence more money printing. My plan is to hold through the bumps.
I wonder what Albert and, for that matter, what H would say about the Christie’s auction of Beeple’s NFT.
I scrolled through some of the 13 yrs worth of daily art images that Beeple just auctioned for which he netted $50M. Honestly, some of H’s digital art is equal to or even better.
Of course, buy stocks. And, short volatility just as the NY Fed does to clean up minor market mistakes as they take place. Makes everyone holding feel good. We wouldn’t want anyone to fall asleep at night and have a bad dream of falling asset prices.
Next thing you know, someone starts having dreams of price discovery and the unencumbered, legitimate flow of capital, and things start to get really out of control.
While I appreciate this kind of token sarcasm better than anyone, the problem is just that it scared regular people away from financial assets for nearly a decade, which in turn cost people money.
The great irony of internet portals and newsletter writers who trafficked in shrill rhetoric about central banks killing price discovery, is that they generally did so while simultaneously pseudo-advising their readers to stay away from financial assets.
The obvious question is: If you know price discovery is dead, and you truly believe that central banks will levitate asset prices or even administer them, then why would you not be a raging bull? Why would you not front-run that assumed central bank buying and tell everyone you know to do the same thing?
I agree with everything you said. And, to answer your question, unfortunately I have a mind and memory of how capital markets should function. My mistake has been a belief in a system that would inevitably realise that the current way of doing things would not succeed. I placed far too much belief in the responsibility of our “leaders” that they would actually do each thing they said, starting from many years ago. Whether a Fed official, an open markets operation desk, a Treasury secretary and down the line through the C suites of what used to be investment banks. Unfortunately, the proverbial can has continued to be kicked down the road. And, here we are now. All time highs ad infinitum, to where, no one knows, but, if dissected from the beginning, anyone with integrity would not have done. To my personal defeat, my mind has not allowed illogical complacency.
What I’ve always tried to keep in mind is that my time on this planet is limited. In the grand scheme of things, my lifespan doesn’t even register on history’s timeline. So, my thinking has always just been: “Well, it doesn’t have to be sustainable. It just has to persist for a few more decades.”
As Harley Bassman likes to put it: “I will caveat that although I am certain of the denouement, it is possible its date is vastly longer than my career.”
True statements. By the way,I love the artwork used in your missives.
Thanks, my friend
Correct me if I’m wrong but arent the soft ycc controls employed by cbs disinflationary? If you’re trying to juice CPI wouldn’t additional “easing” be counter productive?
“In his latest, Albert cited his fixed income colleagues, who upped their 10-year forecast to 2% last week.”
There’s definitely been a rush from the sell side to revise year-end 10y UST yield forecasts to 2.0%. I just wonder with the Fed likely to maintain forward guidance and the ECB and BoJ both likely to keep bund and JGB yields suppressed, can the 10-year even get to 2% let along stay there for a sustained period given the FX-hedged yield advantage?
Charm, seems like there will be a lot of US supply for non-CB’s to sop up, not only the Treasury supply but also the last rush of US Corporate supply as CFO’s try to grab what probably seems like “the last chance to lock in low rates”.
So unless the current QE pace is increased by Fed, then the market will have to absorp, and will likely want a few more bp’s, you know … for the effort.