Albert Edwards: “I remain in the bearish camp”
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September 18th, 2009 by Prieur du Plessis, Investment Postcards from Cape Town
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Albert Edwards, London-based strategist of Société Générale, has always been a firm favourite among Investment Postcards’ readers. His latest research report appeared earlier this week and saw him remaining firmly in the bearish camp.
Edwards’s “Global Strategy” report is subtitled “Money makes the world go round down” and argues that monetary stimulus will have only a limited impact in reviving the global economy. “Massive quantitative easing (QE) around the world has undoubtedly melted the clots of some of the most clogged arteries of the global financial system. That has made things less worse, which is not the same as better,” said Edwards.
Edwards highlights that debt aversion is causing bank lending and the money supply to slump (outside of China) and he has difficulty to see a self-sustaining recovery taking hold in this environment. Testimony to his argument is a massive monetary shrinkage in the US in the last few weeks. “The bank lending data are even worse than the money-supply data. US bank lending is contracting at an unprecedented annualized pace (our data go back 35 years and this is a record contraction both for the three-month period shown in the chart below and over a six-month period),” said Edwards.
Edwards concludes that the global crunch is not receding, but intensifying, stating that the unwinding of the “grotesque debt excesses” of the last decade has only just begun. “As Japan experienced before, it is deleveraging that is the problem and retrenchment takes many years, rendering the economy extremely vulnerable to rapid relapses back into recession when any reverse or pause in extreme stimulus occurs.”
Source: Albert Edwards, Societe Generale, September 17, 2009.
Dr. Prieur du Plessis is an investment professional with 26 years' experience in investment research and portfolio management. More than 1,200 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns, including his blog, Investment Postcards from Cape Town. He has also published a book, Financial Basics: Investment. Prieur is Chairman and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and a number of foreign countries. He also serves as Honorary Consul of Slovenia for South Africa, actively developing economic, cultural and scientific relations between Slovenia and South Africa. Prieur is 54 years old and live with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His leisure activities include long-distance running, traveling, reading, motor-cycling and scripophily. Read more from the author/contributor here.
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Tags: Aversion, Bond Funds, Bond Market, Cash And Cash Equivalents, Cash Balance, Catalysts, ETF, Eye Openers, Global Bond, Global Bonds, Hyperinflation, Market Cap, Market Capitalization, Money Supply, P500, Sideline, Stimulus, Term Liabilities, Term Yields, Trillions, Wilshire 5000Posted in Bonds, Credit Markets, Markets |
