RBS’ Janjuah Shares 2010 Outlook (in Short-hand Note)

Thursday, January 21st, 2010

Courtesy of BusinessInsider.com, Bob Janjuah, Royal Bank of Scotland’s Chief Global Strategist, shares his outlook for 2010 - He really likes commodities - and anything Bernanke and King can’t print.

RBS: Not all sovereigns have bad and/or fast deteriorating balance sheets (as a result of highly risky fiscal and monetary paths). Core Europe, much of NJA, Oz, Norway, Brazil all spring to mind. I think that bonds, currencies, credit and equities in such parts of the world will (a) outperform their peer grp equivalent asset classes in the bad and/or fast deteriorating sovereign balance sheet zones, but (B) will do merely OK on an absolute basis.

Elsewhere I think hard assets, most obviously to me GOLD and even CRUDE, will do EXTREMELY well. Over the belly of 2010 I expect to CRUDE up at $100 and Gold up at $1500.

I like commodities, anything which Bernanke and King can’t print at the press of a button.

Q2/Q3 2010 is when we will see the S&P down in the low 800s or lower, Gold at $1500, Crude at $100, the euro.

XO Index up at 700/700+. We will see BUNDS massively outperform Gilts and USTs. In the 10yr, I expect the Bund/UST spread to be at least 100bps - ie, 10yr USTs to yield 100bps+ more than 10yr Bunds.

(REMEMBER: None of this has anything to do with actual near term CPI-style inflation - assuming of course YOU still believe the data or believe that the official data tells even a half of the whole story - but rather everything to do with rapidly deteriorating sovereign credit risk/debasement/monetisation/shattered & zero policymaker credibility all being priced into bond yields).

In a follow up, Bob Janjuah shares his profound update to his outlook for 2010 in this grammatically incorrect short hand note. He says we may have already seen the highs for the year as a result of the fact that everyone in the world is now tightening:

This section is courtesy of Tyler Durden, ZeroHedge.com.

Bob’s World: Equity Highs/Credit Tights For 2010 Already Seen?

After putting my 1st piece out since Nov just this week, I have been sitting here and thinking…Forgive me for indulging myself in a stream of my own consciousness, but here goes:

The NAHB Index was ugly, as was the UK Inflation data, the ZEW survey, AND the ABC Consumer Confidence release….we also saw CITI BoA as well as MS all ‘miss’….

And yet stocks were at/close to post March 09 highs and up over 1% on Tues in the US ….Very strange!! Whilst I have only a very small degree of doubt that the Fed/US Treasury PPT is and has been actively goosing the US equity mrkt since Obama said Stocks Were Cheap in March 09 (funny that!!), I was beginning to think that we were/are close to peak levels because at peak bubble levels the price action is most ‘irrational’.

AND THEN 3 things hit me - Bang, Bang and Bang…..3 VERY SIGNIFICANT things:

1 - The Chinese are tightening policy more aggressively then even I thgt they would, and the core of the EUROZONE are playing uber Hard Money with Greece

2 - The Obama defeat in Mass is HUGE…….even a freshman can figure out that ‘Obama’s’ defeat in Mass is a move towards a lame duck president AND, most seriously, is a move that will directly and indirectly cause de facto FISCAL TIGHTENING - the Republicans have seen some serious and seriously UNEXPECTED gains in Washington since Obama’s inauguration and are now at the point where they COULD block Obama’s fiscal recklessness….most seriously, the message out of Virginia, New Jersey and now Mass is that the Republicans will do really well in the mid-terms…they will do ‘really well’ because they are going on the tkt of anti-big govt, anti-bailouts to all, & anti-big deficits, all of which is clearly hitting the sweet spot with the US electorate….furthermore, Obama has become a guy who folks either perceive or believe (I’m in this latter camp) has merely bailed out Big Wall St & Big Corporate America, all at the expense of the lower strata of the US economy (the youth, Black and Hispanic people, the SME sector, regional banks) - Yes, that’s right, the very folks who voted Obama in……all he has offered these folks is healthcare, which is now in serious risk, and benefits, where his temptation will be to DO MORE HANDOUTS (including making up more airy-fairy ‘fake job creation schemes’ just to keep folks, technically, off of the unemployment data) but which the Republicans can now much more effectively challenge/block, and which they certainly WILL (IMHO) block post mid-term victories. Key however is that the Mass defeat means Obama and Summers MUST now have serious doubts abt their reckless policies.

3 - The FHA is TIGHTENING policy too (!!!) re its lending in response to its SHOCKING delinquency data and its now invisible capital base - by law FHA will require a BAILOUT!!!!!! This is DIRECT MONETISATION and mrkts won’t like it

SO, back to what I wrote earlier this week. It COULD be that the Austerity is coming ANYWAY & EVEN SOONER than I had originally thght thru a combo:
- of Euro uber-discipline (VA),
- pro-active China (tightening) policy shifts (VA),
- the commercial realisation that the US/UK consumer and housing mrkts are still in a deep deep hole where the fundamentals are getting worse and where lenders (are forced to) pull back even more/tighten money a LOT in order to stop the rot on THEIR OWN balance sheets (part VA, part IA), and, lastly & most importantly,
- maybe, JUST MAYBE, the People have spoken and the message is clear (clearly IA as far as policymakers are concerned). They DON’T want BIG GOVERNMENT. They DON’T want our currencies debased anymore. They DON’T want to bail-out everyone. They don’t want to pay even more taxes to fund bloated government and to fund entitlement pay-outs ad infinitum. Maybe the People GET IT. They may get the fact that the West, esp. the US/UK, CANNOT PRINT/BORROW/SPEND its way out of our hole. Indeed, they may get the fact that we in the West need a deep-rooted and painful restructuring of our economies away from consumption and dissaving, towards savings and investment. If you think abt it for just one minute, it ain’t that complicated. Yes it means less holidays and less consumption of rubbish we dont need. It means a painful period of higher unemployment whilst the Austrian cleansing is allowed to play out. But all of which will then create the platform for the next 20yr period of REAL growth, REAL wealth gains, REAL productivity gains & REAL innovation.

The US electorate, so far, is clearly shouting this message and Obama must be nervous. Clearly in the UK all will be clear in a few mths time. But the sense I have right now is that the political classes may be forced into austerity because its is what voters want. Wow! Lets See.

In terms of mrkts vs what I wrote on Monday, it may mean that the Q1 peak in risky assets that I was looking for MAY have already been seen this week. It is too soon to be too sure - I need to see 3/4 consec closes below 1120 S&P before I have a very high degree on confidence on this - but the distinct possibility IS there.

IF this does indeed prove to be the case, then I would expect to see a move in S&P thru 1080, 1030 and into the 950/1000 range over the rest of Q1. In this move credit does badly, esp. weaker rated credit, and govvies do well, as does the GBP and the UST. Why? Because the market will be pricing for lower grwth, and tighter money + smaller deficits esp in the UK and US).

Again, IF this is the path we are going to follow, I would be extremely surprised if we did not see at least 1 decent multi-mth counter trend rally, but I also think we see lower highs. So think S&P going form 950/1000 back up to 1080/1120 in Q2. The driver for this counter trend rally will be the mrkt belief that the grwth story can survive even with tighter policy. Lagging grwth indicators and overly optimistic fwd looking ’subjective’ indicators will support this, + also lower bond yields will provide ’some’ support.

HOWEVER, as Kevin and I remain convinced that the underlying grwth story for the US & UK - in fact, for the whole world - will be one of multi-yr grwth disappointment (esp. in the UK US) due to weak final demand/prvte sector balance sheet repair and due to the fact that the supposed driver for grwth for EVERY economy seems to be EXPORTS, yet NOBODY can tell who the end buyer is ( it AIN’T China!!), then the call remains that in H2 10, we will see the resumption of serious risk asset weakness, higher volatility, and strength in govvie mrkt - esp BUNDS.

Cheers, Bob

Bob Janjuah
Chief Markets Strategist
RBS Global Banking & Markets
135 Bishopsgate, London EC2M 3UR
Office: +44 20 7085 3249

Tags: 3 Things, Abc Consumer Confidence, Absolute Basis, Asset Classes, Balance Sheet, Balance Sheets, Bank Of Scotland, Bernanke, Bond Yields, Bubble Levels, China, Commodities, CPI, Credit Risk, Debasement, Emerging Markets, Eurozone, Gilts, Global Strategist, Gold, Hard Money, Inflation Data, Lame Duck President, Mid Terms, Mrkt, Nahb Index, oil, Peak Levels, Policymaker, Q3, Rbs, Recklessness, Royal Bank Of Scotland, Significant Things, Sovereigns, Tyler Durden, Uk Inflation, Us Treasury, Usts, World Equity, Zew
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John Paulson (Paulson and Co.) Q3 Letter to Investors

Thursday, November 19th, 2009

Courtesy of Dealbook

Paulson & Co. 3Q Letter

Tags: 3q, Amp, Dealbook, ETF, Investors, John Paulson, Q3
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Global retail sales – looks bad, consumption very weak

Monday, June 22nd, 2009

This post is a guest contribution by Rebecca Wilder*, author of the of the News N Economics blog.

Consumption spending is the “wild card” for the economic outlook in many developed economies (and developing, too, i.e., China). Massive wealth loss has increased saving around the world; and in countries like the US, I still see a very big question mark as to how discrete will be the shift in saving behavior. Or better yet, how far will the deleveraging process go? Will saving remain at its current 5.7% of disposable income? Go to 7%? Or 10%?

The answer is that nobody really knows. Nevertheless, the effects of increased saving and/or reduced consumption on economic growth to date have been devastating. In the US, consumption took -2.75% and -2.99% from overall growth in Q3 and Q4 2008, respectively (see the BEA’s contributions to GDP growth table).

The drag coming from consumption is global. Below are several regional illustrations of the average annual retail sales growth rate (per month) for 2008 and 2009 to date. Out of the 27 countries listed below, 18 posted a positive average annual growth rate in 2008, while just 5 saw the same in 2009 ytd. Note: I do not have access to “good” data for Latin America. I urge you to visit Vitoria Saddi’s blog, Latin America and Brazil - On Economics and Politics; she recently wrote a nice piece summing up the expansionary monetary policy across Latin America.

Note: For each graph below, the month listed in parenthesis next to the country name indicates the latest data point for retail sales. 2008 is the average annual growth rate spanning the months January to December. 2009 is the average annual growth rate January to date.

Retail Sales in Asia: Australia and China holding on

Retail Sales in Western Europe: Ireland and Greece give the rest of Europe some perspective

Retail Sales in Emerging Europe: Latvia suffers, and Poland just barely holding on. The RGE Monitor had a nice article about Latvia and Emerging Europe not too long ago.

Retail Sales in the US and Canada: US consumers dropped off the map; both countries are showing signs of stabilization (the “not falling as quickly” story).

Looks bad - no wonder the consumer outlook is key to many economic futures.

Source: Rebecca Wilder, News N Economics, June 21, 2009.

* Rebecca Wilder is an economist in the financial industry. She was previously an assistant professor and holds a doctorate in economics.

Tags: Asia Australia, Bea, Canada, Consumption, Disposable Income, Economic Growth, Economic Outlook, Emerging Europe, Expansionary Monetary Policy, GDP, GDP Growth, January To December, Latin America, Massive Wealth, Q3, Q4, Question Mark, Retail Sales Growth, RGE Monitor, Western Europe, Wild Card
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Byron Wien: March 2009 Commentary

Tuesday, March 24th, 2009

This article is a guest contribution from MarketFolly.com.

Here’s Pequot Capital Management’s March commentary from Byron Wien. We’ve covered Pequot’s Q3 holdings earlier, and are soon going to be covering their latest Q4 holdings so keep an eye out. In terms of recent movements, we’ve detailed those here. (RSS & Email readers may need to come to the blog to read).

Here is an excerpt:

“I wonder if we are too impatient with our new President. After less than two months in office the stock market is still declining, house prices continue to drop, the futures of the banking and automobile industries remain uncertain, corporate profits are shrinking, industrial production is falling and unemployment is rising. Did we really think he would come out with a flawless plan to reverse these conditions within the first 60 days? The programs announced so far are not bereft of positive aspects. You can criticize the stimulus package for having been written by various congressional committees who put their pet projects in the bill but the legislation contains programs for alternative energy, the environment, education and healthcare which were all promised by the President during the campaign. What’s more, support for the infrastructure projects at the state and local level creates jobs or keeps public employees from being laid off and attends to deferred maintenance projects that may have been on the books for years. More than $1 trillion dollars has already been committed and it may be several times that before we are done in a $15 trillion economy. That’s probably going to be a boost to the
gross domestic product (GDP) of five to seven percent starting this year and continuing into next in an economy that is shrinking at about five percent.”

“Even the pessimists think GDP will turn positive late this year or early in 2010. Nobody knows when the stock market will bottom, housing will stabilize, the banks will feel solid enough financially to start lending again, unemployment will turn down and fear among consumers and business people will dissipate. To assume that there are not a number of constructive aspects to the programs announced (and passed) to date is too harsh a judgment in my opinion. It took decades to create the problems we are facing and it will take years to solve them. The long-term implications of the debt we are taking on to accomplish our goals are another atter, but the economy was in free fall and a series of dramatic steps had to be taken.”

“So I remain one of the few optimists who believe the market will begin to anticipate a recovery in the economy sometime in the second half of this year. I am prepared for the fundamental backdrop for equities to get worse before it gets better. I expect earnings will be disappointing and company guidance will be revised downward and more layoffs and bankruptcies will take place. However, once the positive effects of this enormous stimulus program begin to be seen, I believe the stock market will have already anticipated the good news. Even if the fundamentals only show improvement in 2010 we could see a better stock market later this year.”

You can read the whole document here, by clicking the full screen button at the top right of the viewing pane.

You may also download the document here.

Tags: Alternative Energy, Array, Automobile Industries, Blog, Byron Wien, Congressional Committees, Corporate Profits, Creative Writing, Environment Education, ETF, Excerpt, GDP, Gross Domestic Product, House Prices, Infrastructure Projects, Maintenance Projects, New President, Pequot Capital Management, Pessimists, Pet Projects, Q3, Scribd, Short Stories, Stimulus Package, Stock Market, Trillion, Writing Music
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