Noted stock market bear Albert Edwards is back and as downbeat as ever.
In a note entitled Basket trade suggests "Sell everything and run for your lives" (a reference to an FT letter explained below), the Societe Generale strategist even admits he sounds like a stopped clock for forever predicting a market crash.
However there is no doubt he is right when he talks about growing nervousness and volatility. Leaving the day's positive market moves aside, the FTSE 100 for one has seen a fall of more than 5% since its recent peak not much more than a month ago (4 September). Edwards says:
All investors have a sure-fire signal for when to liquidate their portfolios and head for the hills. We highlight one investor's concern that markets are a 'basket case'. Certainly you can feel the increasing nervousness in the market. Volatilities are definitely on the rise.
Institutional investors are also getting increasingly nervous that we have reached the end of the road and a major market top may be forming in equities. Notwithstanding particularly concerning economic data out of the formerly reliably robust Chinese and German economies, many market commentators are pointing out that US inflation expectations have now slid to levels that previously triggered the Fed to enact QE - yet there seems to be absolutely no prospect of that occurring currently. Quite the reverse.
So maybe it's time to stop dancing and sit this one out. Am I calling a top? What's the point? As an uber-bear I am used to being called a stopped clock. By contrast the market embraces a bullish forecaster however often they are shown to be overly optimistic. The IMF's forecasts for world growth have just been published and guess what - it sees world growth rebounding, just as it has done consistently for the last few years! The market doesn't care that the IMF has been serially wrong and that its forecasts resemble a series of hockey sticks (H/T Zero Hedge). The market loves a bull, even if it is a stopped clock too.
I have to commend a letter to the editor in the weekend Financial Times from a Matt Long. He clearly identifies current conditions as entirely consistent with the top of the bubble. This is the sort of incisive analysis that is often so lacking in our industry,
The next financial apocalypse is imminent. I know this to be true because the (FT Weekend) House and Home section is now assuming the epic proportions last seen before the great crash. Twenty four pages chock full of adverts for mansions and wicker tea trays for $1,000. You're all mad.
Sell everything and run for your lives.
Matt Long, Seilh, France.
This article was written by Nick Fletcher, for theguardian.com on Thursday 9th October 2014 11.49 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010