Sammanfattning av dagens Bob's World

1.       Short term dip in November. Buy that dip if it occurs. S&P could go as low as 1600.

2.       Topping out process Q4’13-Q1’14. Go seriously short when VIX hits 10 and thus signals complacency. Maybe an extreme high in S&P will be 1850

3.       Stock market drops 25-50% over the course of 2014-2015, while the economy rebalances toward the 90% at the expense of the top 10%

Penningmängden i Kina kommer inte rädda dig

En makrobekant på Nomura påpekade förra veckan (och idag) att kraftigt stigande M2 i Kina räddade oss alla 2009. Det var dock ett av Kinas största policymisstag någonsin (det blev en penningmängdsbubbla som skapade inflationstryck och extremt dålig tillgångskvalitet i Kina, dvs framtida kreditförluster) och det gör de inte om.

Det betyder att 2012-2013 är något helt annat än 2009-2010, dvs hopp om samma slags makroförbättring som då är ogrundade.

Just nu är det extrema inflöden i EM-fonder, implicit pga hopp om stigande tillväxt i Kina efter bara ett kvartal med något högre tillväxt (men fortfarande låg). Observera att det kvartalet är den nya politbyråns första kvartal vilket gjorde det självklart att det skulle komma in bättre.

VIX föll under 12,5 i fredags. Sjukt! Tydligen ställer makrofonder ut stora mängder calls vilket skapar ett säljtryck i VIX och ytterligare stop loss-tryck i VIXen, vilket ger intrycket av totalt lugn i världen och på börserna. Det här liknar 1987 mer och mer, eller åtminstone 1998.

Janjuah siktar på 1300, 1500 och 800 i S&P 500

Den här meningen sammanfattar Bobs syn att en sista policyspike kan lyfta index rejält innan kraschen, fast först tror han att det faller till 1300 (nu 1370):

A combo of ECB QE and fiscal/debt ceiling fudges in the US – perhaps also complimented by a short-lived centrally planned but debt fuelled and ultimately wasteful China uptick – could even cause a parabolic spike powerful enough to take S&P – briefly – into the 1500s, before resuming the longer-term march over the rest of 2013 and 2014 to the 800s

[...] but, for now, we will continue to focus on 1300 as an initial major target

Annars är han tydlig med att penningtryckande endast skadar ekonomin:

the private sector continues to ignore Bernanke [...] by instead doing the exact opposite, which means holding onto/building cash and savings, delaying spending/investment/hiring and thus hurting growth.

Bob Janjuah är tillbaka

För några veckor sedan stoppade BJ på Nomura ut sig då SPX stängde en fredag över 1450. Nu verkar han vara tillbaka och redo att ta risk på nedsidan igen. Från Zerohedge:

Dow Jones down 250, and a new bearish letter from Bob Janjuah? Lucky coincidence? Or conspiracy? You decide. From Bob: "How to play it? The SPX is the obvious pure risk short because of how rich it is against other equity markets. Outright is fine, so are options. Take a look at January 1350 puts for example currently trading at 20. If doing outright we would recommend a stop just above the recent highs at 1475. We also like the USD and Treasuries because the market has seen time and time again US problems do not lead to selling of (safe) US assets and it can and we think will be the same again."

Bob's world

Bob Janjuah på Nomura har idag uppdaterat sin marknadssyn från knappt en månad sedan. Han börjar med att kommentera hur rätt han haft (vilket är lite en försköning, men i stora drag ändå korrekt). Huvudbudskapet är att efter risk on som gällt i några månader nu så är det från och med idag dags för risk off. Han siktar på 20-25% nedgång i S&P [vilket betyder minst 30% ras i Eurostoxx 50, min kommentar] fram till årsskiftet då nya monetära stimulanser kan ge en ny uppgångsfas.

This is a very brief update of my most recent note published on July 25th. Referencing back to this July note the key takeaways were:


Firstly: ‘In terms of markets, the route map I set out in early April and which I affirmed in early June continues to play out extremely well. After correctly calling the late March/early April 1420 high in the S&P500, and also the early June (1270) low, we have also now fully captured the risk-on rally in stocks and credit that began in early June…’

Secondly: ‘Tactically, we have not yet hit my targets for the risk-on phase I called in early June – my S&P500 target was set at 1400/1450 by late July/early August, and my iTraxx Crossover target was set at 600bp. And as I also said in June, this risk-on phase was likely to be a struggle due to headline risk and volatility, market illiquidity, and the general lack of strong investor views/willingness to take big risks. Nevertheless, stock and credit markets have indeed climbed the wall of worry. Over the extreme short term, over the next two to four weeks, I would not be surprised to see my targets ultimately hit.’

And lastly: ‘However…I now think the correct thing to do – as I also said in April and June – is to prepare for a serious risk-off phase between August and November…over the August to November period I am looking for the S&P500 to trade off down from around 1400…by 20% to 25%...to trade at or below the lows of 2011... For iTraxx crossover, this equates to a spread wide for 2012 of – in my view – 800/1000bp (from 550/600bps)… investment grade cash corporate (non-financial) bonds remain a core (relative!) safe-haven. This coming major risk-off phase will, in my view, also be very USD bullish (my expectation of Fed USD1trn QE in December should eventually alter the bullish USD trend of course) and bullish core government bonds (USTs, Gilts, Bunds) – perhaps we could see 10yr Bunds at 50bp all-in yields, with USTs and Gilts at/close to 1%. By late 2012, based on my Fed December QE view, my tactical call will likely turn bullish/risk-on – let us see about that closer to the time.’

My July note thus held out the prospect of further Risk On over late July and August, where 1400/1450 has been my long-standing target ‘high’ for Q3 2012, but it also warned that in August we were likely to see the beginning of the next risk off phase, which would likely be the ‘biggest’ move of 2012. Whilst in the extreme short term – days – more risk on is possible, we now feel comfortable in flipping from risk on to risk off and positioning for this major risk off phase.

Just in case something genuinely new and unusual is happening – we note that the risk on phase has, time wise, extended for a few more days than we had originally forecast - and in the interests of prudence, my stop loss on the risk off call effective immediately is a consecutive weekly close on the S&P500 at or above 1450. As the Global Macro Strategy team is looking for Mr Bernanke to disappoint markets at Jackson Hole next week, and also because we are confident that markets will soon discover that neither the ECB nor Eurozone politicians will actually be able to deliver on their ‘promises’, we are hopeful that our stop losses will not be triggered. For now we are happy to risk 30 S&P points against us, in order to potentially pick up 300 S&P points in our favour.

Nomura - inte bearish, men de varnar för att det ser ut som i mars

Good morning – based on our composite sentiment indicator – we believe that the time has come for a brief pause in the rally. Firstly because sentiment has become too stretched, and secondly, there is a lack of catalysts in the near future. Our composite sentiment indicator is now at the highest level since early 2011, indicating sentiment is quite bullish. We should have paid more attention to this indicator earlier in the year. It last peaked on 16th March, calling the top of the Eurostoxx well. Likewise, the two recent troughs in the indicator in September 2011 and May 2012 also did well at calling rallies.


We are in no way getting bearish – this is a short-term call before the ‘news flow’ starts again in September.

Nomura är positiva, men med brasklappar

Nomuras variant på samma tema som jag och ganska många har för 2011, dvs att det lär bli ett bra år, men att risken för en tillfällig nedgång är stor just nu samt att det också finns viss risk för en större nedgång, en systemrisk, lite senare eller som möjligen börjar redan nu:




• The GOOD - 2011 could be a great year for risk. The combination of reasonable growth, low inflation and Fed on hold is a recipe for a decline in risk premiums.


• The BAD - Tactical warning signals exist when looking at a range of equity and bond sentiment and positioning indicators. Markets are ripe for a correction and vulnearable to over-reacting to bad news

• The UGLY - The top three tail risks include: too hot US growth causing rate expectations to be brought forward, oil prices cause a non-linear demand destruction, and China deciding it is in their interest to rapidly appreciate their currency by 20%. The unintended consequence is a massive yield spike in UST yields


• Several things make the honourable mention. Expectations about Europe are so low, undershooting them is near impossible. However, Spain remains a too big to fail zone. The battle lines are drawn. Ironically, the European crisis would go away if the ECB revved up their buyer of last resort role.

Mer bull från Nomura

Nomura i morse - gör upp med negativismen kring Grekland:

There is little doubt that the fiscal crisis in Greece has had a major impact on financial markets this year – an impact completely out of proportion to the country’s weighting in either the European economy, or its financial markets.

Last week’s announced austerity measures should bring forth more tangible support for Greece from the EU, while a successful bond auction helps too.

The feared contagion effect has not materialised, with all other Euro Area countries now able to finance themselves at or below five-year average yields.

Meanwhile, corporate yields – financial and non-financial – have continued their relentless decline, and Europe’s companies can now borrow as cheaply as they could in 2006/07.

Surprisingly, given these improvements, Europe’s stock markets continue to reflect sovereign concerns. National valuations are strongly influenced by fiscal considerations, while the underperformance of Euro Area banks stands in contrast to the strong performance of their US and some UK peers.

Financials also look lowly priced relative to cyclical stocks, yet European GDP growth remains closely tied to bank lending. It is hard to imagine an economic recovery strong enough to justify the cyclical multiples, without an improved lending environment.

Accordingly, as European stock markets recover from their sovereign induced problems, we would expect the Financials to outperform – we remain overweight in both Banks and Insurance companies.