ALBERT EDWARDS: I Had Coffee With Bob Janjuah, And He Cheered Me Up With His Bearishness

ALBERT EDWARDS: I Had Coffee With Bob Janjuah, And He Cheered Me Up With His Bearishness

Albert Edwards, the bearish strategist at Societe General, is out with a new research note to address the all-time high in the Dow.

I was on gardening leave when the Dow reached its previous peak in October 2007. One echo from those days is that I was beginning to feel lonely. Pessimism (realism) is very rare on the sell-side so I took a coffee with my fellow bear, Bob Janjuah and cheered up tremendously, reinforced in my belief that this is all going to end very, very badly indeed.

Janjuah is the strategist at Nomura who is just as bearish, if not more bearish, than Edwards.

Anyway, Edwards is not letting up on his bearishness. He points to recent history.

"As the Dow surges to all time highs it feels eerily similar to the prior mid-2007 peak," he writes. "Exactly the same jitters abound of a bond bear market and true to form Ben Bernanke is making the same complacent comments."

The great thing about Ben Bernanke appearing before Congress is that it gives us loads more ludicrously complacent quotes to store away until after this pyramid of jelly melts – a bit like his famous July 2005 quote rejecting any impact on the economy of a bursting of the US housing bubble by saying ‚Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a

In 2007 a number of folks were talking about the housing bubble and the associated derivatives house of cards. Obviously that’s what took the market down and caused the recession. What bubbles are out there now besides student loans? I’m not sure that popping will be anywhere near the housing crisis as nobody is selling tranches of student loan debt as a AA CDO and nobody is buying CDS’s on them.

The unwinding of the accomodative monetary policy (which has done a great job fighting off further deflation) will be difficult at best but not likely market busting like housing.

I will say that some of the latest data could be pointing to the Q2 stall that we have seen e last three years. But outside of the Q3 European debt crisis swoon the remainder of the year should be positive.

I don't think many are HOPING for something bad, they just don't see anything good. Recently I have endeavored to put together some sort of scenario that Bernanke could come up with when the counterfeiting stops. If he finally says "enough", what then?

The reason people have bought gold is they believe "print money= buy gold". Benanke has been using the printed money to buy our own bonds because the world no longer wants them. If the interest rate went up, the "recovery" would stall, so he was forced, in his own mind, to do this.

Now, when the bond buying stops, what will he do with all the bonds? We still need trillions every year to borrow to study robotic squirrels, so we have to keep the bonds and keep trying to sell new ones at higher interest rates. Eventually though, the bonds will mature, and need to be paid back, so what happens when the bonds convert to cash? At some point, the trillions of cash printed will enter into the economy and we will eventually have Zimbabwe style inflation. I cannot, for the life of me come up with any good outcome for all this money printing. The only question is the time period it happens. I'm betting when we have a Republican president to blame a terrible crash on, sounds good. Obama will be long lionized and placed on Rushmore. If the Fed sells bonds, IMHO, they will probably buy gold with the trillions of new cash they have. Then, gold will finally move as the gbugs have long predicted, but that is years past them giving up on gold.

Unless someone can straighten me out, I don't see any other scenario the FED could do to get out of all this printing. Eventually, and we don't know when, that money will have to be absorbed into the economy. Can the Fed just burn the money they created and take the loss on the bonds they bought? If that's the case, the Dems are right and we should just borrow and print our way into riches. Can the FED just go broke and bail themselves out? I've never been able to understand the FED and how it works in the Constitutional Republic.

Can anyone splain to me how Bernanke is going to get out of this?

It’s all been a house of cards illusion for longer than any of us have been alive; it will continue to be so for centuries after the last of us has posted their last. The market goes up, the market goes down, it goes back up, back down..... has for as long as there has been a stock market.

There is a distinct strain of thought that viewed/views economic hardship for the average American as a reasonable price to pay to get rid of Obama. I regard such as being at least as treasonous as anything cooked up by any of the last four or five Democratic administrations; And a hideous sense of hoping for calamity so that one’s investment in gold and/or firearms would prove to be a wise choice (I have both, but will happily go to my grave never having a genuine need for either and sincerely hope to see burning in the fires of hell anyone who would) and/or in the hope that the subsequent pain would disproportionately fellow citizens who may have voted Democratic.

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