Albert Edwards, Permabear, Sees More Trouble Ahead
he SocGen strategist’s doomster scribblings are a must-read for fund managers — even if he’s often wrong.
Edwards, 62, started in the City of London 40 years ago as a Bank of England economist after completing a masters degree in economics at Birkbeck, University of London.
But he cites his three-year stint as an asset manager at Bank of America Corp., coinciding with the 1987 Wall Street crash, as fundamental to how he thinks — and writes — about the world.
I, for one, look forward to his doomster scribblings, although I reckon his pessimism is currently a bit overdone. However, his dismay about the likely repercussions of central bank interference in setting the price of money in recent years is spot on.
Large firms with ready access to debt capital markets are benefiting from having raised debt at super-low interest rates during the pandemic. They’re now parking cash that earns more in interest than the coupons they pay bondholders — providing a windfall, but one that will prove temporary.
He reckons Europe is already in recession, with the US not far behind. Though not a monetarist economist, he finds it bewildering that policymakers are ignoring sharp declines in both money supply and bank lending, as those contractions increase the risks of a hard landing. I couldn’t agree more.
He reckons governments and central banks are unlikely to stand aside and allow some Schumpeterian creative destruction from a downturn, which could correct some of the misguided policies of the last decade. The pandemic saw governments gleefully cross the fiscal Rubicon and pump money straight to households; central bankers may have thrown monetary policy into reverse but the fiscal splurge continues unabated.
His ice-age thesis was mocked for years — until it was proven to be prescient when interest rates tumbled and the universe of bonds with negative yields swelled to a peak of $18 trillion three years ago. He now looks for US 10-year yields to retrace back below 2%
Edwards envisages a collapse in tech stocks similar to the 2001 rout.
Edwards recommends hiding in the safety of longer-duration fixed income and gold. These might not be the most exciting recommendations available on Wall Street, but that’s not why investors listen to him. Rather, it’s the forensic quality of his analysis and contrarian approach they rely on to challenge their thinking. The world could do with more voices willing to challenge the financial orthodoxy.
Marcus Ashworth Bloomberg 27 december 2023
If you’re buying stocks today, says noted permabear Albert Edwards, you need a psychiatric evaluation.
Sue Chang, MarketWatch Sept 19, 2016
More about Albert Edwards at IntCom
https://englundmacro.blogspot.com/2016/09/if-youre-buying-stocks-today-says-noted.html
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