Albert Edwards: Bear market could take S&P down to 450

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I have not referred to my friend Albert Edwards’s views for a while. Given the rather difficult juncture at which the U.S. stock market finds itself, I thought it opportune to consult with the big guy over at Société Générale in London.

In short, Albert sees that the structural bear market in equities has not yet reached bottom. “We have long said that the de-bubbling process would end only when equities become very cheap and revulsion in equities as an asset class hangs in the air like a fog,” commented the famed strategist.

“Equity investors are in for a rude shock. The global economy is sliding back into recession and they are still not even aware that these events will trigger another leg down in valuations, the third major bear market since the equity valuation bubble burst. We will return to the valuation nadir last seen in 1982, with the S&P bottoming around 450.”

Albert is never short of drawing analogies: Investors’ continued optimism “as the equity bloodbath of the last decade enters its final, even bloodier phase” reminded him of the Black Knight in Monty Python & the Holy Grail. “Despite being grievously wounded by King Arthur, the Black Knight makes light of his injuries which he dismisses as a flesh wound. The vast bulk of the investment industry fails to appreciate that we are locked in a structural bear market and about to enter Act III,” he concluded.

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8 comments to Albert Edwards: Bear market could take S&P down to 450

  • Angela

    Albert seems to have forgotten about the printing press, this is something that America is good at, hence the term, helicopter Ben. The currency will depreciate to such an extent that we could see S&P 1800 by 2012 just like what happened in Zimbabwe.
    I’m a bear and shocked by the strength of these rallies. I would not be a buyer of equities until there is some kind of deep retracement. We will not see 450 for years.

  • @ Angela: Al is very cognizant of inflation coming back in a big way down the line. As a matter of fact, he refers to it as the “Great Inflation”. But he firstly sees a deflationary maelstrom impacting markets.

  • Sherman McCoy

    The guy’s been bearish since 1996! He should consider another line of work.

  • @ Sherman: Yes, he has been negative on equities and bullish on bonds for most of the past 14 years. The outperformance of global government bonds against equities over this period has been in the order of 100%.

  • Andrea Edelman

    “The outperformance of global government bonds against equities over this period has been in the order of 100%.”

    Actualy the BEER ratio has been falling since 2003.

    From 2002 to 2008 bonds have outperformed equities.

    The whole game is to time it right… even a broken clock will be right twice a day.

    SG is definitly a broken clock.

  • Andrea Edelman

    How exactly do you see a crash ? Sovereign debt crisis ?

    It will NOT happen. The ECB and the FED won’t let it happen, they know too well what happens if a country goes broke.

    Then Albert would be right.

    If you look at the price of money in gold it’s been falling for decades… we’ll just print more.

  • avi cohen

    The numbers does not matter albert is on the money!

    it can be 450 or 550 or even 1000.

    bloodbath ther will be.

    most of investors now adays are so used to think short term that anything beyond 3 weeks is something that escapes them.

    Albert is NOT a market timer nor he pretends to be. he might be wrong if you actually try to time the market according to his views BUT
    if you realy listen to his market massage you will be rewarded. trust me.

    Basicly what he sais(the way i see it) is that as an asset class equities are DEAD. as i see it it is better to hold 10-20 percent of stocks in an investment portfolio with
    specific holdings in special situations only, or/ and in specific sectors (like sasol in the energy sector in SA for example) but not anything that resembles to holding the ‘market’.

    Other than that choose wisley between high rated SHORT term bonds/notes and even gold depending on your risk tolorence and you will be much better of 10 years from now and with much less risk than mosy investors and portfolio managers who FAILS to understand that we are living an a diffrent world than the one that we grew up on.

    I guees that the day when everybody will understad albert will be the last day of the bear market.

    shame on them!

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