Is Bob Janjuah (aka Bob the Bear) ready for prime time? How about his sidekick Kevin Gaynor, the Norton to Bob’s Ralph Kramden? Well they better be because they’ve made some big calls and have saved those paying attention a lot of stock-market aggravation.
I first became exposed to the work of Bob the Bear when he was a strategist at RBS thanks to the fantastic blogonometry over at FT Alphaville (where his research has been featured early and often). When Bob Janjuah moved on from RBS last summer, for a brief instant it looked as though the commentariat had lost one of its most prolific bears. But then the duo landed at Nomura as “co-heads of cross-asset allocation strategy” and the Bob and Kevin Show was back “on the air”.
Anyway, Bob’s stuff is off the hook this morning, sobering, nuanced and wide-ranging. A choice snatch of it before I send you over to The Source for the rest…
From FT Alphaville:
In or within a year from now I expect global equities to be 25% to 30% lower. My S&P500 target for the low in 2012 remains 800/900, and I think an ‘undershoot’ into the 700s is entirely possible. For the valuation-focused, assume S&P 500 EPS in 2012 of $90/$100, and P/Es in the 8 to 9 area – I see this kind of P/E as the new norm in the kind of world we are in. In this bearish outcome I would expect 10-year bund yields at 1% to 1.25%, 10 year UST yields at 1.25% to 1.5%, and 10-year gilts below 2%. The USD should do well, credit and commodities should not.
Here I have to insert an important caveat regarding Germany and bunds. My core assumption remains that in the euro zone policymakers do not attempt to fix an excess leverage and low growth problem with more leverage. This type of plan obviously appeals to Tim Geithner, but the core euro zone should be extremely concerned by the suggestion that leveraging the EFSF is a supposed “solution‟
Read the rest…