Fascinating discussion a few weeks ago in welling@weeden with Albert Edwards and James Montier of Societe Generale, reprinted with permission:
"In the cacophony that is global investment strategy research, Albert Edwards (that’s him, below left) and James Montier (on the right) stand out as clearly distinctive voices. And not merely because of their British accents or because they’ve tended to the decidedly bearish side of the scale over the last decade or so. Despite long tenure in the rarified top echelons of the investment banking world, for many years with Dresdner Kleinwort and more recently at Societe Generale(where they are co-heads of global cross asset strategy) both have managed to retain a natural plain-spoken bluntness. Also large dollops of common sense and strong streaks of reflexive independence, which they employ in conveying their often invaluable insights on investment strategy. In Albert’s case, those spring mostly from his long experience in the dismal science of economics and in James’, from his explorations of the equally mysterious realms of behavioral neuroscience.
They are, in a word, skeptics, and at this juncture most deeply skeptical of any and all notions that “the worst is over.” The recession, which has barely begun, is more likely to be deep than shallow, market valuations are hideously expensive and the flation policymakers should be worried about starts with de-, not in-.
For their reasons, keep reading, if you dare."
Inflation Not The Problem
welling@weeden, May 30, 2008
click for video
U.S. stocks retreated, sending financial shares to their lowest level in five years, on a deteriorating outlook for bank earnings. Rising oil prices pushed crude producers higher, leaving the Standard & Poor’s 500 Index and Dow Jones Industrial Average little changed.
Merrill Lynch & Co., Morgan Stanley and Lehman Brothers Holdings Inc. helped lead the drop after Bank of America Corp. cut income estimates for brokerages and Goldman Sachs Group Inc. advised selling bank shares as credit losses linger into 2009. Oil’s second day of gains pushed down Home Depot Inc., General Motors Corp. and United Airlines parent UAL Corp., while sending energy shares to their first advance in four days. American International Group Inc., the largest insurer, tumbled to the lowest since 1997 on Barron’s recommendation to sell the shares.
Almost two stocks fell for each that rose on the New York Stock Exchange. The S&P 500 rose 0.07 point to 1,318. The Dow decreased 0.33, or less than 0.1 percent, to 11,842.36. The Nasdaq Composite Index slipped 20.35, or 0.9 percent, to 2,385.74.
Most U.S. Stocks Retreat, Led by Financials on Credit Concern
Bloomberg, June 23 2008