Edwards: A “Hybrid” Market Stance (Bearishly Bullish)

A news report earlier this month (January) summarizing the current “market view” of an internationally known investment strategist reminded me of the old saying: “with friends like this, who needs enemies?”

The report emerged from London, England, during SocieteGenerale’s(SoGen) annual investment strategy conference. At that conference, the SoGen’s chief global strategist, Albert Edwards, dramatically declared that European equities are “unambiguously cheap” and proceeded to attack United Kingdom pension fund managers, who in recent years have significantly under-weighted stocks and over-weighted bonds (producing an average asset allocation of stocks versus bonds at about 50/50): “…I have to say that this is ridiculous. It allows the rest of us to pick up stocks at cheaper and cheaper prices.”

Let me ask you then: if the above was all that you knew about a well-known and respected market strategist, what would your next step be regarding your own asset allocation? Obviously, if you were inclined to adjust your allocation at all, you’d likely sell some bonds and buy European equities!

Unfortunately, that’s hardly the “full story”. Mr. Edwards has a well-established reputation as a stock market “bear”. In fact, at that January conference, he described himself as a “trenchant equity bear” (the popular media sometimes refers to him as a “perma-bear”. The natural next question to ask him would be: “What new insight or revelation has led you to (seemingly) reverse your stance?”

Mr. Edwards denied that he has experienced any such “moment of revelation”. In fact, Edwards’ clear expectation is that stocks will fall from here. For example, he suggested that the U.S. S&P 500 Index (over the 1485 level on January 18) could possibly move under the 700 level – a level last seen in 2009!  Addressing the European market, he described equities there as “locked in a secular valuation bear market”. He suspects that Europe will need to endure more than two recessions before a new, full-blown bull market can unfold, adding: “We haven’t reached a culmination of despair.” Therefore, Euro equity holders will bear the risk of a steep decline during the next twelve to eighteen months. http://www.moneynews.com/InvestingAnalysis/Edwards-bullish-European-stocks/2013/01/16/id/471697

Perhaps you are, by now, reeling in confusion. Is Edwards “bullish” or “bearish”?  I doubt that the following will help you much, but Edwards opined: “In the sense that we are so far through the equity bear market, I’m relatively more bullish. I expect the S&P to go below 666. I expect there to be total carnage. But I am more bullish than I was!”

Wow! With a “bull” like Edwards, who needs any “bears”?  To his credit, he did qualify the bullish sentiments he expressed with the caveat that his recommendation to buy Euro stocks was only intended for investors who are willing to hold them for ten years!

For the record, I note that Edwards has demonstrated a significant, redeeming quality of humility in the past (not a common trait among “market stars”). Just a few months ago (September) he wrote: “Regular readers will know that in the main, my market timing is unerringly inaccurate, normally months, if not years, too early!”

So, regarding Edwards’ actual “market stance”, all we know for sure is that, whether the market goes up or down in the next few years, Edwards can say: “I told you so.” He called equities “unambiguously cheap”, but he also warned “I expect there to be total carnage.”

We are clearly left (at best) with a “muddled” picture regarding what to do with our own portfolios. Edwards sounds like a delightfully complex thinker, someone with whom I’d thoroughly enjoy a two hour lunch at a fine London pub. However, I am fairly certain that I’d prefer someone else for the task of managing any portfolio funds within which I hold a stake!

Submitted by Thomas Petty

Be Sociable, Share!

Related Posts


MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.

This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.

The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.