Bob Janjuah Warns The Bubble Implosion Can’t Be “Fixed” This Time
Having correctly foreseen in September that “China’s devaluations are not over yet” it appears Nomura’s infamous ‘bear’ Bob Janjuah has also nailed The Fed’s subsequent actions (hiking rates into a fundamentally weakening economy in a desperate bid to “convince markets that strong growth and inflation are on their way back”). In light of this, his latest note today should be worrisome to many as he warns the S&P 500 will trade down around 20% to 25% from current levels in H1, down to the 1500s and for dip-buyers, it’s over: “I now feel even more certain that debt-driven asset bubble implosions cannot merely be ‘fixed’ with even more debt and another round of central bank-driven asset bubbles.”
As Janjuah said in September (excerpted):
I believe there is more weakness ahead – both fundamentally and within markets – over Q4 and perhaps into Q1 2016.
I repeat my view that the Fed does not need to hike based on fundamentals, but I would not be at all surprised to see the Fed hike in late 2015, in an attempt to convince markets that strong growth and inflation are on their way back. Any such hiking cycle by the Fed would I believe be extremely short-lived and quickly give way to renewed dovishness.While I think a US recession is merely possible rather than probable, the evidence is growing in my view that a global recession is more probable than possible.
Where is the Fed “put”, and what would such a “put” look like? It is very early in the process and lots will depend on global policy responses and data outcomes, but I am happy to declare my view: the next Fed “put” is not likely until the S&P 500 is trading in the 1500s at least (so more likely to be a Q1 2016 item rather than Q4 2015); and in terms of what the Fed could do, clearly QE4 has to be in the Fed’s toolkit.
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