Thursday, January 15, 2009
It's one thing to call for a depression - you don't have to look very far in the "alternate news" section of the internet to find forecasts like this and they've been a constant for many, many years - but to hear an analyst at a major firm predict a depression, that's a little different.
When this same analyst also recommended buying stocks two months ago, then it become something of a curiosity. The details are in this report from Reuters.
Societe Generale said on Thursday that the United States' economy looks likely to enter a depression and China's could implode.A target of 500 for the S&P 500 was cited - this represents a decline of another 40 percent from current levels, down almost 70 percent from the 2007 highs.
In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout.
"While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere," Edwards wrote.
"It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression."
Edwards has long been one of the most bearish analysts in London, first with Dresdner Kleinwort and then with SocGen.
But he called in October for clients to increase their exposure to equities, which he said were due a rebound.