Investors cannot move for the weight of broker research comparing the current conjuncture in the US with Japan a decade ago. While bond markets at least, move to discount deflation, most sell-side analysts still say the current situation is unlike Japan a decade ago. They are right. Things now in the US are much, much worse than Japan a decade ago.
On what many are calling a ‘bond bubble’. Edwards pins it when he refers to the performance of JGBs…whoda thought long-term JGBs would be a top-performer back when they yielded 3.5% and Japan was pushing the fiscal limits. My, how the bond market put those deniers to shame.
There is still too much hope about. Until the mantra changes from Equities for the long term to Bonds at any price, we will not have completed our Ice Age journey. It has been a difficult road for me personally for the last 14 years during which I have been laughed at and my ideas dismissed as the attention-seeking ravings of a lunatic. But as we complete the path set out below over year, the Japanese template of supposedly expensive bonds outperforming supposedly cheap equities; this will feel nothing like a flesh wound…
Finally, as the fog of confusion (or fear?) clears, he drops this bomb. If one is looking for a structural bottom to this secular bear, then 450 should be the target on the S&P. Good times.
