ALBERT EDWARDS: Everyone Is Still Way Too Optimistic, And The S&P Is Going To Lose 65%

TBI ^ | 9-30-2011 | Joe Weisenthal

[blam]

ALBERT EDWARDS: Everyone Is Still Way Too Optimistic, And The S&P Is Going To Lose 65%

Joe Weisenthal
Sep. 30, 2011, 6:23 AM

BREAKING: Societe Generale's uber-bearish strategist Albert Edwards is still... bearish.

Despite the big selloff, he's still convinced that everyone is too optimistic. Ultimately, he sees the market losing about 65% of its value from here.

It's simple:

We still hear a lot of nonsense about equity valuations and I certainly don't like feeling left out. Our belief that US equities are still overvalued is based on Tobin's Q, Shiller, Graham & Dodd's and cyclically adjusted PE measures. Investors ignore these at their peril. Those who take reassurance that the current 12m forward S&P PE of 101⁄2x is cheap should take a look at the chart below. The forward PE may be back down at the same level as the low of the last bear market, but 1) we are on peak earnings, and 2) the Ice Age secular trend of lower PE lows in this secular valuation bear market will mean that we move to single-digit PEs in this, the third post-bubble recession.

Those who do not believe this can happen are still choosing to ignore the reality that has unfolded before their eyes since 2000. In phase 3 of the Ice Age we would apply a 7-8x forward multiple to recession-depressed forward earnings of say $70-75/sh. That gets us pretty close our 400 S&P target. Unbelievable and ridiculous? They said that about our 11⁄2% US T-Note forecast this time last year!

[blam]

A Hard Landing In China Now Seems Inevitable

[blam]

PRE-MARKET SELLOFF GETTING WORSE: Germany Getting Crushed, Dow Futures Off Over 100

[rbg81]

I have no doubt that this will EVENTUALLY happen. However, since next year is a Presidential election, I expect the Powers-That-Be to throw everything but the kitchen sink at the financial crisis. One of the main goals will be to keep the banks from failing and the stock market from falling. Obama knows that if this happens, he is toast—even with the MSM crowing about how “smart” and “cool” he is. They man not succeed, but they will try everything.

[blam]

Obama is toast.

He'll become known as 'the worst president ever' replacing little jimmie Carter for that title.

[silverleaf]

Only if Soros and his cartel of globalist financiers thinks his flawed boy is worth propping up.

Want to bet Georgie has a “plan B” for America and obama is not part of it?

Like they said in “the Godfather”, it’s not personal, Fredo, it’s just business. And bring the cannoli.

[rbg81]

Honestly, I think its a big mistake to assume Obama is toast. It is not 1980 anymore. A lot of the electorate consists of people who are 1) clients, 2) dumbed down and 3) hopelessly liberal. Despite his dismal performance and ratings, he still tops all potential GOP contenders in polls. Except maybe for Ron Paul, but RP is even more unelectable than McCain was.

[Tim n Texas]

Frankly, I don’t think the next president will fair much better. The US economy is not in a recession, it’s a depression. And it’ll take 10 years to fix the structural issues in the ecomony...regardless of who’s in the oval office. There’s no quick fix.

[GOPJ]

I have no doubt that this will EVENTUALLY happen. However, since next year is a Presidential election, I expect the Powers-That-Be to throw everything but the kitchen sink at the financial crisis.

I'm with you on this one - elite liberals will take us to the brink to have the economy humming by the election. The problem - some of those short term pushes will make the inevitable crash worse.

It's like a family on the verge of going broke taking out the last two credit cards and splurging to impress out of town rich relatives they want to hit up for a big loan. Relatives who have figured out what's going on...