De Beursvloer #73: Shorters worden uitgerookt

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‘Green Shoots’ Overstated in Bear-Market Rally, Janjuah Says

Last Updated: April 2, 2009 09:46 EDT

April 2 (Bloomberg) -- The “green shoots” visible in the economy will have been exaggerated into “tropical rainforests” by early May and this month’s stock-market rally will end in a sell-off, according to Bob Janjuah, a strategist at Royal Bank of Scotland Group Plc.

As the “full extent” of falling growth and earnings and rising defaults and unemployment emerges later this year, investors will grasp that policy makers aren’t winning their battle against deflation and recession, Janjuah wrote in an e- mail sent on March 31. Stocks will slump by “well over” 30 percent from their highs while bond yield premiums will surge, he wrote.

“Everyone who did not see the locomotive named Global Economic Disaster coming, even when it was staring at us inches from our noses, is now busy all over the media, telling us the worst is over, the green shoots are here,” London-based Janjuah wrote. “All we are having is a very necessary and very normal bear-market rally.”

Stocks rallied around the world today, oil and metals rose and the yen weakened as Group of 20 leaders met in London to discuss economic-stimulus plans. The cost of insuring European corporate debt in the credit-default swap market fell for the first time in five days, while the extra yield investors demand to hold corporate bonds rather than government debt narrowed, according to Merrill Lynch & Co. index data.

Bear-Market Rallies

After falling to lows in November, stocks rallied until early January, before falling again through early March. The MSCI World Index has now gained 21 percent since a 13-year low on March 9, meeting the traditional definition of a bull market. Bear markets such as the current one always have three to five rallies within them, according to Janjuah.

The strategist wrote that the Standard & Poor’s 500 index may fall to between 500 and 550 this year, from 811.08 at yesterday’s close. He also said he expects 10-year U.K. and German government bond yields to drop in the second half to 2 percent, from more than 3 percent currently. He also forecast 10-year government yields will decline to 2 percent in the U.S., from 2.69 percent. The dollar and pound are likely to weaken against the euro, he wrote.

Efforts by world leaders at the Group of 20 summit won’t help end the recession but worsen things, Janjuah wrote.

Nero, Belushi

The G-20 convened in London as some reports suggested the pace of global economic decline is easing. U.S. durable-goods orders and home sales rose in February, Chinese urban investment surged 26.5 percent in the first two months of the year and German investor confidence in March reached its highest level since July 2007. The S&P 500 last month gained the most in seven years.

“My brain defaults to a vision of a bunch of middle-aged men in togas playing their games with their toys, whilst outside the masses are in uproar,” Janjuah wrote. “Think either Nero in Ancient Rome or think” actor John “Belushi in Animal House,” he wrote.

The Financial Accounting Standards Board’s proposal to overhaul fair-value accounting that gives banks some discretion in valuing their assets, is also prejudicial, Janjuah wrote.

The change is “not only scandalous, it is doomed to fail as it raises uncertainty,” Janjuah wrote, before the FASB voted today to relax the rules. “As an investor I want more clarity and transparency, not less, when looking at financials.”

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The “green shoots” visible in the economy will have been exaggerated into “tropical rainforests” by early May

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Op donderdag 2 april 2009 18:59 schreef Sloggi het volgende:
Met green shoots bedoelen ze scheuten van jonge planten. Die groeien dus uit tot tropische regenwouden in mei. Met andere woorden: we gaan verder omhoog, maar het is gebaseerd op lucht.

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Op donderdag 2 april 2009 18:57 schreef pberends het volgende:

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http://www.bloomberg.com/apps/news?pid=20601102&sid=aIGNAEN_tbqA&refer=uk

Wat bedoeld hij precies met deze zin?

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Op donderdag 2 april 2009 19:25 schreef Dave7 het volgende:

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Yes! Het zal denk ik ook wel ff duren totdat deze rally veranderd in een sell-off, kan iedereen zich nog even lekker ergeren aan hoeveel % er gepakt had kunnen worden.... Interessant stukje trouwens!