Sit tight and wait for value
This year will be the “final year of pain and disappointment” for investors. Or so, at least, say the usually bearish strategy team from Société Générale – Albert Edwards, Dylan Grice and Andrew Lapthorne. I went to listen to them speak at a seminar on Monday, hoping to learn exactly what it is that will be so great about 2013.
I’m not sure I came away with an entirely satisfactory answer, but the good news is that we seem to agree on most major market points. We agree that given low growth and quantitative easing (QE) it’s possible US and UK bond yields could go lower. We also agree that while that may make them a good short-term holding, they’re an almost insane long-term investment. If you have an insolvent government, a fiscal crisis and a central bank willing to print money, in the end double-digit inflation is pretty much a given.
We are slightly more bullish on America, perhaps, than Edwards, but we share his view that the hard landing in China isn’t something we need to wait for: it’s probably already on the way. We also doubt the Chinese state can do much about this. It has barely dealt with the fall out from its last massive stimulus and it is hard to see how it can afford another.
• Read the full editor’s letter here: Sit tight and wait for value.