Say Hi To The Cynical Guy

After 30 years of relentless rah-rah bull market optimism, the folks who have been saying for a while now that the good times were going to end badly -- very badly in our case -- are now garnering respect in economic circles.

“Nothing is ridiculous anymore,” said Philippe Jabre, a hedge fund executive in Geneva. “There is no doubt that these days extremely negative research is being tolerated more.”

Mr. Jabre said that most of the research that came his way had a distinctly negative bias and that finding actionable ideas with a positive spin was becoming far more difficult. “These guys are reinforcing a conviction among many who invest in hedge funds that they should remain scared,” he said.

Mr. Edwards’s newfound popularity reflects the trend. Once frequently shown the door by disbelieving clients, Mr. Edwards recently drew 600 investors to a conference in London.

Similarly, Bob Janjuah, the one strategist in London whose prognostications are seen by some as even more dire than those of Mr. Edwards — “even I get depressed reading his stuff,” Mr. Edwards remarked — said he was courted by half a dozen investment banks this summer before deciding to leave his post at Royal Bank of Scotland to join Nomura. (He starts officially in October.)

“Clients are more receptive to hearing polar ends of an investment view,” said Mr. Janjuah, who expects economic growth for the top developed economies to average little better than 1 percent a year over the next five years.

Further afield, Raoul Pal, a former Goldman Sachs derivatives expert and hedge fund manager, has attracted a growing following with his monthly research note that, most recently, predicted a depression in the United States similar to that of the 1930s and eventual bankruptcy for Britain. 

The big multi-billion dollar hedge funds with the big clout are now interested in the truth, not the hype.  The hype got us bubble after bubble after bubble and nothing good came of it.  These long-term player want to know what's coming 5, 10, 20 years down the road, and the answer is frankly an economic paradigm shift for the US into a permabear mode.

We're going to have a long and ugly trip out of this hole, and it's going to take the better part of this decade or even longer for us to escape.