Albert Edwards is well known as the originator of The Ice Age thesis some 15 years ago. He identified the wholly unsustainable nature of western central banks excessive lose monetary policies and how it was, in effect creating a Ponzi Credit scheme. In contrast to most economists, who by the time of 2006 firmly believed that Central Bankers had tamed the cycle and believed in The Great Moderation, Albert believed that previous ‘missed’ recessions would emerge in one large postponed event. He drew heavily on the under-utilized work on sector imbalances of the recently deceased Cambridge Economist Wynne Godley.
Albert is known as an extreme equity bear and has been underweight equities as an asset class in his model portfolio since the end of 1996 in favour of long government bonds. He foresaw an Ice Age where equities would replicate the experience of Japan though the 1990’s and de-rate both in absolute terms and relative to government bonds. He had a target of US 10 year yields falling below 2% for over a decade.
Albert current believes the US equity market has far further to decline on the basis of long term cyclically adjusted PE ratios such as the Shiller PE ratio and also Tobin’s Q ratio. He thinks the biggest deflationary risk is a China hard landing. Like in 2007, there is massive complacence and overconfidence that the “authorities” can achieve a soft-landing.
Albert currently works at French investment bank Societe Generale as a Global Strategist after previously doing the same at Dresdner Kleinwort for 20 years. He has previously worked at Bank America Investment Management and The Bank of England.