A fascinating discussion a few weeks ago in welling@weeden with Albert Edwards and James Montier of Société Générale is republished below with the necessary permission.

“In the cacophony that is global investment strategy research, Albert Edwards (below left) and James Montier (right) stand out as clearly distinctive voices. And not merely because of their British accents or because they’ve tended to the decidedly bearish side of the scale over the last decade or so.

“Despite long tenure in the rarified top echelons of the investment banking world, for many years with Dresdner Kleinwort and more recently at Société Générale (where they are co-heads of global cross asset strategy) both have managed to retain a natural plain-spoken bluntness.

“Also

I’ve been thinking about starting a stock market prediction business. Clearly, there is a huge market for timely and accurate information of this type, and just as clearly, predicting the future is much easier than dealing with the realities of whatever is actually happening at the moment. If investors could know what’s going to happen next, they could develop a plan to deal with it in the present. Maybe Wall Street could help me get this new business up and running!

What’s that? Wall Street institutions already spend billions predicting future price movements of the stock market, individual issues & indices, commodities, and hemlines. Really? Is that right also? Economists have been analyzing and charting world economies for decades, showing clearly the repetitive cyclical changes and their upward bias. Funny then, or strange would be more accurate, that the advice generated by the oracles of

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Gets your attention, doesn’t it? The unfortunate thing though, is that most people will react negatively to this intentionally inflammatory, media-ready, title statement. Has some Wall Street virus attacked our financial experience memory chip? Bouncing around unpredictably is precisely what the markets have always done. In the last forty years, there have been no less than ten 20% or greater corrections followed by rallies that brought the markets to significantly higher levels. Volatility is not a bad thing— a non-event, even.

Ironically, it is this routine volatility (caused by hundreds of human, economic, political, and natural variables) that is the only real certainty existent in the financial markets. Would anyone be happy with market prices that didn’t change? Should anyone expect market valuations that only go up? So what’s all the anxiety, scrambling, and crying about? As absurd as this may sound at first

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