The number to watch this week

One analyst puts it all on the line with one number for the S&P 500 index: 1120

By Kim Peterson Mar 8, 2010 2:24PM
Analyst Bob Janjuah of RBS has boiled down the market recovery to one number: 1120.

Janjuah, who concedes in a note that he will "always be labeled a perma-bear," says he now sees the potential for a bullish call, according to Zero Hedge.

Here's how Janjuah lays it out: If the S&P 500 index closes above 1120 on Monday, Tuesday and Wednesday, we're going up. Next is 1150 and 1220. (Monday, the index has been hovering around 1139)

But if not, if the index closes below 1120 three out of four consecutive days this week or next, then the odds of a downtrend resuming are high, he writes. The S&P should drop below 1000 over the next month.

Did he make the right call? We'll monitor the S&P and see how well Janjuah knows his stuff.

Later in his note, Janjuah puts his bear costume back on to discuss long-term recovery. Over the next several years, the U.S., Japan and parts of Europe will go into a period of "balance sheet repair," with weaker growth and employment, more taxes, more savings and less spending.

There is no sustainable private sector demand, he writes, and there won't be for some years.

He lists four "delusions" getting in the way:

1. Economies will devalue and export their way out of trouble. Everyone is looking to do the same thing, which means a race to nowhere.

2. Inflation will take care of our debts. The problem, he said, is that inflation expectations are already priced into the markets.

3. Governments can keep printing and borrowing money without consequence. Government will not be the solution, he writes, and will become part of the problem as austerity kicks in.

4. The weather. "What a load of tosh," he writes. Enough said.

"At some point the bubble will burst," he writes. "Hopefully for ALL our sakes its sooner rather than later."

The longer we are forced to wait, the bigger the bubble will be and the more horribly damaging the bursting process will be. And if we are forced to wait and the bubble gets anywhere like the one that went pop in late 2007 I have ZERO idea who will credibly be able to bail us all out the next time round. Certainly not OUR governments.

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