Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

[tsetsefly]

That harrowing advice is from The Royal Bank of Scotland, which has warned of a "cataclysmic year" ahead for markets and advised clients to head for the exit. Do not wait. Do not pass go.

"Sell everything except high quality bonds," warned Andrew Roberts in a note this week.
He said the bank's red flags for 2016 -- falling oil, volatility in China, shrinking world trade, rising debt, weak corporate loans and deflation -- had all been seen in just the first week of trading.
"We think investors should be afraid," he said.
Related: Fear & Greed Index
Morgan Stanley warned this week that oil could touch $20 a barrel. RBS says if it falls below $30, then $16 is on the horizon.
The world is in a global recession, Roberts wrote. This terrible cocktail means investors should now be thinking about getting a "return of capital, not return on capital."
RBS compares the market mood with that of 2008 before the collapse of Lehman Brothers and the start of the global financial crisis....

http://money.cnn.com/2016/01/12/inve...rbs/index.html

Would love EJ's take on this year.

what does everyone think about this, might we see a similar year like 2008?

[santafe2]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

http://money.cnn.com/2016/01/12/inve...rbs/index.html

Would love EJ's take on this year.

what does everyone think about this, might we see a similar year like 2008?

His definition of "cataclysmic" is somewhat less than, well, cataclysmic. He's calling for a 10-20% fall in the value of US and European stocks. Certainly seems possible.

And from the Guardian: Analysts at JP Morgan have advised clients to sell stocks on any bounce.

[verdo]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

well i pretty much got out of all assets in december. I think the 10 - 20% correction calls are just a way of playing it safe in case they are wrong. I think the markets will drop a lot more than that unless the FEd changes course. Right now i'm short. As long as the Fed is determined to raise rates and taper, the U.S. market will become quite susceptible to external shocks. It's looking the Chinese market will bring down the U.S. and the world this time, just as the oil price spike did in 2008.

[GRG55]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

His definition of "cataclysmic" is somewhat less than, well, cataclysmic. He's calling for a 10-20% fall in the value of US and European stocks. Certainly seems possible.

And from the Guardian: Analysts at JP Morgan have advised clients to sell stocks on any bounce.

"The Market" is not a homogeneous being. The indices such as the S&P 500 are being propped by an ever narrowing number of highly valued "objects of desire". Market internals are signalling potential difficulty. Earnings are under pressure in the USA multinationals, not least because of currency exchange for overseas division income.

But, a recession is a difficult call at this point, and reading the Fed tea leaves give no real indication of where it will venture next. One indicator I am watching closely is just how much the Fed balance sheet has to shrink in the next 60 odd days to enforce the rate increase. Estimates range from ~$100B will do it, to $1 Trillion is not out of the question. That's a wide spread, and the consequences of one vs the other are rather dramatic for liquidity, as well as the probabilities of a second rate increase.

[jpatter666]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

"The Market" is not a homogeneous being. The indices such as the S&P 500 are being propped by an ever narrowing number of highly valued "objects of desire". Market internals are signalling potential difficulty. Earnings are under pressure in the USA multinationals, not least because of currency exchange for overseas division income.

But, a recession is a difficult call at this point, and reading the Fed tea leaves give no real indication of where it will venture next. One indicator I am watching closely is just how much the Fed balance sheet has to shrink in the next 60 odd days to enforce the rate increase. Estimates range from ~$100B will do it, to $1 Trillion is not out of the question. That's a wide spread, and the consequences of one vs the other are rather dramatic for liquidity, as well as the probabilities of a second rate increase.

I think a big question is to what extent China's Great Wall of Money is showing cracks and whether or not there will be a breach.

Perma-bear Albert Edwards calling for a crash. http://www.zerohedge.com/news/2016-0...ecession-looms

[Verrocchio]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

I can't tell whether the RBS's reaction to the contraction of global trade and lending is overblown or prescient. What is predictable is that a large number of events will occur that appear capable of sending the global economy into a deflationary tailspin. The frequency of these events seems to be increasing.

[GRG55]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

I think a big question is to what extent China's Great Wall of Money is showing cracks and whether or not there will be a breach.

Perma-bear Albert Edwards calling for a crash. http://www.zerohedge.com/news/2016-0...ecession-looms

Aren't permabears by definition always calling for a crash?

[GRG55]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

well i pretty much got out of all assets in december.

Care to share with the rest of us how you got out of ALL assets? 100% Bitcoin vapourware maybe??

[jpatter666]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

Aren't permabears by definition always calling for a crash?

Yep. Question is, is he actually right this time?

Certainly lots of bad juju seem to be lining up, problem is we've been seeing variations on this "sky is about to fall" theme over the past three years. That said, a lot of those reasons are and remain valid. This is a f'd up economic world we currently live in.

[touchring]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

Yep. Question is, is he actually right this time?

Certainly lots of bad juju seem to be lining up, problem is we've been seeing variations on this "sky is about to fall" theme over the past three years. That said, a lot of those reasons are and remain valid. This is a f'd up economic world we currently live in.

It depends on whether the Asian economies (East + South Asia) will hold up.

In Singapore, there's a visible slow down in retail spending as compared to last year (e-commerce spending is up), but no sign of recession yet, despite real estate prices having fallen an average of 20-25% from the peak due to draconian anti-speculation measures - in most countries, this would have caused a recession.

India is doing quite well in my opinion.

Malaysia's consumer spending is still holding up despite having one of the worst currencies in the world. Business spending is down though.

I hope to be able to visit China again later this year, probably Shanghai so I can assess the situation on the ground.

[GRG55]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

Yep. Question is, is he actually right this time?

Certainly lots of bad juju seem to be lining up, problem is we've been seeing variations on this "sky is about to fall" theme over the past three years. That said, a lot of those reasons are and remain valid. This is a f'd up economic world we currently live in.

Well it is certainly "different this time". We are in truly uncharted territory with Central Bank policy actions since 2008 (and maybe even before that with the BoJ?). The market and investing response to unique CB actions required quite a shift in conventional investment thinking. Perhaps unconventional investment thinking is also going to be needed to deal with the potential Central Bank "great unwinding" the Fed is desperate to now lead? The old rules don't apply. And maybe the markets will continue to confound and surprise all of us because of that?

[Thailandnotes]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

I would like to read someone making a good case that a global economic bubble is bursting, one that connects a dozen specific countries, not just regions. It feels like a bubble is bursting here in Thailand, but that’s like buying YUM because your local KFC is always full.

Thais were offered huge amounts of credit that would have been unthinkable five years ago. In a program similar to “Cash-for-Clunkers” first time car buyers were heavily subsidized, but it turned out they didn’t have the income to keep making payments. Yingluck, the former prime minister, appeared in court today to deal with over paying rice farmers 14 billion US (Essentially vote buying. Much of the rice rotted). 3 years ago, I rarely if ever saw a Thai person use a credit card in a store. Today I wait behind customers charging toothpaste while the cashier learns how to work the machine. Four years ago when I opened a bank account in Chiang Mai, I enquired about a credit card. The bank manager told me that would be impossible unless I had a Thai friend sign on as a guarantor. Now, every time I walk in there is a new pitch.

Our friends are spread all over the world, but a lot of them show up here at Christmas. This year from Saudi, Malaysia, Turkey, China, Europe. Many painted a similar picture…way too much credit coming home to roost.

[lakedaemonian]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

I would like to read someone making a good case that a global economic bubble is bursting, one that connects a dozen specific countries, not just regions. It feels like a bubble is bursting here in Thailand, but that’s like buying YUM because your local KFC is always full.

Thais were offered huge amounts of credit that would have been unthinkable five years ago. In a program similar to “Cash-for-Clunkers” first time car buyers were heavily subsidized, but it turned out they didn’t have the income to keep making payments. Yingluck, the former prime minister, appeared in court today to deal with over paying rice farmers 14 billion US (Essentially vote buying. Much of the rice rotted). 3 years ago, I rarely if ever saw a Thai person use a credit card in a store. Today I wait behind customers charging toothpaste while the cashier learns how to work the machine. Four years ago when I opened a bank account in Chiang Mai, I enquired about a credit card. The bank manager told me that would be impossible unless I had a Thai friend sign on as a guarantor. Now, every time I walk in there is a new pitch.

Our friends are spread all over the world, but a lot of them show up here at Christmas. This year from Saudi, Malaysia, Turkey, China, Europe. Many painted a similar picture…way too much credit coming home to roost.

Very interesting.

Where does it end?

Sustenance level rice, water, and oxygen finance for North Koreans?

[verdo]

Re: Sell everything! 2016 will be a 'cataclysmic year,' warns RBS

Care to share with the rest of us how you got out of ALL assets? 100% Bitcoin vapourware maybe??

by all assets, i meant stocks/bonds/any commodities i was still holding onto. I've been short the market, and i don't really plan on reversing that any time soon unless the Federal Reserve does a turn around on their interest rate policy. So far, its been working out.