A little rich from RBS to claim the world is about to end when they have just filled their swag bag with £12Bn of extra shareholders funds. A G Mack
By Ambrose Evans-Pritchard, International Business Editor
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks. "A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist. A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
Such a slide on world bourses would amount to one of the worst bear markets over the last century.
RBS said the iTraxx index of high-grade corporate bonds could soar to 130/150 while the "Crossover" index of lower grade corporate bonds could reach 650/700 in a renewed bout of panic on the debt markets.
"I do not think I can be much blunter. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names.
"Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate.
RBS expects Wall Street to rally a little further into early July before short-lived momentum from America's fiscal boost begins to fizzle out, and the delayed effects of the oil spike inflict their damage.
"Globalisation was always going to risk putting G7 bankers into a dangerous corner at some point. We have got to that point," he said.
US Federal Reserve and the European Central Bank both face a Hobson's choice as workers start to lose their jobs in earnest and lenders cut off credit.
The authorities cannot respond with easy money because oil and food costs continue to push headline inflation to levels that are unsettling the markets. "The ugly spoiler is that we may need to see much lower global growth in order to get lower inflation," he said.
"The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said.
Kit Jukes, RBS's head of debt markets, said Europe would not be immune. "Economic weakness is spreading and the latest data on consumer demand and confidence are dire. The ECB is hell-bent on raising rates.
"The political fall-out could be substantial as finance ministers from the weaker economies rail at the ECB. Wider spreads between the German Bunds and peripheral markets seem assured," he said.
Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.
"There is a Fish in the Milk!" Henry David T.
The "fish in the milk" is the insidious rot still undetected left by the "modular securities" developed by back room "geniuses" working for the large financial institutions during the '90's and forward.
Thinking about "where to invest" is really not looking at the reality of where the average person will be able to survive and how...during the next (now) world financial crisis.
One writer hit it square with the rescinding of the Glass-Steagall Act in the late '90's by the Clinton Administration...under that (Fish in the Milk) economic adviser, Robert Rubin...and his ilk.
Fleeing financial regulation and allowing global capital to over-ride the basic needs of a society will eventually destroy that society.
There will be no "solution" to this crisis...it will be, according to the system we embrace, "every man/woman/child for him/herself."
Not a very pretty picture!
We have all gone along with the creation of a deep narcissistic society...me, me, me, me...especially here in the West. While the rest of the world is trying just to survive...we tromp on despoiling our environment; ignoring others plight as a result of our greedy resource grabbing administrations and corporations.
WE will pay and we will pay dearly while the super-rich will "retire" to their back-woods mansions and wait this episode out and in the meantime those same rich will devour all the choice "investments" left over...that is the story of economic history...
I'm 77 years old; live in one of the world's best areas...California Sierra Nevadas and have seen many economic "downturns."
This one is very, very different and can/will be very destructive. Good luck to all!
Posted by Bill Ross on June 19, 2008 1:51 PM The federal reserve is a private multi-national corpoaration owned by 14 big banks and brokerages which are then again owned by a handful of banking families. These same bankers caused the great depression on purpose (even Bernanke admitted they caused it but pleaded ignorance (bah humbug)). This is stated in many books such as Eustace Mullins "Secrets of the federal reserve". Eustace also shows that they funded both WW1 and WW2. The international bankers make fortunes both monetarily and politically off wars. That is why the world is in perpetual war. The dollar is being engineered into oblivion by these same bankers. They have the power to increase/decrease interest rates. Their end game is a power grab for ALL the wealth of the world. THe credit crisis has all been engineered also. Of all the New Deal legislation the GOP has sought to overturn, one that has always been at or near the top of the list is the Glass-Steagall Act. The repeal of this act in 1999 doomed the US to financial manipulation by the bankers and caused this present credit crisis. THe bankers already own 80%. Next coming is the fiat money called the Amero and then finally a global currency. THis is where this is all headed. And they who control the money control the world (paraphrase from one of the Rothschild's two centuries ago). Our problem is we have families bent on world domination of us "useless eaters". Whether RBS is right on the timing or not I do not know but their theme is correct. We are now at 18% money supply growth per year. Your fiat money will be worth 18% less next year. REad and watch these: 1. Creature from Jekyll Island-Griffin 2. Secrets of the federal reserve-E.Mullins (online free-format not that great, buying the book is better). 3. THieves in the temple-A.Eggeletion 4. Wall Street and the Rise of Hitler-Antony Sutton (this is online-free). Read chapter 12 first. 4. google video (the money masters) go to the website: http://www.msplinks.com/MDFodHRwOi8vd3d3LnB1YmxpY2NlbnRyYWxiYW5rLmNvbS8=
Posted by Tom Tell on June 19, 2008 1:48 PM History has shown that FIAT currencies in the hands of governments backed by nothing more than an IOU will always inevitably become worthless. The global finance system that has been engineered over the last 3 decades is about to suffer a massive heart attack. Can it be revived ? we'll wait and see. Got Gold ?
Posted by Andrew Shand on June 19, 2008 9:42 AM What we are seeing is the inevitable outcome from decades of ignoring fundamental issues in so many areas. Whether we get inflation, deflation, stagflation there is one simple premise common to them all. For the most part wealth is going to be destroyed, to the point where it once again is in balance with reality. That is what is really going on. All the talk, advice and wisdom will not shelter the masses from this reality unfortunately. It is pay back time. That is why nobody knows right now, the system is so manipulated that whichever way it finally moves, it will be sure to take the false wealth with it. There is simply no escape. Of course a few, a very few will time it all right and benefit, take your pick as to which course to take. That is why gold is so great right now, because whichever way it goes, if you own physical gold you end up with value, as potentially with no value for whatever else you buy. Most just do not see this simple reality, and of course will probably thus pay the price for their choices.