RBS tells investors: 'Sell everything'

[denem]

Source: Australian Financial Review

The Royal Bank of Scotland (RBS) has advised clients to brace for a "cataclysmic year" and a global deflationary crisis, warning that the major stock markets could fall by a fifth and oil may reach $US16 a barrel.

The bank's credit team said markets are flashing the same stress alerts as they did before the Lehman crisis in 2008.

"Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small," it said in a client note.

Andrew Roberts, the bank's credit chief, said both global trade and loans are contracting, a nasty cocktail for corporate balance sheets and equity earnings, and uncharted waters given that debt ratios have reached record highs.

Read more: http://www.afr.com/markets/rbs-tells-investors-sell-everything-20160111-gm3ssa

---

So a global banking group is literally telling it's investment clients to run for the doors. That's the sort of call you have to stake your business on so add one more name to doom list along with Morgan Stanley and JPMorgan. Another name on doom list is Donald Trump who is betting on it in more ways than one.

[nc4bo]

1. Happy New Year!

I don't even know what to think of this besides, uh-oh.

[happynewyear]

7. You rang?

[renate]

9. that cheered me up on a downer of a thread

Thanks!

[happynewyear]

11. You are welcome!

back at cha!

[Hortensis]

30. Me too. I needed that.

[happynewyear]

33. Firm belief in that old saying

Laughter is the best medicine!

[nc4bo]

12. !

[LiberalArkie]

2. A lot of people have been feeling this

[roguevalley]

18. fortunately, all I have left to sell is my furniture, my kidney and finally my ass.

Thanks, Bank of Scotland. Cheerio.

RV whose sweet sweet dad derived from Newpitslago in the Hee-Lands.

[tazkcmo]

28. A hospital stole my mom's kidney.

She had a hysterectomy and afterwards the doctor asked he when she had her kidney removed. She lost all her furniture and home in a flood and due to cancer, she lost her ass. For the first time since her death I'm glad she's not around so she doesn't have to live through this.

[roguevalley]

45. omg. Your mama. {{{HUGS}}} and you, honey. I would be doing

time. I'm so sorry and I hug you tightly.

[tazkcmo]

46. Ahhh, ty

It's ok. Obviously, our mom was one tough woman, raising 6 kids pretty much on her own. She raised some tough kids, too!

[kydo]

43. You must be Charlie from Candy Mountain

sweets and joy and joy and sweets ....
shun the non believer ....

[roguevalley]

44. bwahahaha!

[grasswire]

3. is there a similar advisory from Morgan Stanley and JPMorgan?

thanks for the info. Won't matter to me, but perhaps to a family member.

[denem]

13. As far as I know nobody but RBS has put out

an advisory to get out of everything. There are certainly a bearish advisories fro
JP Morgan and Morgan Stanley. You have to ask though, what sort of investments are constitant with Citibank's current advisory of Brent Crude falling to as low as $10.

I have no expertise whatsoever. I just a guy who wakes and hears that David Bowie is Dead three days after buying his new album on the strength of a music video showing a dying man on a hospital bed. I miss just about everything.

[Hortensis]

31. Didn't find any, but learned about the Baltic Dry Index.

From USNews.com

"One doomsday prediction isn't necessarily indicative of an iceberg ahead. Several such predictions, though, appear foreboding for the global economy.

The U.S. economy is largely insulated from Chinese volatility, but a global slowdown is a different story entirely. China's trade weakness is wreaking havoc on international prices, and it's expected that global trade will gradually slow in response.

What's more, the Baltic Dry Index – which is published by the London-based Baltic Exchange and measures changes in the shipping prices of bulk materials – has fallen off a cliff in recent days. The decline is believed to be the result of a widespread drop in import and export demand, as shipping prices tend to fall when demand is weak and transporters are trying to attract business.

The index currently sits well below where it bottomed out at the end of 2008, when the world was suffering through the worst of the global financial crisis. Over the last 15 years, the metric has dropped off when either the U.S. (in 2008 and 2001, most recently) or one of its major trading partners (the euro area at large in 2012) is in the midst of a recession."

http://www.usnews.com/news/articles/2016-01-12/sell-everything-at-beginning-of-cataclysmic-year-ahead-royal-bank-of-scotland-warns

Truth to tell, we've been holding too much in bonds for some time because we've been nervous. We're actually wintering in an old mobile home by the water that we purchased with money taken from stocks -- "diversifying into real estate" -- with the additional bonus that if the worst happened, no matter what we could retrench to a pleasant but sustainable little home. Not that we expect that to happen, but it just felt reassuring.

[Helen Borg]

4. Somebody has major short positions...

Just saying...

[closeupready]

5. Yeah, I'm not feeling pessimistic about the market, so

I'm sure someone in banking has an agenda.

[wordpix]

36. If RBS can read the future, why isn'it ruling the world and defeating Isis?

I would take the doom and gloom with a grain of salt, or a barrel full.

[closeupready]

38. Also, RB of Scotland (RBS) assets likely take a hit when oil drops, due to North Sea oil interests.

So there's that to add in to the mix here.

[Wellstone ruled]

6. Yup,just saying.....

Little observation,as soon as the Chicago Board of Trade Opens,which is one hour behind NYC,all hell breaks loose. Notice the High Frequency Traders come online at 9:00 Central time,and a recent story said that 96%of their trades are cancelled. WTF. Short interests are off the charts. Did we miss something,do they not have to close out their positions at the end of trade,or is the SEC that lame.

[Human101948]

8. Futures do not have to be closed out at the end of the day...

They have expiration date. If you are trading S&P futures, they expire in March, June, September and December. At that point you would have to settle. Many times people will roll over their positions into the next expiration month.

What you saw in Trading Places was that they had to cover their margin calls. When you buy or sell a future you do it on margin. The future might be worth say $50,000 but you can buy or sell it for $5,000. However, if the S&P moves more than that, you have to have enough money to maintain that $5000 margin. If you cannot cover the difference, your broker will liquidate your postion and you may end up owing the broker additional funds.

[Wellstone ruled]

14. Understand the Margin and Option rules.

Referring to the short interest of Equities. The original rule was or is,you put your short on a stock and you had to close out that short by close of market. Or like you say,run it through a trading account or margin account and with that one can stand pat until the stock hits it strike or return your stock. What appears to be happening is,people are shorting equities to replace their loses in commodities. Notice a group of ETF's that are taking it in the shorts,and with the recalculations with technology today,every stock in those ETF's get whacked instantly. Don't have access to the short interest screens,got to be interesting.

[litlbilly]

16. You can bet on it

[anigbrowl]

23. Or an excess of caution

If you recall RBS expanded too fast and then collapsed under its own weight during the financial crisis, having to be bailed out by the UK government amid general disgrace. With those wounds still fresh I would expect them to lean towards pessimism.

The headline is also slightly bullshit - the note is saying to sell anything too risky rather than liquidate - but that's not the OP's fault as this is LBN.

[lark]

10. Crap, sounds like they think that the Repug will win the presidency and wreck the economy.

They always do that when they are in the White House.

[denem]

15. It's for the current year, nothing to do with 2017.

[Yo_Mama]

32. It looks to me as if we entered recession last year. US December rail was down 8.9% YoY

Admittedly, it was a tough comparison period, but that isn't consistent with much but a recession, and inventory/sales ratios have been persistently high. We exceeded the max refractory period. Now the economy is contracting.

Late last year I believe we entered the recessionary downward spiral.

[neverforget]

41. I work for a railroad. Business is down now and they're saying

that the furloughs are going to be deep, up to about 5 years seniority, and long (many months). The job cuts have already started. I estimate my furlough in the next 4-6 weeks if not sooner.

Grain, oil, and coal are way down. Freight and vehicles are down too but not as much. Last year, business dropped off a cliff in the Spring and resulted in about 40 people being furloughed in my terminal in the Northwest. Luckily, it lasted only about 6 weeks for me but about 20 are still furloughed from last year.

[Yo_Mama]

42. I'm sorry. Don't know what to say.

I really don't see anything good happening right now at all, but it would be nice if this could be short.

[neverforget]

47. It is what it is. I don't think it will be short this time around.

The real surprise is that grain isn't moving like it should. That usually gets us to Spring and into Summer, but it's January and that has died off. Not good at all. August or September might be the time frame I get recalled if I should be furloughed now. I'm searching for other work now so maybe something else will come up and save my bacon.

My dad said to never hire on with the railroad. He worked 35 years for them. I now know what he means.

[Yo_Mama]

48. Grain shipments fell hard in the last go-round. I remember that.

Yeah, one gets the sense that this isn't good. Until the inventory/sales ratios heal, it's hard to see shipments picking up a whole lot.
http://www.census.gov/wholesale/pdf/mwts/currentwhl.pdf

Rail is probably one of the first to be hit, but recessions strike everyone except government workers, really. The last one even hit government workers.

I sure hope you find something. That's a long layoff.

[PeoViejo]

17. Pull it!!

[houston16revival]

19. China, Energy, Deflation, Recession, Falling Earnings

Sure sounds like a good call to me.

QE 1,2,3,4 and $$$$ Trillions

But nothing structurally changed

Bad debt was warehoused and the $$$$ was invested
in overcapacity of everything

Batten down the hatches

[closeupready]

21. What "Recession"?? What "Deflation"?

[houston16revival]

22. Well ........

the deflation in commodities prices - oil, copper, steel, coal, mined minerals

and the recession in China, Europe, and the US Manufacturing sector - railroad
shipments are down, sea shipping is down. The US is sluggish but not humming
as the MSM and White House would have you believe. Also the quality of jobs,
and the looming minimum wage increases are unpredictables.

[brooklynite]

20. None of our financial managers are being this dour...

Will get some guidance later this month.

[Turbineguy]

24. RBS doesn't excactly have a great track record.

http://www.smh.com.au/business/comment-and-analysis/the-rbs-grabs-headlines-but-the-end-of-the-world-is-not-nigh-20160112-gm4jwn.html

[Myrina]

25. Self fulfilling prophecy?

Create a panic, investors panic & pull money. Market crashes. See, we told ya' it was going to happen ....

[rjsquirrel]

27. Shhhhhh

You're giving away the trick!

[rjsquirrel]

26. Lol whut

I'm buying like crazy right now. Fire sale prices follow panics. Apple for under $100? Too good to pass up.

Laying down a marker: S&P will wind up plus 6% on the year.

Always bet against the crowd psychology. It's made me a lot of money over the years.

[wordpix]

39. I do the same. Buy when people panic and sell

As my bro the stock expert says, if you need the money now, don't invest in the markets. They are a long term investment. Period. Timing the market is just stupid. Buying when people sell off in a panic is the thing to do, but of course you don't know exqctly when to buy since prices can always decline further.

[cbdo2007]

29. That sounds like a terrible bank. Every investor knows you can't time the market...

and even if you try, you will always make more money by sticking it out through the crashes than selling in a panic either before or after the crash.

[FLPanhandle]

34. Some is short selling heavily.

Sounds more like stock manipulation.

[Nye Bevan]

35. Interesting how nobody was yelling "sell" in the fall of 2007, on the eve of the downturn.

And nobody was saying "buy" when the market was at its absolute trough in early 2009 (I do remember one exception being Michael Bloomberg, a smart man but not a professional stock analyst).

[Yavin4]

37. One should always listen to the dire warnings of a Scotsman

I warned you. I warned you.

[trof]

40. Here's what my financial advisor has to say about RBS:

He's a pretty bright guy. Cum laud from Yale and Wharton School of Business.

"it’s ironic they refer to the RBS credit team. Please keep in mind that RBS’ credit team did such a good job of predicting the 2008 crisis that they were the UK bank with the most dire straits (much more than NatWest, and hugely more than Barclays. Barclays was one of the few banks strong enough to be tasked with actually cleaning up the 2008 crisis. They cleaned up Lehman). Conversely, RBS received a HUGE bailout for a reason. And RBS has a strong history of predicting their own panic. We do know that panic is a terrible motivator from a financial sense.

When the price of oil drops 75%, OF COURSE the value of global trade drops. Oil is probably the most international of products. Other products cannot possibly compensate for a drop that size within such a short time period, especially if the global economy is currently growing 2% or so. And it is affecting different countries very differently than last time (not to mention that gas was around $4-5/gallon in 2008—even if some parts of the global economy are stressed, the current situation is very different).

Global loans go up and down. But access to credit is still easier now than it has been since the 90s. Practically every Federal Reserve in the world has the money spigot open wide, the complete opposite of 2008 initially. It was a complete shutdown in access to credit at banks (especially those lending to mid-size public companies) that exacerbated the 2008 crisis. I highly doubt the Fed is going to make the same mistakes this time (although they might be making different mistakes…I don’t want to let the Fed or anyone else, including me, off the hook, regardless of my opinions of RBS).

We might have a major global recession. Or not. But it won’t be caused by the same factors. And historically, the primary reasons for recessions generally won’t repeat for 20 or 30 years or more at a time…the world generally makes NEW mistakes, not recent, old ones.

Look, I have no idea whether their projection of a terrible year will occur or not. I don’t make predictions, positive or negative, for a reason. Certainly not ones on which I base long-term portfolio design. But based on everything I’ve learned from watching previous crises and from academic literature, RBS has no idea whether we’ll have a terrible year, either. Academic literature actually indicates that predictions such as these are more likely to be incorrect than correct."