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Science Forum Index » Economy Forum » RBS issues global stock and credit crash alert...
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 Posted: Wed Jun 18, 2008 5:08 pm |
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Guest
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one does not need a bank analyst to distill such facts. most cannot
analyse their way out of a paper bag.
if you have a sense of what's taking shape around you, then you are on
your way to being prepared for this coming economic slide. I predict
it will strike around mid 2009.
"going to cash" as this joker suggests is a bad bet as the govt will
sooner drown the economy in inflation rather than enter into a
deflationary spiral.
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RBS issues global stock and credit crash alert
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. |
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