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Sell everything, 2016 will be a cataclysmic year, RBS warns investors
SINGAPORE - The Royal Bank of Scotland issued a dire warning to investors on Tuesday (Jan 12), telling them to head for the exit because of the "cataclysmic year" ahead for markets.
In a note to clients that went around the world, RBS head of European Economics Andrew Roberts said: "Sell everything except high quality bonds."
He said the world is in a global recession and the warning signs - plunging oil prices, volatility in China, shrinking world trade, rising debt, weak corporate loans and deflation - had all been seen in just the first week of trading.
He wrote: "What counts is that the world is slowing, trade is slowing, credit is slowing, we are in a currency war, global disinflation is turning to global deflation as China finally realises what it needs to do (devalue soon, and sharp) and the US then, against ALL THIS countervailing pressure, then stokes the fire by hiking rates."
"We think investors should be afraid," wrote Mr Roberts. "This terrible cocktail means investors should now be thinking about getting a 'return of capital, not return on capital'."
Mr Roberts compared the market mood with that of 2008 before the collapse of Lehman Brothers and the start of the global financial crisis. At least then, he said, emerging markets were there to save the world from complete collapse. But China cannot this time around, let alone any other big emerging market.
China is grappling with "a severely over-valued currency" - as much as 20 per cent, RBS estimates - "continual enormous capital outflow, which has to be stemmed by reserves shrinkage". RBS estimates that as much as US$170 billion (S$244 billion) of private capital left China in December.
A chart showing Chinese outflows in 2015 is "surely now the most important chart in the world", Mr Roberts wrote.
http://www.straitstimes.com/business/companies-markets/sell-everything-2016-will-be-a-cataclysmic-year-rbs-warns-investors
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Discussions
1 person likes this. Showing 24 of 24 comments
quick quick quick. Not much time left. Make hay while sun still shines.
2016-01-14 00:37
Bullz, is it true? A global scale slowing down? But china just slowing slightly, can't be forever 10% growth right.
2016-01-14 00:37
The world is in a deflatory trend so markets will fall with the trend and Malaysia is no exception. The KLSI end of this quarter will be much lower than now. If the Dow is expected to fall by 10% what about the KLSI?
2016-01-14 02:27
You are right. This is not the time to think long term. In and out may be the best solution until better times. Don't be the one holding the baby when all hell breaks loose!
2016-01-14 03:00
LET US xforget some positives things that d world can do... notably China USA .CHINA cENTRAL Bank has some work to do in particular to contain the drop of its Yuan against dollar.The world perceived China actions to devalue its currency as signs pointing to prolong weakness of its growth which was compounded by its recent PMI AND MANUFACTURING DATAs which showed a drop .On Similar ground for USA to review its rate hikes effects t d world economy amidst of its own slowing exports business.
To quote,Mr Stigliz,USA economic professor, felt that Chinas current slowdown will be not catastrophic as the China may have some bullets to raise its game..Remember this... plummeting energy price is also contributing for global mainstream economy - people like you and me who thrives of energy drops to make up for daily business .
2016-01-14 07:23
WTF, when whole world up we were down ; when whole world down we also down.
2016-01-14 09:17
okok, i sell all shares and keep the money at home ok. bank also not save.
2016-01-14 09:41
Profit profits,
WTF, when whole world up we were down ; when whole world down we also down.
14/01/2016 09:17
Biasalah.
2016-01-14 09:42
hi ckwan...thanks for the info (caution). I perfectly agree/understand...
was just joking up there...;)
2016-01-14 10:02
Paperplane2016, you as a fund manager, what action would you take to safeguard your clients' funds?
2016-01-14 13:05
Bring up cash level to 50% if really fear. SELL IN MAY GO AWAY?
hehe.
Move defensive on Div YIELD stocks.
2016-01-14 13:50
DR. Doom predictions. things are bad but not as grim as what RBS predicted. We have survived 9-11, we have survived Lehman bros collasped, we have survived sub-prime, we have survied PIGGS ( EU ) . this are all brought about by the western side (but bail out by the East )
2016-01-14 13:55
It's a herd mentality stampede. When the dusts settled, people will then realize that WTF, America and Europe is still growing healthily albeit at a slower pace. And a China slowdown yes, a collapse, Err, probably not and then they will stampede the other way.
Don't forget the buying power of America and Europe is still robust thus those who export to these two economies should continue to be in good stead
2016-01-14 14:16
A stampede takes place because the majority is always wrong, whether upside or downside. The smart money travels in the opposite direction.
2016-01-14 15:01
Shale bubble! sometime smart money is by chance. Doing the opposite may still be dumb if there are still long down road to go.
2016-01-14 23:33
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Desa20201956
hahahaha
Does that mean the window of opportunity is fast disappearing, but I just got started and haven't made enough yet.
Should I increase my bet size while the sun is still around?
Does this reverse psychology account for why our export shares are surging every day even as our Ministry data suggest our E & E exports have slowed substantially?
hahahahaha
Strike while iron hot, not much time left.
2016-01-14 00:35