tinyurl.com/5qckkp -> www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml
Read comments 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. RBS issues global stock and credit crash alert RBS warning: Be prepared for a 'nasty' period Such a slide on world bourses would amount to one of the worst bear markets over the last century.
Support for the euro is in doubt 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. If you have to be in credit, focus on quality, short durations, non-cyclical defensive names. 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. 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.
More comment and analysis from the Telegraph "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 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.
This is what you get with paper money a central banking. Until we finally realise that price fixing worthless money with fractional reserves is severely damaging to the economy.
Report this comment I read this with concern and would ask if RBS are considering calling in loans early to cover any short fall in the figures. One such loan that springs to mind is the loan given to Tom Hicks and George Gillet aganist Liverpool Fotball Club and the estimated interest of 30million per year.
Report this comment shaun on June 18, 2008 7:26 PM Ditto, really makes you wonder doesn't it. and then everything should be ok again cos i've got a nice cuddly smile"..
The problem is there are to many in the banking businesses that want countries who have always been a high risk to get up to speed with the rest of the money markets, debt markets, and global businesses. Even the World Bank won't loan money to these people like they did at one time. When Brazil tells the World Bank they're not going to repay the money they owe, then they devalue their currency. Russia is still in bad position for loans, and many of the Balkin and Slavic nations are in bad finacial shape. When you have people like George Soros going in there and wreaking their economies and then leaving them in shambles what do you expect? When the banks in the US loan money to people who have no business being loaned money what do you expect. What these banks want to create is a responsible behavior in people, and nations. They think that if someone loans them the money they desparately need they will finally responsible. You can't make a corrupt nation not corrupt by loaning money to them. It always goes to the people of that nation that weren't supposed to get it. Then the nations becomes delinquint on their payments and then they can't pay at all. When are these do-good banks going to get tough on these countries and their corrupt businesses. The reason why these countries and their businesses are corrupt and bad risks are because of the kind of people the banks are dealing with. If there are any of these kinds of people left in office, and the people of those nations haven't been responsible and gotten rid of them, they are still a bad risk and will be. The reason why American investors didn't pour into the former Soviet Union when supposedly Communism fell was because these people hadn't gone through the birthing period they need to go through where they get their democracy legs. You have to wait and see if the people are serious about wanting to be free and take over their own economy. There might be alot of companies in those countries, like Africa, that would make good investments. But, when their governments are Socialist or Marxist/Communists that company's profits cannot make it to the market in loan payments. Those profits will be taken by the government and stolen. It's not the company's fault, it's their countries fault. They've either been to corrupt or Communist to long and there are to many remnants of the old government left that would still cause problems with their nations companies making a profit that would be theirs to keep. But, it's irresponsible behavior even on the part of ordinary Americans that causes banks to look in other areas to make a profit. When they tell the government they can't make any profit on these people they convince the government to let them make loans to other kinds of people who may not have liquidable assets like the bank would like for them to have, but the bank is willing to take the chance anyway. There are bad loans that has for far to long called a "boom" in the economy. When the Bank of Ireland says the boom is about to bust they are pointing out that the time for all these bad, risky loans to run their course and go down. It will be bad on all of us when there isn't enough good business concentrated in enough good business countries like it used to be. Easy credit is what killed the hard work ethic of the people of this world. There are to many money companies that have nothing but credit to loan that don't have to be responsible for the payback.
Report this comment When inflation was relatively high then the credit one took that may have been unaffordable in the short term soon became affordable through increased wages. Now the central governments plug ad nauseum how good for us is the concept of low inflation is the once unafoordable debt that became affordable still remains unaffordable. What we need is a good bout of inflation that will shrink in real terms the value of the debt, assuming of course that you get a wage increase to off-set the effects of the increased inflation. That is what makes the exports cheaper abroad and the imports from abroad more expensive. Those on fixed incomes, like annuity holders, will of course suffer but they will be in the minority compared to the numbers who will benefit.
Report this comment Looks like ALL the moonbats are howling (ie. environmentalists, liberals, Democraps, Republicans, bankers, and the author of this article) As a contrary long-term investor, this MUST be perfect timing for investing in stocks.
Report this comment Gold: Someone truly said that we give strange value to Gold , that we first dig, and then keep it in warehouse and spend money to secure it. Money: The money is being misused by banks, by creating innov...
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