RBS (Royal Bank of Scotland) issues global stock and credit crash alert

[Pale Blue Dot]

Source: UK Telegraph

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.

"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.

Read more: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml

---

It's important to reiterate that this is a bank saying this, not some crank on DU (although this DU crank has been warning about this for months).

:scared:

[ayeshahaqqiqa]

1. I've been expecting this

Thank God we just paid off the loan we took out on our land to pay off ALL credit cards. Now we don't owe anything except for the monthly bill for electricity and phone/internet. And hubby is working on putting up the solar panels and wind generator so that we don't have an electric bill.

Suggestion: stock up on healthy food and stuff that you can barter for goods and services. Set up a plan where you can swap and trade with neighbors. Now is the time to build your community ties and plan how not just you but your neighborhood can get through this.

[groovedaddy]

2. And here we thought the shit was ALREADY hitting the fan!

We were evidently only witnessing the beginning.

[Vilis Veritas]

3. Gather all your CHANGE and HOPE. n/t

[Alcibiades]

4. Read the comments

Quite interesting. A couple of good links in there, too. The quandary for average folks and investors (who are mainly not average folks) comes up in the comments, wherein people comment things such as "cash is king" (which is true to the extent that there's a big risk in other types of assets right now, particularly equities and real estate) but also that inflation is on the way (also true, which will make all those folks holding onto cash feel sorry if they don't find somewhere to put it before it is eroded away). I hope the coming global financial collapse will finally lay to rest the fad for deregulation.

The house price runup in the UK would seem to be even worse than it's been here--here, the inflation in prices has mainly been in the hot urban areas, but many smaller cities in the south and midwest have been unaffected. There it's been more general. On the other hand, most European countries have a better social safety net than we do. Hard to say who will be worse off in the coming global financial collapse.

The folks I worry about are the working stiffs who don't have real estate or cash or other assets, who will continue to see prices rise and incomes fall.

[pitohui]

35. cash is NOT king in a period of inflation, it is losing value every day, see under zimbabwe

actually if you really believed that inflation was going to get worse, the smart consumer would take on more debt, because your debt would become increasingly trivial


example i knew a couple in 1985 who had a $110 mortgage on their home -- the debt on their home having made the amount of the debt trivial because of the huge inflation during the 70s after they purchased their home, they had a nice three bedroom house for a portion of what people were paying for shitty rentals in the same area

from the viewpoint of the bank, yeah, don't take on debt and cash is king because you're the one who is getting re-paid for your loans in dollars (or euros or pounds) that are worth less and less over the inflationary period

but these folks who say, "pay off your debt because of inflation" apparently don't know what inflation is

you take on debt if you expect inflation and get rid of debt if you expect DEflation

[Warpy]

5. A lot of us cranks have been saying this for months

and the RBS is one of two financial institutions that have remained in my portfolio, simply because the management has a grip on reality.

Short term, it's going to be really, really ugly and there is nothing we little fish can do about it except hunker down and try to survive.

[high density]

6. Gimme a break

It's impossible to forecast stuff like this, even if you happen to work for a bank. Cash is a shitty "safe haven." If you hold cash then inflation is killing you like hell right now. If one could accurately make a forecast like this, they would keep their mouths shut and make billions off of it.

[truebrit71]

7. You go ahead and keep yelling at the tide...

...the rest of us sensible ones will make alternative plans...

[Matilda]

9. I don't know about that - banks are very irresponsible when it comes to handing out credit.

My bank is always urging me to get a second credit card, or to opt for
a higher limit on my current card, and they would know from my records
that what they're offering would be stretching my ability to pay.

I'm fairly cautious, and I'm not tempted, but a lot of people do go in
over their heads, and it doesn't take much intelligence to know that when
the markets tighten - as they invariably do from time to time - those
people who are overstretched are in big trouble.

And for the really wealthy, endless credit seems to be available just
on the strength of their names. As the saying goes: "If you owe the
bank $10,000 and can't pay, you're in trouble; if you owe $10 million
and can't pay, the bank's in trouble". But they keep right on making
the same mistakes over and over.

[RUMMYisFROSTED]

28. "Impossible" seems a tad strong.

[pitohui]

36. "if you hold cash then inflation is killing you right now"

this sentence bears repeating because so many people are missing the point

some of the younger folks here have not seen a period of galloping inflation before and simply don't understand what it does to cash savings, it simply annihilates them

a bank account with $2K in it in 1968 could buy a new car (in fact i had a car model from that year that cost that amount), after ten years of galloping inflation, you'd need triple that or more to buy a similar model car, after 40 years of inflation you need around 18K or more to buy a new car of that type (modest four door sedan)

inflation kills cash, and one of the reasons it is important to invest rather than just "save" is because otherwise you will absolutely be financially destroyed, you simply CAN'T save enough cash over decades to take care of yourself in the face of inflation

[Phred42]

8. Global Crash, and on the other side? The New World Order?

:shrug:


Right out of Naomi Klein's Shock Doctrine - isn't it.

Maybe it's time to get rid of the Central Banks and try something else - or - go back to the future.... Before they stole our Money system

[Doctor_J]

10. Ravi Batra on Hatmann's show yesterday said

that the GOP will probably be able to hold it off until after 11/2, using stop-gap measures that will exacerbate the long-term damage but give McSame some help. He predicts the collapse will come November or December

[Pale Blue Dot]

11. I disagree with him. I think they've lost control.

Batra's sentiment is echoed a lot around here, but what I've noticed is a relative LACK of action on the government's part compared to just a couple of months ago. Think about it - the stock market has lost almost 11% of its value in the past nine days yet there's been nary a word from the White House (even if just to say "The fundamentals are strong.") They reacted very differently in February and March. I think they can't stop this thing now, and they know it.

Besides, the economy certainly isn't going to bet any better in the next few months, and it's already pretty bad. McCain is toast no matter what.

[Tempest]

12. And not just some bank saying this

But a researcher with with a proven track record of accurate predictions.

[Malikshah]

13. So what is the average person to do. Enough with the threads about

the axe coming down-- They do not help.

Personally, if a train is coming at me while I'm on the tracks, I'd rather not see it.

Yes-- call me an ostrich all you want, but what the hell is the average person to do-- folks w/ mortgages, credit card debt, stagnant wages, trapped in cars/homes etc.

For once, I'd like to see a Banker actually provide a solution as opposed to a dire warning.

[Pale Blue Dot]

15. "Personally, if a train is coming at me while I'm on the tracks, I'd rather not see it."

That attitude is EXACTLY why we are in this mess. Reasonable, thoughtful people saw this coming 2 years ago - back when we could have done something about it. Nobody wanted to listen then, and nobody wants to listen now.

There WERE solutions. People HAD answers. But you and others like you chose to be ostriches (yes, I called you that) and now here we are.

This is EXACTLY like the run-up to the Iraq War; we KNEW it would be a disaster, we KNEW there were no WMDs, and people didn't want to listen.

I have a family, and I teach low income students who will all be affected negatively by something that could have been prevented if people hadn't been burying their heads in the sand and pretending it wasn't happening. It IS happening, and we won't be able to deal with it as a nation until everyone (finally) admits it.

[Name removed]

16. Deleted message

Message removed by moderator. Click here to review the message board rules.

[PassingFair]

21. Ramen, brother!

We have been digging out of debt we created
with our home business. We are just about out.


But, I don't know that it will make much difference--
when the tsunami hits...all the huts will be swept
to sea, whether they are on stilts or not.

It gives me heartburn.

[Zuiderelle]

31. How on earth does that help anyone now?

That's a pretty judgmental attitude. Sure things could have been prevented, but they weren't. How does it help anyone to say that their situation could have been prevented, when even people who knew that, and did something about it, are ALL now affected by the fact that the situation was NOT prevented?

[bemildred]

29. Street demonstations and marches on various political "strongpoints" would be a start.

Voting every incumbent out of office in November would really get the ball rolling.

[Malikshah]

30. That is what I've been encouraging everyone I know to do. Non-violent protest

en masse. Down here in Florida, I want every last person to surround the state capital and shut down the city until the criminals are out of office.

[tpsbmam]

38. I'm the opposite....

It makes me anxious not to know what's going on and gives me a tiny (and I do mean TINY) sense of control doing what I can now to make a difference a year or 2 from now. There isn't a damn thing I can do to control the mess our "leaders" have created (save for what I'm doing....working to get sane candidates elected) but there are some things I can do to prepare for tougher times. I've been saving what I could. I've cut out frivolous things. I didn't do much that was frivolous anyway in the past few years, but I've been much more attentive to the little ways that I fritter away money. We've done 3 yard sales and anything that I make I stash away for tougher times to come. (My neighbors have used the much-needed money for groceries.) I started stocking up on nonperishables awhile ago. We could probably survive for 2 years now -- we'd have to buy a few things, but we could survive with buying nothing if we had to. If oil is going to go to $200/barrel and gas to $7/gallon, I like knowing that we don't have to buy much to survive and can keep errands to a minimum. I keep my eye on sales much more than I used to and take advantage of them to stock up. I started buying in bulk, too -- never did before.

Like you and millions of others, I can't change where I live, what I drive (pretty good mileage but I live in the mountains -- mileage mostly sucks here), etc. There are little things I can do though, things that I anticipate will make a difference a year from now. For me, it's not knowing that would make me crazy!

[Pale Blue Dot]

14. It's important to note that this week old thread got kicked due to more recent news: Barclays

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3372303

The Royal Bank of Scotland is not alone.

[TwixVoy]

17. I posted this exact article the other day

No one cared. I don't think anyone really realizes how bad the economy is right now.

[librechik]

18. Wait, RBS--aren't they going to step in at the last second and save us?

(while everyone else is sitting around either panicking or blabbing uselessly about how to save us?)

RBS! TAKE ME AWAY!

[Pale Blue Dot]

19. I extend a formal invitation for you to talk to my middle school students

about why we should not try to find ways to "save us".

I'm sure they'll be happy to know that you're not "panicking" or "blabbing uselessly".

[librechik]

22. you misunderstand--of course I want solutions

I'm referring to those great TV commercials for the Royal Bank of Scotland, where there is a group of people (one of them is on a stalled overhead tramway, another has someone choking at a restaurant.) Most of the people stand around dithering while the RBS guy has the presence of mind to step in and thanklessly give the Heimlich, or press the emergency re-start button.

I wish they could be that miraculous in this context. I guess a warning is useful, though.

[SarahB]

23. Edit: Posted under my wife's account.

:-(

[Pale Blue Dot]

24. I'm sorry. I haven't seen those commercials.

As you can tell, I'm letting myself get too worked up about this. It's just so frustrating to see this coming and know there's nothing that can be done to stop it.

Again, I apologize.

[librechik]

26. I know just how you feel--I am furious at the mishandling of the economy over the last 30 yrs

and I too feel helpless--we're all on a slide to the bottom. Complex stuff.

[kineneb]

25. I have been listening to Max Kaiser... (oops, re: OP)

has been saying this for some time over at:
http://www.karmabanqueradio.com/

also Mike Whitney has been writing on the financial situation

So far, everything they have "predicted" has been right. Ladies and Gentlemen, fasten your seatbelts. We are approaching very turbulent times.

(now back to stocking my pantry with dry goods)

[DailyGrind51]

20. This DOES have a bright side.

The Milton Friedmanites have had their way for 8 years and this is the consequence of their "unfettered capitalism". When the economy eventually recovers, the term "free-market" will be considered an oxymoron, like "jumbo-shrimp" and "business-ethics".

[roamer65]

27. I moved to a TIPS fund months ago.

Treasury Inflation Protected Securities fund. If Treasury notes fail, then we're ALL in deep shit...every one of us.

Series I Savings bonds have a similar inflation adjustment scheme, if one wants to get a better rate on their money.

[DemReadingDU]

33. I bought some Treasury Bills via Treasury Driect

Same reasoning...If the Treasury Bills fail, we'll all be getting pitchforks and marching in Washington, DC.



http://treasurydirect.gov/

[pitohui]

37. i received a notice from the treasury dept the other day

they told me that i was limited to buying only $5K in series I savings bonds a year

methinks someone else has had your same idea, perhaps a lot of someone elses -- otherwise why the limit?

in fact, although i haven't been as good as keeping up with buying savings bonds as the gov't apparently believes, i think your suggestion has a lot of merit

those who have the extra cash to invest really should look into this as a way to protect their cash from being eaten alive by inflation

[zam]

32. Fortis predicts a "meltdown" in the United States

American "meltdown" reason for money injection Fortis (in dutch)

My translation:

Fortis predicts a total collapse of the American financial markets within days to weeks. According to Fortis, that explains the series of measures it took last thursday to increase its solvency with 8 billion euros. "We have been saved in the last minute, the situation in the US is much worse than originally anticipated.", says Fortis chairman Maurice Lippens, who maintains that CEO Votron will stay on. Fortis expects bankruptcies among the 6,000 American banks with low coverage ", but also Citigroup, General Motors, a complete meltdown is starting in the United States."



Statements like these are unprecedented for chairmen of big financial companies to make. But I wonder what their motives are. They must know this could start a panic in the financial markets.

[Pale Blue Dot]

34. I posted this in GD

Thanks for the heads up. This is important.