RBS Issues ‘Global Stock & Credit Crash Alert’ – Next 90-Days!

Posted on June 18th, 2008 in Daily Stock Market / Economic News - The Real Story

RBS Issues ‘Global Stock & Credit Crash Alert’.

I like Pritchard. He always gets the juicy scoop. I wonder why it has taken so long for a major bank to tell everyone what we already knew. I should not do this but I am just going to copy it as it was originally printed by the Telegraph UK.  This is a perfectly written article to which I have nothing to add. -Best, Mr Mortgage

“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.”

24 Responses to “RBS Issues ‘Global Stock & Credit Crash Alert’ – Next 90-Days!”

  1. I read this, this morning, and cnbc was reporting it but just briefly on “Sqwak Box” – but then they kind of made fun of it – like RBS is going to fire that analyst – anyway, pretty scary, but, unfortunately not shocking.

  2. Hey print this too while you’re at it 🙂

    Paulson & Co. Says Writedowns May Reach $1.3 Trillion (Update3)

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aXSOhMmQinBc&refer=home

    June 18 (Bloomberg) — John Paulson, founder of the hedge fund company Paulson & Co., said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund’s $945
    billion estimate.

    ————————————
    A bit pessimistic but this j.paulson there knew about subprime and made 3.7B from betting against it. I would at least pay him a lil heed.

    Enjoy :-
    http://www.youtube.com/watch?v=KcY13X-bDm4

    http://www.youtube.com/watch?v=Vemi01A7eH8

  3. Pritchard is right on. Assuming this is the same Pritchard that wrote about the current crash years ago. He also writes for Elliot Wave. Elliot Wave has called each market turn SPOT ON. We’re in a Wave 3 Down – translation….. Look out below!

  4. That’s why Morgan Stanley is going up today ? Nice little stupid manipulation as usual.

  5. It’s pretty amazing how keen people are to ignore the writing on the wall this time around. Its the same as the dot.com thing – if you didn’t drink the kool-aid, then you could see it coming from a million miles away.

    Crazy.

  6. Janjuah is telling you to close the barn door, the horses have gotten away! His “dire” predictions are for a 20% fall in the bourses. Hell, the DOW is down almost 8% for just the last month. A 20% drop is consistent with a recession and/or global slow down. Something most economists have been telling us for months now. This is just more bitchy-little-girl arm waving from Janjuah than imminent doom.

  7. Well it proves that most investors are morons and stupid. It also proves that Plunge Protection Team is desperate to do anything to boost the Morgan Stanley Ponzi Scheme and all the rotten bunch. You will and we will be footing the bill for these bums.

    Get this. It’s soo funny. AMBAC is terminating its contrat with Fitch Rating Services because they are not satisfied with the negative ratings of thei toilet paper junk. What a bunch of bums, (yes it’s a pun).

    Hope the stupid market-racket finally catches on. AMBAC and MBIA are “banca rotto”. It mean bankrupted in italian. It litterally means rotten bench. Don’t sit on the rotten bench of MBIA and Ambac.

    http://www.nakedcapitalism.com/2008/06/mbia-refuses-to-downstream-cash-uses.html

  8. Now that everyone (including banks like Wells Fargo) is negative, I am beginning to think the bottom (in the stock market at least) is coming soon. . .we are finally at the capitulation stage, I agree that the next 30 to 90 days will be the blowout. . .but the housing hangover will be here for another few years.

    Something to think about for those people who have put off selling their house until things improve. . .if your house went down 20% in price, and it goes down even another 10%. . .it would take 6 years of 5% appreciation (the 50 year average for housing) to get back to 2005. . .and that will be after at least one more year of a downtrend, followed by at least two years of flat prices. . .AND assuming 5% appreciation. . .that will be 9 years!. . .I always quote Cisco stock – it went from 70 to 9, and is still only back to 25 to 27. . .this is going to be a long long treck.

  9. CNBC has become a bad joke in a world of bad jokes. They fact that they were openly mocking someone who stuck out his neck with a difficult call is just embarrassing and very unprofessional. Especially, when one considers this very difficult environment we find ourselves in currently. They’ve done the same thing with Einhorn and Fleckenstein. Mark Haines in the worst.

  10. I think Rick Santelli of CNBC is great. Tells it as it is.

  11. I agree Major,

    It’s even more funny watching them back fill after they say the “worst is over”….what will they say if we do see a crash unlike anything our generation has seen? I do disagree with one thing – Haines is not the worst (albeit cranky) – I think Dennis Kneale wins that prize! – That guy needs a smack upside his smarmy little pin head…

  12. Ambac To Terminate Contract With Fitch

    In other news, Bloomberg is reporting Ambac Financial to Terminate Fitch Ratings Contract.

    Ambac Financial Group Inc., the second-largest bond insurer, is terminating its ratings contract with Fitch Ratings.

    “Our decision to refocus and realign our business around our core expertise in the public finance and infrastructure sectors has led us to re-evaluate our ratings needs,” New York- based Ambac said today in a statement. “As part of this review, we have asked Fitch to remove its ratings on Ambac and all its subsidiaries effective immediately.”

    Ambac’s request follows one by rival MBIA Inc., which in March asked Fitch to stop providing a financial strength rating on its insurance unit. Bond insurers lost their top ratings after straying from backing municipal bonds, which rarely default, to guaranteeing securities such as collateralized debt obligations, which package pools of securities, including those backed by subprime mortgages, and slice them into pieces of varying risk.
    The Point Is Moot

    Since Ambac’s guarantee is worthless, there is not going to be much if any new business for Fitch to rate. And as for getting back to “core expertise” (assuming Ambac has any which I highly doubt), I have to ask: What good is expertise when your business model is dead and you have no customers?

    One final point: The equity markets have finally realized that Ambac and MBIA have a date with Zero but the ramifications of the inevitable downgrade of hundreds of municipal bond issues has certainly not been felt …. yet.

    Mike “Mish” Shedlock
    http://globaleconomicanalysis.blogspot.com
    Click Here To Scroll Thru My Recent Post List

    Posted by Michael Shedlock at 2:33 PM Two M

  13. I totaly agree w/ evil-A. Dennis Kaaaneale is the chief propagandist for that network.

    Click on my name for a classic moment in CNBC history of Dennis Ka-Neale being called out by his own colleagues. LoL Permamoron!

  14. CLASSIC DONNY.

  15. If you check out some of the old (2000-2002) clips from CNBC, you can see how they have changed from reporter/journalists to commentator/cheerleaders. Granted, this phenomenon has occured on much of the cable offering, with Fox News being the best example. However, it is a short-term gain as more sophisticated viewers that grow up with this format will dismiss it in the future much like they dismiss most of the pablum on the internet. Those of us that grew up with Walter Cronkite and trusted the news will/are having a harding time discerning the truth.

  16. ya, that happened right about when Tyler Matheson went off the reporting desk to run the show over there. It is simple, there are more longs than shorts and none of the wall st jack asses make money unless you buy stocks. When the market is rallying their ratings go up so they have a vested interest at looking at things as Erin would say, with the ‘glass half full’, at their viewers peril.

  17. You ever notice when the market is crashing or futures are down 150 on really bad news they have Cramer and Tyler Matheson on the front lines in the early morning. If you don’t think they are not trying to effect the market, you are crazy. It is such a BS variety show.

  18. If people still listen to a clown like Cramer, they desserve to lose everything.”Hey don’t sell Bear Stearns ! No! No! No! ” You mean people still follow the “advices” of that baffoon ? Amazing.

  19. Donny,
    OMG, totally funny video – but you have to find this footage – back at christmas, Dennis Kneale was complaining about how there was no pass through in high commodity prices (gold in particular), and what was everyone so upset about, because he bought the same gold tiffany earings for a lady friend 5 years ago, at the same price he bought them for a different lady friend this year, so no pass through…? huh?. What a jack ass? to say on air he basically has his standard gifts for someone that will “do” him enough times to qualify for tiffany earings at christmas? I know a bit off topic – but if you can get that – totally a classic :)…

    It did seem back in ’02 they reported more seriously, less eye candy, etc. I do hate to watch, but there is alot of info to get for my purposes,(even though they spin numbers, along with the gov’t.), especially if you cannot sit in front of a computer constantly. One basically has do the opposite of the spin. It’s too bad really.

  20. http://www.youtube.com/watch?v=hXBcmqwTV9s&feature=related

    Here is one funny for yoy, and it perfectly explains how investment banking works. Great educationnal material.

  21. Marc, try Bloomberg TV and radio. Some cable systems carry it. If not it is available on their site.

  22. […] let’s see if RBS is right – RBS Issues ‘Global Stock & Credit Crash Alert’ – Next 90-Days! – MR Mortgage […]

  23. Yeah Bloomberg is real funny. I listen to it every day. It’s always a great laugh. One day they are bearish for about 15 minutes, and then they go and get a hyper bull to say; “It’s a great to time to buy and bla bla bla.” Ok it’s less funny than Cramer, which is hilarious and so decadent, but it’s good entertainment. 🙂

  24. I’ve followed real-life journalist Prichard since he wrote The Secret Life of Bill Clinton back in the 90s, which seconded Christopher Ruddy BTW. But I would never have seen this article if I hadn’t checked in here at Mr. Mortgage.

    By the time I got there, there was no link to it on Prichard’s main Telegraph page.

    Is that where you found a link to this article, Mr. Mortgage? If so, it got pulled.

    Wierd.

    The Telegraph blogs are down too, supposedly until tomorrow. I’m looking forward to seeing if Mr. Prichard talks about what happened with this piece.

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