Royal Bank of Scotland Says "Sell Everything"

[audreyh1]

Well in June 2010 bank stocks had the following price:

JPM 37.62
BAC 15.00
C 37.90

In October of 2011 they had the following price:

JPM 30.60
BAC 6.00
C 24.73


June 2010 was when the FED was ending QE1 and in November of 2010 the FED realized as RBS had that the financial system was in serious distress and announced QE2, at the same time Japan, and Britain announced their own QEso I would say that he actually got that call right.

For anyone who would mock this call, do not blame RBS for making this call if the market falls 40%. The argument they are making is that financial pressure that are being scoffed at are causing real issues. I just wonder how the Sovereign wealth funds in oil countries that hold over 5 trillion in financial assets are supposed to fund their countries monthly obligations without selling financial assets? How is China supposed to fund outflows of 170 billion a month. I think RBS just approached this as a mathematical question as a result of their algorithms and hated what they saw.

Running_Man: I grudgingly concede that you have a good point.

It's hard to see past the huge gains market since 2011.

 

[RISP]

Assuming the RBS is right, we must immediately reunite with England in order to avert economic and social disaster. Time to learn how to spell colour and pronounce 'alumunium'. ��

It's 'aluminium'. Glad I could help.

Seriously, I never understood why American English dropped that second 'i'. Unlike color/colour or analyze/analyse, this changes the whole sound of the word.

 

[Nemo2]

It's 'aluminium'. Glad I could help.

Seriously, I never understood why American English dropped that second 'i'. Unlike color/colour or analyze/analyse, this changes the whole sound of the word.

World Wide Words: Aluminium versus aluminum

 

[RISP]

World Wide Words: Aluminium versus aluminum

Thanks Nemo, that was an interesting read.

Cliff notes: It's really just that the publisher of one dictionary screwed up. "Noah Webster’s Dictionary of 1828 has only aluminum, though the standard spelling among US chemists throughout most of the nineteenth century was aluminium; it was the preferred version in The Century Dictionary of 1889 and is the only spelling given in the Webster Unabridged Dictionary of 1913. [...] The International Union of Pure and Applied Chemistry (IUPAC) officially standardised on aluminium in 1990, though this has done nothing, of course, to change the way people in the US spell it for day to day purposes."

 

[rayinpenn]

Maybe they are right maybe they are wrong. I am not going to worry about it. I'll stay the course.


Sent from my iPad using Early Retirement Forum.

 

[NW-Bound]

Abby Cohen of Goldman Sachs said "Buy, buy, buy", for US stocks that is. Remember her? She was called a permabull back in the late 90s when she said "Buy, buy, buy". What I like about Abby is the articulate manner when she speaks, whether you side with her or not.

Goldman Sees 11% Upside in S&P 500 After an Emotional Selloff - Bloomberg Business

 

[Bestwifeever]

I've been thinking about this pronouncement as the markets fall this week. Perhaps people who actively trade might follow the RBS's advice but I would imagine these people would already have crunched their own numbers in making trading decisions and don't wait to act on pronouncements like this. I imagine the rest of us have settled on an asset allocation that is comfortable for each of us and that takes into account the level of risk we can abide. So we encounter a period where our investments fall in value--now we are supposed to jump in and sell everything? I don't think so.

Jamie Dimon of JPM made a statement this week (paraphrasing) about how the US economy has been so strong so of course it will hit some bumps, and the headline writers are saying "Dimon says sell!" Or "Dimon says economy is great!" Gah.

 

[Car-Guy]

Buy signal?

Yes, it is for me. (The market would have to drop a lot more before I'd use up all my spare cash, but I have begun buying back in.) YMMV.

 

[Dawg52]

Abby Cohen of Goldman Sachs said "Buy, buy, buy", for US stocks that is. Remember her? She was called a permabull back in the late 90s when she said "Buy, buy, buy". What I like about Abby is the articulate manner when she speaks, whether you side with her or not.

Goldman Sees 11% Upside in S&P 500 After an Emotional Selloff - Bloomberg Business

I've always liked her. She was a regular on Louis Rukeyser's show and made a lot of good calls. Hasn't always been right though.

 

[satpoolman]

You're implying that Matt was less idiotic than Squawkbox?

Good one!

 

[Corporateburnout]

I imagine the rest of us have settled on an asset allocation that is comfortable for each of us and that takes into account the level of risk we can abide. So we encounter a period where our investments fall in value--now we are supposed to jump in and sell everything? I don't think so.

+1.

That's what long term investors/retirees should do. Anything else would be market timing and would stress me out more since I won't know when to get back in. I'll start worrying when the market is down 50%+ but even then I won't do anything but keep rebalancing at the 10% variance from planned AA.

Off to a nice steak dinner with a nice bottle of wine.....Already booked a cab.

 

[NW-Bound]

I would love to be able to say "To hell with the market, I am not going to deny myself of my usual bottle of Chateau Lafite". But the truth is, I have never had such a bottle, even in the best of times.

So, I just came back from Lowe's where I got some more flooring material, and now finished eating up the rest of my batch of homemade onion soup for a late lunch before heading back upstairs to finish my DIY project.

By the way, I was happy today to find at Lowe's the oak staircase nosing to match with a 3/8" engineered oak plank I am going to use for the stairsteps and landing. Such a simple thing, yet until one looks, he does not know how hard it is to find something that will fit. So, I will try to ignore the fact that I have just lost another new CR-V today.

 

[Corporateburnout]

I would love to be able to say "To hell with the market, I am not going to deny myself of my usual bottle of Chateau Lafite". But the truth is, I have never had such a bottle, even in the best of times.

No Chateau Lafite for me even the 2010 vintage is too rich for my blood. I was thinking more like the 2009 Jordan Cabernet.

 

[sansha]

Agreed, I'm no financial expert, but if you think the markets will eventually recover, it's better to buy during one of these panic sell periods, when the market dips. Though I haven't started buying yet.

I'm conservative and think the market is often corrupt from the Federal side and Wall Street. But the Fed manipulating interest rates to zero drives retirement investors to it in hopes of some return that will keep up with inflation.

 

[ziggy29]

I'm conservative and think the market is often corrupt from the Federal side and Wall Street. But the Fed manipulating interest rates to zero drives retirement investors to it in hopes of some return that will keep up with inflation.

See, there's the problem. In 2008, the Fed had a lot of ammo in the form or lowering interest rates, and they pretty much used all of it. It helped avoid a total and complete meltdown of the global financial market, but the ammo they used (dropping interest rates to zero) has not recovered to be made available again.

I'm not a doomsday type but it does concern me that if it gets bad enough, there's almost nothing the Fed or other global central banks can do.

 

[NW-Bound]

...I was thinking more like the 2009 Jordan Cabernet.

Even at $50, this is not something I drink often, and certainly not at a restaurant where they charge 3x more.

Yes, a guy is frugal (or do you call him cheap) when he can lose a 6-figure sum in less than a week, but is extremely reluctant to pay $50 for a bottle of wine. I do pay a lot more for spirits, but then they last longer than one meal.

 

[Corporateburnout]

Even at $50, this is not something I drink often, and certainly not at a restaurant where they charge 3x more.

Unfortunately I developed a taste of fine wine when we entertained customers back in the days. We don't do it often but every once in a while we splurge on a nice Filet Mignon and a Jordan at the Capital Grille.

Who knows if this may be our last for a while especially if the market drops another 20% before our next dinner....

 

[shotgunner]

See, there's the problem. In 2008, the Fed had a lot of ammo in the form or lowering interest rates, and they pretty much used all of it. It helped avoid a total and complete meltdown of the global financial market, but the ammo they used (dropping interest rates to zero) has not recovered to be made available again.

I'm not a doomsday type but it does concern me that if it gets bad enough, there's almost nothing the Fed or other global central banks can do.

This concerns me as well. I suppose they could cease interest rate hikes and resume QE.

 

[34rlsa]

This concerns me as well. I suppose they could cease interest rate hikes and resume QE.

Japan

 

[sansha]

Good point that the Fed has fewer arrows in their quiver. Then, though, the 2008 drop was because the assets being traded or valued were in many cases worthless - mortgages based on an ability to pay that in many cases was non - existent. Those holding the mortgages were going to default in mass, and the houses were overvalued too.

Now the markets are dropping because oil is low and the Chinese economy is slowing. In some respects, oil being low is not a bad thing. People drive more, buy larger cars, buy houses further from work, ship goods cheaper, perhaps travel more as costs are cheaper - all things that will drive the economy up. And cynically, it will just take another war, a few refineries closing, the oil reserves gradually depleting as companies drill less, before oil becomes more valuable. I don't see society moving significantly away from oil for another decade. One way or another I think oil will rebound - or the energy companies will diversify into something else they can sell.

I don't see the central banks caring more for the long term economy over short term profits, even if, as was proven with the mortgage crisis, they knew what they were selling was crap,

I also don't see the Federal government doing anything to rein in the deficit, which has been a significant weakness. During the last crisis, the Russians approached the Chinese to crash the U.S. economy. At the time the Chinese refused, because they perceived their economy depended upon selling to the U.S. But though our government knew this, it continues to spend. Most Americans seem oddly clueless or careless that you shouldn't spend what you don't have and don't insist on a balanced budget. In fact, anyone suggesting that is reviled as being heartless, or racist, or something equally vile. Meanwhile, others who've struggled to pay their way and save are reviled for not being willing to pay the way for others. I don't see the government or popular trend move toward making good choices - in fact the choices made after the last crisis often seemed to perpetuate the same practices and increase the risk. But that didn't stop people after 2008 from investing in the market and doing well. The central banks naturally will be more concerned with their survival than the U.S. economy, and the Fed will assist them because these entities have become so large that the Fed can't cover their collapse. It may be out of arrows for its quiver.

So yes, if things melt down, it could get very very bad. But in that worst case scenario, is there a place where $$ are going to be safe? Stocks will crash. If the banks go en masse, can the bond market survive? The dollar may be worthless paper. After all, we're hardly on the gold standard. Some have claimed the dollar only has held what worth it has because global oil is traded in it. Even if you have your dollars not in banks but buried in your back yard, what worth will paper have in such a scenario?

I'll admit to being very ignorant, and I have no solution of where to invest in such a fiasco. But if/when it happens, seems to me that it will be a much different game. And no one, yet, has a clue what that would be. Those who have made predictions as to such a total collapse, who have recommended doing things like investing in foreign currency (if the global banks crash, good luck), buying gold, or moving to some remote, self sufficient lifestyle are branded as kooks. Considering our economy collapsed in 2008 over banks buying and insuring mortgages as a good risk that were based on overvalued houses sold to people who couldn't afford them the definition of what is a kook in such a case is kind of amusing. Who is kookier, the average investor who looks at this house of cards and is skeptical, or the engineers of the house of cards? But right now, it is a game most companies who provide 401K funds, and most investors, are tied into playing.

Will the carousel stop and crash? Perhaps, maybe probably. Our country is very young in the scheme of things, and our financial markets based upon sometimes shaky principles. But for the average retiree or future retiree, WHEN this doomsday scenario will happen is more important, and WHERE to invest until then is the choice we all have to make. I wish our politicians, government, and banks treated the debt and the money they bandy about as if it were their own. Then perhaps we would be less vulnerable. A good reason to have smaller, more independent banks - but the Fed turned their backs on that scenario, preferring to consolidate into entities that are even more "too big to fail" than before. Again, I am far from being as knowledgeable as I could wish, but in such a doomsday scenario as you put forward, won't the game be very different and the question as to whether to buy or sell in the market minor in comparison?

 

[ejman]

Snip...During the last crisis, the Russians approached the Chinese to crash the U.S. economy. At the time the Chinese refused, because they perceived their economy depended upon selling to the U.S. snip

Oy Vey, Where is Rewahoo's asteroid to put us out of our misery...

 

[VFK57]

This concerns me as well. I suppose they could cease interest rate hikes and resume QE.

Another round of QE would help but this will be hard proof of Jim Rickards "Currency Wars" point of view as other major economies will follow the suit. It would certainly lead to hyper inflation. Mr Rickards advises on portfolio consisted on Gold, Real Estate, Land, Arts and some equities of companies "with a future". However his predictions of Gold price going through the roof yet to be seen.

 

[cyber888]

All these predictions are self-fulfilling prophecies. If you and everyone else believe them, then everyone will turn their stocks to cash. Yeah, everyone will sell their stocks for cash. Everyone will be selling and selling. And their prophecy will be fulfilled. If you don't follow them, and do the opposite, the bull market will be back. It's all market psychology. "The end is near .. it's doomsday .. everything in the world will crash." Let everyone repeat that mantra, and then you have a self-fulfilling prophecy. And they will be buying and buying cheap. Then, they will begin to preach "Buy now, everything is cheap", but they have already bought in cheaper.

The thing is - the market already tanked by 15%. Yeah, it might tank another 5-10%. And after all the Fear is gone, the deep discount buying starts and the price jumps up. And you're left holding cash as prices have recovered. . The question is - can you time the market ?

 

[Looking4Ward]

Wake me up when it's over.

 

[Dog]

Oye. DH retires in May


Sent from my iPhone using Early Retirement Forum