Getting harder to suppress

[LAK]

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=A1YourView&xml=/money/2008/06/18/cnrbs118.xml

RBS issues global stock and credit crash alert
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 12:19am BST 19/06/2008

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 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.

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.

advertisement"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.

Morgan Stanley warns of catastrophe
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 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.

[Standing Wolf]

More comment and analysis from the Telegraph

Reading British "newspapers" is a lot like talking to four-year-old children: intereseting in a mild way, but not how to pursue facts.

[LAK]

Newspapers; I agree. Coming from a major bank it is alittle more significant.

[K Frame]

So far they're the only ones to issue the chicken little sky is falling report of this magnitude.

Even if this does happen, though, that would only take the S&P back to around 1,000.

Significant, yes, but catastrophic?

And I've just got to wonder at the head you chose to put on this thread...

"harder to suppress"?

Who's suppressing what?

The only thing significant about this is that it's just another person/panel's guess on what is going to happen. That it comes from a major bank doesn't remove the fact that it's a guess.

[LAK]

What's just over the horizon. The signs have been everywhere for several years now and there is an obvious and logical reason it is being suppressed. You can either see it plainly or make excuses for what is going on - either way it is coming as sure as night follows day.

[K Frame]

If you do a little digging, instead of just reading the front page and stopping there, you'll find that there is absolutely NO consensus among economists and other financial experts over whether there is going to be a recession or not.

Most of them can't even agree whether we're in a recession or not right now.

I'm going to ask you one more time.

WHO is supposedly doing this suppressing, and of what, or is this just another "IT'S THEM! THEM I TELLS YE! YOU KNOW, THEM!" pyschobabble conspiracy theory?

For something that's supposedly being suppressed there's certainly been an awful lot of talk, debate, and discussion about the health of the US and global economy over the past year, with absolutely no shortage of GUESSES as to what might be happening and what might happen in the future.

To seize on this RBS report as proof positive that the world economy is going to melt around our ears and we're going to be thrown into a Depression that makes the 1930s look like Happy Days is, well... dumb.

[K Frame]

Hum...

Maybe UCLA's Anderson Group of economists are on the payroll of "The EVIL THEM" society? I'm sure Mr. Leamer has been hansomly paid...

From yesterday's L.A. Times

"Under pressure from falling home values, high oil prices and rising unemployment, the economy in California and the nation will perform anemically in the coming months -- but there still won't be an actual recession, UCLA forecasters say.

"I am holding on to what is now a shaky view: no recession this year," said economist Edward Leamer, director of the quarterly UCLA Anderson Forecast, which is being released today.

The predictions, however, call for somewhat more pain in the months ahead than previously forecast, with little improvement this year or next.

Not good, but not a recession, which is commonly defined as two consecutive quarters of negative growth in gross domestic product.

"In a recession, things happen quicker and nastier," said David Shulman, a senior economist at UCLA.

Normal growth will not resume until 2010, Shulman said.

"The witch's brew of the popping of the housing bubble, a wounded financial system and increasing inflationary pressures coming from rising commodity prices will keep the economy on a sub-prime growth path for the next several quarters," he said.

The drag on the economy from the buckling housing industry may become the most severe since the Great Depression, the report said. There will be little or no growth in gross domestic product this quarter, and GDP will probably slip into negative territory in future months before finishing next year with a tepid average improvement of 1.2%.

A key factor in favor of the economy, the forecast says, is that so far the pounding of the housing market has not badly damaged the job market.

In the 1990s, Southern California home values fell after many workers -- particularly in the aerospace and defense industries -- lost their jobs and couldn't keep up mortgage payments. Foreclosures peaked in 1997, when employment already had recovered, because many homeowners had struggled for months to hang on.

"This time, what happens in housing stays in housing," Leamer said, as many employers worried about the economy hold off on new hires but decline to cut staff.

Many homeowners are choosing to sell their houses at a loss and move -- not because they lost their jobs, he said, but because they owe their lenders more money than their houses are worth.

Bailing out makes financial sense to them. "The lenders have provided an option to walk away if things go bad -- you might as well exercise that option," Leamer said.

Distress sales will continue to wreak havoc on home valuations for the rest of the year, the forecasters said.

In Lancaster, for instance, deeply discounted foreclosure-related sales account for about eight of 10 transactions, said real estate agent James Malanowski of Coldwell Banker. The upside is that the vast majority of sales are to first-time home buyers who previously had been priced out of the market.

"Buyers are out there buying again," he said. "We have a huge inventory."

Therein lies one of the silver linings to the precipitous drop in home prices, the report said. UCLA forecasters predict that distressed home sales will continue for an additional nine to 12 months. The remainder of 2009 will be devoted to picking up the pieces and watching to see how home prices level out when the market isn't dominated by foreclosures.

"The unprecedented speed of the price adjustment means that instead of several years of slow bleeding [like the 1990s] we have compressed the necessary adjustment into two years of intense housing pain," wrote UCLA economist Ryan Ratcliff. "Mom always said it's better just to rip the Band-Aid off."

The decline in house prices, however, has wiped out about $3 trillion in home equity nationally and helped crimp consumer spending.

Sales of durable goods, such as automobiles, will stay soft as $4-plus gasoline weighs heavily on household budgets and keeps sucker-punching the U.S. economy.

In years past, the cost of crude oil imports ate up about 1% of the nation's GDP, forecast director Leamer said. Now it's eating up 3%. "That's a heck of a lot of money leaking out of the borders of the U.S."

It's also a bracing slap to American consumers, who need to pay heed, Leamer said.

"The global economy is communicating to Americans that we are not as wealthy as we thought we were and we are racing global competition for scarce resources," he said.

"It's saying we need to save more as a society and the government needs to be more forward-looking. We are not having sensible debate about the long-term fate of the economy."

[LAK]

You can laugh it off if you please. It does not change what is obvious, not just to me, but a great many others as well, many who are very well credentialed whether they are considered "top economists" or not.

For something that's supposedly being suppressed there's certainly been an awful lot of talk, debate, and discussion about the health of the US and global economy over the past year, with absolutely no shortage of GUESSES as to what might be happening and what might happen in the future.

Several topics related to this have been well trodden on here and I see no need to dig them all up and present them to you since you have read them as well.

Anyone who expects to see any "consensus" among "experts" on this subject are likely to be disappointed. Certainly those who are looking after the interest of stockholders and banks don't want a sudden run.

To seize on this RBS report as proof positive that the world economy is going to melt around our ears and we're going to be thrown into a Depression that makes the 1930s look like Happy Days is, well... dumb.

Well, it is not I who am jumping to conclusions; I did not even imply that the RBS was the single item of proof for me or anyone else. Rather another one, this time from what I would consider be the last type of institution I would expect to make such public statments.

You are attempting to ridicule the wrong person; RBS's Mr. Janjuah and Jukes ought to be your targets. They are making the statements, not I.

And the UCLA Anderson Group? Who knows who pays them or where they have their heaviest investments. The Anderson Group - nor the UCLA as an institution - certainly have no interest in the financial welfare of you or I.

[Nitrogen]

If you do a little digging, instead of just reading the front page and stopping there, you'll find that there is absolutely NO consensus among economists and other financial experts over whether there is going to be a recession or not.

Most of them can't even agree whether we're in a recession or not right now.

I'm going to ask you one more time.

WHO is supposedly doing this suppressing, and of what, or is this just another "IT'S THEM! THEM I TELLS YE! YOU KNOW, THEM!" pyschobabble conspiracy theory?

For something that's supposedly being suppressed there's certainly been an awful lot of talk, debate, and discussion about the health of the US and global economy over the past year, with absolutely no shortage of GUESSES as to what might be happening and what might happen in the future.

To seize on this RBS report as proof positive that the world economy is going to melt around our ears and we're going to be thrown into a Depression that makes the 1930s look like Happy Days is, well... dumb.

That's the beauty of experts.  You can find a bunch to tell you whatever you want to hear.  Either Global warming will kill us all, or is a liberal consparicy.

That Evolution is a sound theory explaining bits of biology, or that it's completely wrong and God built everything in 7 days.

You can even find experts that'll tell you that wearing magnets will allow you to live forever.

[Manedwolf]

Sounds like someone at the newspaper or a bunch of investors at that bank are either selling short or trying to bump up their hedge funds.

[K Frame]

OK.

Three requests to identify exactly who is "suppressing" this information.

No answer, just more "the answers are out there!"

Pure, fanciful, conspiracy theory drivel. You question just who pays the University of California Los Angeles' Anderson Group of economists. That's funny, especially when you're holding up the representative of a commercial entity like RBS as an unbiased observer of the truth. Of course there's NO chance that the man, or RBS, is trying to influence the markets in a way that will allow them to sweep in and scoop up low priced equities. Nope, no chance that there's anything other than pure, lilly white motivations.

You want to do "It's an evil conspiracy by THEM!" do it someplace else and stop wasting our time and Oleg's bandwidth.