RBS: 'Sell everything' - Business Insider (businessinsider.com)
Emotions play an important role in the market. Experienced traders, analysts, economists, and strategists do their best to denude themselves of their emotions when they are making trading decisions or recommendations.  That way they won't be influenced by the peaks of euphoria and depths of despair that so often drive the ebb and flow of markets. 

So when a major global bank, such as RBS, advises clients that they should "sell everything" investors had better take notice. Writing in the UK Telegraph today Ambrose Evans-Pritchard says Andrew Roberts, and the interest rate strategy team at RBS, has advised clients to, “Sell everything except high-quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” That follows on from an incredibly bearish outlook for 2016 that Roberts' team issued late last year. 

At the time Roberts said there are "a number of bad headwinds affecting the world right now, which will worsen in 2016" and that this means RBS is wary of "mostly everything except high-quality 5-10y govt bonds," It's easier to ask what markets and assets Roberts is not bearish on. But some of the highlights include a negative outlook for commodities, with RBS advising clients to "stay short all commodities. 

Yes, especially oil." Roberts is also bearish stocks saying "negative returns in 2016 are probable, though without a recession they should be manageable, think -10-20%, rather than a rout." No rout. That's the good news. But as a recommendation that stocks will fall, that investors should stay short commodities, and that in a global universe of available trades only buying bonds looks attractive suggests another tough year ahead for investors. Part of Roberts' original thesis was that there has been a dangerous build up of debt globally. 

Think the run up to the sub-prime crisis and the credit crunch that followed. China is a big part of this Roberts says and, as a consequence is at the top his list of themes for 2016. China, "has very high debt levels (as a % of GDP) given they are still emerging" and crucially they have accumulated this debt incredibly fast, he wrote. 

Key here is not just the size of the debt pile, the "level" in Roberts term but a recognition that the faster the debt has been accumulated "the less the probability that it is in safe, ultra long-term, hands." Roberts says China is "only" the third greatest debt bubble build up in the last 25 years. But it remains a clear and present danger to markets and the global economy because like Thailand, just prior to the Asian crisis, and Ireland in the run-up to the sub-prime crisis, these episodes ended badly in every single case. 

RBS-china-debt.jpgRoberts goes further noting that: We can make a very strong conclusion that this build-up has occurred very fast, and as such makes China even more vulnerable to the slowdown as it occurs....continue reading...

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