RBS: Equity Investors Are The "Worst Cult In History," Prepare For The "Cliff Edge"

The Business Insider ^ | 6-30-2010 | The Pragmatic Capitalist

[blam]

RBS: Equity Investors Are The "Worst Cult In History," Prepare For The "Cliff Edge"

The Pragmatic Capitalist
Jun. 30, 2010, 4:59 AM

I’ve read some alarming research in recent weeks and months, but this one takes the cake. RBS is sounding the alarm on risk assets with a call that markets are at risk of falling off the edge of the cliff. They refer to equity investors as the “worst cult in history….which has no basis in fact, or history, but yet seems universally accepted.” (There’s actually a strange truth in that comment). They believe the current downturn could very well “destroy” this “cult”:

“Get ready for the cliff-edge. Be maximum long duration of nominal government bonds in safe haven markets. This means US, UK, Germany, in that order, and perhaps others. Be long gold. Think the unthinkable – we always do, and you should ask yourself why the consensus refuses to do so, and seems perpetually on the ‘everything is ok’ side of events. If I was any more bond bullish we would explode, this is identical to 2008, including the incredible complacent (and we believe wrong) consensus.

They’re not just bullish on treasuries – they are super bulls with a 2% target on 10 year yields:

“Get ready for sub 2% on 10-yr USTs; sub 2% on 10-yr bunds; and the UK not far behind, 2.5% 10-yr Gilts. Our long held US$2000 gold view as a trade for the breakdown of the financial system looks increasingly ok. We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe), and for the global economy (particularly in the US/Europe).

[snip]

[NeoCaveman]

This means US, UK, Germany, in that order,

Over Switzerland and Canada?

[blam]

Plunging Consumer Confidence and Treasury Yields, Economic Depression Is Here

[timestax]

bttt

[NVDave]

Thanks for bringing that to my attention.

I’ll have to think about that for awhile before I have anything coherent to say. Suffice to say, it is a wide divergence from what other investment banks are projecting - ie, GDP’s of upwards of 3.5%, yields on the 10-year T of 4.5 to 5.5%, etc.

Hell, Goldman is still standing pat on their SP500 call of 1300 by year end.