Sell Everything?

[jaysabi]

Royal Bank of Scotland economists have urged investors to sell everything except high-quality bonds, warning of a “fairly cataclysmic year ahead.”

Writing in a client note dated Jan. 8, the bank’s European rates research team said that clients should be concentrating on return of capital, not return on capital, and that an ominous outlook to the world economy “all looks similar to 2008.”

The Key Points

• The note is particularly bearish on China and global commodities, and predicts that oil could fall as low as $16 a barrel.
• In a grim set of predictions, Andrew Roberts, head of European economics, rates & CEEMEA research said that the world has far too much debt to be able to grow well.
• He also warned that advances in technology and automation are set to wipe out up to half of all jobs in the developed world.
• The note says equities could fall 10% to 20%.
• It predicts the year will be spent focusing on how to exit positions that have benefited from long-running QE, including emerging markets, credit and equities.

Source: http://blogs.wsj.com/moneybeat/2016/01/12/rbs-warns-sell-everything/?mod=e2fbRBS

A 10 to 20% fall in equities certainly isn't a long shot. QE has produced a long run-up in stock prices, and on average, we see a market correction of 10% every two years and a 20% correction every five years. Still, the advice to "sell everything" seems a bit much.

[teonoaro]

I'm hearing deflation news from several places in last 24 hours. As per the article you have quoted here, many countries may face economic slowdown, especially the oil manufacturing countries. They have played a major role in market speculations in the past to rise prices up. Now they're reverse. RBS may have said it right to sell. Time for sell. The deflation is coming. However, some countries are going to experience inflation. Their economic growth may go outstanding and their currency is going to rise in value against dollar. The world is revolving. Anything can happen.

[Razick]

I'm not saying they are wrong, but I do want to address a problem with those claims:

Alarmists have been saying for centuries (no exaggeration) that technology will wipe out jobs and make it impossible to make a living. Each time, they have been wrong. Technology has lead to increased standards of living and more job creation. Yes, outdated jobs are destroyed, but they are replaced with new, often better paying, ones.

[bearex]

I guess we will see everything fall and bitcoin rise I dont think it will drop below 400 in the next 8 months.

[HabBear]

Well this is concerning, maybe we all need to evaluate how our investments may be adjusted to provide more protection.

Remember that this sentiment from RBS is a self-fulfilling prophecy. If everyone does decide to sell the markets will fall, so the only way to test this theory of RBS is for everyone to hold.

Good news for BTC of course!

[richardsNY]

They are most likely talking about traditional investments and not about Bitcoin. Bitcoin is still relatively unknown to these people. If they have the balls to try out something new with a lot potential for future growth, then Bitcoin is the right choice for them. They just need to realize it.

[BellaBitBit]

Bitcoin could look like a safehaven in circumstances like this.  I agree that more and more jobs are going to be automated.  You can see that happening everywhere - more self checkout (cashier jobs at risk), banking through mobile app (bank teller jobs at risk), and I have read articles of increased AI in many areas of production.  This will happen, just how long who knows.

[HabBear]

Bitcoin could look like a safehaven in circumstances like this.  I agree that more and more jobs are going to be automated.  You can see that happening everywhere - more self checkout (cashier jobs at risk), banking through mobile app (bank teller jobs at risk), and I have read articles of increased AI in many areas of production.  This will happen, just how long who knows.

Razick has it right, every time some new technology comes along there's fear that it will take jobs away.  It may take specific jobs away (that would be done by computers or machines) but often it opens an opportunity for new jobs to be created. The problem is when works don't adapt to find new skills if their job is replaced by a machine...that will lead to bad consequences to that person, but people need to learn that this is all just nature...where survival of the fittest reigns supreme.

[jaysabi]

I'm not saying they are wrong, but I do want to address a problem with those claims:

Alarmists have been saying for centuries (no exaggeration) that technology will wipe out jobs and make it impossible to make a living. Each time, they have been wrong. Technology has lead to increased standards of living and more job creation. Yes, outdated jobs are destroyed, but they are replaced with new, often better paying, ones.

I'm inclined to agree with you, that the alarmist warnings about job destruction are overblown, but the trend is certainly real. Automation and technology reduces the need for human employment. The economy shifts and people find new industries, but this shift is not unlimited. There will not be new jobs simply because there are more unemployed people, there has to be economic need for the employment. Manufacturing jobs are decreasing, and the American economy has adapted with an increase in service jobs, but there is not an unlimited need for service jobs. I think you're saying that with lower than average employment participation rates in the American economy, even though the economy has largely "recovered" and continues to improve. With that said, I think the alarmist warning is overblown because this is a trend that, while accelerating, still takes decades to play out. We're not in danger of having massive unemployment on account of technology in the next 10 or 20 years, though it certainly gets incrementally worse as time goes on.

[jaysabi]

Bitcoin could look like a safehaven in circumstances like this.  I agree that more and more jobs are going to be automated.  You can see that happening everywhere - more self checkout (cashier jobs at risk), banking through mobile app (bank teller jobs at risk), and I have read articles of increased AI in many areas of production.  This will happen, just how long who knows.

Bitcoin will not be seen as a safe haven. RBS published this research note to advise people to flee from risk. They're saying even equities are too risky, and Bitcoin is riskier than equities by many magnitudes. There's just no circumstance in which people are fleeing risk that Bitcoin does well.

[Razick]

I'm not saying they are wrong, but I do want to address a problem with those claims:

Alarmists have been saying for centuries (no exaggeration) that technology will wipe out jobs and make it impossible to make a living. Each time, they have been wrong. Technology has lead to increased standards of living and more job creation. Yes, outdated jobs are destroyed, but they are replaced with new, often better paying, ones.

I'm inclined to agree with you, that the alarmist warnings about job destruction are overblown, but the trend is certainly real. Automation and technology reduces the need for human employment. The economy shifts and people find new industries, but this shift is not unlimited. There will not be new jobs simply because there are more unemployed people, there has to be economic need for the employment. Manufacturing jobs are decreasing, and the American economy has adapted with an increase in service jobs, but there is not an unlimited need for service jobs. I think you're saying that with lower than average employment participation rates in the American economy, even though the economy has largely "recovered" and continues to improve. With that said, I think the alarmist warning is overblown because this is a trend that, while accelerating, still takes decades to play out. We're not in danger of having massive unemployment on account of technology in the next 10 or 20 years, though it certainly gets incrementally worse as time goes on.

People always underestimate the supply side of the equation:

1. Businesses use technology to replace workers because it reduces costs.
2. If costs decrease, eventually products become cheaper.
3. Consumers spend less money on these goods, often essentials and basic goods.
4. So they then spend that money on more and better goods and services/luxury goods and services.
5. Which creates jobs in those fields.

Also, the businesses have to hire experts to manage technology. Consider how many openings for engineers, IT personnel, developers, etc. were created by the advent of computers. Smartphones may have destroyed many jobs but how many people are employed developing applications, hardware and services? And how much time and money do we save by having them.

Finally, as essentials become cheaper, we don't NEED to work as much. Many people think that unions created the 40-hour workweek, but that's simply not true. Workweeks have declined because technology and higher living standards have resulted in a reduced need for work, and the workweek is still getting shorter, on average, to this day.

100+ years ago a middle wage earner might have had to work from dawn until dust just to earn enough to feed his family and put a roof over their heads, but today, we not only work less but also have more luxury goods even in the average American household.

Once again, this is because 1) we can afford more leisure time and 2) even after working less we still earn enough to have more. That's because of technology.

There might be a point at which technology does pose more of a threat to labor, but over the past few centuries, and likely for the next half century at least, it's been a very good thing for society and the Luddite Fallacy has been proven wrong again and again.

If you want to learn more about this kind of thing, this book is a great starting point. It's easy to read and probably makes a lot more sense than my rambling.

[ObscureBean]

Looks like the new world is ready break out of the cocoon, the most important element of the puzzle, AI, is still missing but we're making progress    Once we have AI, it'll be a whole different ball game. I find it fascinating how the human mind has nearly rendered the human body obsolete.

[n2004al]

Royal Bank of Scotland economists have urged investors to sell everything except high-quality bonds, warning of a “fairly cataclysmic year ahead.”

Writing in a client note dated Jan. 8, the bank’s European rates research team said that clients should be concentrating on return of capital, not return on capital, and that an ominous outlook to the world economy “all looks similar to 2008.”

The Key Points

• The note is particularly bearish on China and global commodities, and predicts that oil could fall as low as $16 a barrel.
• In a grim set of predictions, Andrew Roberts, head of European economics, rates & CEEMEA research said that the world has far too much debt to be able to grow well.
• He also warned that advances in technology and automation are set to wipe out up to half of all jobs in the developed world.
• The note says equities could fall 10% to 20%.
• It predicts the year will be spent focusing on how to exit positions that have benefited from long-running QE, including emerging markets, credit and equities.

Source: http://blogs.wsj.com/moneybeat/2016/01/12/rbs-warns-sell-everything/?mod=e2fbRBS

A 10 to 20% fall in equities certainly isn't a long shot. QE has produced a long run-up in stock prices, and on average, we see a market correction of 10% every two years and a 20% correction every five years. Still, the advice to "sell everything" seems a bit much.

For me is everything exaggerated. First I don't believe that in such few time can be something big like that what which is happen at 2008. To not forget that the crisis began at 2008, first, is the second biggest one after the crisis of the '30 and, second, is not you surpassed fully. So, all the world is working to eliminate all the consequences of this crisis and meanwhile are annalists which predict another one similar to that? First of all this mean that everyone has learned nothing from the previous one and I cannot believe that all the other people who worked in this direction are stupid and are not able to learn how to prevent the happening of the same or the similar thing and only the above annalists are good professional. Then (second) how is possible that only the above annalists are so able to understand so very well the overall world economic situation and the other similar of them not?

As for me they want fame.

[jaysabi]

Royal Bank of Scotland economists have urged investors to sell everything except high-quality bonds, warning of a “fairly cataclysmic year ahead.”

Writing in a client note dated Jan. 8, the bank’s European rates research team said that clients should be concentrating on return of capital, not return on capital, and that an ominous outlook to the world economy “all looks similar to 2008.”

The Key Points

• The note is particularly bearish on China and global commodities, and predicts that oil could fall as low as $16 a barrel.
• In a grim set of predictions, Andrew Roberts, head of European economics, rates & CEEMEA research said that the world has far too much debt to be able to grow well.
• He also warned that advances in technology and automation are set to wipe out up to half of all jobs in the developed world.
• The note says equities could fall 10% to 20%.
• It predicts the year will be spent focusing on how to exit positions that have benefited from long-running QE, including emerging markets, credit and equities.

Source: http://blogs.wsj.com/moneybeat/2016/01/12/rbs-warns-sell-everything/?mod=e2fbRBS

A 10 to 20% fall in equities certainly isn't a long shot. QE has produced a long run-up in stock prices, and on average, we see a market correction of 10% every two years and a 20% correction every five years. Still, the advice to "sell everything" seems a bit much.

For me is everything exaggerated. First I don't believe that in such few time can be something big like that what which is happen at 2008. To not forget that the crisis began at 2008, first, is the second biggest one after the crisis of the '30 and, second, is not you surpassed fully. So, all the world is working to eliminate all the consequences of this crisis and meanwhile are annalists which predict another one similar to that? First of all this mean that everyone has learned nothing from the previous one and I cannot believe that all the other people who worked in this direction are stupid and are not able to learn how to prevent the happening of the same or the similar thing and only the above annalists are good professional. Then (second) how is possible that only the above annalists are so able to understand so very well the overall world economic situation and the other similar of them not?

As for me they want fame.

Downturns in the market are common. RBS is not saying this year is going to be as bad as 2008 (they're not saying it's not either, that's your comparison), they're saying it's going to be a bad year and you should flee to safe assets to preserve capital. The market doesn't only go up or explode in crisis. The market has a down year on average for every two up years, and the 1920s was not the last time the market had a crisis. The market has had significant trouble of varying degrees in the early 2000s, the 1980s, and the 1940s. Downturns are common, and they are a normal and healthy part of the business cycle.

I don't agree or disagree with RBS's analysis that this will be a bad year, only the advice that the reasonable thing to do is sell everything in response.

[Moneyburner]

Urging everyone to sell everything is the type of thing that causes a huge market crash in the first place... 

[fuathan]

Urging everyone to sell everything is the type of thing that causes a huge market crash in the first place... 

You are absolutely right! Most of them just want to speculate the market that's all...

[The Sceptical Chymist]

Never listened to Royal Bank of Scotland before.  Won't start now.  Lol, did you have to search long and hard for a doom-and-gloom article like this?  Chances are there's always going to be someone around who's saying such things, like Kwukduck with bitcoins.  They could be right but I'm not worried.

[Daniel_Th]

I think this is highly unlikely and this is simply doom mongering and unnecessary.

There are always opportunities if you look in the right place and the world does have issues but we all need to invest well. Oil might go down more, but automation is still not that advanced to worry the developed world...... yet.

[jaysabi]

Never listened to Royal Bank of Scotland before.  Won't start now.  Lol, did you have to search long and hard for a doom-and-gloom article like this?  Chances are there's always going to be someone around who's saying such things, like Kwukduck with bitcoins.  They could be right but I'm not worried.

No, it was on the WSJ blog. When a major bank says something like this, it tends to grab headlines.

[smith coins]

Why everything, i don't think that someone needs to sell everything, this is going in extreme, what if bitcoins crashed what will you do?, sell a part 50% max of the total budget for anyone that planned to invest.