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Investors should be preparing for a financial “cliff-edge” as the Eurozone and the US prepare for “monster” money printing exercises, according to RBS. In a note to investors last week, RBS head of European rates strategy Andrew Roberts tells investors to move to government bonds and gold in preparation for a second global dip.
He says: “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.” Roberts says another banking collapse in Europe coupled with deflation in the US will lead to “dramatic turn downs in valuations”. He says: “This may finally destroy the world’s worst cult: the cult of the equity, which has no basis in fact, or history, but yet seems universally accepted. This all sounds somewhat doomsdayish, so we should update how the real economy/banking is panning out for us.
It is saying: the end-game approaches.” Roberts also warns that the US Federal Reserve may be considering a “monster” quantitative easing programme in an attempt to keep bond yields at around 2 per cent. He says: “We have been wrong before, but we think the risks associated with us being wrong are low but the risks associated with us being right are more than 10 per cent returns in 10-year US government bonds at the same time that equities/commodities will collapse far beyond what even some equity bears anticipate.”