Coffee House

‘Sell everything’ – here’s the incendiary RBS warning on deflation, risk and the next crash

12 January 2016

4:27 PM

12 January 2016

4:27 PM

The advice of Andrew Roberts, head of European Economics at RBS, has today gone around the world: its time to sell, ahead of a stock market crash. The RBS European rates research team said that things all “looks similar to 2008.” It seems to cap a bearish round of forecasts: Standard & Poor’s, the credit ratings agency, has more companies on a negative outlook than at any time since the last crash. Are we due another one? The fill document of the RBS note is here (pdf). And the edited highlights below:-

I think my ‘severe downside for the world’ call is looking ok so far. The fact that we are going well is very dangerous for every investor in the world. Why? We posited a negative outcome in the Year Ahead, risks for which were very high, and massively underpriced, with consensus on its usual ‘goldilocks’’ platform. What we are now seeing is those risks now playing out. That is the problem. It is not lost on me when something goes from a forecast, to an actual outcome.

The downside is crystallising. Watch out.

Sell (mostly) everything.

Since we published this Year Ahead on 24 November 2015:

  • China stocks are down a healthy -10%, a good start to the year, more to come.
  • Brent is -$12, halfway to our $26 (then $16) target already.
  • Baltic Dry is -16%, copper -1.5%, coal -6.3%, soybeans +0.3%, wheat – 3.5%, corn -4.1%, also partly showing up what a super calm El Nino does to food prices, a much forgotten component of inflation indices. Stay limit short.
  • Emerging market I-share total return down another -13%. Do NOT try to catch this falling knife.Danger is lurking out there for every investor . . .

The world is in trouble. Our net rationale in six bullet points:

  1. The baton of growth pre credit crunch was in the western world, and passed to Asia post credit crunch.
  2. But this has been a debt fuelled build up.
  3. We have come to the end of the willingness to build up such debt, especially as demand factors start to act against this build-up (e.g. especially demographics).
  4. I showed in the Year Ahead two facts, either of which would lead a visitor from Mars to conclude, knowing nothing else, that we are in global recession: Negative world trade growth, or negative world credit growth
  1. This is a terrible cocktail. How consensus suggested a month ago that 2016 would be better than 2015 is a total mystery to me.
  2. And there is no-one left to take up the baton of growth.Hence the ex-Fed official Mr Richard Fisher’s pertinent comments this past week: “The Federal Reserve is a giant weapon that has no ammunition left.”Of course, he is not strictly correct because the Fed has limitless ammunition, it has just chosen to take its bullets home rather than deploy them. There is surely no coincidence that this ‘risk off’ bout has occurred within weeks of the Fed hike, I am firmly in the camp of those who thought ‘be careful what you wish for’, and was actually quite surprised at the calm way the hike was taken in the first week afterward.

    The key though, is the actual backdrop. What counts is that the world is slowing, trade is slowing, credit is slowing, we are in a currency war, global disinflation is turning to global deflation as China finally realises what it needs to do (devalue soon, and sharp) and the US then, against ALL THIS countervailing pressure, then stokes the fire by hiking rates.

    China trying to grab market share of (shrinking) world trade leaves every corporate facing tougher conditions, a cheapening competitor selling their wares at a lower prices. This is now starting to happen in sharp fashion. And the key for the rest of the world is simple – and always has been.

    Sell mostly everything

    Sell everything except high quality bonds.


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Show comments
  • Tuga

    These are probably the same idiots that said Oil was only going to go up and BRICs were the place to invest a couple of years ago…
    And been talking about house prices crash for 40 years when despite some blips and recession has always just went up, as offer didn’t keep up with demand, economics 101.
    Economic experts have as much clue about the future as fortune tellers..

  • Hugh Jeego

    How much should you trust someone who tells you that it’s in your best interests to sell everything now, when they’re in the market to buy it?

  • well_chuffed

    Being way past middle age I have heard more than a few predictions that house prices are going to collapse. Yes , some well overpriced houses have gone down in value on some of these occasions but in general , house prices rise – end of. There is such a shortage of housing in this country , the prices will not go down for a generation if not more. When the Blair administration decided to allow all and sundry into the country , they did not decide to build more houses and schools and so on. This has been compounded by the heir to Blair continuing in the same vein. The end result is a massive shortage of housing and since supply and demand rules the roost , we are not going to see prices drop anytime soon.

    • Makroon

      Yes, it’s called supply and demand – something far too complicated for the loud-mouthed prats over the pond to understand.

  • Sue Smith

    I’m listening to this at the moment. It’s ominous overtones (as it were) have got me worried!!

  • Baron

    So cash should be it, right? Cash in a bank with the phoney guarantee up to £75,000? Hmmm

    If we’re going to get hit by another serious meltdown, what should one rather hold, a stake in a tangible asset like a well managed, debt free company with a solid customer base (whatever the market value of its paper may be), or cash (in a bank) that can ‘disappear’ (as it did) if or when the bank is declared insolvent (à la Lehman Brothers).

    • LG

      The article stated high quality bonds. Did you read it?

      • Baron

        OK, LG, point taken, Baron missed it.

        Have a look at the gilt below. Is it a good one at the price, yield?

        • LG

          Why do you refer to yourself in the 3rd person? Are you special needs in some way?

          • CortexUK

            It’s an indicator of a narcissistic personality disorder.

            • Baron

              Well, who can tell, Cortex, but it always was Baron’s hope it irritates, displeases, even maddens the ()ankers who pollute the net without having anything constructive to add to the bank of human knowledge.

    • cmflynn

      Our bank, HSBC, quietly lowered the guarantee to £60,000 at the beginning of this year. Ominous?

      • Baron

        If the FSCS fund were to have not enough money (more than likely if the meltdown were severe engulfing every bank, financial institution) one would be happy to get just six quid, cmflynn.

        Bonds (gilts) don’t come under the same insurance scheme, but it would not be a problem for the Government to declare bonds as equivalent to cash, include them under the fake insurance, ‘confiscate’ them in a meltdown. It would not be that easy with company equity paper.

        Bonds of all kind are ‘near cash’, and cash it is those in governance would like us to hold because it makes the creeping introduction of the cashless society that much easier.

        • cmflynn

          You seem to know more than us. We are retired with no private pensions. What would you do if you were us? We’ve got a bit of cash. Around £60,000 each in hsbc, some shares, around £40,000 each, no bonds and a couple of houses, one in London. We thought we were safe. but now not so sure. Thank you so much for your advice. I know we are a bit dim financially.

          • Baron

            Never underrate yourself, cmflynn, never assume others know better, for as the Chinese proverb has it ‘a man can predict everything, but the future’.

            Your split feels about right, Baron’s similar except his other abode’s located offshore, he hails from that neck of woods. It’s unlikely all asset classes would get hit, you should be safe.

            Please, don’t take it as an nudge to do it, but you may like to watch the oil price, or rather the share prices of the oil majors that pump it up, they’re down massively, it will not last. Oil remains the key source of energy, before the price per barrel stops falling, the share prices will respond well in advance. This is just common sense, nothing brilliant about this reasoning.

            Here’s an example of Shell’s share price, around half of what it was in the Summer 2014. There’s a risk, but were Shell to go belly up, Britain would, too. The dividend yield’s good, dividend cover solid, having few shares cannot harm any portfolio. (But, again, if you were to consider to go ahead you should get better advice than Baron’s ranting about it. (Btw, he has taken a far riskier plunge with Gazprom).


            • cmflynn

              Thanks for the advice. We’ve had some Shell shares for years and got too fond of them. They were so steady and paid such a good divi. We should have sold them over a year ago when they first started to dip. Since then we’ve hung on thinking they must hit bottom soon. First rule of investing, don’t confuse your shares with your children! Here’s some tips you might like to look at by way of thanks: Fever Tree Drinks have gone up over 200% in the past year. They obviously can’t keep that up but the trend is still up, 6% this year already. There’ll come a time to jump off but not while they’re still going in the right direction. James Cropper is small compared to the giant of the sector Mondi so has room to grow and is growing steadily compared to its rival, up 52% last year. The demand for paper is growing all over the world but the number of trees is finite. Finsbury Food Group are up 100% last year in spite of austerity people still seem to want ‘convenience’ foods and will probably go on doing so in the near future. The trick, of course is to take your profit and sell as soon as your darling starts to droop. Advice we didn’t take ourselves with Shell.

      • Clive
  • RavenRandom

    So free advertising for a broker because he backs a big opinion. The market had been going down he forecasts the trend to continue. How right was he in 2008, how right were any of them. Shame on the Spectator for this free advertising.

  • CortexUK

    “Mark? It’s George. Fire up the printing presses, we need to protect house prices at all costs. At all costs. And while I’ve got you on the phone, make sure you don’t touch the Bank Rate for another year at least. I see that everyday things are still becoming cheaper – apart from housing, so far! – and we can’t be having any of that. Keep the rate on the floor until we get some good general price inflation back. I’ve helped you with that with the national living wage and the apprentice levy, but you have to keep sticking to your part of the deal. Right, got to go. See you.”

    • Mynydd

      George it’s Mark, your wish is my command, but please cover all bases and keep telling the general public how independent I am, just like you do about the OBR.

      • Clive

        So you are asserting that the BoE and the OBR are not independent

        On what evidence ?

  • iMutti

    The oil multis face a $5 trillion futures refinancing shortfall.
    Expect Dhahran to beg for your investment.

  • Roger

    Where is that next big bubble to chase until it bursts?

  • Lady Magdalene

    This would be the RBS that failed to spot the crash of 2007 coming, would it?

    • CortexUK

      Completely different leadership.

      • Makroon

        But just another nit-wit with a Wall Street complex – “I was the only one to spot the crisis !!”
        Roberts should just bore off, and those who follow his advice (or that of the increasingly ridiculous Warner), should really not be allowed out alone.

  • Ron Todd

    I trust economic forecasts as much as I trust long term weather forecasts.

    • Ken

      I don’t even trust short-term weather forecasts!

  • English Fuhrer

    This country needs the old mob back at Top Gear.

    • Leon Wolfeson

      Yea. why, if he’d been in the Bullingdon club…

  • Polly Radical

    RBS – those widely-respected experts!

  • English Fuhrer

    Deflationary death spiral overload syndrome.

  • rhodaklapp8

    If RBS can see it coming, it probably isn’t.

  • Augustus

    The most likely source of volatility in 2016 is politics.

    • Dominic Stockford

      A change of mayor to one from a party that is pretty anti-business and anti-banking will probably trigger some pretty terrible times ahead.

  • Observer1951

    Hold cash and buy near the bottom, if you can call it. RBS has a shocking record but I reckon a big correction (25%) is due in the next 18 months.

    • Roger

      Correction OK, but how did you compute 25%?

  • Zalacain

    I have no idea what is going to happen over the next year, but I do think that low oil and commodity prices are good for European economies.

    • Leon Wolfeson

      To a degree. Unfortunately, the UK has government policy restricting demand, and our inflation remains dangerously low (and remains there – it’s clearly not rising despite those who wish it would, loudly, in “forecasts”).

      • CortexUK

        Inflation has been built in to the economy with the insane national living wage and additional costs on business through things like the apprenticeship levy. A very high number of employers have warned that they will raise prices in 2016 to pay for these things. And once oil stops falling back to trend, the inflation rate won’t look so rosy anyway. Strip out oil and inflation is over 1%. No, not high, but not deflation/negative inflation either.

        • Leon Wolfeson

          Ah, insane to slightly lower state funding of big companies. Insane to train workers, etc.
          Never mind what happens in other, more successful, economies like Germany and the Nordics.

          You’re saying all the same things, too, that were said this year, that it’d rise blah blah.
          It’s not. Over a year without it going over 0.1%.

          The fact it’s there *despite* those housing costs etc. is a very, very clear warning sign. But yet the government are determined, as you are, to keep demand low.

    • Sue Smith

      You’re probably right. Lower oil prices are very good for developed economies. One would like to think something positive would come out of all this. But Europe is on the skids – I don’t think there’s anything to be done about its self-inflicted miseries.

    • CortexUK

      Oil isn’t low until it falls below $15. The bubble is bursting – but it’s still more expensive today than on any day in about 135 of the last 150 years. And yes, that’s in 2015 dollars.

      But yes, of course, cheaper oil is great.

  • UnionPacificRX

    -China’s exports are hammered due to the consuming economies of the US, EU and the Middle East who cannot absorb her exports. that has help slow China’s growth.

    -Because of that China does not need commodities as much. the commodities market is hammered. India did not export iron or during November and December. Instead India is importing high grade iron ore from Brazil and Australia. Both of whom are engaged in a “metals export war” and Brazil’s economy has shrunk by 4%

    -New York Stock market lost 2 trillion dollars. that is equal to the GDP of India.
    Saudi Arabia, Iraq and Libya are pumping oil to keep the US shale & deep sea Oil industry out of commission. That is hurting Venezuela, who has the world’s largest reserves of conventional oil and who is servicing a 60 billion dollar debt from China using oil. Now she has to send more oil due to the crash in prices.

    -Russia is engaged in an “oil War” with Saudi Arabia since her exports have been hit and also engaged in keeping the US shale and oil industry out of commission
    Saudi Arabia cannot raise the price of oil since that would allow the US shale industry to come back and does not take into issue that Russia will continue to pump oil to cripple the US. Venezuela will also increase production to avoid a complete collaps

    • Sue Smith

      The one good thing in all this is that those bandits in Saudi Arabia are going to get what’s coming to them – finally!!!!

      When I think; in the 1970s the world was screaming “we’re going to run out of oil”. It was hysteria on steroids, much like the climate catastrophists now!!! So, excuse me if I don’t seem convinced about the apocalyptic climate forecasts – I’ve seen this kind of thing all before.

      First, the Cold War and nuclear annihilation;
      Secondly, the Oil Crisis
      Thirdly, climate catastrophe
      Now, sharemarket crash/Depression

      • King Kibbutz

        I never did take the kids to see the butter mountain.

        • Sue Smith

          Perhaps you can drum up another catastrophe for us to worry about? “We need the eggs” as Woody Allen would say.

      • Dominic Stockford

        They have sovereign wealth – we don’t. They won’t crash.

        • CortexUK

          Their reserves are plummeting. They’ll need to start a flash sale of foreign assets in a couple of years if the oil bubble isn’t reinflated. I’m sure they could ask Goldman Sachs to help them out.

        • Sue Smith

          But they’ll feel the SQUEEEEZE bit time. And their bullying won’t stand.

      • LG

        You’re forgetting Y2K

        • Sue Smith

          And so I have!! Thank you for reminding me!!!!

          • LG

            But if you think climate change isn’t happening then you’re sadly deluded.

            • Sue Smith

              Yes, the climate is changing. Now, as to whether it’s man made…!!

              I don’t select my catastrophes to believe in; I merely point out how many of them we have faced in the last 50 years, which creates a credibility problem. Ever heard of the boy who cried “Wolf”!?

              This is not an attack on you, personally. I point out what history has shown. In any case, I’ll be dead and buried before there’s a climate meltdown.

        • Robin_Guenier

          Except that Y2K was a real problem – fortunately (largely) resolved:

      • UnionPacificRX

        Yes I agree. there is a sense of satisfaction to see them go, or at least cut down to size, but I want the west to be far away from the fall out. it is going to be messy and I do not want European or US leaders taking it upon themselves that this is now our problem. I have had enough of that. Yes I remember the 70’s oil panic and the TV program “All in the Family” where his daughter and son in law give him a hard time about it.
        Been watching some great movies about World war 2 in :Europe and every now and then I feel shades of that is taking place in the Middle East. The implosion of that region must not be the problem of the West
        I believe that is why Merckel is losing so much popularity. She is selling Germany to the problems of that region.

        • Sue Smith

          To be honest, I’ve been thinking all this has the makings of another world war – especially Russian involvement in Syria and the downing of the Malaysian Airlines 777 in Ukraine.

          I’m reading the biography of Sergei Prokofiev at the moment and am surprised to learn he was Ukrainian and born deep in the Ukraine. Of course, the USSR swallowed it up after 1917. And what is really astonishing to me is learning about what a wonderful, sophisticated city of culture and affluence was the city of St. Petersburg before those barbarians took control. One learns so much about the zeitgeist when reading biography, especially about somebody like Prokofiev who had one foot in the progressive west and another in repressive Russia.

          Europe today?

          • UnionPacificRX

            Yes St, Petersburg is beautiful. Isn’t the Hermitage in that city”? exactly where was the “amber room”? in Moscow or St. Petersburg?
            With 7 billion if we have a world wide economic meltdown we may see ,many Wheimar Republics as hunger and pestilence stalks the earth. That could be much worse in many ways. What is worse than that world war is a protracted period of intense suffering.

            • Sue Smith

              Yes, St. Petersburg is home to the Hermitage. I don’t share your apocalyptic vision etched in hyperbole either!!

              I’m listening, as I write this, to Obama’s “last” State of the Union. By God, that man loves the sound of his own voice. America has had 6 years of solid preaching from this dreary windbag and no material improvement in its economic conditions!!

              • UnionPacificRX

                President Obama is the worst President the US has ever had
                -under him US debt increased more than all the 43 Presidents before him. At 19 trillion dollars in debt, the US is the nation with the world’s largest debt. World debt stands at 57 trillion dollars. When we hit 24 trillion dollars in debt we will not be able to pay the interest on the interest on that debt. Unfunded Liability debt (Social Security, Medicare etc) is at a whopping 220 Trillion dollars.

                -95 million are out of work, 50 million are under poverty, Home ownership is at at all time low of 63% which is equal to 1967 but with a population of 330 million.

                -Obama’s “Obama care” is a sham. It is 2 thousand pages of regulations and taxes. No Congressperson could have read it in order to understand it and then approve it and yet it was approved. .The supreme court upheld it due to it being a ‘tax”. Obama care has driven businesses into bankruptcy.

                -Obama’s “Open Border” policy has let in millions of illegal refugees, most of them then end up on the government dole. In 2011 it cost California 30 billion dollars just to subsidize these illegal refugees, who refuse the learn :English, do not have any skills, and many have criminal backgrounds. they are one of the biggest problems in low income jobs which the black community depends.

                -Obama’s unconstitutional approach against the private ownership of guns is a sham. He dictates that to the rest of us while he and the politicians are well guarded with security who have the right to guns. We do not have that luxury.

                -The US now has one the world’s highest corporate taxes. It has effectively driven “Corporate America” out of the US. We even have to buy “insurance’ on our cell phones. Something people never did when we had land lines.

                -Obama has effectively used the EPA to shut down the Coal industry while promoting electric cars. We are still driven by a coal based economy. That means more electric cars more coal is burned. Now we are exporting coal to nations who do not have the technology for clean burning coal or liquefied coal. All in the name of Global warming. Irony is that Obama and his family are driven in a 45 limousine escort that does not spare burning Gasoline.

                -Obama and his family have spent over 70 million dollars on vacations alone and they do not include his golf games.

                -Under Obama race relations are at its worst. The term “racist” is liberally used when he is confronted with questions he does not like to answer.

                -Obama Trade” weighs 100 pounds and no one can possibly read or understand the implications of such a massive bill. Yet the Congress are supposed to approve it. why not simply give a blank piece of paper to sign instead?

                -Under Obama the NSA, Homeland Security and other intelligence organizations have become so intrusive that Germany changed how she does her office work to that of files and typewriters just to avoid the long reach of the NSA.

                -Obama has increased the size of the government so much and appointed “Tsars” to run these Bureaucracies. It is one of the largest government expansions and goes against the 10th amendment. The IRS is now a behemoth. Obama is doing this while cutting the military both in size and funds.

                -Obama’s “Fickle Fanny” foreign policy has created more enemies than friends. he claims the death of Osama bin Laden but not the rise of Al-Qaeda and her new child IS. Relations with Russia and China in Obama’s “containment policy” is a disaster.

                The list is very long, but the American people are sick and tired of this socialist liberal double game of the Obama’s administration. One thing about Socialists is that they always live like Capitalists, while preaching to others to live like Socialists.

                Obama is so bad that history will define the US before, during and after President Obama leaves office.

          • Kasperlos

            Most depressing is that the great composers, artists during the Communist era were not fully able to express themselves as they would want to. Consider that the Soviets reviewed and edited compositions. How utterly sad for the artists. What a wicked world. We’ll never know what their original music sounded like.

            • Sue Smith

              Those brutes were not in a position to know anything about serious music, let alone edit it. What kind of pact would these ‘editors’ have struck with the devil to earn them the right to edit the music of Prokofiev or Shostakovich?? We’ll never know.

              From what I’ve learned in this biography, “the authorities” considered Prokofiev’s music too elite – too removed from the workers and a kind of pejorative challenge to their collective intelligence. Too right!!!!!

              • Makroon

                Strife is good for artists. Consider what happened to promising young Stravinsky when he made his “dash for freedom”. I hope you enjoy listening to Britten and Bernstein, I think I’ll stick to Shostakovich

                • Sue Smith

                  “Strife”? Threatening behaviour towards yourself and your loved ones? Removal to the gulags for years (which happened to Prokofiev’s first wife).

                  Thanks, but no thanks.

          • zappata

            Ukraine was only nominally independent for a couple of years between the Treaty of Brest-Litovsk and the Bolshevik victory in the Russian Civil War.Even then,It was effectively German controlled and occupied for part of that time and a savage battleground between the Reds,the Whites,the Blacks(anarchists),cossack revivalists and assorted Nationalists for the rest.It never really left Mother Russia until the USSR was dissolved.

        • Makroon

          Fat hope.
          The US neo-Cons have bet the farm on Saudi (and worse, their particularly primitive version of Islam).
          It is already too late to bail.

          • UnionPacificRX

            It is reason and not hope. If Saudi Arabia is to implode we have to do what it takes that the fallout is minimized. They are not that powerful to the world.

        • mohdanga

          Saudi, Iran, Iraq, and the rest of the Middle East have been riding the oil gravy train for 50 years and what have they done with it?? Without Western technologies and expats running the place they would collapse. But dummies like Merkel think that this is the West’s fault!

          • UnionPacificRX

            It is dangerous bringing these refugees for the bring with them the problems of the Middle East and Africa into Europe.
            Just read that Denmark is going to charge rich refugees of their gold etc if they have over 1500 Kroner. that is not good. for then they “buy” themselves into Europe and have a “moral” reason to change Europe. They should not be allowed
            We should demand that Muslim and African nations do this job. they are not. In that sense Merkel is setting in motion a civil unrest in Germany, which then spreads across Europe.
            Always keep this in mind. If the case was reversed no Muslim nation would throw open their borders to European Christians and Jews and the UN will be fine about it.

    • King Kibbutz

      Wouldn’t you think they could all just, sort of, take turns?

      • UnionPacificRX

        What I am seeing now has been the result of many years It is a confluence of conflicting forces that is hard to stop. some are the result of others as in the export crisis. the deliberate oil war that OPEC or Saudi started was short sighted and now it is catapulting out of hand. The commodities market is linked to exports
        One of the many reasons the US is doing badly is due to deliberate policies that should not have existed. Under President Reagan and with a Democratic Congress we had 7% growth. Now we have some of the world’s highest corporate taxes.
        There are problems around the world that are self made. they are yet to play out.

        • mohdanga

          And the US can’t cut taxes because of its huge debt…..but yet people call for more gov’t spending!!

          • UnionPacificRX

            There are 95 million people out of the workforce
            50 million who are under the poverty line
            Millions of refugees and most importantly, Illegal Immigrants who are on the government dole (2011 in California it cost her 30 billion just for services to them)
            US regulations have driven Corporate America out, increased penalties fees, and taxes while increasing the size of the government. do you know now we have to pay insurance on our cell phones? Insurance for a telephone makes as much sense as a flying hog.
            The debt is out of control. at 19 trillion we are the largest in the world where world debt is 57 trillion. Most of that goes to pay Social Security Medicare. and a litany of other issus
            we stopped being a consumer producing nation and now are just a consumer consuming nation. that is the major economic problem.


    The bears at RBS are so hungry… they are literally starving. Now they want you to sell everything so they can eat.

    Remember the sign:
    Don’t feed the Bears.

    • Cim Thayne

      They’re so affected by the ABN Amro incident that they think being unrelentingly, absolutely, ridiculously bearish makes them seem tough and ‘realist’.

      • Sue Smith

        I certainly hope you’re right. Meanwhile, I’m BUYING at the moment. I’ve made some disastrous decisions, sure, but overall I was right to buy during the GFC.

        • Roger

          I asked my Broker to take another look into reducing risks, but for a long while now have moved away from equities to more solid Bonds. He thinks we are OK and that RBS are over egging. I am an OAP and need monthly cash.

          • Dominic Stockford

            Moving into bonds is exactly what RBS are saying we should be doing.

            • Harold

              They might be but do not take the risk, FTSE will be below 5,000 next Christmas, interest rates will start to climb inflation will edge up, spending will drop off. Once interest rates go up bonds will start to fall.

              • Dominic Stockford

                Get Bonds which have a set income – until interest rates rise higher than that set income they remain better than anything else. Simples. And, given the 4-5% you can get on them, pretty medium term as an investment.

          • Sue Smith

            I’ve never understood anything about bonds. Where do you get these, and what is the way of determining the return? It’s pretty low isn’t it?

            But, I cannot sell my shares and cop such a loss at the moment. I’m down nearly 6 figures!!

            • Roger

              I am fortunate in that my Broker is in a large organisation that has a unit specialising in private sector bonds. Not without risk, but most are blue chip and recently with coupons in the range 4% to 6%. They tend to buy a large portion or the whole block and then divide it out to subscribers. In this way I have moved from 70% equities to under 30% now and portfolio has produced around 4 and a bit on average. As I said I need monthly cash, with low to medium risk, but have moved lower.
              Might be wise to move to cash and wait for some pickings.

              • Sue Smith

                Thanks!! I manage our own super fund and it is presently tax fee (though pressure is being applied from the Left to re-introduce tax -during this time of torturous concerns and shocking returns).

                So, I’m not in a “fund” per se. I did look at all that in 2007 when I set our fund up, but haven’t since. So, I don’t buy bonds. If I went into a fund like yours I’d pay THEIR charges PLUS my own auditing costs for our fund ($4.000pa). And I have half my fund in cash, which is a waste of time. So, am buying more equities as the market collapses! But in little licks this time.

                I think we’ll buy a house with our fund this year and get out of cash. But I don’t have returns like yours at the moment, except in shares – which is about 4% (but maybe less if market continues to crash).

                Do you get a capital return as well as interest on those bonds?