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Coffee House

The author of the RBS ‘sell everything’ note has been predicting disaster for the last five years

13 January 2016

5:52 PM

13 January 2016

5:52 PM

Should we sell everything because Andrew Roberts (not the historian but an analyst at RBS) tells us to in the expectation of crash? Before you press the ‘sell’ button, it might just be worth reflecting on the fact that there has always been a time when some analyst somewhere has been handing out the same advice.

Quite often that somebody has been Andrew Roberts himself. In June 2010, for example, he said: ‘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. Think the unthinkable,’ he said. The unthinkable in that case turned out to be that, contrary to the Cassandras’ warning of a double dip recession, it didn’t happen. The global banking system survived and stock markets grew strongly.

Mr Roberts was at it again in July 2012 when he said: ‘People talk about recovery, but to me we are in a much worse shape than the Great Depression… Even the Congressional Budget Office, probably the most bullish forecaster in the world, is forecasting a US recession in the first half of next year. It’s amazing stuff.’ As we now know, there was no US recession in 2013. Instead, the US economy grew by 3.2 per cent and the stock market grew strongly.

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Like the proverbial stopped clock which is right twice a day, if you are constantly predicting a stock market crash you will eventually be right, but it doesn’t make your advice very useful. When you are eventually right, you may go around saying ‘I told you so’, yet in the meantime great fortunes will have been made by people who ignored your advice and piled in and joined the boom.

What makes me sceptical of the suggestion that we are on the cusp of a bust is that we haven’t really had a boom. True, some indices have trebled in seven years, but only from a deep, deep trough following the 2008/09 banking crisis. Bull markets never last more much more than five years, it is often argued. But are we really in a bull market? Markets have been sliding for nine months. The correction in the FTSE 100, for example, is very close to the 20 per cent which would mark an official bear market.

So maybe we are at the bottom of a dip and it is upwards from here. I don’t know, and nor does anyone else. It is all very well trying to analyse economic fundamentals, but markets are so unpredictable because they are the mercy of investors’ emotions.

If everyone followed Andrew Roberts’ advice a stock market crash would become a self-fulfilling prophecy. But there is little sign of it so far – markets are up strongly this morning across the world. The value that investors put on Mr Roberts’ advice is evidently not that great.   Maybe they remember that his bank not only failed to foresee the last crisis but bought ABM Amro just as doom descended, forcing the government into a bailout. That is one investment I wish that I, and all other taxpayers, had not been forced to make.

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