Wednesday, June 9, 2010

BMO: Go To Cash... Now!

How bad is the evolving debt crisis in Europe?

Well... Bank of Montreal has some simple investment advice for it's clients.

Get out of equities and go to cash!

Ummm... can't get much more straightforward than that.

In fact that's the title of the report from BMO's Quant/Tech desk.

From the Report:

"We advocate switching out of equity positions and going to cash. The European sovereign debt crisis appears to be nowhere near over. The global credit environment is worsening. Cost of capital is going up and availability is going down. There are large gaps between where the credit market prices risk and where the equity market is priced. Equity is lagging the deterioration in credit conditions. Moves in currency, equity and commodity markets are mirroring the moves in the credit market. Global growth, in a credit-constrained environment, will slow. Profits will be squeezed by the higher cost of capital... We advocate a zero weight toward equity, and that investors convert their equity positions to cash."

The global credit environment is worsening and the cost of credit is going up. That's been my message for months now and we welcome BMO to the doomsayer bandwagon.

And when it starts to go up, it's going to go waaaay up.

It's not rocket science folks. That's why a major real estate purchaase you plan to hold, purchased over the last three years, has been the absolute worst move of your financial life.

For those who so desire, the BMO report is below.

Go To Cash



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1 comment:

  1. I got out a month ago. I've telling people to get out and to read your blog. Instead I'm ignored and I have a new nickname, Mr Doom.
    Great work as always Whisperer!