BMO Has A Simple Message To Its Clients: Go To Cash Now

Tyler Durden's picture

In a surprising development, the most bearish, and easily most comprehensive, report that we have read in a long time on the broader markets, comes from Canada of all places, via BMO's Quant/Tech desk. The report's title is simple enough: Go To Cash - In Plain English. Not much clarification needed. Here is the gist: "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."

Full report below, and here is a link to the original report with far more technical data.


Go To Cash

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Noah Vail's picture

Yeow! Zero equity weight. Where's the sugar?

SteveNYC's picture

"Mark it ZERO"....equity weight, that is.

MrTrader's picture

Ha, ha ha. That's a quant desk ? OMFG, the most stupid, degrading recommendation I ever read. At least, if they would recommend buying gold or land, I would say there is an "alternative" to zero equity. Cash in a ZIR environment and supposedly high risk world is as stupid as saying throw it of the window.

Mr. Anonymous's picture

Really?  In a deflationary environment, too?  I would think protecting capital is more important than increasing profits. i.e., anybody pulling their money out in December 2007 and sitting on it for 2+ years.  

PD Quig's picture

I did just that in our retirement accounts (well, on Jan 4, 2008) and was laughed at in these pages by much smarter people who insisted that I should have bought the rally--phony or not. Of course I wish I had in retrospect, but there are many more who wish their accounts were still at their Jan 2008 values, too.

Now that my old 401k is a new IRA (I left my previous job), I intend to use futures to play the downside. Not an all in bet, but enough to be meaningful.

jbc77's picture

For the standard IRA or 401K if you rode it down and then back up again there is nothing wrong with hiding out in a fixed sub account at this juncture in time. If your observant of whats transipring in Europe you have to try to preserve and protect your asset, especially now. We have confirmation on whats going to go down.

Cognitive Dissonance's picture

There isn't a "fixed sub-account" for an IRA unless the IRA is invested in a variable annuity that offers one as part of the overall mix of sub-accounts. Or if it's invested in a fixed annuity, which is essentially all fixed account. An IRA doesn't quite have the same packaged asset mixes available as do larger 401(k)s.

On the other hand, IRAs can be placed in a wide variety of vehicles, from brokerage account to CD's in banks. Including Gold, though I would be very careful who, what, where and how.

milbank's picture

I agree.  I moved a massive amount of equity oriented money, i.e., sold equities, out of the market in July 2007 near what became the top in October.  Bought bonds of various lengths and money markets.  I'm very happy.  Sure, in retrospect, I'd loved to have caught the runup from March 2009 but, this money is not for speculating.  I want back in, not after the first massive drop but, after the second, which is yet to come and will come.

It's the second mouse that gets the cheese.

Don Gorgon's picture

You've just highlighted the inherent problem with quant analysis in a market playing liquidity musical chairs. 

Alexandre Stavisky's picture

I see another inherent problem.  Its predictive power and forecasting ability makes it a sure thing.  Herein lies our future.

Whenever a "cultured" four-lettered scion of the old-world power and money pyramid ascends near unto the pinnacle--the pyramid inverts becomes more a funnel to again loot the base, precipitating all to the capstone. BLUM or RAHM. All high are brought low, the common ashlars making up the bulk of the structure are tumbled, and a new cycle begins...usually in great turmoil.   Build the pyramid up, assume the pinnacle, invert and tumble.  Transposed those images could make a fine banner, and an emblem an ambitious mercenary tribe can get behind.

France in 1936...and what happened to them (the largest land army in the world at the time) in 1940?,9171,848594-1,00.html

USA in 2008, and what of its fate in 2012?

Curiouser, and curiouser.

Incidentally another powerful flag, one that rose up and devoured the infected Fleur-de-Lys was symbolic of what?

As I recall Nurnberg was a hub to all the European and far east overland trade routes used since Rome, the center to a multitude of spokes.  What was its significance to a maniacal, poorly mustachioed Hun corporal and his Flying Circus Richthofen cohort accomplice?  A cupped whirling mill centered there, reaching out to collect, harvest, and grind to pieces what commodity?

Were the colours, black, white, crimson chosen because of historical association with the state? or in mockery of this? Negredo, Albedo, Rubedo.

War upon the pyramid builders and malchemists, just to substitute another despotic hierarchy.,9171,932213-1,00.html

Ascend or descend the pyramid, grapple for the baton of dominion, play the cycles of man.

The faces and names and means of intrigue change.  The tyranny of such serpents, not so much.



Woosirsir's picture

very good history and reference!

AnAnonymous's picture

Yep, France relied on gold as a way to retain value during the Great Depression. Did not serve them well. It served no countries in the little  based on gold association the French put up.

Every country involved was to have issues with modernizing their armies whereas countries with fiat currency would do much better.

i.knoknot's picture

wasn't it France that called in their gold for $$ in 1969/70 that led to Nixon essentially defaulting and ending the U$ gold standard?

interesting... all...

Oh regional Indian's picture

Thank you for the thought provoking prose and links.

Very nice. Great perspective.

mephisto's picture

Degrading to who?

The analysts? I dont care.

Not degrading to the clients for sure.

GS is short Gold's picture

it's your constitutional right to load up on equities champ.

BlackBeard's picture

Wow.  That took some balls.  Expect somebody on that desk to be promoted or fired within the next year or so.

johngaltfla's picture

Agreed. But if we drop another 30-40% they look so brilliant Cramer might even hug their nuts live on his show.

IQ 145's picture

 Yeah boy; that sucked all the air out of the room. No more of that silly optimism.

Kataphraktos's picture


Cognitive Dissonance's picture

Is it me or are a large number of people/groups getting extremely worried? I'm seeing this not only on ZH but every where else, thou not as intense as on ZH. Unlike early 2008, when everything was still "OK" even as the market drifted down into the Sept/Oct crash, many people don't like what they're seeing.


schoolsout's picture

Shrimp come fresh from the motherfakkin' sea?

Cognitive Dissonance's picture


No, they come from Piggly Wiggly. Right there on the front page of their web site. :>)

schoolsout's picture

Where are you from?  You gotta be from around here if you know about the Pig!



edit....Nevermind...I never knew the Pig was in ~17 states.  I really thought it was an SC/Southeast thing

Cognitive Dissonance's picture

You may remember the other day when I mentioned my mother calling your area God's country. Her brother, my uncle, lives "in country" as he likes to say and when I was much younger, my mother would take the kids down to SC for a few weeks during summer school vacation.

Even after I left home, I would still occasionally visit the area with my family and/or my mother. Now that mom is in her 80's, I have the honer to take her down there twice a year to visit her brother, who is still going strong at 88.

I've always been impressed with the local people, who despite my clear Yankee accent, have always treated me with open arms and lots of smiles.

schoolsout's picture

Well, if you get down this way again, look me up (not sure how you would) and we will go wet a line and have a beer....or three.

Mikebrah's picture

SC is awesome.  Planning a trip to Charleston this summer.

schoolsout's picture

I'll be slightly north of Chas.

Hope you have a good time!

hognutz's picture

Man, I am from Georgetown!   Small world huh?

Postal's picture

Agreed. I sense the same. I think in 2008 we still had hope and optimism. Since then, TARP has worked so well and full employment has returned... [/sarcasm]

As I posted on another thread, I'm more worried now than I was in 2008--and I was unemployed back then.

Steaming_Wookie_Doo's picture

Agreed. We were willing to give Hopey McChange the benfit of the doubt. But he's turned out to be an innefectual exec, a liar, and keeping all of the same crap as W (i.e. Gitmo, war on 'terror', etc).

As for the markets and general sentiment, even the thickest Joe Public knows we can't have a jobless recovery. That kind of recovery is only for the bankster class. Speaking of which, that whole TARP thang, $24.7 trillion total obligations--that's enough to have paid off every mortgage, credit card and student loan in the US. You don't even need those pesky CDS's at that point (unless that's been your intention to crash everything).

At this point we stare straight into the face of of what we've been trying to avoid: the fact that the level of debt was untenable, and has been made more so by further QE. I think they will try another round of QE, and it too will fail and we inflate. Then come the distractions of war. The war on terror thingy isn't scaring the populace like it used to, so we may get something a little more 'engaging' to get everyone's mind off the wholesale looting of the country. Then, as wars are untenable and expensive, the existing framework collapses and we end up with a new system. Of course we could go straight to step 3 and mock up a new system, but the lunkheads in charge are too thick to just walk away while they've got what they've got.

WaterWings's picture

Hopey McChange is prepared for starvation in massive portions of the United States, a la Stalin.

Strange crop damage? Gulf oil? Anything in common?

Imagine NO townhall meetings with constituents this summer:

DaveyJones's picture

I used to have hope and optimism

but that was just an economic aneurysm

I need more asshats's picture

If so many cash positions are maintained volume will be non-existent. A slight breeze will be able to move the market in a predictable agreed upon direction. S&P's -->2000 by Dec. Go momo's.

Cognitive Dissonance's picture

Or down.

Thou I agree that will few playing, the momo HFT can "own" the market and dictate direction. Maybe we're both correct. Down, then a pump up after QE 2.0

Jeff Lebowski's picture

Or down. +1

If a stiff breeze can move the market, what can baby boomers, which comprise 26.1% of the population (78 million), do as they move their 401k into guaranteed funds?

Our thoughts and actions are not always the same.  Many boomers got caught in equities in 2008/2009 trying to expedite their retirement, and remained fully invested during the rally attempting to make back lost time.  What to do now, is the question I've no doubt many are asking... 

That's just my two cents...


superman07's picture

wonder when the next 401k to annuity talk will begin again?

I cant see the government actually letting the people get thier money out to do what they wish.

IQ 145's picture

  Cheese ! Gromit, Cheese !  I love that animation.

chumbawamba's picture

Dow 17 (Denninger will still be invested, waiting for the comeback).

I am Chumbawamba.

Mako's picture

There won't be an exchange when this one is done to trade on.

I tried to tell that guy years ago how it was going to go, he called me tinfoil.  Hahahah, yet here we are. 

chumbawamba's picture

Karl will setup shop on Wall Street with a plank lain across some bricks in front of the smoldering debris that used to be the stock exchange to keep trading going.

He will not be proven wrong.

I am Chumbawamba.

Mako's picture

I am really starting to like you.

Some names for the exchange.

"Tinfoil Stock Exchange" 

"Call Your Congressman Stock Exchange"

"Implosion Stock Exchange"

"Short Below Zero Stock Exchange"

"Closed For Lunch Stock Exchange"

"Brick and Plywood Stock Exchange"

"Quit the BS Stock Exchange"

sondog's picture

Folks, stop the looting!

akak's picture

"Black Letter of the Law Stock Exchange"

" 'No, Really, the Dollar is Going to Go UP!' Stock Exchange"

"You Can't Eat Gold Stock Exchange"