Stephen King, global economist at the investment banking division of HSBC, is clearly a man with a strong spine.

Yesterday his department issued a glossy publication entitled Bubble Trouble: the US Bubble and how it will Burst. Over 52-pages, Mr King explains what a "bubble" is, how to spot one and he also takes a stab at forecasting what will happen when the current American bubble is pricked.

These are not easy words for an economist working for a big, highly respected integrated investment bank. He is not part of a little independent think tank, trying to drum up publicity for the sake of it.

As far as Mr King and, indeed, the market as a whole is concerned, Bubble Trouble is a document which effectively says to HSBC's corporate clients: "Hold on, the US market is going to crash and maybe you should not attempt that juicy fee-rich transaction". As far as HSBC's institutional clients are concerned, Mr King is simply telling them to stop buying stock. They can keep their commissions.

He says "Bubble Trouble" is not the "definitive bank-wide HSBC view." But it is the research department's view - and it is a refreshing read in a market where most market bears tend to keep their mouths shut for fear of looking stupid when prices fail to crash. (Too many strategists at the big investment houses have called the "top" on too many occasions over the past two years or so as the great bull market has roared onwards.)

Still, HSBC's clients get to know why bubbles matter (significant resource misallocation), how to time the burst (educated guessing, it seems) and whether the world will survive (life will be tougher than in the aftermath of Japan's burst bubble a decade ago and we risk a "deeper and longer lasting global recession.").

That said, Mr King's thesis is pretty simple. He and his team have trawled through economic history, studying past bubbles to come up with a set of "bubble indicators".

The HSBC bubbles checklist identifies 12 symptoms, ranging from "above trend growth" to "current account deterioration" and "falling private sector savings."

Lo and behold, America now scores 12 out of 12, with indicators suggesting "that the US productivity miracle of recent years has now given way to a financial market boom."

"Good news on growth in the short term is likely to be replaced by declining asset prices by the end of this year, and possibly, a recession by 2001," Mr King writes. The ongoing hi-tech revolution might be very exciting, but it is also reminiscent of the production and communication break throughs of the 1920s, "genuine improvements in productivity which, nevertheless, gave way to excessive equity valuations".

Strong growth in the US accompanied by an absence of inflation is classic bubble stuff, "seducing investors into believing in permanent new paradigms - beliefs which normally end in tears.

"The US bubble is likely to burst through a combination of rising interest rates and a falling dollar. We see both coming through in the second half of this year, suggesting a significant risk of a sharp and sustained fall in asset prices towards the end of the year and in the first half of 2000," Mr King says.

"This combination is likely to deliver a slowdown in growth through 2000 and raises the risk of outright recession in 2001. The rest of the world will not be immune. Falling US equity prices and a weaker dollar will create problems for both Japan and Euroland, increasing the dangers of outright global recession."

All eyes will be on Alan Greenspan next week as the open market committee meets. Investors should clearly check to see whether the federal reserve chairman is carrying a pin.