Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 20 November 2014 at 14:00 GMT

Outrageous Predictions: A reckoning’s coming

Chief Economist & CIO / Saxo Bank
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By Steen Jakobsen

Standing on the doorstep to 2015, we are experiencing near perfect conditions for momentum and equity investment. Inflation has fallen to its lowest since the 1980s, interest rates have followed, and energy is relatively stable.

Corrected for inflation, oil at $80/barrel today equals $20-40/b in the 1970s.

Low volatility has given investors a false sense of security that could lead to the biggest upset in 2015.

Central bankers meanwhile have become the generals in an economic war in which the final tool in the box - competitive currency devaluations – merely exports problems overseas.

Nowhere exemplifies this better than Japan after the latest bazooka launch by Shinzo Abe threatens to become an out-of-control, inflation-stoking missile. Japan may have bought the global markets a further quarter or two of protection but the real world will have its say.

 Wither Japan in 2015 if Shinzo Abe's policies spiral out of control? Photo: Thinkstock

We saw it for one week of mayhem in October. If that’s anything to go by, we are in for a rollercoaster ride in 2015. Tangible assets and production sit at all-time lows. Paper money investment has crowded out productive capital while societies are dominated by hairdressers and bankers. We’re losing the art of manufacturing.

Meanwhile the power of the US of A is waning as China rises and when the superpower pecking order changes, volatility and war ensue.

Nothing is ever given and Outrageous Predictions remains an exercise in finding ten relatively controversial and unrelated ideas which could turn your investment world upside. By imagining the most negative scenarios and events you will have a better chance of navigating the turmoil.

And we at Saxo Bank remains convinced higher volatility and a potential move towards a mandate for change is upon us as macro thinking enters a final fight to the death before we can again put our faith in people, ideas, education and change rather than hollow promises.

2015 will be a tough year but potentially also the year we look back at as the nadir. As Winston Churchill famously said: “If you are going through hell, keep going”. 

-- Edited by Martin O'Rourke

Steen Jakobsen is CIO and chief economist at social trading leader Saxo Bank

Juhani Huopainen Juhani Huopainen
Japan: After the IMF-recommended sales tax increase is completed, economic growth fails to pick up, markets realize that Bank of Japan's asset purchases will not be increased and JPY and Nikkei plummet. The drop in value is deemed to be proof that Abenomics has failed, and the narrow support for the current monetary policy in the board of BoJ is lost, and BoJ will first decrease asset purchases. USDJPY crashes to 100, where it was at the beginning of 2014.

Europe: signs that France and Italy would be moving toward leaving the euro area force Brussels to abandon the enforcement of the two- and six packs, which put limits on the budget deficits, breaking the EU-level macroprudential framework. In retaliation, German demands for tighter monetary policy become louder, and chancellor Merkel will be forced to stop QE-plans and markets begin to expect a rate increase, forcing yields higher, which only aggravates the debt- and deficit problem. EURUSD rallies as hopes for QE is lost.
Konstantinos Tzavras Konstantinos Tzavras
Rodrigues Rodrigues
Be fearfull when others are greedy. I see the biggest crash in history following this gigantic mooney priting bubble. After the bubble blows i see a New Word Order where mooney looses value and people start trading goods again. In my outrageous prediction i see the end of capitalism as we know it. I m not giving numbers to tradable instruments cause i see them ending and markets freezing with no value at all. Am i beeing to outrageous? :)
thewickedwiz thewickedwiz
Hi presume you mean JPY soars (third sentence)
djoshuaelliott djoshuaelliott
At least 1 country will leave the Euro in 2015
fxtime fxtime
Gold reaches $2500 as Russia invades Estonia and Latvia !
MrScalper MrScalper
Ole Hansen's outrageous prediction for 2015 to come true once again
Dinastarsky Dinastarsky
First semester :Everything is fine ; Oil continues to slide lower, a boon for the USA and China, Europe is upset by social protests, France - Italy see their Govt Bonds rates jump much higher , the shorting of their bonds is an easy trade, so Euro goes down to 1,18 $ , as a consequence of social unrests continental europe , the GBP is stronger , a wave of entrepreneurs leaves France for the UK. The US $ jumps up to 96 on the DXY index , Gold-Silver lose another 10%, Russia slowly digest eastern ukraine while China reinforces its power in Asia. the JPY reach 145 Yen/ $ ;
Second semester , the situation gets sour ; after a wide unrest in Japan, the citizens are running on banks to withdraw their cash , exchange it for US $ , and they dump their japanese government bonds , the BOJapan interest shoot up but to no help, total freeze of financial system in japan, Mr Kuroda dumps its mountain of US T bonds , the US economy start to tank . Hedge funds are betting on a DJ-SP crash.
benlouro benlouro
Best - PSI or IBEX up more than 20% in 2015
Worst - India lower more than 10% in 2015
Best - long US 10Yr for target Yield 1.50%
Worst - short High Yield all over
Gold at 2000 usd
Crude at 50usd
Sugar up more than 100%
aidamarklough aidamarklough
This comment has been redacted
Adam Courtenay Adam Courtenay
The US economy will falter and the USD plunge
Nostress Nostress
ECB will do whatever it takes, QE... :P
Pierre Orphanidis Pierre Orphanidis
France plunges into a Greek-style crisis. The yield on French 10-year bonds jumps to 15%. Italy's, Spain's, Portugal's and Greece's yields on 10-year bonds skyrocket to 30-40%.

The Eurostoxx 50 crashes and reaches 2,000. There's an outrageous flight to the USD and CHF which reach parity with the EUR.

The yield on 10-year T-Notes reaches 0.9% and the 1-year T-Bills yield -1.0%
KdGfutures KdGfutures
Palladium price will hit $1000 through 2015Q4
global turmoil is expected around autumn 2015 so spx will correct at least 30%
usdjpy will go back to 90s
Sam Me Sam Me
Oil drops to below 60USD... Refinancing of US Shale Oil companies gets impossible. A 200Bil USD HY bubble bursts and 2/3 of the shale oil companies default.
Sam Me Sam Me
Full convertibility of CNY...(that's a really mean one).
Martin O'Rourke Martin O'Rourke
1. Russia falls into China’s orbit.
Russia’s attempt to redraw the political map on its periphery in 2014 proves in 2015 to be, far from demonstrating Vladimir Putin’s mastery of realpolitik, a colossal failure as the Ukraine venture, a continued weak oil price and the plunging ruble force it towards Beijing as the lone potential ally with international clout. Japan is a non-starter given the lack of a WW2 peace treaty and Europe (painfully) faces up to its energy security issue and hardens its resolve with harder-hitting sanctions. Russia, already undermined by a gas deal in 2014 largely on China’s terms, is forced into concession after concession to maintain a show of solidarity as the near-bankrupt and beleaguered state starts to resemble a one-trick pony. Under such circumstances, Putin’s domestic standing slowly but surely comes under scrutiny, less through the official press and more via social media, leaving him perhaps fatally wounded by the end of 2015.
Clare MacCarthy Clare MacCarthy
Return of the European Coal and Steel Community—52 years later
The founding members of the original cartel (viz. Germany, France, Benelux and Italy) finally lose patience with the jingoistic sabre-rattling nationalism of Britain and Hungary and the profligacy of Club Med and opt to return to the roots. Minus Italy at first. The new core rejects all UK entreaties for concessions, seizes control of the euro and embarks on a bold federal programme of ever closer union. Estonia is quickly invited to join, as is Ireland (once its debts are paid) and eventually Italy, after Draghi becomes president. The Nordics, meanwhile, restore the Kalmar Union, which even Iceland is happy to join, while the Iberian peninsula, straining under debt and regional rivalries, splinters into a dozen principalities. Greece sells all state-owned property to the new Core Europe (to pay the bills) and resigns itself to being Europe's summer playground. Merkel turns the Parthenon into her holiday home.
Martin O'Rourke Martin O'Rourke
2. Bitcoin rediscovers its zest.
Bitcoin hit $1,147.25 on December 4, 2013 (Source: Coindesk), but has since been as low as $323.74. Even now it is scraping along the bottom of that range at around the $380 mark (November 25). That said, Bitcoin has had to take in its stride a significant number of obstacles in 2014 including the infamous collapse of the MT Gox Bitcoin exchange based in Tokyo in April. Because some 850,000 Bitcoins subsequently went missing with a market value of approximately $450 million at the time, many saw this as the death knell of the crypto-currency with predictions of the $10 Bitcoin gaining (ahem) currency. It hasn't happened. Despite the odds seemingly piled against the currency and the fightback from traditional money sources, Bitcoin continues to survive. If it can ride 2015 without the kind of hiccups that we have witnessed in 2014, then Bitcoin could once again take steps towards the heights of December 2013. Let's say $800 at some point in 2015?
Clare MacCarthy Clare MacCarthy
Whoopee. My prediction is already coming home to roost. This came in a minute ago from Dow Jones: FRANKFURT--German airport operator Fraport AG (FRA.XE) said Tuesday it won the bidding process for a 40-year operating concession of 14 regional airports in Greece, together with its Greek consortium partner Copelouzos Group.

Martin: Don't put your pension into Bitcoin :-)
Juhani Huopainen Juhani Huopainen
Clare & Martin - that is pure Tom Clancy-material. I sometimes play around by commenting a news with a paragraph from an imaginary techno thriller: "Draghi received the day's operational guidelines from the Central Command via the usual dead drop. Something had clearly gone wrong"
Robert Ryan Robert Ryan
Britain quits the EU and restores the Commonwealth system of preferences, and scraps visas for citizens of Commonwealth countries. EU goes broke after losing UK taxpayer funding. British supermarkets swamped with cheap New Zealand dairy products and lamb. At long last the English can afford to eat well, and better nutrition allows their cricket and rugby sides to defeat the rest of the world. Britain flooded with retrenched journalists from Australia and South Africa. Queensland flooded with British retirees.
Xenon Xenon
2015 S&P 1000
Clare MacCarthy Clare MacCarthy
Juhani - can't stop laughing at that one :-)
Martin O'Rourke Martin O'Rourke
Juhani, if only I was that smart! Rob, that's quite a vision you have there. Did it come to you in a dream?
Kairos64 Kairos64
1) Brent Crude drops to 50% from the top to 57,5 USD as global economy contracts everywhere but in the USA and drains demand. 2) EUR/USD goes to 1.00 , as the US economy outpaces Europe in recession. 3) Swedish housing market finally breaks the uptrend, and tumbles 20% as new mortgage rules and rising unemployment pops the bubble. 4) ECB is forced to take control of more than one commercial bank in Southern Europe.
bvlaerhoven bvlaerhoven
1. Japan completely loses the economic pedals and prints negative GDP's for all 4 quarters. USDJPY closing in on 150.00
2. Gold moving higher towards 1600 on repatriation moves from central banks.
3. Oil at the same time moving lower towards 50 USD per barrel. Downmove will only stop when we see big time consolidation in the shale oil industry
4. US economy flying high forcing the FED to raise rates sooner and more aggressively than currently expected. (1.50% by end of 2015)
5. Germany holding a referendum about what to do with euro-membership after ECB starts buying government bonds.
Fxspinner Fxspinner
Argentina pays the holdouts and starts growing more than its neighbours
Gayle Bryant Gayle Bryant
Commercial space flights become a reality and space tourism turns into the year’s hottest new sector for investment. A space bubble forms and then bursts when … [tune into next year’s Outrageous Predictions for the sequel].
Oliver Morrison Oliver Morrison
The Nigerian stock exchange is the best performer of the year, and the Naira reaches a record high against the dollar as Boko Haram lays down its arms in a peace deal negotiated by Tony Blair, who returns to the UK as new leader of the Labour Party, which then sweeps to power in the general election.
Neil_Flynn Neil_Flynn
Alibaba's global expansion fails to take off, and the share price drops to $50 by December 2015
bvlaerhoven bvlaerhoven
Tesla loses more than 50% of its value as cheap oil reduces the demand for batteries. The gigafactory turns out to be Musks Waterloo.
bvlaerhoven bvlaerhoven
Putin and Obama becoming best friends!

Nothing works better than a good old Russian invasion somewhere to raise oil prices. Obama sees the opportunity and talks tough on Russia. OIl shoots up....mission accomplished. To celebrate Putin and Obama go hunting together and they both pose barechested just before swimming in the frozen lake


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