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 / 29 November 2016 at 14:00 GMT

Outrageous Predictions: We called Brexit in 2014 — did you?

Former managing editor, / Saxo Bank
  • Saxo Bank's Outrageous Predictions called the Brexit vote in December 2014
  • Outrageous Predictions has a history of getting it right on big calls
  • Logic underpinning the publication a useful antidote to mainstream analysis
  • Outrageous Predictions 2016 likely to deliver on Russian rouble call
  • Ole Hansen's silver rally call also hits the target
  • Have your say on what could unfold in 2017 on our dedicated page

Who would have predicted a Brexit as long ago as 2014?, of course. Photo: iStock

By Martin O'Rourke

A coruscating interview with Saxo Bank's Steen Jakobsen by last Thursday was a timely reminder of the chief economist's rather uncanny ability to make a call against consensus and call it right, seemingly against the odds.

In this case, Michael McKenna's article focused on Jakobsen's March 29 call on CNBC that Clinton "cannot win the US election", a belief that much to the chagrin of the global establishment not only proved correct, but also ushered in the ultimate maverick Donald Trump as president-elect.

Jakobsen's point was less about Trump's suitability for the role and more related to the anti-establishment wave that has swept the globe and unleashed a backlash that, with Italy's referendum on constitutional reform projected to lead to a 'No' vote on Sunday, shows not the slightest sign yet of diminishing.

But, while the anti-establishment wave has become the dominant narrative of 2016, Saxo Bank's Outrageous Predictions for 2015 spotted the trend as long ago as December 2014 when it made its call on Brexit for 2017.

The details of the call don't exactly tally with the facts on the ground, but the case presented two years ago now looks entirely plausible in the light of subsequent events. It was, of course, subject to more than a little ridicule at the time.

But, with the British people voting by a majority of 52% to 48% on June 23 to exit the European Union and with article 50 of the Lisbon Treaty set to be invoked by a self-imposed deadline of March 31, 2017, prime minister Theresa May, barring further hiccups, will set in motion a process we called, as they say, "a long time ago, in a galaxy far, far away..."

Who hasn't got used to the lovable Nigel Farage gurn over the last 12 months or so?

Source: Outrageous Predictions 2015

Flippant though the point may be, the world which we will confront in 2017 is a million miles from that which we faced on the doorstep of 2015. Brexit, Donald Trump's victory in the US, the rise of the far right in Europe, a likely punch on the nose this Sunday for the establishment in Italy, and even the election of the (let's say) unorthodox Rodrigo Duterte in the Philippines, all smack of the deep dissatisfaction with elites and their ability to solve the problems facing the world in the wake of the global financial crisis of 2008.

Speaking of which, It was also an outrageous prediction dating back to December 2005 that called the US housing market crash and anticipated a 7% slide in prices by the end of 2006. For anyone who's had the pleasure of seeing the heavily-Oscar nominated The Big Short, how big a call that was during the American real estate boom that perfectly encapsulated the era of irrational exuberance is difficult to underestimate.

The subsequent default rate in the subprime home mortgage sector witnessed in the demise of Fannie Mae and Freddie Mac led to a plummeting of house prices in the US, mushrooming evictions, and laid the seeds for the anti-establishment wave that is in full blossom in 2016.

Of course, for every outrageous prediction that comes through, we expect and anticipate at least five that do not and some of the more colourful in recent years not to be borne out have centred on natural events such as Icelandic volcano Bardarbunga erupting from our Outrageous Predictions 2015 publication or an El Nino-led inflation surge from Outrageous Predictions 2016

Neither has come true. 

The premise underpinning both, nevertheless, remains live.

A weather-related scourge that hasn't panned out in 2016

Source: Outrageous Predictions 2016

John J Hardy, Saxo Bank's head of forex strategy, meanwhile boldly predicted a 20% rise in Russia's rouble by the end of 2016 and, with USDRUB at just beneath the 65.0 handle on Tuesday from a January 1 starting point of above 77.50, this more or less looks on course for a bullseye by December 31.

Hardy also called a Clinton win and a democratic victory in the senate. By the finest of margins, that so easily could have come true and underlines just why the logic that underpins Outrageous Predictions is much more pertinent to a reading of global trends and developments than the mainstream consensus and media might have you believe.

Saxo Bank head of commodities strategy Ole Hansen also nailed a 33% rally in silver prediction for 2016 after the precious metal topped out above $21/oz in the third quarter from its January 1 starting position of just below $14/oz.

Silver delivered on Ole Hansen's 33% rally call in the third quarter:

Source: SaxoTraderGO

There have been other calls too, like the bank's pretty outlandish oil-to-$175/barrel call for 2008 that threatened to become a reality when oil peaked at more than $150/b. What Opec, meeting tomorrow at what is likely to be a feisty get-together in Vienna, would give for a price/barrel that was even within touching distance of half that 2008 peak.

China's devaluation of 2015 after it raised the fix on USDCNH to 6.3305 on August 11 was also predicted by Hardy in the publication for 2015 where he anticipated a 20% slide in the yuan.

A quick glance at the rate November 29 now has USDCNH at above 6.9 with 7.0 increasingly looking like the new line-in-the-sand for the pair. At the time of the call, the pair was closer to 6.20, with Hardy certainly landing the direction of the pair if not quite the trajectory... yet.

What can we expect in 2017? That would of course be telling and, with rather more care and attention than a UK-government aide walking into 10 Downing Street with a handwritten note on the UK's Brexit strategy visible for all (or an eagle-eyed cameraman to be entirely fair) to see, we're not giving anything away here.

But the themes that have dominated 2016 do inevitably play their part in the 2017 listing and we think we've put together 10 fresh predictions that we think will have many of you intrigued, quite possibly animated, downright angry on more than one occasion and thoroughly engaged in the debate. Whatever happens, it is bound to be a thoroughly exciting year!

Do you have an Outrageous Prediction for 2017? We'd love to get your view.
Either squawk to our
Outrageous Predictions page or comment in this article.


Nope, we didn't either but chief economist Steen Jakobsen did at least call this
triumph back in March, in diametric opposition to the consensus. Photo: iStock

Martin O'Rourke is managing editor at Saxo Bank


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