TV

Mads Koefoed
Nobody has more experience with various monetary easing schemes than the Bank of Japan, but despite several decades of little to no success, the central bank continues to pile on like an addict in need of his next fix.
Article / 17 December 2012 at 21:01 GMT

Saxo Bank's Outrageous Predictions 2013: Extreme complacency

Chief Economist & CIO / Saxo Bank
Denmark

This year’s Outrageous Predictions are once again a selection of mainly negative events, any of which can change the financial landscape and in some cases even the political status quo.


It is always tempting when making predictions to call for radical changes to the market landscape, but having produced this publication now for over 10 years, we hope the real value on offer to readers is to identify major events and risks that seem out of the box and “outrageous”, but are actually far more probable than appreciated and could have significant (mostly very negative) consequences on investment returns in the New Year.

Our biggest concern here on the cusp of 2013 is the current odd combination of extreme complacency about the risks presented by extend-and-pretend macro policy making and rapidly accelerating social tensions that could threaten political and eventually financial market stability. Our recent calls for a forest fire-style crisis that would be short and scary, but also establish healthy conditions for moving forward, have been met with the historically correct response: Any real change has only come about as a result of the exigencies of war.

Before everyone labels us ‘doomers’ and pessimists, let us point out that, economically, we already have wartime financial conditions: the debt burden and fiscal deficits of the western world are at levels not seen since the end of World War II. We may not be fighting in the trenches, but we may soon be fighting in the streets. To continue with the current extend-and-pretend policies is to continue to disenfranchise wide swaths of our population - particularly the young - those who will be taking care of us as we are entering our doddering old age.

We would not blame them if they felt a bit less than generous. In other words, the kind of confrontation we risk is not a military one, but rather a struggle between the mistreated young generation and the old fogies, who think they are entitled to all of a society’s wealth and to do everything to defend the status quo. In a way, it is the 1960s all over again, though a deeper struggle rooted in economics as much as politics - the 1 percent versus the 99 percent, to borrow the most common way to draw the battle lines. Occupy Wall Street was a mere amuse bouche and distant early warning of this phenomenon. The appetisers and main courses will soon arrive if we do not change our ways.

All of this leads us to believe that society will tilt increasingly towards more radicalism in Europe in 2013, where the far left and far right will both gain ground by appealing to the desperately disenfranchised voters who have very little to lose in responding to their messages. Current mainstream European politicians are running on ideological empty. And they have never shown that they understand the ‘representative’ portion of a representative democracy.

The macro economy has no ammunition left for improving sentiment. We are all reduced to praying for a better day tomorrow, as we realise that the current macro policies are like pushing on a string because there is no true price discovery in the market anymore. We have all been reduced to a bunch of central bank watchers, only ever looking for the next liquidity fix, like some kind of horde of heroin addicts. We have a proforma capitalism with de facto market totalitarianism. Can we have our free markets back please?

As you look at our list of 10 ‘predictions’, they may not look particularly outrageous in some cases, but remember that we have extremely low volatility in all asset classes due to the lack of real price discovery. In such an environment, it means that almost any move outside of two standard deviations is becoming outrageous, as it suggests that the totalitarians are losing their grip.

As we must do every year, we also need to underline that these 10 events are not Saxo Bank’s official calls for 2013. Ironically, though, they could prove far more relevant for investors because of the huge impact if any one of the 10 sees the light of day in the New Year. Before trading or investing, we all must know the worst case scenario - capital preservation is a must and your portfolio needs to be able to weather a perfect storm, or for that matter any storm.

As we leave 2012, the consensus call is for the S&P 500 to rise 10 percent next year, and not a single analyst sees the market down in 2013 – I do not remember a similar level of complacency since the year 2000, when everyone I knew quit their job in the hope of making a fortune day trading. One of the things we can learn from history is that we rarely ever take its lessons to  heart.

Best wishes for 2013,

Steen Jakobsen

Download document

Outrageous Predictions 2013

2y
benlouro benlouro
having some problem with my browser/computer can´t look at the videos. did Saxo publish this year OP in PDF? thanks
2y
NannaArnadottir NannaArnadottir
Hi! I can't open the Japanese prediction :(
2y
Hank Hank
No contributor suggested massive protests or revolutions in PIIGS countries?

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Show latest activity
Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail