It is difficult to be in the market under circumstances we have now. We are at the top in many indices, and many of the great blue chips have gone too far. Netflix, Amazon, Yelp, Twitter and Pandora media (better called “the fat five), are all bubbles waiting to plunge about 50%.
The average stocks in the U.S is not expensive, but they are not cheap either. It is better to look at the European and the emerging markets. Gold is still declining but it seems to bottoming out soon, ready to take off again. Gold dropped -1.13% yesterday ahead of tomorrow’s Fed Statement and Press Conference. So, what are we suppose to do next year?
Every year, Saxo Bank are publishing a list with some forecasts and predictions about the markets next year, and those predictions can have huge impact of the global markets.
This time they have predicted scenarios from a return to a “Soviet-style economy” in the EU (?) and a huge recession in Germany. They also predict a failure of the QE program in the U.S. Wow!
These ten predictions are not the official forecast of the bank for 2014, chief economist Steen Jakobsen said, and they are not ment to be “pessimistic”.
2014 should be the year in which a mandate for change not only becomes necessary, but is also implemented, he said. History tells us that changes have always come as a result of the thorough failure of the old way of doing things.
What will happen to the U.S and German economy next year? Will they reach “escape velocity” next year, or will they slow to zero growth? What about the European Parliament? Will the upcoming elections herald a new anti-EU coalition?
Those predictions are made to remind us that “a wake-up call is necessary as the alternatives would leave us with a dire outlook, Jakobsen said.
The ten ‘outrageous predictions’ are listed below.
1. EU creates a new wealth tax on savings above €100,000 in a return to a ‘Soviet-style economy’.
2. The European Parliament elections see the creation of a strong anti-EU alliance, to include the UK Independence Party.
3. The bubble bursts in the five US technology giants that have been trading at a huge premium to market valuations this year – Amazon, Netflix, Twitter, Pandora Media, Yelp.
4. The yen falls below Ұ80 per dollar, as investors pile back into the currency, forcing the Bank of Japan to delete its government debt in order to escape deflation.
5. The US recovery slows down, bringing deflation worries back to the fore.
6. Far from tapering, the Federal Reserve increases QE to $100bn per month and focuses on mortgage bond purchases to support a flagging housing market.
7. The price of Brent crude falls to $80 per barrel, as producers fail to slow down production.
8. Germany enters an unexpected recession as economic activity slows.
9. The French CAC 40 index drops 40% as local politics takes a turn for the worse.
10. The currencies of the ‘Fragile Five’ countries – Brazil, India, South Africa, Indonesia and Turkey – fall 25% against the US dollar.
Take a good look at all the markets today. The Fed`s two day meeting with the FOMC statement release ends today at 2pm ET. If they start to taper or not, I think it will be very sensitive to all the markets.
I don`t listen to what the FOMC members say before those meetings. I do only listen to one person, and that is the Fed chairman Ben Bernanke. He is the man. Is he going to taper? I don`t think so, but let`s wait and see later on today….
News today: Building Permits & Housing Starts at 8:30am, Crude Oil Inventories at 10:30am, Fed Statement at 2:00pm, FOMC Press Conference at 2:30pm.
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