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Outrageous Predictions 2016

It`s time for some predictions for 2016, and Saxo Bank is out with their own predictions and they are outrageous. “Outrageous Predictions” are “Outrageous Predictions”. Very bold. They are outrageous, expecting next year’s El Niño to be the strongest ever. Oil making a drastic return to $100 a barrel, and EURUSD to skyrocket back to 1,23 to name a few.

Steen Jakobsen, Chief Economist at Saxo Bank, commented: “We are nearing the end of the paradigm paralysis that has dominated the policy response to the global financial crisis. Quantitative easing and other forms of intervention have failed. China is transitioning, and geopolitical tensions are as complex as ever. The marginal cost of money is rising, and so is volatility and uncertainty. It is against this backdrop we have set this year’s predictions.”

 

Predictions 2016
Saxo Bank’s Outrageous Predictions 2016

  1. EURUSD direction? It’s 1.23…
    Europe is running a massive current account surplus and its weaker inflation should, in macroeconomic logic, mean a stronger currency, not a weaker one. The race to the bottom has gone full circle, meaning we are back to a weaker US dollar again as the direct outcome of US interest rates policy.
  2. Russia’s rouble rises 20% by end-2016
    By the end of 2016, a surge in oil demand and the Fed raising rates at an inappropriately slow pace causes the Russian rouble to rise some 20% versus the US dollar/euro basket in 2016.
  3. Silicon Valley’s unicorns brought back down to earth
    2016 will resemble 2000 in Silicon Valley with more startups delaying monetization and tangible business models in exchange for adding users and trying to achieve critical mass.
  4. Olympics to turbo-charge EM’s Brazil-led recovery
    Stabilisation, investment spending on the Olympics, and modest reforms will see sentiment rebound in Brazil, with EM exports helped by cheaper local currencies. The result: EM equities to have a great year – outperforming bonds and other equities.
  5. Democrats retain presidency, retake Congress in 2016 landslide
    The Republican Party goes from strength to dramatic weakness as the rifts from an internal struggle on its future direction play out. This leads to a landslide victory for the Democratic Party as they successfully execute a get-out-the-vote campaign with Millennials coming out in droves having been frustrated by the political stalemate and weak job prospects of the last eight years.
  6. OPEC turmoil triggers brief return to $100/b oil
    OPEC’s crude oil basket price drops to the lowest since 2009 and unease among weaker as well as wealthier members of the cartel over the supply-and-rule strategy continues to grow. The long-awaited sign of an accelerated slowdown in non-OPEC production finally begins to flicker. Suitably buoyed, OPEC catches the market on the hop with a downward adjustment in output. The price mounts a quick recovery with investors scrambling to re-enter the market to the long side – once again bringing $100/barrel prices onto the horizon.
  7. Silver breaks golden shackles to rally 33%
    2016 will see a renewed confidence in silver. The political drive towards reducing carbon dioxide emissions by supporting renewable energy will add to increased industrial demand for the metal, given its use in solar cells. As such, silver will rally by a third, leaving other metals behind.
  8. Aggressive Fed sees meltdown in global corporate bonds
    Late 2016 will see Fed chief Janet Yellen embark down a hawkish path with a series of aggressive rate hikes, triggering a huge selloff in all major bond markets as yields start to rise. As the portions of bank and broker balance sheets allotted to bond trading and market making have almost disappeared, one of the vital parts of a functioning market is simply not there. This realisation sinks in too late and the entire buy-side flee into a panic selling one-way street, as highly advanced risk models lurch into a symmetric red alert.
  9. El Niño sparks inflation surge
    Next year’s El Niño will be the strongest on record and will cause moisture deficits in many areas of southeast Asia and droughts in Australia. Lower yields across agricultural commodities will curb supply at a time when demand is still increasing on the back of global economic expansion. The outcome will be a 40% surge in the Bloomberg Agriculture Spot Index, adding some much-needed inflationary pressure.
  10. Inequality has last laugh on luxury
    Faced with rising inequality and unemployment of over 10%, Europe is considering the introduction of a basic universal income to ensure that all citizens can afford to meet their basic needs. In a more egalitarian society where other values are promoted, demand for luxury goods decreases sharply – the sector collapses.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. UA-63539824-1.

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Outrageous predictions for 2015

On December 18 last year, I wrote about Saxo Bank`s outrageous predictions for 2014. It`s funny to read those predicions one year later. Every year Saxo Bank comes out with their outrageous predicions which is very funny and interesting to read. These are ten unlikely events, even if their risk is underappreciated, that would have significant consequences for global markets if Saxo Bank have right with their predicions.

Outrageous

This time they predict that Mario Draghi quits the European Central Bank to become Italian president. They predict that the U.K housing market to collapse, and a U.K exit from the EU. Furthermore; they predict China devalues yuan 20% and inflation of 5% in Japan.

Saxo Bank`s Chief Economist Steen Jakobsen said this about their predicions;
“2015 will be a tough year, but potentially also the year we look back at as the low point in everything. Inflation has fallen to its lowest in decades, interest rates have followed and energy prices are sharply lower.

The lack of volatility in data and in asset markets has given investors a false sense of security and that could lead to the biggest upset in 2015. We saw a possible preview of coming attractions during one week of mayhem in October of 2014. If that’s anything to go by, we are in for a rollercoaster ride in 2015.”

“Saxo Bank’s Outrageous Predictions remain an exercise in finding ten relatively controversial and unrelated ideas which could turn your investment world upside down. By imagining the most negative scenarios and events, whether a Russian default, volcanoes spreading havoc, or an internet Armageddon, investors have a chance to stress test their assumptions about the future and what these events might mean for their own investments. We must remember that while the predictions outline rather extreme market scenarios, over the years, a number of them have unfortunately come true.”

Saxo Bank’s Outrageous Predictions 2015

1. UK housing sector to crash
Surveys are already showing that momentum is fast leaving the UK housing market, particularly in London. The impending Bank of England rate hike will see the UK suffer a housing crash with prices falling as much as 25% in 2015.

2. Japanese inflation to hit 5%
Incessant Bank of Japan money printing crushes confidence in the yen as Kuroda-san finds that his policy to bring inflation back to his country is met with too much “success” – a symptom of Japan losing control of its currency.

3. China devalues yuan 20%
China will be looking for any way it can to ease the enormous deflationary pressures that are the downside of a credit boom. As deflationary risks loom China tears a page from the BoJ policy playbook and moves to devalue the yuan by 20%, joining Japan in its fight to import inflation and demand.

4. Draghi quits ECB
To bring the Germans fully on board with the European Central Bank’s move to QE, Draghi steps aside to allow for full ECB quantitative easing to proceed under a new president, Jens Weidmann of the Bundesbank. Draghi sees greater opportunity for his skills in Italy, where President Napolitano requests that he succeed him.

5. Russia defaults again
Plunging oil prices and a cold financial shoulder from Russia’s geopolitical antagonists see large Russian companies or the government itself defaulting on foreign debt. A default, like in 1998, is what is needed to secure the country’s future, together with a diplomatic solution on the Ukraine question.

6. Internet hacks smash e-commerce
In 2015, new attacks on e-commerce’s largest players become even more widespread and aggressive, sending shockwaves through the web and cloud service providers. Amazon.com, the largest e-commerce retailer and dominant player in web-based services, suffers a decline of 50% on the widespread fallout to the e-commerce industry and also because of its overvaluation.

7. Volcanic eruption cancels Europe’s summer
Like the volcano Laki in the year 1783, the already active Icelandic volcano Bardarbunga erupts in 2015, leading to a massive release of noxious sulphur dioxide and other gases that cloud the skies over Europe. The eruption shifts weather patterns and brings fears of a weak harvest across Europe, with grain prices doubling even as the volcano’s fallout proves more modest than feared.

8. Cocoa futures hit a record USD 5,000/tonne
Demand for chocolate is rising globally as Western preferences shift towards darker chocolate and Asian appetite increases. With supply affected by concerns over the Ebola virus and underinvestment in key West African production regions, the world is consuming far more cocoa than it is producing. This leads to a record high price for cocoa above USD 5,000 per tonne in 2015.

9. UK seen leaning toward 2017 exit from the EU (Brexit) on UKIP election landslide
The UK Independence Party (UKIP) wins 25% of the national vote in Britain’s general election on 7 May, 2015, sensationally becoming the third largest party in parliament. UKIP joins David Cameron’s Conservatives in a coalition government and calls for the planned referendum on Britain’s membership of the EU in 2017. UK government debt suffers a sharp rise in yields.

10. High-yield corporate bond spreads double
After a sentiment shift on high yield bonds, investors heading for the exits in 2015 discover sparse liquidity and steep price declines. With an ultimate washout in high-yield credit, shock waves will once again shake the foundations of Europe’s weak economy. The Markit iTraxx Europe Crossover doubles to 700 basis points in 2015.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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