Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Land Rover Discovery Sport Rattling / Knocking Sounds From Car Pillars - 25th Apr 18
China Takes the Long View on Gold-Silver... and So Should You - 25th Apr 18
Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves - 24th Apr 18
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UK Gambling Statistics - What the Numbers Say - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

10 Outrageous Predictions For 2015

Stock-Markets / Financial Markets 2015 Dec 11, 2014 - 04:33 AM GMT

By: Raul_I_Meijer

Stock-Markets

Interesting – if not outrageous – remarks today from Steen Jakobsen at Saxo Bank in Denmark, always good for some fresh insights, and a statement from him that I would like to decorate with a few question marks. As WTI oil looks threatening to break through $60 a barrel with another 5% loss today, let’s first take a look at Saxo’s, and hence Steen’s, Outrageous Predictions, via Tyler Durden. We can take it from there.


Saxobank’s 10 Outrageous Predictions For 2015 – A Reckoning’s Coming

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.

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. And we at Saxo Bank remain 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.

That’s the intro, now let’s get to the predictions themselves, and I’ll give my version.

10 Outrageous Predictions…

• Russia defaults again

Possible, but I wouldn’t want to rule out Russia’s preparedness for what is happening today. They’ve seen the neocons coming from miles away, and they surely have considered today’s reality in their planning. But, again, a default is possible. If Putin thinks it’s a smart thing to do.

• Volcano eruption decimates crops

That’s not really a prediction, it’s more of a crazy wager made at 11.59 pm on New Year’s Eve after a few bottles of bubbly.

• Japanese inflation to hit 5%

That would not only mean a great success for Abe, Kuroda and Abenomics (which has been an abject failure to date), it would also mean they find a way to get the Japanese people to start spending like a bunch of Jewish American Princesses, and I really can’t see that. So a no for me.

• Draghi quits ECB

Absolutely. Draghi is stuck between desperate spend spend spend forces on the one side and the Germans on the other. It’s clear he would love to do the former’s bidding, but the Germans really don’t want anything to do with it, and that’s not because they’re traumatized over what happened 80 years ago in Weimar, a silly argument thrown around far too easily. They simply don’t believe in letting debt take over an economy and hold it hostage, which is what the rest of the world is doing.

Interesting question is who’ll succeed the future Italian president. Another Goldmanite like Mario would appear useless, it would just lead to another case of being stuck in a Mexican stand-off. So a more Berlin-friendly chair? Germans have no room to move, if they go for broad asset purchases, they’d be voted out of office and voted down by their domestic court system.

My guess would be that if and when Mario leaves, the EU has a big problem, because a replacement that everyone can agree on will be hard to find, And that in turn may be a danger to the union itself. Which it should be too. It’s an unholy union between partners that are far too far apart from each other.

• Corporate bond spreads to double in 2015

Entirely possible. What’s happening today with oil is already affecting other commodities, and will spread to stocks sooner rather than later. Bonds can’t be far behind, be they sovereign, corporate or just plain junk. Wash out, bloodbath, pick your favorite term.

• Internet hacks smash online shopping

Perhaps. Hackers seem to be more focused on ‘loftier’ goals for now, but who knows? Who knows where the main hacker communities are located in the world to begin with?

• China devalues yuan 20%

I’m guessing Saxo means a deliberate move here, as in an announced one. And I’m not sure they’d need that. They can do it by stealth. It matters of course whether you mean devaluation vs the USD, or another currency. They probably mean the USD, and then it’s not so hard. I wouldn’t be at all surprised if the euro loses another 20% vs the USD in 2015, the yen seems a given, so why not the yuan? Lots of dollars will be looking for a way ‘home’. The question becomes: can the Fed still drive the dollar down?

• Cocoa futures hit USD 5,000/tonne

Now I’m outta my league. I’ll have to pass. I do know, of course, that chocolate has been threatened for a while, but that’s the extent of my ‘expertise’.

• UK house sector to crash

Along with quite a few others. Central banks have focused on housing in Australia, New Zealand, Canada, the US itself, and all these markets are facing a lot of pressure. The UK may be even crazier than all the rest, London surpassed Hong Kong as the most expensive city only recently. Which is where my thoughts turn to all the Londoners who’ve been chased out of their own city by the insane dreams of Cameron and Boris Johnson. They are the ones who should be chased out.

• Brexit in 2017

That’s not really a 2015 prediction, is it? But, you know what, let’s make it a broader issue: I bet you there’s going to be a lot more pressure, from multiple sides, on the European unity. Which is good: Brussels is a power game gone horribly wrong over the backs of nice, sweet, decent ordinary people all across the ill-fated ‘union’.

And we’re not done yet. Steen Jakobsen also did an interview at CNBC, in which he has an 11th prediction, namely that the US might bail out its energy sector. I find that curious, because I’ve said a few times recently that I don’t think that’s going to happen. But first, Steen:

Steen Jakobsen: The US Could Bail Out Its Own Oil Sector (CNBC)

An economist who correctly predicted the fall in oil price this year has told CNBC that the U.S. government could look to bail out its energy sector in 2015 as the commodity’s low price starts hitting the country’s economy. “The U.S. energy sector is clearly important,” Steen Jakobsen, the chief economist at Danish investment bank Saxo Bank, told CNBC Wednesday. “They are paramount to the long-term strategic issue that the U.S. will be self-dependent on oil.”

[..]Jakobsen believes the [US energy] headwind could soon become a tailwind despite gas becoming cheaper at the pump for U.S. citizens. “It will subtract 0.5% from GDP, bare minimum,” he said. “There’s a precedent here, back in the 80s we also had an oil crisis and that led to bank recoveries.” He added that oil companies are in for a “massive correction,” similar to the downtrend seen in mining stocks, explaining that exploration was getting “hugely expensive” with energy majors having little free cash flow available. The S&P 500 index has clocked gains of around 11% so far this year but the energy sector within the benchmark is currently down nearly 12%.

One of Jakobsen’s “outrageous” predictions this time last year was for the commodity to drop below $80 per barrel which was achieved in November with oil now trading at around $65. BP sounded the alarm on Wednesday morning by saying that it is implementing a cost-cutting program due to the tumbling prices. Any potential bailout for the sector, or even the banks that lend to them, would prove vastly unpopular in the U.S.

Dennis Gartman, commodities investor and editor of The Gartman Letter, told CNBC that any bailout is simply inconceivable “We bailed the banks out and the public’s anger has been very real and very long standing,” [..] “Bailing out the oil companies would be even more seriously hated.”

BNP Paribas’ Global Head of Commodity Strategy, Harry Tchilinguirian, was equally in incredulous at the possibility of the U.S. government stepping in. “In the event that oil prices fall further into 2016 and hurt smaller un-hedged independent operators as their free cash flow declines and their ability to raise finance is curbed, it is possible to see closures or consolidation in the sector,” “But is this reason enough for the government to intervene?” Christian Schulz, the senior economist at Berenberg Bank, agreed that U.S. oil producers, and their lenders, could get into trouble if lower oil prices remain but said they are not “systemically important enough” to be bailed out by the government.

I don’t think public anger would be the major issue, and I also don’t think the industry is not “systemically important enough” (that seems a bit ignorant even for a ‘senior economist’, the entire edifice runs on oil).

I think the problem, the reason why America cannot bail out its oil industry, at least not overtly, lies elsewhere. Bailing out the US housing industry is one – expensive – thing. Bailing out Wall Street banks is another – closely related, and infinitely more expensive – , but still close. The latter involved bailing out foreign banks, but they’re still primary dealers, or in other words, part of the ‘family’.

Oil is a whole different piece of cake. The Fed or Treasury could try and lower exploration costs, or something in that vein, but in the end the only measure that would be really effective is raising revenue, and that can only be accomplished with higher prices. And since oil prices are set globally. that in turn means that bailing out US oil also means bailing out Russian, Libyan, Venezuelan oil. And that would be hard to defend in today’s American political climate, helping Putin and Maduro get back on their feet.

It’s of course a ‘curious conundrum’, to find that by helping your own you also help your ‘enemy’. But it is, from where I’m sitting, a very real issue when it comes to oil. On top of that, there’s of course the fact that the US shale oil industry is already falling to leveraged bits, and has never been a viable industry, just a land speculation Ponzi. And how or why could the US bail out that kind of scheme out, and at the same time, don’t let’s forget, save the whole financial world from the fall-out of what’s happening to oil? What to do when that plunge starts to infect stocks and bonds, which seems an inevitable next step?

I am of course ready to stand corrected, but I simply don’t see what Steen Jakobsen suggests. Oil is too shattered an industry within the US, and also, though in a different way, globally, to be bailed out and saved by the Fed’s bell.

By Raul Ilargi Meijer
Website: http://theautomaticearth.com (provides unique analysis of economics, finance, politics and social dynamics in the context of Complexity Theory)

© 2014 Copyright Raul I Meijer - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
Raul Ilargi Meijer Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules