Saxo Bank 10 Outrageous Predictions for 2014
LONDON, December 17, 2013
LONDON, December 17, 2013 /PRNewswire/ --
Saxo Bank , the online multi-asset trading and investment specialist, today
releases its annual set of 'Outrageous Predictions' for the year ahead.
Although the probability of any one of the predictions coming true is low,
they are deduced strategically by Saxo Bank analysts based on a feasible - if
unlikely - series of market and political events.
This year's predictions range from an EU wealth tax and the Bank of Japan's
cancellation of all its government debt to a nasty hangover for the tech
sector's 'Fat Five' and a plummeting Brent crude price as the market becomes
awash with oil. Another outrageous claim is that US deflation will loom large
following Act II of Congress's political morass in January, while Germany may
be dethroned as the Eurozone's outperformer and fall back into recession.
Prospects for Brazil, India, South Africa, Indonesia and Turkey will also look
grim if QE tapering in the US leads to higher marginal costs of capital from
rising interest rates, exposing those with current account deficits and
eroding the value of their currency. Meanwhile, Europe could face renewed
political and economic turmoil when an anti-EU transactional alliance becomes
the largest group in the European Parliament.
Steen Jakobsen, Chief Economist at Saxo Bank, comments:
"This isn't meant to be a pessimistic outlook. This is about critical events
that could lead to change - hopefully for the better. After all, looking back
through history, all changes, good or bad, are made after moments of crisis
after a comprehensive failure of the old way of doing things. As things are
now, global wealth and income distribution remain hugely lopsided which also
has to mean that significant change is more likely than ever due to
unsustainable imbalances. 2014 could and should be the year in which a mandate
for change not only becomes necessary, but is also implemented.
"We emphasise that the Outrageous Predictions are not Saxo Bank's official
calls for 2014, but rather an exercise in feeling out the major risks to
capital preservation, and intended to encourage investors to prepare for the
worst case scenario before trading or investing."
To see more please go to the Outrageous Predictions website:
To follow Outrageous Predictions or make your own, join the conversation on
Twitter by using the hashtag #SaxoOP and don't forget to follow Trading Floor
and Saxo Bank on @tradingfloorcom and @SaxoBank.
Saxo Bank's Outrageous Predictions 2014
1. EU wealth tax heralds return of Soviet-style economy
Panicking at deflation and lack of growth, the EU Commission will impose
wealth taxes for anyone with savings in excess of USD or EUR 100,000 in the
name of removing inequality and to secure sufficient funds to create a "crisis
buffer". It will be the final move towards a totalitarian European state and
the low point for individual and property rights. The obvious trade is to buy
hard assets and sell inflated intangible assets.
2. Anti-EU alliance will become the largest group in parliament
Following the European Parliamentary elections in May, a pan-European, anti-EU
transnational alliance will become the largest group in parliament. The new
European Parliament chooses an anti-EU chairman and the European heads of
state and government fail to pick a president of the European Commission,
sending Europe back into political and economic turmoil.
3. Tech's 'Fat Five' wake up to a nasty hangover in 2014
While the US information technology sector is trading about 15 percent below
the current S&P 500 valuation, a small group of technology stocks are trading
at a huge premium of about 700 percent above market valuation. These 'fat
five' - Amazon, Netflix, Twitter, Pandora Media and Yelp - present a new
bubble within an old bubble thanks to investors oversubscribing to rare growth
scenarios in the aftermath of the financial crisis.
4. Desperate BoJ to delete government debt after USDJPY goes below 80
In 2014, the global recovery runs out of gas, sending risk assets down and
forcing investors back into the yen with USDJPY dropping below 80. In
desperation, the Bank of Japan simply deletes all of its government debt
securities, a simple but untested accounting trick and the outcome of which
will see a nerve-wracking journey into complete uncertainty and potentially a
disaster with unknown side effects.
5. US deflation: coming to a town near you
Although indicators may suggest that the US economy is stronger, the housing
market remains fragile and wage growth remains non-existent. With Congress
scheduled to perform Act II of its "how to disrupt the US economy" charade in
January, investment, employment and consumer confidence will once again
suffer. This will push inflation down, not up, next year, and deflation will
again top the FOMC agenda.
6. Quantitative easing goes all-in on mortgages
Quantitative easing in the US has pushed interest expenses down and sent risky
assets to the moon, creating an artificial sense of improvement in the
economy. Grave challenges remain, particularly for the housing market which is
effectively on life support. The FOMC will therefore go all-in on mortgages in
2014, transforming QE3 to a 100 percent mortgage bond purchase programme and -
far from tapering - will increase the scope of the programme to more than USD
100bn per month.
7. Brent crude drops to USD 80/barrel as producers fail to respond
The global market will become awash with oil thanks to rising production from
non-conventional methods and increased Saudi Arabian ouput. For the first time
in years hedge funds will build a major short position, helping to drive Brent
crude oil down to USD 80/barrel. Once producers finally get around to reducing
production, oil will respond with a strong bounce and the industry will
conclude that high prices are not a foregone conclusion.
8. Germany in recession
Germany's sustained outperformance will end in 2014, disappointing consensus.
Years of excess thrift in Germany has seen even the US turn on the euro area's
largest economy and a coordinated plan by other key economies to reduce the
excessive trade surplus cannot be ruled out. Add to this falling energy prices
in the US, which induce German companies to move production to the West; lower
competitiveness due to rising real wages; potential demands from the SPD, the
new coalition partner, to improve the well-being of the lower and middle
classes in Germany; and an emerging China that will focus more on domestic
consumption following its recent Third Plenum.
9. CAC 40 drops 40% on French malaise
Equities will hit a wall and tumble sharply on the realisation that the only
driver for the market is the greater fool theory. Meanwhile, the malaise in
France only deepens under the mismanagement of the Hollande government.
Housing prices, which never really corrected after the crisis, execute a swan
dive, pummeling consumption and confidence. The CAC 40 Index falls by more
than 40 percent from its 2013 highs by the end of the year as investors head
for the exit.
10. 'Fragile Five' to fall 25% against the USD
The expected tapering of quantitative easing in the US will lead to higher
marginal costs of capital from rising interest rates. This will leave
countries with expanding current account deficits exposed to a deteriorating
risk appetite on the part of global investors, which could ultimately force a
move lower in their currencies, especially against the US dollar. We have put
five countries into this category − Brazil, India, South Africa, Indonesia and
About Saxo Bank
Saxo Bank is a leading online trading and investment specialist. A fully
licensed and regulated European bank, Saxo Bank enables private investors and
institutional clients to trade FX, CFDs, ETFs, Stocks, Futures, Options and
other derivatives via three specialised and fully integrated trading
platforms; the browser-based SaxoWebTrader , the downloadable SaxoTrader and
the SaxoMobileTrader application available in over 20 languages. Saxo Bank
also offers professional portfolio and fund management through Saxo Asset
Management who accommodates high-net worth private clients and institutional
investors and provides banking services and advice to retail clients through
Saxo Privatbank. The Saxo Bank Group is headquartered in Copenhagen with
offices throughout Europe, Asia, Middle East, Latin America and Australia.
Media enquiries Kasper Elbjørn, Head of Group Public Relations +45-3065-4300
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