Outrageous Predictions 2013 from Saxo Bank

The Danish investment Saxo Bank has published its annual ten wild predictions for 2013. The purpose of the predictions is to provoke investors to think out of the box, and be prepared for major events that can shape the markets of 2013.

Saxo Bank report“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” said Chief analyst of Saxo Bank, Steen Jakobsen. “Current major political tendencies are empty”, Jakobsen said, quoted by Russia Today. He adds that “Occupy Wall Street” movement was just the beginning of the process. More, the authors of the report predict, next year society will move toward radical movements as both the ultra-right and ultra-left find supporters appealing to feelings of desperate voters who have nothing to lose.  So, let take a look …

1. DAX plunges 33% to 5.000 (Peter Garnry)

  • Germany accepts debt mutualisation – Germany’s debt downgraded
  • Export volume continues to drop, and domestic demand too small
  • Recession by Q2-2013 – Merkel loses election in September

2. Nationalization of major Japanese electronic companies (Peter Garnry)

  • Japan outmatched by South Korea on foreign market and no domestic demand
  • Junk status for many Japanese companies is near and multi decade lows in growth leads to desperate measures
  • Japan launches Rising Sun Trouble Asset Relief Program (TARP)

3. WTI crude hits 50 (Ole S. Hansen)

  • US Crude Oil production rises strongly and with inventory at 30-year highs and limited export
  • options, the price falls
  • Global consumption of oil and the price of Brent Crude(benchmark) drops and supply side OPEC and Russia react too late (due to monetary reasons)
  • Shale gas takes even bigger role – and forces discussion on linkage of crude and NatGas

4. Gold corrects to USD 1200 per ounce (Ole S. Hansen)

  • Growth in the US surprises to the upside and interest rates spike
  • Physical demand from China and India falls as capital markets are opened
  • The Fed is caught in crossfire over its threshold mandates as the natural unemployment rate is recalculated to 7.5% from 6.5%

5. Soybeans rise by 50 percent (Ole S. Hansen)

  • Stock at nine year low – extreme vulnerability to weather
  • All years ending in 3 – (1983,1993, 2003, 2013?) have been big up years for Soybeans
  • China stockpiles beans for food security and to raise income for its farmers

6. USDJPY heads to 60.00 (John J. Hardy)

  • The big push for inflation and monetary printing fails as both parliament and BoJ resist
  • Deflation remains the main issue and it explains most of the move in JPY during the last 10 years
  • Japan’s economy goes into a tail-spin. Negative exports and demographics see Japan repatriating some of the USD 7 trillion they have sent overseas during the last three decades

7. Spain takes one step closer to default – rate 10%+ (John J. Hardy)

  • Social tension takes over political agenda – Catalonia/Basque votes for independence
  • Spain gets downgraded to junk. No institutional investors can hold Spanish Government bonds
  • Spain caught in domino effect from Grexit

8. EURCHF breaks the peg – touches 0.9500 (John J. Hardy)

  • EU Crisis re-emerges – perhaps around Italian election? This forces Greek exit and contagion fears of domino effect on Spain and Portugal
  • SNB fails to balance growth and deflation and reserves move toward 100% of GDP, forcing a move to abandon peg before it becomes too costly
  • End result is capital controls which stop the CHF from flying even higher

9. 30-year US yield doubles in 2013 (Steen Jakobsen)

  • 30-year expected return 0.4 percent before fees! Leads to exodus from bonds to equity
  • US downgraded on weak reform element in fiscal cliff compromise
  • FED’s new threshold makes monetary policy mechanical – market sees inflation sooner

10. HKD unpegs from USD (Steen Jakobsen)

  • China deepens its political commitment to turn away from its managed peg to the US Dollar
  • China initiates talks on major Asian trading zone leading to new currency ASEAN
  • US Dollar rises forcing China to weaken its link and currency

Read the whole report about the outrageous predictions here:

Saxo Bank outrageous predictions 2013

Source: Saxo Bank

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