Saxo Bank's 10 Outrageous Predictions For 2013

Tyler Durden's picture

Exceprted from Saxo's Steen Jakobsen's 2013 Extreme Complacency,

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.

Before everyone labels us ‘doomers’ and pessimists, let us point out that, economically, we already have wartime financial conditions: the debt burden and fiscal deficits of the western world are at levels not seen since the end of World War II. We may not be fighting in the trenches, but we may soon be fighting in the streets.

To continue with the current extend-and-pretend policies is to continue to disenfranchise wide swaths of our population - particularly the young - those who will be taking care of us as we are entering our doddering old age. We would not blame them if they felt a bit less than generous. In other words, the kind of confrontation we risk is not a military one, but rather a struggle between the mistreated young generation and the old fogies, who think they are entitled to all of a society’s wealth and to do everything to defend the status quo.

All of this leads us to believe that society will tilt increasingly towards more radicalism in Europe in 2013, where the far left and far right will both gain ground by appealing to the desperately disenfranchised voters who have very little to lose in responding to their messages.

The macro economy has no ammunition left for improving sentiment. We are all reduced to praying for a better day tomorrow, as we realise that the current macro policies are like pushing on a string because there is no true price discovery in the market anymore. We have all been reduced to a bunch of central bank watchers, only ever looking for the next liquidity fix, like some kind of horde of heroin addicts. We have a pro forma capitalism with de facto market totalitarianism. Can we have our free markets back please?

As we leave 2012, the consensus call is for the S&P 500 to rise 10 percent next year, and not a single analyst sees the market down in 2013 – I do not remember a similar level of complacency since the year 2000, when everyone I knew quit their job in the hope of making a fortune day trading. One of the things we can learn from history is that we rarely ever take its lessons to heart.

10 Outrageous Predictions

1. DAX plunges 33 percent to 5,000 (Peter Garnry)

The leading German stock market index DAX was one of the world’s best performing stock markets in 2012 as Europe’s economic juggernaut continued to fare better than most Eurozone countries, despite the crisis on the continent and weaker activity in China. This will all change in 2013 as China’s economic slowdown continues, thereby putting a halt to Germany’s industrial expansion. This causes large price declines in industrial stocks due to stagnating revenue and declining profits at major industry players such as Siemens, BASF and Daimler. This market stress deflates consumer confidence and as a result domestic demand, highlighted by weak retail sales. With domestic demand failing to offset weakening exports, approval ratings for Chancellor Angela Merkel plunge ahead of the German election in the third quarter, and ultimately the deteriorated economic situation obstructs her re-election attempt. With a weak economy and uncertainty about a new government, the DAX index declines to 5,000, down 33 percent for the year.

2. Nationalisation of major Japanese electronics companies (Peter Garnry)

Japan’s electronics industry, once the glory of the ‘Land of the Rising Sun’, enters a terminal phase after being outmatched by the roaring South Korean electronics industry, with Samsung the winner. The core driver of the industry’s decline is a too domestically oriented approach which has led to a high fixed cost base due to Japan’s extreme living costs, pensions and the strong yen. With combined losses of USD 30 billion in the last twelve months ending September 30, 2012, for Sharp, Panasonic and Sony combined, creditworthiness deteriorates greatly and the Japanese government nationalises the electronics industry in déjà-vu style - similar to the government bailout of the US automobile industry. There has been no nominal growth in Japan’s gross domestic product in eight out of the last 16 years and as a consequence of the bailouts, the Bank of Japan formalises nominal GDP targeting. The BoJ expands its balance sheet to almost 50 percent of nominal GDP to spur inflation and weaken the yen. As a result, USDJPY goes to 90.

3. Soybeans to rise by 50 percent (Ole S. Hansen)

Bad weather during 2012 caused havoc to global crop production and we fear this will continue to play an unwanted role during the 2013 planting and growing season. The US soybean ending stock, which improved slightly ultimo 2012, is still precariously tight at a nine-year low. This tightness leaves the price of new crop soybeans, illustrated by the January 2014 contract on Chicago Board of Trade futures, exposed to any new weather disruptions, either in the US or South America (which is now the world’s largest producing region) or in China (the world’s largest consumer and biggest importer). Increased demand for biofuel, in this case soybean oil to cover biodiesel mandates, will also play its part in exposing the price to spikes should worries about supply resurface. Speculative investors, who reduced their soy sector exposure by two-thirds towards the end of 2012, will be ready to re-enter and this combination of technical and fundamental buying could potentially push the price higher by as much as 50 percent.

4. Gold corrects to USD 1,200 per ounce (Ole S. Hansen)

The strength of the US economic recovery in 2013 surprises the market and especially financial investors in gold, who in recent years have come to dominate the market thereby making the yellow metal extremely sensitive to expectations for the global interest rate environment. The changed outlook for the US economy combined with a lack of pick-up in physical demand for the precious metal from China and India, which both struggle with weak growth and rising unemployment, trigger a major round of gold liquidation. This is particularly a result of the US Federal Reserve’s decision to reduce or completely cease further purchases of mortgage and treasury bonds. Hedge funds move to the sell side and once the important USD 1,500 level is broken a massive round of long liquidation follows, especially by investors in Exchange Traded Funds who have been accumulating record holdings of gold. Gold slumps to USD 1,200 before central banks, especially in emerging economies, eventually step in to take advantage of lower prices.

5. WTI crude hits USD 50 (Ole S. Hansen)

US energy production continues to rise beyond expectations, primarily brought about by advanced production techniques, such as in the shale oil sector. US production of West Texas Intermediate crude oil rises strongly and with inventory levels already at a 30-year high and export options limited, WTI crude oil prices come under renewed selling pressure and slump towards USD 50 per barrel. Weaker than expected global growth compounds this process triggering a surprise drop in global consumption of oil and the price of Brent Crude, the global benchmark. The supply side, led by the Organization of the Petroleum Exporting Countries and Russia, reacts too late to this challenge as its members - desperate for revenues to pay for ever increasing public expenditure - hesitate to reduce production, so the supply glut rises even further.

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

The Liberal Democratic Party comes back into power with its supposedly JPY-punishing agenda. But the reality of office, an uncooperative parliament and resistance from the Bank of Japan, mean that only half-measures are introduced. Meanwhile, the market has become over-enamoured with the potential for LDP leadership to bring about change and over-positioned for JPY weakness. As the market loses its enthusiasm for global quantitative easing and risk appetite retrenches, the yen vaults to the fore again for a time as the world’s strongest currency due to deflation and repatriation of investments, and carry trades find themselves turned on their head. USDJPY heads as low as 60.00 and other JPY crosses head even more violently lower, ironically paving the way for the LDP government and the BoJ to reach for those more radical measures aimed at weakening the yen.

7. Hong Kong unpegs HKD from USD – re-pegs to RMB (John J. Hardy)

China deepens its political commitment to turn away from its managed peg to the US dollar. A big step in this direction is taken as Hong Kong moves to unpeg the Hong Kong dollar from the US dollar and repeg it to the Chinese renminbi. Other Asian countries show signs of wanting to follow suit in recognition of Asia’s shifting trade patterns and as national policies of accumulating endless USD reserves begin to erode. China also takes steps to increase RMB convertibility to grab a larger share of global trade – part of its large ambition to hold more sway over developing and frontier economies and commodity producers. This starts a process of wresting some of the advantages of holding a major reserve currency away from the US currency. RMB volatility increases as China loosens its grip on the currency’s movements, and Hong Kong quickly grows to become a major world currency trading centre and the most important centre for trading the RMB.

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

European Union tail risks are re-aggravated – perhaps by the Italian election – or over the nature of Greece’s exit from the European Monetary Union and the worry that Spain and Portugal will follow suit. This sends capital flows surging into Switzerland once again and the Swiss National Bank and Swiss Government decide it is better to abandon the Swiss franc’s peg to the euro for a time, rather than let reserves accumulate to more than 100 percent of gross domestic product after they more than doubled to nearly two-thirds of GDP over the course of 2011 and 2012. Punitive measures and capital controls eventually brake the franc’s appreciation, but not until EUR CHF has touched a new all-time low below parity after having neared parity in 2011.

9. Spain takes one step closer to default as interest rates rise to 10 percent (Steen Jakobsen)

The market ignores the strains on the social fabric at the European Union periphery as input to EU systemic risk. This is particularly the case for Spain, where disposable income for over 1.8 million people is now less than EUR 400 a month and only 17 million out of a population of 47 million are employed. The unemployment rate is 25 percent and youth unemployment is alarmingly over 50 percent. On top of this, Catalonia is threatening to break away from Spain. While the European Central Bank and the EU are busy ‘selling the success’ of lower interest rates, Spain has seen total debt (public and private) explode to over 400 percent of its gross domestic product. Only Japan is in a worse state. With social tensions so high, the public sector simply cannot cut its public outlays further. In 2013, Spanish sovereign debt is downgraded to junk and the social strain pushes Spain over the edge, seeing Spain reject the extend-and-pretend policies of EU officialdom. Yields rapidly increase after the downgrade and as an inevitable default is priced in.

10. 30-year US yield doubles in 2013 (Steen Jakobsen)

The 30-year US Treasury bond tells us that the expected return over the next 30 years is a real return of 0.4 percent (2.8% yield minus a break-even inflation of 2.4%). This cannot last in a world of forced inflation via infinite monetary printing and a possible downgrade of the US - if we fail to get structural fiscal reforms. The Federal Reserve is expected to keep rates low for longer but in 2013 this could be challenged by the zero interest rate policy which forces investors to leave fixed income to attain any yield. The global bond markets is USD 157 trillion versus a stock market valuation of USD 55 trillion (Source: Mapping global capital markets 2011 - McKinsey & Company). This means that for every one dollar in equity there are three in fixed income. With no return or even negative return (after costs) the substitution of bonds with stocks is appealing. For every 10 percent the mutual funds reduce their bond weightings the equity market will see 30 percent on net inflow – this could not only lead to higher US rates, but also be the beginning of decade-long outperformance by stocks over bonds, which is long overdue.

Source: Saxo Bank


Full presentation below:

Outrageous Predictions 2013

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Fips_OnTheSpot's picture

11. Unicorn are hording up unexpectedly

Biggvs's picture

#11 is the only outrageous one.

P.S. Gold at 1200 would be a dream buy.

nope-1004's picture

This is particularly a result of the US Federal Reserve’s decision to reduce or completely cease further purchases of mortgage and treasury bonds. Hedge funds move to the sell side and once the important USD 1,500 level is broken a massive round of long liquidation follows

LOL.  First, hedge funds are way underweight gold.  That data has been shown here extensively.

Second, I'd like to know when the Fed will "cease further purchases of MBS" and stop this ponzi train.  If that ever happens, the domino effect will be spectacular, with confidence in the USD tanking bigtime.


cifo's picture

Below average clowns. Not outrageous nor funny.

ratso's picture

I will be happy to take the other side of every one of these ten predictions and put my money where my bet is.

Mister Ponzi's picture

I really don't understand the negative sentiment towards these predictions. Of course they are extreme and the authors are probably not surprised to see 80+% of them not come true. However, big money is being made by contrarian investments and some of these ideas are really interesting. One example is the unpegging of the Hong Kong dollar. For us non-U.S. investors, in periods of financial stress money could always be made by shorting our own currencies and going long the U.S. dollar. By replacing the U.S. dollar with the Hong Kong dollar in this trade you can have the upside of this trade, and avoid the idiosyncratic risks of a dollar crash while at the same time buy a free option of a HK dollar revaluation. Again: that this will happen in 2013 is not particularly likely given that the peg has been maintained for so many years but it is really an interesting idea.


I always read clever ideas and well-explained arguments that run against my personal views with particular interest - that way you learn most and most likely avoid mistakes.

Panafrican Funktron Robot's picture

They took the HKD unpegging from Kyle Bass and others, who have been saying it for a while now and are already positioned accordingly.  

dracos_ghost's picture

Of course they are extreme and the authors are probably not surprised to see 80+% of them not come true.


Then they're really not predictions, they're just shit talking so fuck them. This is a second article from the SAXO short bus crew that is just downright stupid. You can't even give them the benefit of the doubt. Jeebuz, ZH, what next Fonzi jumping the shark to keep hit rates up.

AGuy's picture

"the Fed will "cease further purchases of MBS"

Or US Treasuries. I simply don't see the Fed permitting any meaning full interest increases. The Federal gov't will need to borrow near or more than $1 Trillion USD per year. Allowing rates to rise would only increase the amount of money the Gov't needs to borrow. Also Many states are on the brink of Bankruptcy. They need to borrow on the cheap too.

I don't see Oil or Gold taking a Dive. I will be a buyer of PMs if they take a dive.  I can't see Oil diving below $70, because much of the new supply (ie Deepwater, Tar Sands & Shale) costs close to $70 to get it out of the ground and transported to the refineries.

eatthebanksters's picture

12. The U.S. returns to free market principles; cuts taxes and spending; ends welfare as we know it; fires Bernanke and closes the Fed, arrests, prosecutes and jails Blankfein, Dimon, Mozilllo and a host of others; changes rules to to require real transparency in any marketplace; and adopts one law to replace zillions of others:  the did you fuck someone else law...all that is required for conviction is for a jury of your peers to come to the conclusion that you fucked somebody for a nickel.  Any one of these would be outrageous.

CPL's picture

Trained with only the best inner tubes and bananas money can buy.

ball-and-chain's picture

2013 will be repeat of 2012.

Money printing.  European contraction.  Reduction in the labor force.

We'll probably have another spree killing or two.

Lots of armed crazy people in America.

Wash, rinse, repeat.

Cognitive Dissonance's picture

"4. Gold corrects to USD 1,200 per ounce (Ole S. Hansen)"

Today's PM toilet flush, with Gold just barely holding at the 200 DMA, is do or die for Gold at these levels. Next level in the 1630's/40's.

As far as I'm concerned the lower it goes the more attractive it becomes.

lasvegaspersona's picture


the danger to the Feds in squashing the POG is that some fools buy physical at those lower prices. Too much of that and its game over.

Cognitive Dissonance's picture

The game is already over. They just want to rape, plunder and pillage for as long as they can.

They keep attacking and I'll keep stacking.

AGuy's picture

"the danger to the Feds in squashing the POG is that some fools buy physical at those lower prices. "

Or they just mandate a 90% tax on PM sales.


Panafrican Funktron Robot's picture

"Or they just mandate a 90% tax on PM sales."

Not really a problem.  Why would you sell your PM's for fiat?  

Theosebes Goodfellow's picture

Sell what? Didn't you hear about my boating accident? I lost everything. Gone. Imagine my devastation. It's shocking, just shocking! I can speak of it no more. Forgive me.

Spastica Rex's picture

People will still listen to them.

Really shitty crystal ball, though.

Bastiat009's picture

Thanks for proving my point. You can publish nonsense over and over again and still be read.

e_goldstein's picture

You can publish nonsense over and over again and still be read.


I think you just defined the key to Robert Prechter's success. 

akak's picture



"But, but, but it is DEFLATION that we have to fear, not the ongoing currency debasement!  Who are you going to believe, me or your lying eyes?"

FrankDrakman's picture

Thanks for the link; they were pretty much completely wrong in 2011 as well.

What do these guys do? Get all likkered/coked up, and write this stuff with hookers' lips glued to their johnsons?

Whalley World's picture

All your Hooker Lip Glue belong to us!

Groucho's picture

thanks for that. just on a quick read it looks like 0 for 10 to me. at some point any reasonable person would just stop making predictions.

globozart's picture

during backtesting found worthless - complete waste of time 

zilverreiger's picture

12. ...


Bastiat009's picture

Why is this outrageous? Because the market makes sense today? What will happen to the men who made those predictions if they are off by 100% or 1000% .. they will probably get promoted.

Hayabusa's picture

What about #11 "The peasants will rise up with their pitchforks and torches, storm the castle and take retribution on those who exploited and stole from them, their children and grandchildren."

Chump's picture

That goes beyond outrageous and enters fairy tale land.

Nick Jihad's picture

Aren't these the same politicians who enabled them to steal from other people, other people's children, and other people's grandchildren, and from generations yet to be born?  It's really a competition between Peter and Paul, each urging politicians to steal from the other, whilst the other urges them to steal from him.

woolybear1's picture

who are these clowns? 

Element's picture

These are the clowns who if they knew the future would not be telling shit to you about it.

Gmacks's picture

Gold at 1200 USD.... Yeah ok

Jaspergers's picture

They must have meant 12,000 USD... 1,200 is under breakeven for miners.

booboo's picture

Norwegians got into some bad lutefisk and schnapps, not a good mixer.

kaiserhoff's picture

There's such a thing as "good" lutefisk?

Rathmullan's picture

Complacency feeds on itself because it rewards itself. This is what causes crashes. I put the odds greater than 50% that one is coming in 2013.

Sheeple Shepard's picture

Outrageous indeed.

I will start worrying about Gold when interest rates start to rise.

Whalley World's picture

Worry not, in the 70's gold rose with interest rates!  No diff this time round.

Mad Mohel's picture

Who the fuck is Saxo?

I could get better predictions from Vinny in Maintenance.

Matt's picture

Considering the title is "Outrageous Predictions", you should be able to get better predictions from nearly anyone, except maybe Jim Cramer or Paul Krugman.

Calidreaming's picture

who the fuck is saxo bank?   

akak's picture

You can find them right next door to Tuba Bank.

Both tend to be rather loud and brassy in their predictions, but continue to hit off-notes in their performance.

boogerbently's picture

....catchy beat, but tough to dance to, I'll give them an 86.

francis_sawyer's picture

more like a 'skinflute' harmonic orchestra...

Jam Akin's picture

With some backing bagpipes...