Saxo Warns "Markets Are Drifting Into Dangerous Territory"

Tyler Durden's picture

A lack of volatility in the markets is dangerous, according to Saxo Bank's Chief Economist Steen Jakobsen, who says we need to know why the danger will be with us for some time. In this brief clip he warns, "...the world seems to think there is a stable permanent equilibrium which doesn't make sense if you think about it, unemployment is still rising, debt to GDPs are still rising, the Crimea situation is increasing in tension, not decreasing, The US still has a lot of stuff to do on social security and welfare spending…for two or three years down the road, with no activity, the world will fall into not only deflation, but also a recession." Jakobsen predicts that, year on year, world growth will actually be "a big fat zero" and therefore the markets are drifting into dangerous territory


As Jakobsen notes,

My longest used chart for fixed income – confirmation is coming soon…..30-year to 2.50 percent

Remember this trend has continued despite 100 percent of macro strategist thinking US rates will be higher in six months time – despite extreme low volatility & complacency – despite the so-called: Great rotation.

Of course it reflects deflation, lack of growth and extremely poor policy responses, which this morning was indirectly admitted by Fed chief Janet Yellen:

Yellen concerned Fed model offers distorted prediction on prices

Yes, the policy makers talk, but the market clearly disagree, especially the bond market.

Imagine if Russia/Ukraine “really” is at true geopolitical risk, if lowflation is not transitory, if growth does not come back again this year, if central banks have no alternative at zero bound, if European Central Bank chief Draghi is bluffing (as he often does)….., if China devalues…. ?

No, it will never happen. We have great diplomatic efforts being expended on Russia, central banks understanding the true economy and politicians who are committed and fully in line with the real economy, plus an extremely strong bank sector – The King is dead, long live the King….

Greed is good – Leeman BrothaZ

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border dog's picture

Oh...John "Ketchup" Kerry...will fix Russia/Ukraine soon....all will be well.....

NotApplicable's picture


Oquities's picture

i am drifting into dangerous territory too - it is one part apathy, one part anger, one part ennui, one part nihilism and one part retribution.  watch out!

kaiserhoff's picture

Evil as the Fed is, it always seems to be following in Japan's wake.

I think the carry trade is the only reason the PIIGS are still afloat, and US rates are stable to falling.

tahoebumsmith's picture

Dangerous? How about a death spiral... To sum it up in a few short words, THE FED IS HOLDING THE GLOBAL FINANCIAL SYSTEM HOSTAGE! Qe  this bitchez, 20 TRILLION DOLLARS in printed fiat to fight a debt crisis? It's a ponzi scheme, they are playing patti cake with themselves in a mirror. Other countries are bailing and the failed Bernanke plan he sold is coming home to roost... Cockadoodle doooo ...Yellen is so ironic...Believe me when I say there will be alot of yellen. I hope you're prepared physically, mentally and monetarily in something other then the dollar. It can be anything from firewood to mechanical services, shiny stuff or produce. The tipping point has tipped and there is no turning back now. Thank's Barack, the hope and change we all will remember for decades...

Sudden Debt's picture

As long as tomorrow is POMO day I'll be happy :)

disabledvet's picture

I don't know why that makes me laugh out loud...but it does.

In the 2000's we had The Great Moderation followed by a VERY impressive display of "The New Normal." (Cue Young Frankenstein and Dear Abbie.)

Now it's The Storm Before the Calm.


I sense the presence of an intermediary...just in time for a Disntermediation?

There is a reason why deflations were "all the rage" in Great Britain and North America. "Central Europe was always open for business."

The one exception of course was during the Cold War.

gbresnahan's picture

He forgot to mention how cold it is outside.

Hohum's picture

"Debt to GDPs are still rising."  Hasn't that been the case (public and private) for many decades?

Strat-O-Sphere's picture

The markets are rigged with QE bullshit money. I agree with the analysis. It is hard to say how anything will pan out when the whole financial system is nothing but fraud.

Not Goldman Sachs's picture

No matter how dented, that can still kicks.

AdvancingTime's picture

Deflation is not a given. Never before has mankind diverted such a large percentage of wealth into intangible products or goods.  I contend this is the primary reason that inflation has not become a major issue. The modern economy is loaded with interwoven contracts reeking of contagion. If faith drops in these intangible "promises" and  money suddenly begins to flow into tangible goods seeking a safe haven inflation could soar even as debts go unpaid and promises are left unfilled.

Like many people I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply. The timetable on which events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas. It is important to remember that debts can go unpaid and promises be left unfilled. More on how we have sowed the seeds for inflation to suddenly strike in the article below.