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Saxobank CIO: Credit Cycle Has Peaked, Gold Will Be Best-Performing Commodity
Submitted by Saxobank CIO Steen Jakobsen via TradingFloor.com,
- Forget the 1930s. Inflation is different this time.
- Real rates are finally coming off in the US
- More and more pundits see inflation ticking higher
- A summer of European growth – and hell afterwards
- ECB's balance sheet as % of GDP little changed despite QE
- The credit cycle has clearly peaked
It'll be a sweet summer but a hellish autumn in Europe. Photo: iStock
The overall position:
Our major allocation shift is working on fixed income, but commodities and gold still need the all clear regarding a Fed hike….
Here's a reminder of the main points of my major strategy change as detailed in an article on May 18:
The headlines for the next 6-7 months say:
- US, German and EU core government bonds will be 100 bps higher by and in Q4 before making its final new low in H1 2016. US 10-year yield will trade above 3.0% and bunds above 1.25%
- Energy: WTI crude will hit US $70-80/barrel, setting up excellent energy returns.
- US dollar will weaken to EUR1.18/1.20 before retest of lows and then start multi-year weakness.
- Gold will be the best performer in commodity-led rally. We see 1425/35 by year-end.
We need to stop talking about deflation and using 1930s comparison about a Fed hike:
Source. InflationData.com
Real rates are finally coming off in the US: Positive Gold and negative US$?
Wow – inflation expectations are rising and rising fast….
European “cost advantage” is disappearing fast and furiously – enjoy the summer of growth – afterwards, you can expect: zero growth, zero reform and higher inflation “expectations”…..
Excuse me? Didn’t the European Central Bank start quantitative easing. In a world of madness it's hard even to see change in the ECB balance sheet. Japan is just not real, indeed, nothing is!
This is a poorly constructed chart… but clearly… the credit cycle has peaked……
Source: Bloomberg
Compare this to the commodity cycle:
Source: Bloomberg
And, just to remind you… when the Fed hikes it’s a margin call. There is no basis in the bank's mandate to do so, but its need to normalise policy will have data support over the summer as the CESI (Citigroup Economic Surprise Index) will mean revert.
Source: Bloomberg
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Russia, RSX will be first. GDX, GDXJ will be second.
First to do what, exactly? The joke is on everyone, none of the paper claims that have been created will be honored!
Then we're all fucked. Spot silver is not low enough for me to buy a monster box. Spot gold could go down as well. DCA into the GDX, RSX, GDXJ seems like the right play for 2015 - 2020.
I’ve heard from both financial advisors and columnists that zero is the correct allocation to precious metals. Considering the cracks that are showing up in the debt based monetary system this is a ridiculous assertion. This is a rebuttal to the ridiculous claim that you should not own ANY precious metals.
the problem is that when the shit hits the fan these paper fuckers all look at each other, piece of paper in one hand package in the other, and they run to gold repo, the only money good collateral there is, supply of paper gold goes up, price goes down
"clearly the Credit Cycle has peaked"
LOL
Yeah, I know what he means -specifically...but...
The CBs are still printing/QEasing.
The Commercial Banks are still rehypothecating and short selling and generating trillions of derivatives bets annually...
Collateralization? Mark it all to fantasy!
Goal-seek and adjust! The Ratings Agency says it's all AAA once the mortgages are shredded and the MBS codes on the MERS spreadsheet are all that can be ascertained with certainty!
Nation States are still running up the future liability tabs via deficit spending, continuing or ramping up vast un(der)funded entitlement, social services and retirement benefits programs.
such forceful statements about clearly rigged markets suggests a hidden agenda here. are they looking for counterparties?
If....
You eat meat.
You get an education.
You need healthcare.
How can you say we don't already have run-away inflation in parts of the economy? Even if you look at sections of housing it's ridiculous like NYC, D.C., San Fran.
You need a mortgage essentially to get an education, go to the hospital, or buy a home. Car loans out to 5 years.
Just because you don't need a wheelbarrow full of cash to buy a potato doesn't mean inflation isn't already far ahead of us.
You know how bad healthcare inflation is? I heard someone at the bar say they wish they had insurance to pay their Obamacare deductable of $5,000. Think about that.
Right on the money. Among other things, i handle insurance benefits for small groups. Most of the major carriers are discontinuing group policies that have less than $5000 out of pocket maximums per person ($10000 max for family). Two years ago, we had no deductibles or coinsurance of any kind. Any wonder why Americans have no money? This is the biggest transfer of personal wealth in history.
See, you don't understand economics. Sure, deductibles and health insurance rates are skyrocketing, but then you just go see Dr. Nick Riviera who only charges $19.95 for a by-pass. Please learn some hedonics before commenting. Sheesh!
Would love it if the 19.95 doctor shows up. Hoping it happens. Doubt will apply to the medical industry anytime soon. Hedonics take time. And, the system in place makes it even more difficult.
You know how bad healthcare inflation is? I heard someone at the bar say they wish they had insurance to pay their Obamacare deductable of $5,000.
no problem there's a derivative for that
This credit cycle has peaked ? Well I'll be a monkeys cunt. This CC is older then I am.
The credit cycle will never peak because central banks will soon go entirely digital and get rid of paper currency.It'll help them bring on hyperinflation.
WTF? Yeah, I'll eat my hat if 10's are over 3.00% at the end of the summer.
"WTF? Yeah, I'll eat my hat if 10's are over 3.00% at the end of the summer. "
Some people are operating under the expectation ( or, is it simply illegal pre-announcement disclosure? ) that The FED will indeed raise rates in the summer/fall in order to say that they have.
The effects of any such increase, however marginal, will not be favorable to a great majority of US Dollar debtors, the domestic RE markets, etc...
The marginal rate increase will thus be rapidly reversed.
-IMHO, it is highly likely that such a marginal rate increase followed closely by reversal and lowering will set up a round of FED QE in spring 2016 designerd to both buy The FED some sorely lacking credibility on rates language, and to try and float the markets through the 2016 election without suffering a massive correction and generation of deep public resentment...
This guy sounds like Rosenberg who was told by his employer to do a 180° on his macro views or be fired...they have to sell inflation much like the NY Fed.
You'll have to eat your hat .... somebody already ate your hair !
Time to try a truly neutral FED, ECB and BOJ policy.
Pack your stuff, shut down your "Fisher Price" trading machines and get the fuck out of the building.
Que the ranting of a 100 commentors who know nothing of the speculating but won't let that stop them.
"Forget the 1930s. Inflation is different this time."
Forget inflation, deflation is the last act of the inflation/deflation cycle. Bubbles deflate.
Gold represents a debt which has already been paid.
What the cabal calls money today is an unpaid debt which can never be paid.
As long as people can be convinced to hold currency (and it's equivalents such as bonds) and not spend them it is the same as if they were never printed.
As long as 'gold' investors can be convinced that a paper promise is as good as the metal it is the same as if the gold was actually mined.
So only when confidence in paper is rattled will we see any real change. When that day comes it could come very quickly. Everyone knows something funny is going on. They know the numbers don't add up. Most are waiting for the look of recognition on the other guys face. When they see that, then and only then, do they plan a quick run to the exits.
I suggest you get your gold now. It is cheap and you can actually get the metal.
Another "Gold to Explode" prediction .... one of these days .... one of them will be right on .... and, as a boner, Tyler will finally talk down the DOW, too ! LOL
Does anyone trust this guy???
If an Economist came out of a coma (insert joke here) and looked at US economic data would they say "Fed is probably right at the beginning of a rate hike cycle" or would they say "Fed is either at the end of a rate hike cycle or just about to ease". The Chart of "Fedhike" Indwex above says the same thing.
But Fed is desepare to end the ZIRP experiment and are using bogus Unemployment rate to rationalize their move. I think Fed hopes one small hike, jawbone the fallout, hike again, massage markets, etc.
i think one hike and risk markets will shit the bed and Fed will backtrack like crazy, hint of cutting back again, QE4 etc.etc.
I have said it before, and I will say it again- the Fed simply can't wait much longer to raise rates since, sooner or later, another recession is going to occur. And if it occurs with ZIRP still in place, every monetarist and Keynesian around is going to have shit on their face. We are way down the rabbit hole.
This guy is almost always wrong
Unless by saying gold he effectively means gold and silver he contradicts himself. Gold going to 1425 is around a 25% increase in price. Silver going to 35 is around a 120% increase.
I think he meant gold to 1425-1435.
I wish he was right - but I think he will be wrong.