Via Saxobank's Steen Jakobsen,
Standing on the doorstep to 2015, we are experiencing near perfect conditions for momentum and equity investment. Inflation has fallen to its lowest since the 1980s, interest rates have followed, and energy is relatively stable.
Corrected for inflation, oil at $65/barrel today equals $20-40/b in the 1970s.
Low volatility has given investors a false sense of security that could lead to the biggest upset in 2015. Central bankers meanwhile have become the generals in an economic war in which the final tool in the box - competitive currency devaluations – merely exports problems overseas.
Nowhere exemplifies this better than Japan after the latest bazooka launch by Shinzo Abe threatens to become an out-of-control, inflation-stoking missile. Japan may have bought the global markets a further quarter or two of protection but the real world will have its say.
We saw it for one week of mayhem in October. If that’s anything to go by, we are in for a rollercoaster ride in 2015. Tangible assets and production sit at all-time lows.
Paper money investment has crowded out productive capital while societies are dominated by hairdressers and bankers. We’re losing the art of manufacturing.
Meanwhile the power of the US of A is waning as China rises and when the superpower pecking order changes, volatility and war ensue. Nothing is ever given and Outrageous Predictions remains an exercise in finding ten relatively controversial and unrelated ideas which could turn your investment world upside.
By imagining the most negative scenarios and events you will have a better chance of navigating the turmoil, be it a Russian default, volcanoes spreading havoc, or an internet Armageddon.
And we at Saxo Bank remains convinced higher volatility and a potential move towards a mandate for change is upon us as macro thinking enters a final fight to the death before we can again put our faith in people, ideas, education and change rather than hollow promises. 2015 will be a tough year but potentially also the year we look back at as the nadir.
As Winston Churchill famously said:
“If you are going through hell, keep going”.
10 Outrageous Predictions...
- Russia defaults again
- Volcano eruption decimates crops
- Japanese inflation to hit 5%
- Draghi quits ECB
- Corporate bond spreads to double in 2015
- Internet hacks smash online shopping
- China devalues yuan 20%
- Cocoa futures hit USD 5,000/tonne
- UK house sector to crash
- Brexit in 2017