Saxo Chief Economist Warns Consumers "Maxed Out", Fears 30% Plunge In Stock Market

"I think overall we have been pricing in for Goldilocks and we are closer to Frankenstein to be honest," warned Steen Jakobsen, Saxo Bank's outspoken chief economist, during an interview with CNBC, and that divergence from reality could mean markets face a 25-30% correction from a potential sudden recession scenario.

Jakobsen cited several factors including growing credit-card loans (and soaring delinquencies), a widening fiscal deficit in the U.S., doubts over infrastructure spending plans, and a potential trade war.

"All the data we've seen over the last few weeks has basically been that the consumer is maxed out, we've seen that in credit card loans as well, so I think the consumer is done spending the money."

The Saxo Bank economist appears to have noticed what we highlighted earlier in the month, that while the larger U.S. banks that dominate credit card issuance have focused on prime and super prime consumers post the Great Financial Crisis (GFC), and have enjoyed a prolonged period of low charge off rates concurrent with the Fed’s almost decade long ZIRP.

As TCW's Chet Melhotra notes, it is America's smaller banks - those not in the Top 100 by asset size - that have experienced in just the recent months a surge in charge off deterioration, which at 7.9% is on par with the last financial crisis!  In other words, to find where the next consumer credit crisis hides - and will erupt next - ignore the big banks and focus on the smaller ones.

 

And as we also noted here, judging by the collapse in household "buying plans," the consumer is indeed "maxed out" as Steen notes.

 

As CNBC details, Jakobsen highlighted a "Goldilocks" scenario that he feels traders are mistakenly pricing in to markets, where fresh economic data are either not too hot or not too cold. Overall, the global economy is currently experiencing lower levels of unemployment and higher growth. Looking at 2018 in particular, many analysts hoped for strong global growth on the back of higher inflation and higher investment, but according to Jakobsen, these drivers "aren't actually materializing."

Instead, Jakobsen made a reference to the novel "Frankenstein," arguing that the economy had been skewed by central bankers, who have injected trillions of dollars into the global economy to boost growth and investment.

Estimates for the first quarter of 2018 "started at more than 5 percent expected GDP (gross domestic product); we are now significantly less than 2 percent for the (first quarter) expected, so I don't really see things happening in the growth area," Jacobsen added.

"We've been at 2 percent exactly since the financial crisis, I don't think we're going to deviate from that," he said.

And Jakobsen warns that in a scenario of a potential sudden economic recession, he sees a possible market correction of between 25 and 30 percent.

Comments

Endgame Napoleon NoDebt Fri, 03/30/2018 - 08:14 Permalink

Except on here, I wonder if political & economic elites will ever be called out for defining “low unemployment” as a state wherein half of citizens make on average $13k, while 50 million working-aged citizens sit on the sidelines, out of the workforce? The gap between what basic living expenses cost and what the undisclosed, underemployed and out-of-the-workforce citizens can afford is wide, explaining most of the credit chasm.

For those who hold the “jobs,” many are just churn jobs. In between those fly-by-night jobs, people must cover bills while looking for a new churn job for a lengthy period before the first inadequate paycheck arrives, even though we all pay into the UC system and even though corrupt momma managers and retained, non-quota-meeting, culture-fit mom employees often take an enormous amount of time off beyond their PTO and mandated pregnancy leave, while bullying out those who do not. Some Americans stay on UC for months, while others get $0.00. That same equation applies across the whole rigged system. 

In reply to by NoDebt

karenm Thu, 03/29/2018 - 20:01 Permalink

Maxed out??

What happened to "Best economic conditions in decades"? 

Or

"Highest sentiment ratings since 2010"?

 

See, it's all bull shit, every bit of it. 

Endgame Napoleon karenm Fri, 03/30/2018 - 08:21 Permalink

They base those forecasts on polls that Trump debunked during the campaign. They just call a “scientific” selection of subjects, asking them questions. In this city, they advertise temp polling jobs, which pay $9 per hour. These are just the people asking the questions, but nonetheless, the gospel it is not.

In reply to by karenm

Endgame Napoleon MusicIsYou Fri, 03/30/2018 - 08:27 Permalink

Due to concentrating two high-salaried jobs in one household with no risk to create jobs, the top 20% of dual-high-earner parents do fine, managing to go on lengthy and expensive vacations every couple of months, in addition to financing homes in expensive zip codes, second homes, home renovations, private schools, etc. The gap between them and the 1% is wide, but the 20% has less risk due to employing no one and leveraging themselves very little to start / maintain businesses. In the past, that wealth from high-paying jobs was spread out over more households. 

In reply to by MusicIsYou

MusicIsYou Thu, 03/29/2018 - 20:08 Permalink

Gee it could be because 99% of wealth is owned by 1% of the population, and the 1% is a small number of consumers. There's not even enough consumers in the top 1% that will make it affordable for robots to manufacture goods and services. That's why in the not too distant future civilization is just going fall apart. But hey, at least the top 1% can count all their money, and that's the only thing they'll have. Haha the mega rich are going back to the stone age. Haha, well that's the circle of life.

Endgame Napoleon MusicIsYou Fri, 03/30/2018 - 08:46 Permalink

Their solution is to destroy the those living on earned-only income in the bottom half—the half that has on-average earned income of $13k, specifically the citizens with one income who are not paid by government to have sex and reproduce.

Government creates artificial consumers by paying the rent, groceries, electricity and other major household bills of many womb-productive, single-earner households in the bottom half, adding monthly cash assistance and a refundable EITC child tax credit up to $6,431 for them to spend. 

Along with the 50 million working-aged citizens out of the workforce, any underemployed, non-womb-productive, non-welfare-eligible citizens are not consuming much unless it is on credit. 

The other part of the solution is to import hordes of low-cost, foreign workers with male breadwinners and womb-productive wives/girlfriends who produce welfare-eligible US-born kids.

The men work part time for a pittance to stay below the earned-income limit for monthly welfare and refundable EITC child tax credits, just like the single mom citizens in the bottom half of the economy do. 

In that manner, Bigly Government artificially creates a consumer base for the products that the 1% manufacture with low-cost labor in China. It is a subsidy system, like farm subsides, propping up the 1%’s foreign manufacturing investments. 

In reply to by MusicIsYou

indygo55 Thu, 03/29/2018 - 20:09 Permalink

This will go on at least until fall when the new year approaches and the real unwinding occurs with the tightening from the FED, Money still to be made here folks. 

g3h Thu, 03/29/2018 - 20:18 Permalink

Quick. Call the Chinese. We export them TBS - Trump-backed securities.

Then we pass lump sum cash to Trump counties.

Balanced trade, happier Americans, win for the President.

BeerMe Thu, 03/29/2018 - 20:19 Permalink

This is bullshit.  The consumer has been maxed out for a long long time.  This fucker hasn't been paying attention.  Now I'm buying.  Fucking clowns.

HRH of Aquitaine 2.0 Thu, 03/29/2018 - 20:20 Permalink

Hey, I am dumping my triple-play Comcast bundle once my MagicJack ($43 for a year) arrives next week. I will probably sign up for Hulu for TV and start trying out digital TV attennas for free TV. Anyone have a good digital TV antenna they recommend that is less than $80?

Oh found a very cool 6-speed bike for $40. Waiting to hear back from the seller on CL! I hope I get it! It even has a big butt seat! My butt isn't that big but it is one of the comfy seats not one that looks like a torture device you are supposed to sit on.

AGuy HRH of Aquitaine 2.0 Thu, 03/29/2018 - 22:27 Permalink

"Anyone have a good digital TV antenna they recommend that is less than $80?"

Sure:
GE 29884 Pro Outdoor/Attic Mount Antenna

I tried a lot of antenna's this year. This one works the best to me. It able to pull in a bunch of stations about 80+ miles away (I do live on top of hill which provides a large gain). This also has a wide angle reception compared to other antennas that can pull in long distance channels,but have are extremely directional You have to accurately point them at the station.

In my location, there are stations in many different directions, so I needed an antenna that was fairly omnidirectional. I pointed the antenna at the weakest stations, and the antenna is able to receive the other stations that are from other directions. I was able to recieve 50 channels from about 20 stations (digital stations often broadcast multiple channels)

If all you stations are located in a single direction, than you make have good luck with 1byone 80 Miles Digital Amplified Outdoor works well.

Both antennas are under $40 from amazon.

I tried to use multiple antenna but its very difficult to get the antennas matched that does not cause interference reflections as well as getting multiple antenna accurately pointed when the antenna are mounted high on a mounted pole.

A good resource to determine which stations you can receive use tvfool http://www.tvfool.com/

In reply to by HRH of Aquitaine 2.0

autofixer Thu, 03/29/2018 - 20:25 Permalink

Everything bad is converging this fall.  Just in time for the mid-term elections and the Demoncrats return to power.  Trump then announcing his return to his roots in the party of slavery.  

Alexander De Large Thu, 03/29/2018 - 20:27 Permalink

ZH is going into gay territory with UFO stories now.

Trying their damndest to jerk off on the last shred of a sock of credibility this site has left.

Stawk markit gunna crash 30% then we gunna go to thermulnookleer war with Chinussiaranorkorea then aliens gunna land to tell us da good newz bout Jeebus and silver coinz.

Giant Meteor Alexander De Large Thu, 03/29/2018 - 22:05 Permalink

While I'll admit there has been a dearth as late of weighty readables, here and there are sometimes nuggets to be mined. And the comment section! Well sure, it sometimes suffers as well, both in edifying and original content.

Folks quite often for lack of better hobbies simply huddle round the burning ash can of humanity on cool nights, shit talking, egging and cheering each other on like drunk bohemians marooned on misfit Island. Be that as it may, there is rarely a shortage of good tall tales, boasting contests, pissin, moanin, cussin, the occasional rhetorical brawl. Also, good one liners, humor, fantastic satire, worthy personal attributions, with a few novelettes, and manifestos thrown in for good measure ..

May I recommend for you instead sir, please too try the brawny nukler steak and peppers with the Jerimiah Johnson green beret sauce, with just a smattering of Kim Jong-un secret Chinese meeting. For dessert try the Stormy Daniels delight, lightly sprinkled with Mueller/ Russian collusion chesnuts ..

In the future, just pass on the gay UFO candied yams ..

In reply to by Alexander De Large

shortonoil Alexander De Large Fri, 03/30/2018 - 09:00 Permalink

"ZH is going into gay territory with UFO stories now."

 

Try educating yourself a little before you post. Unexplainable aerial craft have been observed, recorded, and reported by over 1000 US, and British military officers over the last 70 years. The need for proof is getting a little redundant. They have no more need to communicate further with us than you have to engage in an enlightening, uplifting conversation with an orangutan. Let's just hope that they don't evict us for screwing up their planet.

In reply to by Alexander De Large

Aubiekong Thu, 03/29/2018 - 20:34 Permalink

Well what happens when the central banks (government) just prints money and buys public stocks in effect becoming the owner of all private companies?

RedBaron616 Thu, 03/29/2018 - 21:25 Permalink

Everyone has an opinion and I am not convinced anyone's opinion is better than anyone else's. They all act like they know what they are talking about, but in the end, only one in 1,000 will nail it. The rest will claim to have been very close, but they still hedge their bets. None of them are out of the market entirely. Smoke and mirrors.

 

MrNoItAll Thu, 03/29/2018 - 21:39 Permalink

He said the same thing on an interview at Peak Prosperity. Steen must have been selected by TPTB to go forth and spread the word of impending doom to the witless masses.