Saxo Bank’s 10 outrageous predictions for 2014


This is becoming something of an annual institution. And here they are:

1. EU creates a new wealth tax on savings above €100,000 in a return to a ‘Soviet-style economy’.

2. The European Parliament elections see the creation of a strong anti-EU alliance, to include the UK Independence Party.

3. The bubble bursts in the five US technology giants that have been trading at a huge premium to market valuations this year – Amazon, Netflix, Twitter, Pandora Media, Yelp.

4. The yen falls below Ұ80 per dollar, as investors pile back into the currency, forcing the Bank of Japan to delete its government debt in order to escape deflation.

5. The US recovery slows down, bringing deflation worries back to the fore.

6. Far from tapering, the Federal Reserve increases QE to $100bn per month and focuses on mortgage bond purchases tosupport a flagging housing market.

7. The price of Brent crude falls to $80 per barrel, as producers fail to slow down production.

8. Germany enters an unexpected recession as economic activity slows.

9. The French CAC 40 index drops 40% as local politics takes a turn for the worse.

10. The currencies of the ‘Fragile Five’ countries – Brazil, India, South Africa, Indonesia and Turkey – fall 25% against the US dollar.

Not so outrageous this year beyond number 1. My forecast for the most likely one is number 5, my base case!

David Llewellyn-Smith
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  1. Last years list had a few spiritual winners!
    1. The stock of Apple Inc plummets 50 percent from 2011 high
    4. Australia goes into recession (The effects of the slowing up-and-coming Asian giant ripple through Asia Pacific push other countries into recession. If there ever was a country dependent on the well-being of China it is Australia with its heavy dependence on mining and natural resources. And as China’s demand for these goods weakens, Australia is pushed into a recession, which is then exacerbated as the housing sector finally experiences its long overdue crash – a half decade after the rest of the developed world.)
    And missed on the other 8!

  2. Outrageous predictions for 2014? Let’s see.

    The Fed, BoE, ECB each finds it impossible to scale back ZIRP/QE and keeps moving their respective goal posts despite a steady flow of seemingly improving economic data. One of them –the ECB – actually tries to taper to set an example. But then the interest bills in the Eurozone suddenly triples and a tsunami of bankruptcies engulfs the continent. After the rise of a few neo-Nazi states and large scale ethnic cleansing therein – future historians will count the death tolls to the north of several millions, plus 100m refugees spreading to Russia and North Africa – the ECB promptly back flips. But the damage is already done.

    North Korea interprets the resulting turmoil in the West as a one-in-a-million opportunity to invade the South, and mobilizes the half starved population to cross the border. The South crushes the invasion force with the US. Desperate to save his regime, Kim Jong-un resorts to tactical nuclear strikes. The first strike invites massive counter strikes from the US, but unfortunately for Kim, the second and subsequent missiles fail to launch due to insufficient rocket fuels – the missile commanders on the sites have long taken out the rocket fuels and smuggled to China for food and iPhones. The American ICBMs wipe out North Korea.

    The resulting radioactive fallout massively contaminates the region. China and Russia demand compensation from the US, but the US congress refuses. Russia, already having been destabilized by the massive inflow of refugees from the neo-Nazi states in the Eurozone, decides to nuke the US. The nuclear fallout causes the global temperature to plunge by 10C, and the IPCC scrambles to increase the carbon emission target by 10000000000%.

    At the end of 2014, DJIA = 0, S&P = 0, ASX = 0