Annually, investors and ordinary people around the world afraid of various negative economic forecasts. Although some of them may seem incredible, such forecasts can serve as an indicator of the critical risks.
Saxo Bank publishes a set of forecasts that are unlikely, but still possible.
"You should not take this forecast as pessimistic: it is based on critical events that can lead to change - hopefully for the better. Ultimately, looking back, we see that all the changes - good and bad - happened during the crisis after the final failure of the old methods, says chief economist at Saxo Bank Steen Jakobsen" - 2014 should be the year when change will not only become vital, but will be implemented".
"Shocking predictions" are not official forecast Saxo Bank in 2014, rather it is an attempt to understand the key risks for investors and to prepare for the worst possible scenario before making trading or investment decisions.
THE WEALTH TAX IN THE EU: BACK IN THE USSR
The European economy made a circuit in nature. In 2014, the deflation and lack of growth will sow havoc among politicians, forcing the European Commission to establish a working group to develop a variety of taxes on wealth for those whose savings exceed 100 thousand euros or dollars.
This initiative will be presented as an attempt to eliminate inequalities and to make 1% of the richest people to pay the state more to ease tensions in society. In this situation, you should consider buying the SPDR Gold Shares ETF and sell the basket of equally weighted rating Hermes International, LVMH and Sotheby's.
THE EUROPEAN PARLIAMENT WILL BE ANTI-EUROPEAN
After the advent of the Lisbon Treaty in 2009, the European Parliament has become not only a powerful legislative body, it is now necessary to listen, in the selection of candidates for the post of President of the European Commission - the Executive body of the European Union.
In may next year will be elections to the European Parliament, and European and anti-European transnational Alliance will become the largest group in Parliament.
In this case, Europe is unlikely to be able to appoint the head of the European Commission, which means the region will start the political and economic chaos. In these conditions, buy German bonds and sell Spanish paper with a spread of 300 basis points.
"JUICY FIVE" high-TECH SEGMENT IN 2014 will find a HEAVY HANGOVER
The American information technology sector is trading at 15% below the current valuation of the S&P 500, but a small group of shares of the technology segment is trading with a huge premium of about 700 percent above market value.
Among these companies include Amazon, Netflix, Twitter, Pandora Media and Yelp, and this growth may indicate the creation of a new bladder inside the existing one, because investors overestimate the capabilities of companies and markets after the financial crisis.
THE DESPERATE BANK OF JAPAN
If in 2014 the global economic recovery to slow down, the demand for risky assets will decline. In such a situation, investors will return to buying the Japanese yen, the exchange rate of which to dollar drops below 80.
As a result, the Bank of Japan may simply write off all government debt securities, but the result of such actions for the world economy even now hard to predict. Now the ratio of public debt to GDP reached 215% and it continues to grow.
It is not known what the outcome of these accounting manipulations in the public sector, so the decision can turn the nervousness of the market in a full prostration, and possibly even a potential disaster with unknown side effects. In Japan, for example, thus possible to dissolve about 15% of government bonds.
DEFLATION IN THE USA: WAS VERY CLOSE
Although the American economy is strengthening, but the housing market remains weak and wages were practically not growing. In January the budget standoff in Congress continues, and this increases the risks of reduced investment, employment and consumer confidence.
As a result, the inflation next year starts falling instead of rising, and on the agenda of the FOMC POPs up again the problem of deflation. In such circumstances, the preferred trading strategy is to buy 10-year bonds, on which rate of return will be 1.5% in 2014.
QUANTITATIVE EASING WILL AFFECT THE MORTGAGE
The U.S. economy continues to face serious challenges: in the private sector continues the process of refusing from borrowed funds in equity; the housing market is fighting for their position every time rates rise; the public sector continues to reduce costs; employment in the private sector is at a low level — and all this Federal Committee on open market operations knows.
Particularly acute in artificial support needs the housing market and therefore the fed will go to any measures to save the sector of housing loans in 2014 So in 2014, the FOMC will switch to the mortgage, transforming QE3 to a 100% purchase program of mortgage bonds. In this scenario, the regulator will extend the program up to the amount of more than $100 billion a month.
THE PRICE OF BRENT CRUDE WILL FALL TO $80 PER BARREL
Global oil markets are now seeing a transition period.. the Average price for oil grade Brent for the last three years has been established at $110 per barrel, and in 2014, according to the forecast, it will amount to $105 per barrel.
The expected growth in oil supply from countries outside OPEC, more than 1.5 million barrels per day in addition to another two million barrels that would be released by the solution to the supply problems from Libya and easing of sanctions against Iran, will provide a high level supply of oil on the world market. Producers have to join efforts to reduce overall production. Hedge funds react to the changing dynamics that will form a large short position in the market for the first time in many years. All this will contribute to the reduction in the price of Brent crude oil to $80 per barrel.
Russia and OPEC will not react quickly, because they are interested in a high price. At the same time, the US will also follow the same strategy with a view to ensuring the economic feasibility of shale oil extraction. However, as soon as producers begin to cut production, oil will respond with rapid growth, and investors will come to the conclusion that high prices still too early to write off as a relic of the past.
GERMANY IN RECESSION
In 2014, the Germany economy will cease to grow steadily. Germany may lose European leadership, GDP growth may be significantly below 1.7 %.
Contrary to all expectations, the production of goods and services in the economy next year will decline, not increase, while the rate of return on 10-year government bonds of Germany will drop to one percent.
THE FRENCH MARKET WILL COLLAPSE
Stock bubble, inflated as a result of pumping the markets with liquidity, will continue to develop in 2014, but then equities hit the wall, and there is a collapse of the realization by market participants of the fact that the only driving factor of growth in the market is the "greater fool theory".
Meanwhile, problems in France will only intensify in the conditions of inefficient management of the country under the leadership of the government of françois Hollande. The CAC40 index by the end of 2014 will drop by more than 40% compared with the highs of 2013 on the background of how investors are rapidly leaving the position.
CURRENCY "WEAK FIVE" MUCH CHEAPER
Normalization in global rates, which should start with ending the program of quantitative easing in the U.S., will increase the marginal cost of capital from raising interest rates. As a result, countries with increasing deficits of current accounts would be vulnerable to falling demand from global investors for risky assets, which ultimately will cause a decrease in exchange rate of national currencies, especially paired with the US dollar.
In this category we put five countries: Brazil, India, South Africa, Indonesia and Turkey. Against the background of rising costs with increasing labor costs and the expansion of subsidies related to the maintenance of the labour market, the "weak five" will decrease courses of their national currencies.
With time almost gone. They have only one tool — a currency depreciation. Equally weighted rating sell a basket of currencies "weak five" in hopes of getting 10-interest income.
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