Aisa thought...It's getting worse...

Dear All,

 

We are close to big bubbles and dis-continued pricing in the market (less and less REAL liquidity)….……and in 2014 there will be taken a lot of bad MACRO decisions in the name of:

 

Inequality

Deflation

Bubbles

Lack of growth

 

I am just back from Asia and I had my worst fears confirmed. The quick-and-dirty conclusions:

 

Conclusion:

 

·         USD vs. Fragile Five (Indonesia, India, S. Africa, Tyrkey, and Brazil) likely to be up 20% in 2014  è (EMG crisis coming back……for real this time)

·         India will be under IMF supervision post their election in May, which is turning extremely nasty.. (Check the opposition candidates program!) è  Domino effect? 2014 could the year where "elections matters" – (EU in May, India in May, etc..)

·         Asia realize that lower "quality growth is needed" - meaning 200pp overall lower growth in exchange for less "rentier FDI models) è Asia contribution to global growth will be 100-150 bps lower… reducing global growth by 50-75 bps…

·         Housing in major bubble - I did not meet A SINGLE person who did not want to increase housing investment if it fell 10%  (it's up 100% and they want to buy a 90% price rise?)  è The day Fed does tapering housing market is at risk for 40%-50% correction

·         DM Asia remains only segment still expanding US dollar net funding (continues to increase capital dependency on FED!)  =è US dollar dependence increasing not falling

·         China's plenum real objective is overlooked: Policy uniformity - which never comes with real reforms and progress  è China will not change fundamentally, but consolidate its Communist model.

 

The good news?

 

Volatility is certain to return.

 

Tapering is not the real risk…. Look to India, Indonesia and Brazil as the canaries in the coal mine……Current account numbers cant not easily be managed and the conclusion is in: Lower growth and weaker currency only way to reduce short-term pressure.

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Investment Officer

 

Saxo Bank A/S  |  Philip Heymans Allé 15  |  DK-2900 Hellerup
Phone: +45 39 77 40 00  |  Direct: +45 39 77 62 23  |  Mobile: +45 51 54 50 00

 

Research: http://www.tradingfloor.com/traders/steen-jakobsen

Please visit our website at www.saxobank.com

 

This email may contain confidential and/or privileged information.
If you are not the intended recipient (or have received this email
by mistake), please notify the sender immediately and destroy this
email. Any unauthorised copying, disclosure or distribution of the
material in this email is strictly prohibited.

Email transmission security and error-free status cannot be guaranteed
as information could be intercepted, corrupted, destroyed, delayed,
incomplete, or contain viruses. The sender therefore does not accept
liability for any errors or omissions in the contents of this message
which may arise as a result of email transmission.