Happy New Year - 2015 was an amazing macro year, 2016 will be even more exciting.....

"May the New Year bring you courage to break your resolutions early! My own plan is to swear off every kind of virtue, so that I triumph even when I fall!" 
― Aleister Crowley, Moonchild

 

2015 was  an exciting macro year, probably the most interesting since the GFC crisis started:

 

·        Policy makers went into overdrive and still failed – the lower for longer was dismissed, only for ECB to turn up late to a party ending. I love the timing of ECB and Europe,' better late than not at all' seems the motto of choice. The refugees will add to investment & growth in Europe in 2015 making ECB look out of line…..

 

·        Fed hiked "in spite" and will probably take Q1 growth as sign of confirmation – realizing too late that US economy can't tolerate higher rates..

 

·        Three years of falling emerging markets – consensus claims there will be a fourth year, of course I doubt that….

 

·        Oil going to sub-25?  Market seems to forget that Iran has been exporting oil forever, just not "legally"… plus OPEC needs production ceiling if Saudi et al wants to maintain the power of the region….

 

Finally, as 2015 close – the long warned signal for Fixed Income to sell off have come: today my "models" sold 10 and 30 Y US bonds plus went short both LQD and IEF – interesting close…!!!! Indeed….

 

 

 

 

2015 was the failure of central planning and the "asset allocation" year was the worst EVER – according to Bianco Research (Thank you Jim Perry !!!)

 

http://www.arborresearch.com/bianco/?p=113797

 

 

 

Let me end the year by wishing the best of luck and prosperity in 2016 – I promise it will be exciting year – Never has there been more opportunities, never have the policy makers been further away from the "the truth" and consensus than now, and of course our dear politicians are hopeless lost in a world of fantasies with reality catching up to their "pretend-and-extend" – You can run from Greece going bankrupt, but you can't hide from millions of refugees!

 

I had the pleasure of meeting many of you from this email list and I must say I was impressed by your commitment and willingness to discuss! Thank you for welcoming me all of you!

 

Safe travels into 2016 and Au Revoir,

 

Steen

 

 

 

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.

Steen's Chronicle: The Big Nothing? Final macro note of the year

Steen's Chronicle: The big nothing?

 

"I love to talk about nothing. It's the only thing I know anything about" – Janet Yellen……….sorry Oscar Wilde J

 

Finally! Saxo Bank's Outrageous Predictions is out:  Saxo OP-2016 Link to PDF and less important: Fed hiked!

 

My 'real' 2016 outlook in headlines will be this:

 

·       US Dollar will weaken – it will follow the "normal path" of weaker US$ post the first hike. https://pbs.twimg.com/media/CVEL-skVEAAyeOs.png:large

·       China will do better than expected – the easier monetary policy, but more importantly the "internationalization of RMB" will drive demand up, not down

·       Emerging market will be the best performing asset – it has both price and value being cheap. Argentina moving to floating currency is first good news in three years and more is to come.

·       2016 will be a year of two halves: A bad start, and a good finish. S&P will trade both 1.800 and 2.200 during the year, but overall 2016 is a "year of transition from zero bound, none working policies towards a new business cycle which will start with a "bust" and then a new start.

·       El Nino will impact inflation, growth and commodities positively: https://pbs.twimg.com/media/CWIgP6kUAAARm_6.png:large

·       Inflation will be higher next year – higher than expectations: El Nino adds 0.2%, base effect another 0.2% and then some demand pull and more credit flow.

 

Federal Reserve – Fed says four, market says maximum two – I'm with Fed

Fed left it was late, probably too late, but the tone of the press conference and "dots" indicates Fed high believe in their forecasts.

Four hikes is on the cards for 2016, the market consensus is two hikes offered – the gap remains and for now the risky assets trades on fading the Fed.

Fed however do tend to deliver the promised hikes. An excellent piece "Historical lesson from Federal Reserve rate-hike cycles" from Allianz Global Advisors proves the point:

 

Most commentators of course thinks this time it's different – always is right?

 

Q4-GDP looks better and better, my favorite indicator: Fed Atlanta's GDPnow is now well inside the consensus:

 

 

The big question: Inflation or not?

 

The main "new information" I got from Chairwoman Yellen was her increased confidence in inflation picking up – here lies a potential "explanation" between Fed and market. Market simply does not buy higher inflation despite these headline recently:

 

 

Euro core inflation at two year high and overall core-inflation have not only increased by stayed closed to 2% at all times here is the link to Yellen direct answer to inflation

Meanwhile my main theme for Q3 and Q4 of this year – the price of capital rising continues – I don't need to remind you but it has been carnage.

 

 

Tactical

I leave 2015 risk wise very light on positions – my price signals is not flashing yet and the only optionality I will want to own is upside in crude (WTI), Gold/Silver and weaker US$.

It will take the market a week at least to "get…" the message that the cost of money has now started a move higher and probably much higher than most people can even imagine. 80% of all trader in the market today have never lived through a Fed hike cycle and the cost of capital needs to rise – the 57 trillion US$ of debt which has financed the meaker growth we have seen since 2009 now needs to be addressed.

 

Thank you,

 

Let me use this opportunity to say thank you to all the customers, investors, conference attendees, media and colleagues I have met in my busiest year ever.

I have been on the road for more than 120 days, been to more than 30 countries, but everywhere I am astonished how smart, open and engaged everyone is and this despite me often telling you that you are the dumbest generation ever, the most bland, the most average, and the least productive!

This ability to accept the discussion, for us to have the conversation has been the highlight for me and it's a sign of not only a willingness but also a commitment to move towards a mandate for change.

I wish all of you a happy holidays, may the presents be large and plenty,

Safe travels,

 

Steen "Santa Claus" Jakobsen

 

 

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.

2016 Outrageous Predictionsis out!

Dear All,

 

Please find the OP-2016 attached as PDF – and a presentation I use to explain them.

 

Hope you will enjoy it.

 

Safe travels,

 

Steen

 

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.

US Excess rate indicates MAJOR cycle turn ? Cost of capital RISING despite ECB and a slow FED

 

 

Interesting chart – the US "excess rate" in 10 yr. sector……hence the "cost of capital" for reserve/funding currency of choice…

 

A high – too high price of money- have a tendency to "kill growth" in rest of the world and hence spill over into lower markets, US$ and risk…..

 

Here its charted vs. the DXY index…  The excess rate follow Sinus-like progress from -50 to +50 – below/above creates reversals….

 

In other "divergence" is MAX-ed out presently…..

 

Another look here at 12 month (1 yr) – GDP weighted ….also… price of money rising..

 

 

 

Finally, credit space.. CCC – Junk has gone ballistic..

 

 

 

Even BAA – lowest investment grade keeps seeing rising yields…

 

 

Leveraged loans @ 2010/11 prices!!!!

 

 

 

 

Another divergence chart… EUR high yield vs. Global High Yield..

 

 

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.