Merryn's Blog

Ten outrageous predictions for 2014 - all of which are possible

Saxo Bank has made a list of ten predictions that go against the consensus view for the year ahead. MoneyWeek readers won't be surprised if any of them come true.

Every December Saxo Bank publishes a list of ten outrageous predictions for the coming year. The idea is that the things on the list are unlikely and definitely not part of the consensus view, but that they are also possible. This year's list is below.

Your comments and your own predictions underneath are very welcome, but here's my thought: the ten might not be part of consensus thinking, but I can't see Moneyweek readers being particularly surprised if any of them happened.

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1. EU wealth tax heralds return of Soviet-style economy

It will be the final move towards a totalitarian European state and the low point for individual and property rights. The obvious trade is to buy hard assets and sell inflated intangible assets.

2. Anti-EU alliance will become the largest group in parliament

The new European Parliament chooses an anti-EU chairman and the European heads of state and government fail to pick a president of the European Commission, sending Europe back into political and economic turmoil.

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3. Tech's fat five' wake up to a nasty hangover in 2014

These 'fat five' - Amazon, Netflix, Twitter, Pandora Media and Yelp present a new bubble within an old bubble thanks to investors oversubscribing to rare growth scenarios in the aftermath of the financial crisis.

4. Desperate Bank of Japan to delete government debt after USD/JPY goes below 80

In desperation, the Bank of Japan simply deletes all of its government debt securities, a simple but untested accounting trick, and the outcome of which will see a nerve-wracking journey into complete uncertainty and potentially a disaster with unknown side effects.

5. US deflation: coming to a town near you

With Congress scheduled to perform Act II of its 'how to disrupt the US economy' charade in January, investment, employment and consumer confidence will once again suffer. This will push inflation down, not up, next year, and deflation will again top the Federal Open Market Committee (FOMC) agenda.

6. Quantitative easing goes all-in on mortgages

Quantitative easing

The FOMC will therefore go all-in on mortgages in 2014, transforming QE3 to a 100% mortgage bond purchase programme and far from tapering will increase the scope of the programme to more than $100bn per month.

7. Brent crude drops to $80 a barrel as producers fail to respond

For the first time in years hedge funds will build a major short position, helping to drive Brent crude oil down to $80 a barrel. Once producers finally get around to reducing production, oil will respond with a strong bounce and the industry will conclude that high prices are not a foregone conclusion.

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8. Germany in recession

Add to this falling energy prices in the US, which induce German companies to move production to the West; lower competitiveness due to rising real wages; potential demands from the SPD, the new coalition partner, to improve the well-being of the lower and middle classes in Germany; and an emerging China that will focus more on domestic consumption following its recent Third Plenum.

9. CAC 40 drops 40% on French malaise

Housing prices, which never really corrected after the crisis, execute a swan dive, pummeling consumption and confidence. The CAC 40 Index falls by more than 40% from its 2013 highs by the end of the year as investors head for the exit.

10. Fragile five' to fall 25% against the dollar

We have put five countries into this category - Brazil, India, South Africa, Indonesia and Turkey.

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