Thursday 17 January 2019

Saxo Bank’s ‘outrageous predictions’ grim

Dubai, December 29, 2007

A UK recession. A 25 per cent drop in the S&P 500 from its 2007 high. China’s stockmarket down 40 per cent. Oil pushing $175 p/b and continued underperformance of G3 currencies.

These are Saxo Bank’s outrageous predictions for the year ahead. And if it proves true, economic conditions in 2008 will be grim.

The Copenhagen-based online investment bank’s ‘outrageous predictions,’ compiled as part of their 2008 Outlook, are an annual attempt to predict black swan sightings in the global markets, and this year present an ominous view, said an official spokesman.

“Looking ahead we see that there are already signs that some of the world’s biggest economies could be tipped for a recession in 2008. While it is unlikely to escalate to that point, there are early indicators of rising inflation and we have only just begun to see the unraveling of the credit market,” said Saxo Bank’s head of strategy David Karsbøl.

But adding weight, and concern for the greater economy, is the historical accuracy of at least some of Saxo Bank’s annual ‘outrageous predictions.’

“Almost a quarter of our outrageous predictions for 2007 were close to or 100 per cent accurate. We forecast that the Federal Fund Rate would reach four per cent in 2007. By this last quarter it reached 4.25 per cent, so our ‘outrageous prediction’ was in fact only 25 basis points off the mark - something not many market commentators foretold at the outset of 2007,” added Karsbøl.

A number of Saxo Bank’s Forex predictions also looked more like realistic than outrageous claims as the year’s volatile conditions took its toll on currencies.

“We predicted the AUDJPY would surge to a high of 100 then fall to a low of 85, in fact it rallied to 107.8 and fell back to 86.04 so we were very close on that. Most notably, our ‘outrageous’ call on the USDNOK plummeting to 5.40 came true, and kept on falling,” said Karsbøl. 

“Finally, from the outset we were very bearish on the US housing and building sector in 2008. We predicted the S&P1500 Home Builders Index would reach 795 and quite drastically drop back to 521 by yearend. We came close, but the downturn was more severe that even our ‘outrageous predictions’ claimed, plummeting from a high of 751 back to 252.”

“Our outrageous predictions are not a science, but are meant to incite thought and debate in the market,” added Karsbøl.

Saxo Bank’s Outrageous Predictions for 2008: 1, Ron Paul elected as president of the US in 2008; 2, S&P500 falls 25 per cent from its 2007 high to 1182; 3, EURSEK falls to 8.8000 (now 9.4000); 4, USDSGD falls to 1.4000, but then rises to 1.6000 (now 1.6000); 5, EURHUF rises to 275; 6, At least three of the largest 10 US home builders will go bankrupt; 7, Chinese stock market falls 40 per cent by late summer; 8, Grain Prices to double – again!; 9, World oil prices accelerate to $175; 10, UK growth turns negative. – TradeArabia News Service

Tags: Recession | Saxo Bank | prediction |

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