Deus Ex Macchiato

Posting will probably be somewhere between light and non-existent from here to year end, so here are few predictions to mull on. They are in the tradition of Saxo Bank’s 10 Outrageous Predictions for 2010, although some of them are a little less far into the tail. I don’t expect any of them to come true, but if one could get exposure to them very cheaply, it might be a lottery ticket worth buying. A few we have already commented upon either here or elsewhere, so no claims are made for originality – see what you think.

1. A major European bank, hitherto seen as one of the winners of the Credit Crunch, will announce surprisingly large losses.
2. The Yen will finally get the creaming it so richly deserves, given the state of the Japanese economy. USDJPY to 110, EURJPY to 150.
3. Very few bankers of any import will leave the UK once they discover how boring and well-regulated Switzerland is.
4. The ECB will cut liquidity too fast, then have to reverse and pour funds into the financial system.
5. 1 week dollar Libor does not breach 0.5% all year.
6. The US winter lasts into April, and natural gas prices surge.
7. Equity market volatility will collapse, with the VIX trading below 15. This will make guaranteed equity products cheap, but few will buy them.
8. There will be heavy equity market falls in China, causing at least a mini emerging market crisis, and possibly something bigger.
9. Greece will be fine, and its five year CDS spread will tighten below 160 b.p.s. before the year is out.
10. Basel III won’t be nearly as bad as feared for the banks, and share prices of large banks will recover fast in 2010.

Posted in: Markets by David /