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Steen Jakobsen, Chief Economist Currency Wars – the new extend -and- pretend ? 2013

Steen Jakobsen, Chief Economist Currency Wars – the new extend -and- pretend ? 2013. The Perception vs. Reality Gap. ‘Illusion’ vs. reality Stock market vs. Unemployment rate ECB ‘succes’ vs. Rising debt / gdp levels Optimism vs. Crisis management Momentum vs. Fundamentals

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Steen Jakobsen, Chief Economist Currency Wars – the new extend -and- pretend ? 2013

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  1. Steen Jakobsen, Chief EconomistCurrency Wars – the new extend-and-pretend?2013

  2. The Perception vs. Reality Gap • ‘Illusion’ vs. reality • Stock market vs. Unemployment rate • ECB ‘succes’ vs. Risingdebt/gdplevels • Optimism vs. Crisis management • Momentum vs. Fundamentals • Economiccrisis vs. Politicalcrisis

  3. 30 years of experience in a fewlessons John MaynardKeynes Joseph Schumpeter Denial Protest Mandate for change

  4. Dominating Trends for 2013/14 MonetaryPolicy: QE replaced by currency manipulation and more ‘overtmonetaryfinancing’ Macro trends: 2013 willsee the crisisevolve from an economiccrisis to a fullblownpoliticalcrisis Macro inputs: Lowerenergycosts, reshoring to the US, lowercontribution from growth from EMG due to ‘MiddleIncome Trap’ and inflationary pressures, global lowerdisposableincome and higher net taxlevels. Investment:Flatstockmarkets at best for balance of 2013, betterfixedincome performance(lowgrowth+ tension), and risingagricultureprices. FX exposurewillmake up bulk of attribution to return for balance of 2013

  5. Investment themes for 2013/14 Beta exposure: 70% in Permanent Portfolio Alpha exposure: 30% in directionals Alpha risk: FX Shorts: GBP, ZAR, SEK, HUF, PLN, AUD(fromQ3),CAD FX Longs: USD(50%), EUR (vs. EEA), SGD, NOK Futures Long: Soybeans, Timber, Gold, Bunds, 10Y Notes, AUD bonds Futures short: BTP, OAT, CAC-40 and DAX (both in options) Neutral: JPY, Credit, Outrightstocks Opportunistic: Sub-Sahara excl. S-Africa, Aluminium, Gold miners, Insurance companies, energytrading Politicalplays: France to underperform, Italybeing non-compliantto OMT, Germany election, Eastern Europe in deeprecession,Tyrkey:Middle East safe haven

  6. Currency manipulation the new Extend-and-Pretend

  7. FX Manipulation: Shades of grey Open manipulation: Switzerland & Japan Semi-open manipulation: UK, South Africa, Poland, Hungary, Taiwan, South Korea, China ‘Needs to intervene’: Sweden, Canada, Australia, New Zealand ‘Agnostic’ Europe, Singapore, Norway

  8. Middle Class can’t save us now…

  9. Need a war? Weare ”at war”….economically

  10. The Italian job

  11. The Germany – anotherparadox

  12. Growth? Where? EMG slowingdown….

  13. Eurozone indicators point towards more gloom

  14. China – Bad growth – Middle Income trap

  15. France – the new “weak”Germany – the new “spender”

  16. Macro Overview • Slower growth, but is Spring coming?

  17. Game changer: US shale gas

  18. The wonders of microeconomy and markets (All sourcesarefrom externalnews sites)

  19. Demographicsare not a drag compared to peers

  20. CEO’sbuying back stocks but privatelyselling….

  21. Valuation • Hope vs. Reality

  22. Abe-nomics & JPY (All sourcesarefrom externalnews sites) (Data as of 2012-11-22)

  23. Investors needs to be ”agnostic” on economics

  24. Allocation • Allocating risk vs. Allocating asset • Stocks: • SPY US (18.75%) • EM Bonds: • EMB US (14.50%) • Commodities: • DBC US (10.00%) • GLD (4.50%) • Corp. Bonds: • LQD US (6.25%) • Treasuries: • IEF US (25.00%) Government • IPE US (21.00%) TIPS

  25. Allocation • Allocating risk vs. Allocating asset

  26. Housing– Better and better .

  27. GBPUSD • GBPUSD – lowest monthly close since 1985: 1.4100

  28. USDZAR • USDZAR – recent upside despite strong risk appetite…

  29. AUDUSD • AUDUSD – coiling for a big move?

  30. Thankyou!

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