The Iranian economy is already under pressure as it is. However the single most important export good is
oil and since we expect oil to trade as low as $40 or even $35, the purchasing power of the Iranian society
in USD will diminish. The government will be under severe pressure as they will not be able to uphold the
supply of basic necessities. There are limits as to how much the Iranian population will stand up to. These
limits are wide in a well functioning economy, but with energy prices dropping heavily, social unrest and
dissatisfaction are guaranteed.
Materialul in intregime aici:
Crude @ 25 USD
Crude will trade lower during 2009 as the demand slows due to the worst, global economic contraction
since the Great Depression. We will see production cuts by OPEC, but due to disagreement within OPEC the
cuts will not be as substantial as required in order to hinder crude falling from the current levels.
Furthermore, oil producing and less civilized countries that have grown dependent on oil revenues in order
to please their populations will desperately break any concerted efforts to keep oil prices high.
S&P500 in 500
S&P500 will hit 500 in 2009. The primary reason will be falling earnings, rather than falling P/E ratios (since
the low interest rates justify relatively high P/E’s). There are several reasons why earnings will continue to
drop: 1) Consumers will no longer be able to extent their credit from banks, since they are writing off losses
and need to lower their balances. 2) Cost of funds have also increased in the corporate sector and
especially for debt financed consumption. 3) Total housing equity is vaporizing and will no longer be able to
serve as collateral for loans. 4) Companies will curb their investing programs, which will hurt B2B business
Italy will make good on threats to leave the ERM
Italy has a long‐run affection for devaluations, which is not possible within the single‐currency cooperation.
Government finances are under immense pressure and the ERM requirements will not only be violated,
they will be completely ignored in 2009. EU is likely to crack down on excessive government budget
deficits in several member states, but Italy could make good on previous threats to leave the ERM
AUDJPY to 40
The Australian economy is heavily influenced by the commodity market and a large part of the country’s
economic expansion in the past year has been driven by the commodity boom. We believe that the whole
commodity complex will be left dead in the water for the next ten years due to real demand destruction
caused by the high prices in the past five years. At the same time, we are bullish JPY with the big, Japanese
Current Account Deficit and the overwhelming domestic savings.
EURUSD to 0.95 – and then to 1.30
The potential problems in the Euro‐Zone are simply not getting the attention they deserve. European bank
balances are under tremendous pressure due to the out‐sized exposure to Eastern Europe – a region that
will increasingly falter during 2009. At the same time intra‐European economic tensions are increasing as
witnessed by the government bond spreads vs. Bunds. Additionally, the USD is the primary medium of
exchange in money markets, which ensures that as long as they stay tight, USD demand will be high. That
said, the USD isn’t a sound currency and the obvious problems in the Euro‐Zone are very soon all priced in.
Thus, a move to 0.95 will be undershooting the fundamental case.
Chinese GDP growth to 0%
This is as close to recession, China gets in 2009. The export driven sectors in the Chinese economy will be
hurt significantly by the free‐fall economic activity in the US. Furthermore, a lot of the commodity based
investments that have been undertaken in the past five years will sour with the collapsing commodity
prices. Since the Chinese economy has been stimulated by overly expansive monetary policy for years,
more of the thereby induced speculative excesses will also be revealed in 2009.
Pre‐In’s First Out
We believe that several of the Eastern European currencies currently pegged or semi‐pegged to the EUR
will be under increasing pressure due to capital outflows in 2009. Several of these countries already have
extremely large Current Account Deficits and their needed refinancing will make them vulnerable to
additional credit market disruptions. This especially goes for the Baltic currencies.
Reuters/Jefferies CRB Index to drop 30% (to 150)
Commodities might have been an even bigger bubble in the past years than equities (but not credit
derivatives). We believe that the speculative excesses have been so large that they have even skewed the
demand and supply statistics. We even doubt the consensus belief that demand has been outstripping
supply for years is true. Hidden stockpiles of especially industrial metals will be unloaded during 2009 and
that will press prices even lower.
First Asian currency to be pegged to CNY
China’s economic, political and cultural influence is growing and a return from Phony Economics to Old
School economics will lead everyone to focus at the important issues. In other words: Who has the
productive potential? Who holds the debt? Who has growth and savings? Most of the answers will favor
China and the Asian economies will increasingly look towards China to find new trade partners and to scale
down on the hitherto US‐centric agenda
Materialul in intregime aici: