2015 Outlook : A Bittersweet Symphony

The following message has been going around.

EM 2015

Upon investigation, I found that it is untrue. It is not 1997 with the same dates mentioned above, it is 1998 – the year of the Russian financial crisis where LTCM was brought to her knees in the chaos that ensued.

Skeptics would beg to differ on any historic repetitions in this case because if 1997 had the same calendar as 2014 which has gone by quite crisis free, how can we suppose that 2015 will repeat 1998 ?

On that skeptical note, I was reading some outlooks for 2015 and decided that Nassim Taleb is right.

nassim taleb

Doug Kass, whom I admire, also observed quite correctly that no one on earth was calling for $53 oil, 2.2%, 10Y US treasury yields and 2090 S&P500 at the end of 2013.

MAULDIN 2015http://www.mauldineconomics.com/outsidethebox/15-surprises-for-2015

2014 has been about the US economy turning, aircrafts falling out of the sky, drone wars, Ebola, Ukraine and small scale social unrest in the backdrop of the FED, oil prices, China developments and data breaches. We could include the mini Latam crisis in Venezuela, Argentina and Brazil too, but aren’t they always in some crisis or other ?

2014 has been a major turning point for myself. I have changed, my market mindset has changed, my writing has changed. The cynic has been silenced because there is not much point in pointing out the obvious and fighting the tide of social indifference.

It has been a trying time for societies around the world, people slaves to debts, working hard with no time to think about much except about the next smart phone; others work hard to preserve their hard earned millions, afraid to erode their wealth and the situation is not getting better as prosperity continues to spread to Africa, Cambodia and more.

The disillusioned see cause in the radical Islamist movements, public protests, venting their votes the other way during elections such as the US mid terms.

So, 1997 ?

My favourite song of that era – Bittersweet Symphony by The Verve is apt for 2014.


2014 performance best summarised in this Deutsche graphic of select investments/assets.


And this one from the Economist.

2014 charts2014 charts2

2015 Outlook

Key themes extracted and compared at the WEF for 3 years.

wef trends

Central Banks

2 out of 3 major central banks are on heightened alert to arrest falling inflation, 1 is looking for an opportune time to exit the ZIRP policy and the rest are just helplessly waiting on the 3 besides defending their currencies.

All I can see are short term gains and long term pains, even in the US, from all these extraordinary monetary mechanisms that bring the side effects of greater inequality, making millionaires in a world of billionaires, fueling the disparity gap leading those left behind down the path of desperation and despair.

I still like the idea of a non interventionalist approach by central banks  – http://www.wsj.com/articles/the-depression-that-was-fixed-by-doing-nothing-1420212315?mod=e2tw

China, the other major central bank to be reckoned with, is on her own tangent, pursuing global dominance in trade and major structural reforms in her markets with results unknown.

Full guide of what central banks are expected to do – http://blogs.wsj.com/economics/2015/01/05/global-central-banking-in-2015-a-first-quarter-update-for-25-economies/


Major elections just in UK and Canada. Busy times for rest of Europe – Denmark, Estonia, Finland, Greece, Poland, Portugal, Slovenia, Spain, Switzerland and Turkey.

Africa to be avoided with 4 elections – Tanzania, Burkina Faso, Nigeria and Egypt.

Asia is quiet except for Sri Lanka and perhaps, Singapore (with new rumours now of an election in Q3/Q4.

Resonating Chaos

2015 will be a chaotic year, with nothing for certain, 7 years after the global financial crisis.

It is the end of the easy monetary policy era that was funded by the US Fed as the QE taper of October 2014 continues to impact fragile developing economies.

The currency wars will continue as Europe and Japan seek to weaken their currencies which gives another excuse for the USD trade besides the rate hike story.

Lower oil prices will be beneficial in due course but we should expect to see, 1. slippages i.e. benefits not accruing directly to the consumers and, 2. credit defaults and/or credit widening that will hurt the borrowing economies (mostly EM) and corporates.

The world has not seen 3 consecutive quarters of lower oil prices since 2003 and the magnitude of the fall we have seen in the past 6 months is equivalent to that of a large scale economic crisis, quite wiping out that usual war premium that markets price in (a trade idea, perhaps ?).

WTI Crude Quarterly Chart

WTI Crude Quarterly Chart


I was mid way in my writing when the news of the Paris attacks broke. Yes, 2015 shall see a lot more of these little outbreaks of violence which has been brewing since last year – Sydney, Canada, NY shootings, Ferguson and now, Paris, although I am not sure if HK counts.

Social fabric has been asunder-ed by the stress of housing 7 billion people on Earth, each wanting to have a piece of it along with the enviable lifestyles of the rich and famous that is paraded each day in social media.

Thus, I will not give up on Gold this year but I shall be giving up on half the tech stocks out there certainly as the valuations of those taxi apps soar through the roof with nothing to save their skins with, except a user base that is as fickle as the next app that comes along.

The tech stocks that are worth buying are, alas, in private hands. We do have Palantir coming up this year and I hear some private banks have already got their allocations, so where does that leave the small players ?

For my grievances against tech, I still hold bullish on my long term calls on robotics and fuel cells as I have written about last year. The jobs of tomorrow are gradually being lost to robot waiters and drone delivery men. It will not happen all in 2015 but I am certain it shall start. https://agenda.weforum.org/2015/01/what-happens-when-automation-leads-to-job-losses/?utm_content=buffere06a7&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

Giving up on bonds is easy enough as stuff worth buying deliver worthless yields to the retail investor who needs the absolute returns. Pitch this against the funds and central banks who do not need those returns and we have a polarised and disgruntled marketplace.

And so the theme of equities and high grade bonds is an easy sell for most reports we have gotten in our in-boxes because corporate cash levels are at all time highs, profits are returning to health and inflation is expected to be kept in check.

China, India and Indonesia for the EM investments and US to represent the DM world. Europe and Japan looking sickly along with the small majors in Canada and Australia.

We are expecting rate cuts, easing and stimulus again and the populist central bankers will not fail to deliver which means our imaginations will be tested with the word quadrillion.

When the human brain can only grasp 7 digits or syllables, I think 9 (billion) is manageable but 12 (trillion) is already stretch such that 15 (quadrillion) would lead to a break down or a loss of confidence ? Shall we see when Apple (mkt cap 649 bio) tries for the trillion mark ?

Central banks have broken ranks in their personal agenda as we note that the WEF points out increasing nationalism as a theme.

The only thing the world has in common is perhaps their fight against the ISIS or ISIL, or whatever the movement is called these days without considering that the monster is created by their societies and their allies. A faceless foe is the most underestimated risk we face, not knowing where it will surface next and never to be eliminated as the wealth gap grows.

Least we forget about Ebola and MERS and the other health threats that are lurking, God forbid another missing plane, please.

Hacking will become increasingly prevalent, noting the Bitcoin banks theft, Sony, customer data leaks at banks, Target and the rest. http://www.informationisbeautiful.net/visualizations/worlds-biggest-data-breaches-hacks/

An outage would be catastrophic when businesses and networks get crippled which makes me wonder if there is insurance for that sort of stuff ?

2015 is the year of the bittersweet symphony as we reap the rewards of the years leading from the Lehman crisis.

As the song goes.

“‘Cause it’s a bittersweet symphony, this life
Try to make ends meet, you’re a slave to money then you die

My plans for 2015

I see myself changing my mind daily in 2015 where nothing is certain anymore and volatility returns to the marketplace.

I shall not be writing as much this year. After 3 years on this site, I am struggling to find a reason to continue my personal sponsorship of the running costs and the time that it takes up given the dismal results of our fund raising efforts, which simply implies that our material has no appeal except to the few faithful readers that we have.

After the site overhaul, the plan is to continue to publish bond information, commentaries and summaries the best we can, along with the occasional editorial. Friends and readers who have become good friends know where to find me if they want.

As for me, I will return to trading a little more, on my own account, and share my views along the way in the new forum section that I am hoping to fix. Hopefully, like-minded readers will submit their input and feedback.

2015 will be a big year for us all.


“Seize the day, put very little trust in tomorrow”