This document summarizes a webinar presented by Steen Jakobsen, Chief Economist and CIO of Saxo Bank. The webinar covered macroeconomic topics including deflation risks in Australia, low growth in Europe, and predictions for interest rates and currencies in 2015-2016. It also provided investment recommendations to be long US fixed income, short the Australian dollar and BRICS currencies, and neutral on equities with a 25% allocation. Key predictions included recession in Germany and a near-recession in the US, as well as a peak in the US dollar in 2014 and its subsequent secular weakening.

1. 1
Webinar with
Chief Economist and
CIO, Saxo Bank,
Steen Jakobsen

2. 2
Housekeeping
 This webinar will run for 40 minutes, inclusive of questions.
 Please ask questions at any time. Where we can, we’ll answer
them as we go.
 This webinar will be recorded.
 Please take the time at the end of the webinar to complete our
feedback questionnaire.
 This webinar contains general advice only and does not take
into account your, or anybody else's, investment objectives,
financial situation or needs. Please see the full disclaimer on our
website www.rivkin.com.au.

3. 3
About the presenter and host
Steen Jakobsen
Chief Economist and CIO,
Saxo Bank
Oliver Gordon
Global Investment Director,
Rivkin

4. Deflation: The Elephant in the room for
the AUD housing boom
Australia, November 2015, Saxo Bank A/S

5. 5
How bad is it?

6. 6
Macro core view
A simple man’s view of the world
One Trading view:
Fixed income will outperform all
assets. 10YR US <1.50% by Q2/Q3
2015
One Economic view:
Dis-inflation/deflation will be catalyst
for asset sell-off
One Timing view:
Q2/Q3-2015 low in this cycle for ALL
indicators
One guaranteed view:
Volatility will go SIGNIFICANTLY up….

7. 7
Our biggest call:
Yields will go to new lows..

8. 8
Watch November for big drop in US Yields

9. 9
Low point getting closer: Q1/Q2 2015

10. 10
Low point getting closer: Q1/Q2 2015

11. 11
The Economic Bermuda Triangle
Steen Jakobsen’s Economic Theory – Where is my Nobel Prize?

12. 12
80/20-Principle
The Pareto principle (the law of the vital few, and
the principle of factor sparsity) states that, for many events,
roughly 80% of the effects come from 20% of the causes.[1][2]
• 80% of all credit given to 20% listed companies and banks
• 20% of population owns 80% of wealth
• 80% of all jobs comes from Small-and Medium Sized companies
• 20 mio. SME’s in Europe alone (27 mio. in the US)
• 20 mio. people now unemployed in Europe
• 80% economy needs growth to sustain 20%
• 80% return in SME’s vs. 20% in big companies next 5 years?
• ”Betting” on 20% will lead to 80% chance of Japanisation

13. Where does growth go from here?

14. 14
European recovery – Where?

15. 15
2015 also a total loss for growth?

16. 16
No defaults, no growth and no inflation means?

17. 17
Minsky moment

18. 18
Final Notice: Credit is 75% of growth

19. 19
Deflation: The death of status quo

20. 20
US: Disinflation to deflation?

21. 21
US: Disinflation to deflation?

22. 22
Inflation at low level = Economic damage

23. 23
ECB – final round with Draghi and easy money?

24. 24
The deflation ECB didn’t believe in…

25. 25
ECB keeps talking (& dreaming)

26. 26
Why are we copying Japanese model?

27. 27
Australia:
A one trick economy
with outsized risk

28. 28
Low interest + negative gearing = Housing boom

29. 29
Private debt out of control?

30. 30
RBA caught out

31. 31
RBA caught out

32. One: don't be surprised if the Reserve Bank of Australia cuts the official cash
rate to 1.75 per cent, down from its current record low level of 2.5 per cent.
OK market moved from confidence of higher to unchanged
Two: there's more chance of him being selected to play football for Denmark
than the official cash rate rising. Still not playing for DKK
Three: the Australian dollar might have a run up to US95¢ or US96¢ in the
short term but by the end of the year it will be closer to US80¢. US91 to
US86 and market was looking for US100
Four: stand by for some clarifying comments from the governor of the RBA
Glenn Stevens following his remarks last week on the ­Australian
dollar. As
expected
Five: the Dow Jones could fall as much as 30 per cent from its peak. Not yet
ECB & BOJ have delayed move
Six: China will grow at 5 per cent not 7 per cent See chart – its 5%
Seven: the US Federal Reserve will soon be forced to taper its own tapering
program. Ouch didn’t get that one right
32
Seven points on Australia(March 2014)

33. One: Reserve Bank of Australia cuts the official cash rate to 1.50 per cent,
down from its current record low level of 2.5 per cent. (AUD bonds remains
best investment vehicle through Q2­2015)
Two: there's more chance of him being selected to play football for Denmark
than the official cash rate rising in the AUD and US
Three: the Australian dollar could see 80¢ in the short term but by the end of
the year 2015 it will be closer to US90/95
Four: Housing market will test solidity of Australian banking system – New
harsh regulations by Q2­2015
Five: Australian stock market will fall as much as 25 per cent from its peak in
2015 (Driven by sell off in banks by 30/40%)
Six: Commodity prices will bottom out in Q2/Q3­2015
Seven: Global inflation will spike in Q4­2015
leading AUD growth
33
Seven NEW points on Australia(November 2014)

34. 34
China and Japan
At opposite ends?

35. 35
JAPAN QE Desperado – a very imprecise weapon

36. 36
China is 5% growth next five years….

37. 37
Markets and RISK

38. 38
US Real economy leads S&P?

39. 39
End of US supremacy?

40. 40
Positions:
• FI: Long US Fixed income – Sub 1.5000 in Q1/Q2
• FX: Short AUD, Short BRICS
• Equity: Neutral (25% allocation)
• Commodities: Short: Copper, Iron Ore vs. Long Aluminium
•Monetary Policy:
• ECB: Deflation running away from ECB / No full blown QE possible
• BOJ: QE Infinite – what’s retiring deb? Desperation
• FED: Tapering will finalize. New expansion of balance sheet H2-2015
• China will continue to slow – response?
Predictions 2015:
• Recession in Germany(Euro area) & Near recession in the US
• Inflation: Low in ‘inflation expectations’ by Q1
• 2014 peak in US Dollar – 2015 US dollar will start secular weakning
• Small cap + SME’s will outperform 20% segment by 10%
• BRIC’s will collapse on non-reform
Macro Outlook in headlines

41. 41
Outragous Predictions 2015
DRAFT

42. 42
OP-2015
DRAFT
• UK House prices to drop 20%
• Draghi leaves ECB and becomes Italian President
• Russia goes bankrupt
• Biggest Vulcano eurupts –Bárðarbunga – Cancel summer?
• Japan in recession
• Corporate bond spreads explodes higher
• CNY devalues
• Australian Banking sector needs restructure on mortgage
exposure

43. 43
Thank you
Thanks for attending our webinar! We trust you found it useful
and enjoyable.
We hope to see you on another webinar again soon.
If you’re interested in learning more about trading
Global markets, or Rivkin Global, please email
info@rivkin.com.au
Or visit www.tradingfloor.com