The year of the silver

Serious foodstuffs and oil price rises and the weakening of the dollar is forecast by the chief economist and CIO of the Danish – with strong online presence – investment bank and capital market trading house, the Saxo Bank.
In the interview Steen Jakobsen gave us, he goes against the opinion of almost every investor and portfolio manager. He believes that the El Niño natural phenomenon will favourably affect the world economy because it will increase oil and foodstuff prices, generating inflation.
He thinks that the inflation, China’s rapid growth, and the special technologies required for solar energy becoming more widespread are making silver even ‘shinier’ – it will become the star of the next year.
The interviewee also thinks that the attempts to integrate migrants might be successful and have positive effects on the European economy.

Péter Zentai: Do you anticipate significantly higher oil prices, stronger rouble and euro, weakening USD exchange rate, and a serious rise in the price of silver for 2016?
Steen Jakobsen:
The economic, market, and stock market history teaches economists and investors to prepare for the exact opposite of what the majority believes, what the consensus might suggest. We have been publishing our end of the year forecasts for 13 years, and they have gone against the popular opinions. However, there has not been any investor or portfolio manager who was brave enough to follow our considerations…

Am I right, if I assume that in the next year, the price of oil and geopolitics, such as the refugee crisis will be in the centre of attention, and will be dominant factors in the markets?
As for the refugee/migrant problem, its developments will indeed significantly influence the European and world economy and politics.
What are your predictions in this respect?
We think that a geopolitical drama is less likely to happen. We think that a positive outcome is more realistic: a rush of investments that was triggered by the integration of migrants is going to take place sooner and more intensely than expected – especially in Germany, where investments have been lagging in the recent years. Migration forces those investments and reforms that were held back for years: in education, building and road construction, and healthcare.
However, it will cause government deficits in Germany in 2016. The short term negative economic and financial effects will be compensated by the substantial economic benefits and the easing of the demographic problems on the long term…
In 2016, the greatest disaster to Europe would be if the majority of the UK voted for exiting the EU. This could become one of the biggest tragedies in the history of the EU. We think that the UK remaining a member of the EU is vital.

According to your predictions, the price of oil tripling is not unlikely at all…
Still, we cannot entirely exclude it: OPEC can still agree on a minimum price, say they decide they would not let the price go under 40 dollars a barrel. This could be followed by serious geopolitical difficulties and extraordinary crises in Europe or in its close neighbourhood, and – what we strongly anticipate – China entering a significant economic growth phase again in the second half of the year.
Nevertheless, our researches and calculations suggest that starting from 2016, the price of crude oil will fluctuate between 40 and 60 dollars for another 10 years.
There is a consensus among the major investors that after the American interest rate increase cycle, and the European quantitative easing, the dollar will keep getting stronger against the euro and every other significant currency. However, your predictions are the exact opposite!
Look back into the recent past: in the last two and a half decades, every time Fed increased interest rate – so the last five times – never did the dollar get stronger, but weaker!
This is the historical example and the lesson. And the recent one is: the amount of dollars kept outside the United States is far higher than what is kept inside. Countries, companies, and individuals have borrowed funds mostly in dollars. Countries producing global GDP are directly dependent from the dollar, its appreciation naturally harms, while its depreciation boosts world economy.

What relation do you think the dollar will have with the euro in the next year?
1 euro will be worth 1.20-1.25 dollars until the end of next year. However, I can guarantee, if the dollar:euro parity (1 dollar = 1 euro) does take place, according to the current consensus, or 1 dollar is worth more than 1 euro, then it is quite likely, that the world economy fall into recession.

Isn’t it more likely?
No, it is not. Even though, the markets will be dominated by negative news in the first half of 2016, by the second half, the positive outcomes of the migration crisis, the growth of China, the rising oil prices, and Russia’s advancement will be in the centre. We think the UK will stay in the EU, and all in all, the El Niño – contradictory to the expectations – will be beneficial to the global economy.

How is that possible? The El Niño results in rising ocean temperatures, floods, and many other natural disasters…
But many preventive measures and actions to ease the negative effects have been taken in America, Asia, and parts of Europe and Africa: enormous professional, scientific, technological, and infrastructural developments have been taking place that will contribute to the increase of the growth rate of global economy. The El Niño indirectly-directly will increase oil’s world market price by 20%. An increase of foodstuffs prices will follow – even by up to 40%! Inflation in the leading countries – currently in danger of deflation – will be a gift, a key element of the rapid growth of world economy…

Why are you optimistic about Russia?
I just returned from there, and actually, under the surface the renewal of the economy and a general modernization has started. The weakening of the dollar – that we strongly anticipate – increases the price of oil and every other energetic material – as always. As a result, the Russian economy will steadily recover: we expect a 20% appreciation of the rouble for the next year.
The depreciation of the dollar will determine the markets next year. As I said before, this is a key to rapid growth.

Furthermore, you predict the boom of silver too…
Since there are going to be new inflation tendencies in the next year, silver will become one of the most efficient investment assets. The spread of solar panels and numerous other technologies significantly increases the demand for silver.
2016 is going to be the year of the silver, its price will grow by 20-30% more than other noble metals such as gold.

Original date of Hungarian publication: December 28, 2015