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Oil at $US100 and the Birkin’s demise? Now that’s outrageous.

Oil at $US100 a barrel, a drought-driven outbreak of global inflation and the collapse of luxury goods brands.
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Sound like outrageous predictions?

Well, they’re meant to be – but don’t be surprised if they come true, and best place a few investment bets just in case they do.

Such is the view of Steen Jakobsen, chief economist at Denmark’s Saxo Bank, who at this time every year comes up with 10 “outrageous predictions” for the following year.

His forecasts for 2016 are a little bit cheeky, quite a bit contrarian and definitely outrageous. But in the crazy post-global financial crisis world of negative interest rates, $US40 a barrel oil, and flat-wage submission, anything with a tinge of risk is going to excite.

For instance, he sees the Organisation of the Petroleum Exporting Countries’ (OPEC) “supply-and-rule strategy” finally triggering a 150 per cent surge in the price of liquid gold when members agree a production cut.

“The long-awaited sign of an accelerated slowdown in non-OPEC production finally begins to flicker,” Jakobsen says.

“Suitably buoyed, OPEC catches the market on the hop with a downward adjustment in output. Oil in the frame

“The price mounts a quick recovery with investors scrambling to re-enter the market to the long side – once again bringing $US100/barrel prices onto the horizon.”

Perhaps more upsetting, at least to the rich, would be the death of luxury labels as the world goes all equality-conscious, eschewing the purchase of Hermes’ $US300,000 Birkin handbags and totally impractical Lamborghinis.

And the premise for this outrageous prediction?

“Faced with rising inequality and unemployment of over 10 per cent, Europe is considering the introduction of a basic universal income to ensure that all citizens can afford to meet their basic needs.

“In a more egalitarian society where other values are promoted, demand for luxury goods decreases sharply, [and] the sector collapses.” Still with us?

Well, what about a sharp turnaround in the fortunes of battered Brazil, which now stands on the brink of an economic depression because of low oil, political corruption, overspending and capital flight. The 2016 Olympic Games, which the country is hosting, come to the rescue, Jakobsen says, driving investment, returning stability and buoying emerging market financial assets around the world.

In the same vein, he sees the aforementioned oil-price spike saving the beleaguered Russian rouble, which has depreciated about 115 per cent against the US dollar in the last two years. It’ll recover about 20 per cent of this next year, Jakobsen says. The euro, too, gets a boost from its massive current account surplus and the end of greenback dominance, while rising US interest rates trigger a massive sell-off in the already jittery high-yield corporate bond market.

The problem is there are no buyers, so prices hit the floor, where the securities are mopped up by vulture funds and the like. El Nino and crop yields

Nor is there good news for and the rest of the Asia-Pacific region, as the most extreme El Nino on record drives down crop yields, which pushes up food prices. Global inflation, long-gone and now missed, returns with a vengeance.

Silver, meanwhile, becomes the new gold, rallying 33 per cent as the production of solar panels, which use the metal, explodes.

But wait, there’s more!

Remember the 2000 dotcom bubble, whose implosion is often blamed for the aggressive interest-rate cutting that led to the subprime crisis and then the global financial crisis, which led to aggressive interest-rate cuts, which caused …?

Well, it’s back, as the new-generation Silicon Valley start-ups suck in investment dollars but struggle to actually make physical money as they focus on “adding users and trying to achieve critical mass”, Jacobsen  predicts.

Finally, and perhaps not that outrageously at all, Jakobsen sees the US Republican Party’s fortunes tank as their infighting intensifies and the Democrats expertly harness the votes of millions of Millennials’ frustrated by the lack of jobs and appalling level of political debate in the country.

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