‘Tis the season for market predictions for the year ahead, and while most analysts keep their crystal-balling within tight ranges, Saxo Bank has compiled 10 surprises that could rattle financial markets. How about a surprise selloff in gold to drive the yellow metal to $1,200 an ounce, for example? Or an unusually sharp oil-production rise to slam crude-oil prices back to $50 a barrel?

“These ten predictions are not Saxo Bank’s official forecasts for 2013. They could, however, prove far more relevant for investors because of the huge impact if any one of them sees the light of day in the New Year,” said Steen Jakobsen, chief economist at Saxo Bank.

“Before trading or investing, investors must know the worst case scenario — capital preservation is a must and portfolios need to be able to weather a perfect storm, or for that matter any storm,” he said.

Here are the 10 outrageous predictions for 2013:

1. Germany’s DAX plunges 33% to 5,000 –- China’s economic slowdown will continue and add pressure on Germany’s industrial expansion. Such a scenario will stoke low consumer confidence and large price declines in industrial stocks, which make up a large part of the German benchmark index.
2. Nationalization of major Japanese electronics companies –- Japan’s electronics industry suffers after strong competition from South Korea, causing annual losses of $30 billion for Sharp Corp., Panasonic Corp. and Sony Corp. alone. Credit worthiness will deteriorate and the Japanese government feels obliged to nationalize key industry players – similar to the U.S. government’s bailout of the auto industry.
3. Soybeans rise by 50% — After a year of extremely poor harvests due to bad weather, new crop soybeans will be just as exposed to new weather disruptions in the U.S., South America and China. Increased demand for biofuel will also push prices higher and food security will become a buzz word.
4. Gold drops to $1,200 an ounce — The strong U.S. economic recovery surprises the market and especially gold investors, which flee the traditional safe haven investment. Additionally, lack of pick up in physical demand from China and India trigger a round of gold liquidation, and the metal falls to $1,200 an ounce before central banks eventually start taking advantage of lower prices.
5. Crude oil slumps to $50 a barrel –- U.S. crude-oil production continues to rise through advanced production techniques and with domestic inventory levels already at 30-year highs combined with limited exports options, oil prices come under renewed selling pressure.
6. The dollar/yen  falls to 60.00 – Japan’s new leader Shinzo Abe has vowed to use aggressive easing measures to boost the economy, which has punished the yen. Not all measures are introduced, however, and the market becomes over-positioned to for yen weakness and risk appetite retrenches, prompting the dollar to drop 60.00 yen, as the Japanese currency emerges as the world’s strongest currency.
7. Euro/Swiss francs  relationship breaks peg, touches 0.9500 – As European Union tail risks are aggravated –- maybe by the Italian election or a Greek exit of the euro zone – capital flows surge into Switzerland once again, inspiring the Swiss National Bank and Swiss government do abandon the franc’s peg to the euro rather than push reserves past 100% of Switzerland’s gross domestic product. As a consequence, the euro/Swiss franc touches a new low.
8. Hong Kong unpegs the Hong Kong dollar from the U.S. dollar and re-pegs to the Chinese renminbi – The renminbi’s volatility increases and Hong Kong becomes a major world currency centre.
9. Spain steps closer to default as interest rates rise to 10% — With social tensions in the country, the public sector cannot cut costs further and Spain’s sovereign credit rating will be downgraded to junk. Yields rapidly rise as an inevitable default is priced in.
10. 30-year U.S. sovereign yield  doubles in 2013 – The Federal Reserve’s low-interest-rate policy forces investors to leave fixed income and substitute bonds with stocks. As the bond market is far larger than the equity market a 10% reallocation to stocks should amplify equity fund inflows by around 30%. This leaves to higher yields in the U.S. and marks the beginning of a decade-long outperformance by stocks over bonds.

There’s always a key number on which the market is based. Sometimes it’s an interest rate, as in Europe today. Sometimes it’s another number, like America’s unemployment rate. In the past it’s been housing starts; it’s been inflation; it’s been GDP. For 2012, the key number is the oil price.

It’s the oil price because decoupling growth from oil prices is the key to real prosperity. Throughout the last several years, growth and oil have grown closer together. It’s at the point where now a jump in the Dow Jones industrial average is nearly always matched by a rise in the price of West Texas Intermediate, and vice versa.

Most of what has been happening in the U.S. economy, below the surface, is aimed at this decoupling.

Before you jump on me for another rant against big oil, let me state first that what U.S. oil and gas companies are doing is part of the equation, at least in the near term. Fracking has already decoupled natural gas prices from growth. For the last two years, we’ve had real growth in the economy but falling natural gas prices. Oil can be the same.

Drillers have now had several years to accommodate themselves to spot prices of near $100/barrel. This has given them time to invest enough capital to produce large supplies, profitably, at that price. And once a well goes into production, the nominal cost of producing an additional barrel is usually quite low.

But the more important work is taking place on the demand side. The technologies of efficiency are growing, and have a ready market. Every barrel saved in industrial production, every KwH a commercial building owner can save, every gallon of gas a consumer doesn’t use while remaining productive at work, that’s money in the pocket. It’s an investment that pays for itself, whether you’re replacing bulbs with LEDs in your Christmas lights, buying a higher-mileage car, or insulating a building.

Renewable energy is what will maintain the gains. Yes, it’s small now, in the general mix. But it’s increasing, thanks in part to today’s prices, and in part to advancing technology. Even if solar installation doesn’t grow in 2012 from 2011, the supply of solar energy in the market will grow dramatically, because the base is low. The same is true for wind energy, for chemicals and other feed stocks produced from biomass, and for geothermal energy.

Over time it’s this harvest of the abundance all around us that will not only keep oil prices reasonable, but cause them to roll over in time. For 2012 let’s focus on WTI, the spot price for oil in our own country, less in relation to European “Brent” prices than in absolute terms. Keeping that price down as economic growth accelerates, as employment grows, is the key to nearly all other market prices for 2012.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

By Andrew Packer

In 2011, oil will continue the upward trend that it’s been on for the past few months. Prices will likely break $110 per barrel by the end of next year… if not by the end of summer.

Any short-term corrections along the way should be treated as opportunities to increase your longer-term exposure. The reason couldn’t be simpler…

All energy investing starts with oil.

Let me explain…

I like alternative energy. But the bottom line is… the bottom line. See, in order for oil alternatives to really gain big demand, oil needs to be inconvenient (read: expensive). Sure, oil alternatives will be great investments, but rising oil prices will get them there.

The more expensive oil becomes, the more appealing its alternatives. It only makes sense to start with oil and take advantage of those rising prices.

The good news is oil prices are already starting to rise. In the past month alone, prices have nudged past the $90 per barrel mark.

The first to benefit from this energy boom will be oil barons of the world. That’s why I suggest you start your energy portfolio with a few oil companies. In fact, oil companies should comprise 40%-60% of your energy portfolio.

If you invest in oil companies that also have exposure to other areas like natural gas, go for the higher end of that 40-60% range. If you invest in pure oil plays, 40% is plenty.

I suggest you start with big players like ExxonMobil (XOM) or Conoco Phillips (COP) for their stability and generous dividends.

But for bigger gains, you’re going to have to invest in smaller companies focused on exploration. That’s where the big money in energy has always been… and always will be.

Already, my favorite oil play, a small-cap Canadian player in my Exit Alert Strategist portfolio, is trading at a substantial discount to book value. It’s also made a major discovery this year. Based on the value of its assets alone, you only have to shell out a quarter for every dollar of value you get right now.

Even better, I expect oil prices to surge thanks to strong demand for energy commodities and a weak dollar. Once oil spikes further, the company’s value will continue to increase substantially.

This gem is just one of many that I’m currently looking at. If our recent energy plays are any indication (now up 65%, 24% and 9%), this small-cap energy player could rise as much as 40% in the coming months.

Again, as conventional energy prices increase, alternatives will become more viable. That’s a big, multi-decade trend you’ll want to get behind. And I’ve already got three alternative energy plays in the Exit Alert Strategist portfolio in wind, lithium battery technology and uranium.

But this simple rule of energy investing — lead with oil — is the best way to start your own energy portfolio. As we look to a “green future,” rife with oil alternatives, we can’t lose sight of what will get us there – skyhigh prices for “black gold.”

by Sean Hyman, Currency Cross Trader

I can’t tell you how many times colleagues in the industry have called me an “idiot” for correctly predicting what’s coming next in the markets. Take oil for instance.

Back in 2005, my buddy Greg and I were both working at a Forex firm. At the time, we told some of our friends at work that oil would hit at least $80 a barrel.

This was long before the world had seen $147 oil. In fact, the world had never seen $75 oil. And oil’s current price – $50 – seemed “high” to my friends.
So everyone thought we were insane for even suggesting $80 oil.

We tried to explain that we saw fundamental reasons for higher oil. Namely we saw a worldwide demand that was about to outstrip supply. But on top of that, I had my eye on a specific chart pattern that told me oil would hit at least $80. They still didn’t believe us.

Of course, I don’t have to tell you we were right. In fact, as oil climbed to its all-time high of $147 in 2008, our $80 estimate seemed conservative.

But when oil hit $140 in June 2008, Greg and I started saying oil was too expensive. Once again, my friends in the industry gave us a tough time for suggesting oil might drop. Once more we tried to explain…

No One Believed Oil Would Plummet Either

From a fundamental perspective, we knew the incredibly high oil price would drag down the U.S. economy. After all $4 gas makes a dent in a consumer-driven economy. You can’t spend as much on everything else if you’re shelling out $70 for a gas each week.

From the charts, I saw oil was heading lower too.

For the Past Two Years, the Canadian Dollar &
Mexican Peso Tracked Oil Exactly

Again, we were right. I watched as oil dropped all the way to the high 30s – and we got in.

At $33, the same Nay-Sayers called me an idiot for buying. They just assumed oil was going to $10 or $15 a barrel because once something starts falling it doesn’t stop, right?

Why Oil Will Pass $100 a Barrel in 2011

1. The Charts Say So. Looking at oil’s chart, oil is already making “higher highs and higher lows” as the recessions around the world come to an end. So oil is already trending higher.

2. Demand Is Growing Again. Even though there has been meager growth, it’s been enough to push up oil’s price as global demand for the “black gold” increases again.

3. Bernanke Likes to Print Money. The Fed will continue to print fresh dollars to keep the U.S. out of another recession. In doing so, the Fed will dilute the dollar’s value. That will force anything priced in dollars (like oil) to rise in price.

This just proves what I’ve always said. When everyone pats you on the back for buying a certain stock, commodity or currency – don’t even bother. Just sell now and get your money back while you can. Because once “everyone and their mama” is buying, you’re already too late.

But when everyone calls you a “blooming idiot” for either buying or selling a particular position, hang in there. You will be rewarded. With a little patience, you will be in good shape within a year or so.

I tell you all this, because I’m seeing the same kind of turnaround in oil. Next year, oil will blow past $100 a barrel again. Right now, you can make strategic positions in certain currencies to play off oil’s next rise.

Why Buy Currencies and Not Oil Outright?

Now you could buy oil futures or an oil ETF to play $100 oil. But in the currency market, you can play this trend by buying “oil currencies” such as the Canadian dollar and Mexican peso in the spot forex market.

Why trade these currencies instead of oil itself? First of all, you don’t have brokerage commissions with the currency trades. You have less slippage because there are higher volumes of trading in the forex market.

More importantly, the FX market trades with more leverage. This means you can earn larger profits off oil’s rise by buying the Canadian dollar or Mexican peso.

Both Canada and Mexico are major oil exporters, so their economies and currencies rise and fall with oil’s price. So just how closely do the peso and Canadian dollar track oil? Take a look at the daily, 3-year chart below.

By Charles Riley

Gold and oil prices have been joined at the hip in recent months, but that all changed in the days leading up to Thanksgiving.

Gold prices are back on the rise, rebounding from a brief decline as investors seek refuge from eurozone debt worries and the prospect of a bigger clash on the Korean Peninsula.

Other commodities have diverged. Crude prices, which earlier this month hit two-year highs near $88 a barrel, spent the week hovering within a narrow trading range just above $80. That marks the first time since late August that gold and oil prices have parted ways.

Commodities had been on a roll since the Fed outlined its asset purchasing program earlier this month. The purchases will put pressure on the U.S. dollar. Since commodities are priced in dollars around the world, a lower greenback makes it cheaper for foreign investors to buy.

But rising geopolitical worries have cooled investor enthusiasm.

“It seems the world has gone crazy and there are new risks around every corner and these risks have conspired to bring oil prices back down,” said Phil Flynn, an analyst with PFG Best, in a note to clients.

Eurozone debt worries, the release of the Fed’s lower outlook and conflict in Korea have all contributed to the cooldown, Flynn said.

Track commodities

Oil did get a boost Wednesday, following the government’s weekly inventory report. The report showed crude inventors bumped higher in the latest week. According to research firm Platts, inventories were expected to decline. Crude prices for January delivery rose $2.61, or 3.2%, to settle at $83.86 a barrel — it’s highest close in over a week.

And in a bit of good news for consumers heading into the holiday shopping season, cotton futures have been on the decline. Over the past 10 days, cotton prices have dropped some 15%.

Cotton prices had been on a tear for months, and that was worrisome for consumers because higher cotton prices translates into higher prices for jeans, t-shirts and other clothing.

Prices for other metals moved higher Wednesday, with copper gaining 1.5%. Among agricultural commodities, corn, soy beans and wheat gained around 1%.

Coffee and lumber prices were the lone decliners on the commodities board, with both trading about 1% lower.

FX Signals by MDM Partners

by STEPHEN GANDEL

FX Signals by MDM Partners

It’s a long held mantra on Wall Street to buy straw hats in winter. The notion is that you should buy the shares of a company when no body wants them, or when things look their worst. Buy at the low. So based on that logic here’s the question: Is BP’s stock a buy?

Did the markets really think the top kill was going to work? Evidently so — BP shares fell 15% today, to $36.52. But before we declare this the end of BP, let’s put this in perspective: the shares traded as low as $34.06 in March 2009. And over the last three years, BP is down 46%, compared to 30% for the S&P 500 (and Exxon Mobil) and 93% for Citigroup.

The most likely fate for BP at this point isn’t death but rather takeover. There’s been a lot of speculation along those lines, and with BP’s leadership looking even weaker than its stock price, the rest of Big Oil is surely salivating at the prospect of picking BP up without much difficulty.

I don’t think the acquirer would be Exxon. Other than that I do think another oil company could come in and pick up BP assets effectively erasing the reputational risk and making those assets worth a lot more.

I don’t think the acquirer would be Exxon. Other than that I do think another oil company could come in and pick up BP assets effectively erasing the reputational risk and making those assets worth a lot more.

UPDATE: The New York Post has more today on why analysts think BP is a buy:

A number of top oil analysts see BP as a summer bargain, and predict cash flows could jump as much as 30 percent next year. Analysts said that once engineers get a grasp on their new plan to tame the gushing oil, investors could see a quick pop in the share prices of all three oil companies involved in the mess. If the latest fix shows signs of working, “we believe it’s likely that the shares of BP will see a near term move higher,” analyst Pavel Molchanov of Raymond James said in his bullish report yesterday on BP. Also, I missed this earlier, but JP Morgan’s analyst also weighed in on BP pointing to the size of what they think the stock buying opportunity could be:

Struggle to rationalize BP’s extreme share price reaction – JPM says they had originally assumed a total containment cost of $7.2bn (100%, based on 120 days at $60m per day). So far, the costs have averaged $24m per day given 42 days since the tragic loss of well control occurred. BP’s 65% share of their original cost estimate is approximately $5bn including the cost of the two relief wells. The difference between this figure and the relative loss of market value ($37bn) is around $32bn. The firm struggles to believe that litigation settlements, claims payments and punitive damages will rise anywhere close to rationalize the difference ($32bn).

How low will the yield on Treasury bonds go? The new consensus is that yields could continue to drop throughout the summer. I have a story up today on Time.com about the bull market in Treasury bonds. The Wall Street Journal is also on Treasury bonds this morning with a round up of where the different investment banks believe yields are headed. And there is another interesting move in the Treasury market today. For the past few weeks, Treasuries have been moving in the opposite direction of stocks. So the assumption has been that when stocks rebound, Treasury prices will fall. Not today. Stocks are up, and bonds are up. Long live the Treasury rally.

by Rex Nutting, MarketWatch

Global trade rebounded further in March, driving U.S. exports and imports to their highest levels since October 2008, the Commerce Department estimated Wednesday.

The U.S. trade deficit – the difference between exports and imports of goods and services – increased by $1 billion to a seasonally adjusted $40.4 billion, the highest since December 2008 when global trade contracted violently after the September 2008 financial crisis.

In March, imports increased 3.1% to $188.3 billion, while exports climbed 3.2% to $147.9 billion. Shipments of raw materials increased the fastest, but all categories of imported and exports goods showed growth.

In the first three months of the year, imports were up 18.6% compared with the same period a year ago, while exports were up 19%. The trade deficit averaged $38.9 billion a month during the quarter, up from $36.3 billion in the fourth quarter.

Imports of petroleum increased sharply in March to $22.3 billion, the most since October 2008. The average price of crude oil rose about 2% to $74.32, while the volume of imported crude rose 11% to 9.66 million barrels a day, not seasonally adjusted.

Most of the increase in trade value came from higher volumes, not higher prices. The real trade deficit (adjusted for price changes) increased 3.6% as real imports increased 3.5% and real exports rose 3.4%.

Trade flows have not fully recovered from the brutal global recession, however. Real imports remain about 10% below the peak established two years ago. Real exports are 7% beneath the peak of August 2008.

March details

Exports of goods and services increased 3.2%, including a 4% rise in goods alone. Exports of services climbed 0.9%.

Imports of goods and services increased 3.1%, including a 4.3% gain in goods alone. Imports of services fell 1.3%.

Exports were led by a 7% increase in shipments of industrial materials and supplies to $31.4 billion. Exports of capital goods rose 1.8% to $36.7 billion, led by generators, semiconductors and airplane parts.

Exports of foods and feeds rose 1.8% to $8.4 billion. Exports of autos and parts rose 0.4% to $9.2 billion. Exports of consumer goods rose 5.5% to $14 billion.

Imports were led by a 7.5% increase in shipments of industrial materials. Crude oil accounted for most of the gains, but metals and chemicals also increased significantly.

Imports of capital goods rose 0.8% to $34.4 billion, led by aircraft, machinery and drilling equipment. Imports of autos and parts rose 7.7% to $17.3 billion.

Imports of consumer goods rose 1.4% to $38.6 billion, led by TVs and drugs. Imports of foods and feeds rose 5.3%, led by fruits and vegetables.

Regional details

Imports from Mexico rose to record $20.1 billion. Exports to the European Union increased to $21 billion, the most since late 2008. Exports to Japan and imports from Japan were at the highest levels since October 2008.

The trade deficit with China increased to $16.9 billion in March. So far this year, imports from China have risen 12.4% compared with last year while U.S. exports to China have increased 46%.