I will start my financial assets forecast for 2015 with words of founder and long lasting manager of Pimco – Bill Gross.

“Beware the Ides of March, or the Ides of any month in 2015 for that matter. When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over.

Timing the end of an asset bull market is nearly always an impossible task, and that is one reason why most market observers don’t do it. The other reason is that most investors are optimists by historical experience or simply human nature, and it never serves their business interests to forecast a decline in the price of the product that they sell. Nevertheless, there comes a time when common sense must recognize that the king has no clothes, or at least that he is down to his Fruit of the Loom briefs, when it comes to future expectations for asset returns.”

This gives you perfect delineation of the market of still fresh 2015. Although we have some interesting opportunities to invest, it will be defensive stance I would urge you to take. Below you can find my opinions about respective classes of assets.


For those investing in stocks it is crucial to understand that today’s bull market started in February 2009. It is now 6 years since that time and it is the longest period of share prices climb for 80 years. For comparison, the average period of time between a decline and market rise rarely takes more than 3-4 years.

Economic environment changed in the last decade. Share prices are not correlated with basic economic fundamentals but they rather look at the amount of quantitative easing being served. It does not change a fact that right now we are in the period of a very mature bull market. Those who needed to make money, already did and substantial number of investors already left the stock market. At least from the most expensive ones.

“The last 10% of hike I always leave for the rest” – Rotschild

George Soros in the few weeks increased his short sell position to 1,3 trillion USD. Is it typical bear play or securing other long positions? This I don’t know but it is worrying information.

Generally 2015 will be a year of slow capital flight from stock markets. The developing markets are now cheaper (P/E, P/BV) than already developed ones, they bear more risk of imminent crisis.

I believe that reduced position in the stock markets is a viable action. Prices in most markets are high and with few exceptions stocks are expensive now.

Cheaper stocks can be found in Russia, but the Ukraine situation must be resolved for some hikes in prices. Small businesses in Indonesia (INXJ) are paying 4% dividend while being cheap. China’s stocks were cheap but after recent climb of nearly 50% they sit on the expensive shelf now. There are always some great sales but catching them is relatively difficult.

Unfortunately, quite a lot of stock markets are correlated with the share prices in the US. In the situation that desired collapse will finally materialise this will push prices down in the whole world.

I used word ‘desired’ on purpose as small crisis will be perfect justification for triggering another round of quantitative easing which is required to sustain the stock prices, real estate prices and the debt of the US.

Mentioning the US, a stabilising factor for stock prices and countermeasure against falls will be involvement of Japanese investment funds that finally can participate in the markets outside Japan. They will be interested in the US debt as well as stocks.

Interesting fact. In my opinion Tesla shares are already bursting bubble. Situation similar to the BTC bubble from last year when the street came to realise that the price cannot rise forever.

Bottom line is that if you investing in stocks – be ware and be cautious.


What we see forming right in front of our eyes is the biggest bubble in the history of mankind. It is made up from government bonds due to their high price (low yield) which is possible only because of quantitative easing abused around the globe.

a)  No one with right senses would agree to invest his/her money  into 10 year bonds of the US government with yield of only 1,8% in the situation when the real inflation rate is peaking at 8%. Insolvent Spain can borrow for 10 years giving back only 1,3% rate.

This absurd is underpinned with a lot of sheer faith in the central banks willingness to bail out bond holders in the event of any problems. The solution will be again – printing more money to buy all unprofitable debt that has close to zero chances to be repaid.

Today’s market situation shaped itself into typical Ponzi scheme. We have investors that do not want to profit out of the bonds yield but rather they are counting on further hike in their price while bonds’ profitability take a nose dive. We have all boxes ticked.

For me it’s simple nonsense or irresponsible playing with fire. It takes just one country in Europe that will not be able to roll their bonds (issuing another round of bonds to pay the creditors of the previous rounds) and the big myth of ‘safe bonds’ will be gone. Therefore, the price of government bonds are too much tied to interventions of central banks to be deemed viable investment worth your time.

If I need to estimate yield of the 10 year US bond at the end of 2015 I would aim at 2.4%. A lot higher than it is right now and way lower than analysts’ forecasts.

b) Shale bonds

The shale boom in the US is a fact and data suggest that 87% of the new oil and gas production is coming from shale. Although, shale gas was produced while being in the red most of the time. Average price of shale oil ranges between 70-80 USD. WE can see that production from shales is putting negative cash flow in the books of the shale industry right now.

We must look into Wall Street to see why this situation was sustained and why it lasts for so long. Shale bonds were paying 7-9% per annum. In the near-to-zero interest rates looked like a great buy for anyone that looks for profit.  Most of the companies will not be able to buy out those bonds. Investors should not think of reaping great profits if the price of oil will stand still under 50 USD and gas around 3,5 USD.

Worth of the shale bonds? Two trillion USD. Triple the amount of MBS that started 2008 economic meltdown.

Above circumstances makes shale bonds good option but only if you short selling them.

c) Corporate bonds

I used those meanwhile looking for interesting investments. Usually they paid out 7-11% per annum and luckily I avoided any insolvency of the issuers. It is getting harder and harder to get similar yields with such low risk especially with historically low interest rates.

Generally, as a part of diversified portfolio make a lot of sense on condition that they are short-term (up to 18 months) and you avoid several industries bound to be riskier (developers etc).


2014 was the year when gold hold strong on its USD position. Any other currency generated considerable profit. In 2015 gold should rise with a stable course.

I think that losses that put the price between 1050-1100 USD are already behind us.

There are number of circumstances that underpin this forecast. Every single time prices of precious metals were record low, the demand in China, India, and Russia was exploding. Today it is extremely hard to get big volume trade with official price.

For a cartel it is simply easier to allow steady increase of gold price to acceptable 1650-1700 USD rather than sell out whole reserve and control its price without physical collateral.

During last three years multiple attacks on the gold price pushed weak, short-term investors out of this market.  The contemporary price for those who stay is not the main objective.

Many things suggest relative ease in terms of price. After big hikes there will be time for the price to correct itself and land around 1200 USD. Again, next 2-3 months on the rise to 1,350-1,400 USD and adjustment. This scheme will repeat until end of the year when traditionally the price of gold and silver will be attacked.

The biggest variable and unknown in forecasting this market is China. Its exports of over 2,000 t/year makes me comfortable to say that state reserves of China may be over 7,000 t. Similar amount may be in the hands of citizens as the promotion of investments in gold is nothing new in China.

Unless the West will deliver desired amount of gold to China, update of the China’s reserves may result in the shock climb of the price.

Another variable is Russia. Escalation of sanctions due to the Ukrainian conflict may push Putin to press for repayment of the oil and gas debt owed by Ukraine. Investors would update the prices of aurum after quickly buying big quantities of gold.

Regarding rumours about introducing gold standard to any of the currencies – it is too early to be optimistic about it. There is a possibility of ruble plummeting due to incompetence of Russia central bank but introduction of new currency that could be correlated with Russian gold reserves will be only internal money. Without China making its move there will not be any serious change in this sector. Just like I was expecting before, as long as Chinese will be able to drain western reserves there will be no sudden moves.


Silver being the young brother of gold follows it whenever the big brother goes. Difference is that the changes in silver price are more violent. It can be seen in the gold/silver ration. When the price goes down the ratio rises. At the end of 2011, at its peak it dove under 35. Today it is around 72.

Assuming that gold will rise up to 1650 USD we can by correlation imply that price of silver will get into range of 30 USD and the gold/silver ratio to fall to 55. In my opinion this assumption can hold and its realistic.

There is an argument against rise of silver. Comex’s increase of reserves by 30% from 50 mln to 65 mln oz. The counterargument is in the numbers. Those reserves are worth about 1,1 bln USD and this amount can be bought by China in just two weeks.

Silver opponents claimed that development of graphene can slow down demand for silver in many industries. The industrial demand is responsible for over 60% of general demand. Nevertheless, silver has over 10 thousand different uses in the industry and in most of those cases finding equivalent is right now impossible.

In my opinion silver forecast (especially with today’s prices) is looking way better than for gold.

Mining Companies’ Stocks

Stocks of companies that works in the mining sector guarantees big leverage compared to the price of the metal itself. This is due to the fact that when the price of the metal changes by 10-15% the corresponding profit/loss of the company changes by 30-40%.

The ETFs that tracks mining companies’ performance are in the same place they were year ago. This is interesting as the prices of metals are also similar to those year back. Meanwhile energy costs being the half of the production cost are 50% smaller.

I do not possess data about the costs of extraction but most probably they also are lower year to year (already mentioned fall of energy prices, cuts in both salaries and production from more expensive sources). Those factors are yet to be seen in the stock prices of companies. Still they look very attractive compared to the whole market.

This is the case especially for small mining companies (market capitalisation under 1 bln USD), where P/E ratio hovers around 11 although, silver and gold prices are at their record low.

When it comes to forecast, in incoming year the indexes of big mining companies (GDX) will rise from its levels today by 80% and indexes of small companies by 100-140%. There is one ‘but’ here! Stocks here are leveraged by a significant factor and in the event that the price of gold will reach 1,000 USD huge number of small companies will go bust. This big scale bankruptcy risk is mentioned for example by Mark Faber. While this scenario does not have huge possibility of materialising it is still something to be aware of in case it does materialise.

If you bought stocks of small company in 2011 pushed by the wave of euphoria – right now your losses are about 85%. Personally I think that small companies in this sector could be the black horse of 2015 but it will not be an easy year for them.


The most manipulated and affected by speculation prices can be found (apart from precious metals) in oil. When you look at it the reason is evident – trade war with Russia. In my opinion prices we see now will not hold for longer than 6 months. There are number of reasons behind that:

a) With oil price below 50 USD per barrel (USD/bbl) many production sites generate only losses. This makes energy companies to lower or minimise production and reduce capex. It is estimated that reductions will reach 1 trillion USD this year. This in turn affects production. Supply is said to be lacking 7-8% globally compared to last year. Look at this in the long-term perspective – prices will eventually climb as supply fall behind demand.

b) Hydraulic fracturing (‘fracking’) in the US is threatened at prices below 80 USD/bbl. Now when we add to the situation the fact that shale companies already owe over 2 trillion USD we see that there is huge bubble ready to burst. If (or ‘when’) this bubble bursts we would see not only energy sector but also financial sector being severely affected. For the moment situation seems to be under control thanks to zero interest rate policy but the bomb is still ticking.

c) Political motivation. Russia and China. Both affected by low price of barrel but in two different direction. Russia is hit badly, especially due to budget dependence on oil exports. On the other hand, China’s growth is accelerated by cheap oil. Clearly China is the biggest beneficiary of the US-Russia conflict. The longer price holds or slumps more the sooner China can come back to the GDP growth of 7% or more. This double edged sword cuts both ways and the rise of China can be a strategic catastrophe from the US point of view.

d) OPEC. Last year we saw oil price tumble by 50%. In normal circumstances Saudis should limit production and stop this nosedive. Pressure from the US made it so Saudi Arabia sticks to its guns. Now oil exporting countries need to cover their budget deficits and face problems given the situation does not change.

I believe that if Saudis do not bend and enable the prices to rise, OPEC division will sooner or later end up in Iran, Venezuela or Ecuador leaving the organisation. Russia will be magnet strong enough to mobilise those dissidents to build new model to ‘manage’ the oil price.

Natural gas

Natural gas turns from being investment asset into one of very speculative nature. In the past I always tried to buy cheap gas and wait until more investors recognise it. It was in 2014 I needed to sell it twice to buy it out at lower price as its price changed so drastically.

Wave of the oil price sale dragged down gas. It is rare phenomenon to see gas below 3 USD/mmBTU. Knowing that production cost during shale gas revolution was around 7 USD. Every sale for 3 USD makes shale company borrow 4 USD. This is the debt problem I mentioned earlier with shale oil.

Markets have to wait for the comeback of long lasting high prices. Still I will be surprised if natural gas in 2015 does not break barrier of 4USD/mmBTU.

Real Estate

In general I stay away from real estate. Main reason being unprecedentedly low interest rates pushing prices of properties up. What is worse, most countries experience bigger inflation (in real money) than the level of their interest rates.

Unfortunately 90% of mortgages are based on variable interest rate. Lose control over inflation and instalments will explode. This will inevitably affect valuation of properties.

I am NOT against investments in real estate. What I am saying is – consider the timing of your investment – hold onto your capital for 3-5 years. This timeframe will secure you best entrance to several countries with their well-educated demographic. Rather than buying n-acre lot or residential property for renting in South Asia, consider investing in passive funds operating in this region.

Leaving aside global trends of 2015 prices will still be on the rise in Chinese enclaves of Toronto, Vancouver, Sydney or Auckland. Over Chinese millionaires diversify their portfolio by buying properties there for cash.

Industrial Commodities

Industrial commoditiesare THE big mystery for me in the coming year. On the one hand, we have recession on global scale that drives demand for any industrial commoditiesdown.

Copper price has dropped 45% from its peak, lead lost 55%. On the other hand, central banks all over the world increased supply of currencies and as a result a lot of unused capital will find its place in the market of industrial commodities.

It is hard to say whether it is good time to enter this market. Personally I would wait for the air to clear out for better assessment.



Just like I said before – forecasting financial events is extremely hard task. Too many variables and factors being very much dependent on decisions made behind closed doors makes it quite unpredictable.

Today, prices of nearly all assets are being manipulated and we are left without much choice. We have to keep our common sense on point and put emotions aside. The most important for now is to securely store your capital. It goes without saying you should focus on that when constructing your portfolio for 2015.

Investing opportunities emerge from the market but there is no guarantee that cheap assets will yield any profit soon.

Good example here is silver. Since 2013 you simply could not get any big volumes of it. Korean Appla factory had to stop production for 3 weeks due to shortage of silver. Eric Sprott’s funds waited for 3 months for delivery of contracted silver. Those events would not suggest that prices of silver could go down by 40% as we can see them at the end of 2014.

How to forecast in this environment? I hope that when we meet to examine these predictions in 2016 most of my points will be right. Should they be wrong it will be great material to practice analysis of correlations and dependencies.


Good luck with investing in 2015.