Friday, 5 February 2016

UK, Europe and US review 2015


UK
It is unfortunate that I usually start with the UK, as the 2015 forecast was rather dull. I didn’t have anything dramatically good or bad happening which makes it much harder to assess. However, given that I predicted that it was highly likely that the conservatives would remain in power (when I made the forecast back in 2012 no less) when all the so called political experts and polls did not, I guess I deserve some brownie points.
I didn’t specifically predict the refugee problem (I hadn’t ever looked at Syria at that point) but I did identify ongoing unspecified issues that correlate with that problem.  70%
Sterling
Once again an example of how difficult it is to predict nothing much happening.
I waffled a lot in my sterling forecast, not really identifying any trends until the end of the year. But that also reflected the reality as not a lot happened to the value of the currency, there were no interest rate changes, even though there were constant discussions about them. The only movement was really in the dollar value at the year end when the US raised interest rates. 60%
 FTSE
An ok attempt. I did predict mergers being an issue around March and the Shell/BG merger was the big topic in early April (i.e. within the 3 month window). .
I also identified that there we external factors that were causing major shifts in value within the market but not in all companies (and of course the oil and china situations created just such a scenario)
I was, however, wrong about the market being just flat with fluctuations in June though as it fell 10%, although at least I was clear that it would not rise. I also missed the rapid fall in late August. I did identify the swings between then and November though and that it was November when the weaker trend would become apparent. And certainly my December forecast was accurate. 80%
USA
Unlike the UK where I didn’t predict too much hardship, I expected the US to have a much worse 2015 than it did, and particularly economically. The reality was very different and yet in some ways pretty much spot on. The debt issue seemed to take a back seat, which I did not expect as there was optimism regarding the economy. However the reality is that that debt situation has not gone away.
Furthermore there were many issues in 2015 that show underlying problems in the country. The protests in Baltimore and other racial related cases as well as the events of San Bernadino in December do suggest such problems. The changes in laws relating to single sex marriage and marijuana as well as the highlighting of transgender issues etc. are all highly polarising for the US. And indeed the consequences, rather than being seen (for the most part) on the streets have been seen in the choice of electoral candidates and although my closing remark was that despite this the US wouldn’t be embracing communism any time soon, it does tally with the surprising strength of Bernie Saunders progress.    So perhaps a better forecast than I initially thought. 65%
US $
Ok, this one was a howler. I did not predict the continued rise of the dollar in the early part of the year, though it was somewhat more mixed than the previous 5 months.
I did however, predict a change in sentiment around April and this was the case. June’s lack of trend was also identified although the prediction for July was no better than chance. And although it turned out to be correct that the dollar was a good bet in September as it started to strengthen again then  the forecast for weakness at the end of the year was just plain wrong.  40% (i.e. worse than tossing a coin but not completely the opposite!). This is a damn shame as the US$ used to result in my most consistently accurate predictions.
Dow
It is fascinating reading my introductory comments for the DOW in 2015. Although I predicted no particular direction for the first few months I said some pretty dramatic things. I think they will turn out to be prescient.
I also like my comment re radical changes in April; Apple joined the DOW.
I think my rather bland prediction for the next few months reflects the rather bland activity too, even identifying a July positive blip.
I then wrote – “the whole market is undergoing a revolutionary change and values are likely to suffer as this will create uncertainty. The Dow is likely to undergo a significant change at this point – perhaps in composition, number of components or sector emphasis” And the shift in August (relating to China, oil etc.) tells its own story.
I then wrote “Such changes do not bring investor confidence. So September is therefore accompanied by a feeling of deep seated fear. But, although there are some minor fluctuations, and certainly no significant rises in the market at this time, there is no severe drop from then until November either.” In actuality there were rises, but only recovery from the rapid changes of August. It was a missed opportunity though so I can’t give myself full marks.
 I expected December to see the return of the problems but was a bit out on timing as this did not happen till January.
Despite some mis-steps I’m very pleased with this forecast. Particularly given the fact that I was relatively positive about this market from 2009-2014 compared to many astrologers.  It is important not to just see the difficulties in the global picture but to understand how they are reflected in a specific market’s chart. In this case government financial policy protected the markets for a long time. That is changing.  85%
 
NASDAQ
Having accurately identified that some of the gas would be pumped back into the NASDAQ over the past few years, I did not predict a good start to the year. In fact it was ok. In the first month or so the index went no-where. Arguably, also, the small range over most of the first six months confirms my view that the market would be subdued with some positives. The summer forecasts for June –July were reasonable too.
I saw a change coming in September (obviously this was late August in reality, well within the bounds of my forecast range), which would put an end to more speculative valuations. And sure enough the events of this period took the heat out. Indeed the NASDAQ tracked the Dow almost exactly over the 3-4 months suggesting that it is beginning to be judged on the same criteria.
That said some of the major tech stocks did well and the index held up better than the Dow due to less energy exposure.  
I correctly assessed the end of the year would be more stable. It was and that itself is noteworthy given the pattern of the NASDAQ at other recent year ends.  80%
 Euro
Basically I predicted that not a lot would happen with the value of the Euro in most of 2015 and this proved to be the case. Despite the forecast fluctuations it ended up where it started against Sterling
The currency was volatile in the summer as expected (due to the resurrected Greek situation) and it did as forecast fall briefly in October /November but this was as expected short lived.
Although the dollar strengthened at the yearend due to the interest rate change the Euro did not fall against other currencies.   80% (can’t really give more as not enough happened)
Germany
Looking at my forecast for 2015 in Germany one thing stands out. I forecast difficulties for the leadership particularly in the early part of the year (this was mainly due to Greece again) and the latter part (which turned out to be the migrant refugee crisis). I am really pleased with this prediction given the strength of Merkel’s reputation up till this year. 
I noted debt issues might be to the fore around July, when the Greek vote did in fact cause ripples.
I also noted that there were shades of the early 1930s in the themes for Germany in 2015, something that the migrants issue does reflect to some extent.
But I also predicted that economically there would be relative stability and strength (I imagine I was confused when I wrote it how that could be!!) and sure enough Germany has survived the year well
As this extract from Bloomberg Jan 14thdescribed.
Germany, the euro area’s biggest economy, is benefiting like no other member of the 19-nation currency bloc from unprecedented stimulus by the European Central Bank. With unemployment at a record low, wages rising and oil more than 37 percent cheaper than last year, domestic spending has become the driver of economic growth and exporters are shifting their attention from slowing emerging markets to recovering developed nations.
So a rather successful forecast for Germany -90%
France
My French forecast can be considered less of a success though.
Generally, it was ok, economically the year was relatively benign, for a country that rarely shows dramatic growth- though unemployment remains a problem.
Not predicting the February attack on Charlie Hebdo may be forgiven, although highly publicised it was very specific. But failing to identify the November attacks is a failure. Though I did see the significator of the events I described it as merely due to the power of the government rather than unpicking the reason behind everyone supporting France at the time. The events probably also had an impact on the political agenda and the regional elections of December but it is still poor not to have picked up something more than I did.
It is an example of how difficult it is to pinpoint the nature of how a specific event will play out years in advance even when you know “something” will occur.
Still, given the overall forecast and the ability to identify something the score for the country is not too bad: the pretty standard 75%
 
Spain
My overall forecast for Spain in 2015 was for an increasingly improved and stable economic situation. And this proved to be the case. In the words of “focus Economics” on 2/2/2016
 
Spain’s economy grew at the fastest pace since 2007 last year, as the country remains firmly entrenched on a growth path following years of recession. Strong domestic dynamics, underpinned by the lowest unemployment rate in over four years in Q4 and a less tight fiscal position, have allowed the economy to outperform many of its European peers.

 
But my forecast also included some challenges with a repeated theme of challenges re partner nations especially around May and October/ November. In fact it seems that my interpretation was at fault, the issues identified were not about foreign partners but domestic opposition with the  populist anti-austerity movement Podemos making dramatic gains in local and regional elections in May and the run up to the elections which finally occurred in December resulting in no overall government at the year .
85% - all timing right but not full marks due to the misdiagnosis of the one significator.
Italy
My forecast for 2015 was devoted almost entirely to the economy. Something which given the events of the last decades is in itself noteworthy. And it was correct – in Italian terms at least there was a year of relative positive political stability!!!
I expected that May would show the beginnings of some positive economic news and indeed it was in May when the country was finally able to point to a quarter of, albeit tiny, positive growth and again as forecast July showed positive news, this time in decreasing unemployment.
However, I was also sceptical suggesting that the news was mixed and emphasising that the problems in Italy were far deeper than just recovery from a 2000s boom and bust. And indeed the signs that the overburdened and depressed banking sector needed help have continued (and start to be addressed in January 2016).  90% ( A bonus for no mentions of leader!)
Ireland
I did not forecast a good year for Ireland’s economy, seeing that it would still be struggling to recover from 2007/8. Indeed I predicted that the end of the year would be really quite difficult.
In reality the only difficulties in December related to the floods.
In fact it experienced high growth during the year ( albeit from a low position); over 6% and making it the fastest growing Euro economy in the year with improvement in the construction sector ( though not general consumption) and a reduced deficit; the only concerns being spending pressures given the still high debt levels. However, politically it was interesting with 3 new parties formed.
Nevertheless, noticeably worse than random on this one: 30%
 Greece
I didn’t have too much happening in my forecast for Greece the first half of the year- although given some of what had gone before, we must note that everything is relative!
In fact, in the first few months, while on the surface the duck was looking calm, underneath the feet were paddling furiously to stay afloat.
I gave a rather mixed bag forecast for the period April to October with some stability but also the expectation of drama /surprises and radical change affecting the government.
For instance I thought that the period around July would be ok and there was a surprise miniscule amount of growth reported for the second quarter.
But also in July, with the country up against the wall re repayments, and the banks closed for 3 weeks, there was an internal vote in favour of measures to keep the creditors happy despite this being against the general policy of the ruling party.
In August, after a German vote, Greece secured its third bailout. So the country was able to make its due payments. I suppose that is stability of a sort!
I was closer on the government situation with the Prime Minister resigning at the end of August.  And in September the ruling party survived following elections (I estimated this sort of event in October but that’s within the month either side range).
 I suppose it was rather a strange period and exactly as I described. Lots of drama but ultimately no changes.
I expected the last few months to be mixed. And they were; with protests and strikes but ultimately approved its budget and received some aid.
A difficult one to score. On initial reading I felt I’d done badly but breaking it down I feel that actually the prediction summed up the year well- a lot of events but not much difference in trend. 80%
 
Iceland
Nice to follow Greece with Iceland; the contrast is so telling.
I started by noting the ongoing sense of restriction (represented by the capital controls still in place)
I also noted some more specific matters might be highlighted at the beginning of the year, including climate change and indeed there was a Time report that land was rising 1.4inches pa in some areas of the country. A theme that as expected was repeated at the end of the year as the Paris Climate Agreement brought climate issues back into the discussion in Iceland, after silence regarding the issue before last parliamentary elections
However, I had the period March to May as a possible time for volcanic or other disruptions. In fact the 2014-15 eruption was deemed to have come to an end at this time
Nevertheless, there was a disruptive influence of sorts at play as a new Gallup poll published 30th of April showed that the Pirate Party formed in 2012 was now the biggest political party in Iceland with 30.1%.A picture that has continued all year and re-iterated in December.
I expected talks would return to previous matters by June and  Iceland started to prepare to phase out its currency controls- (by the year end had relaxed controls on one the bank) and raised rates.
I thought that there would then be a positive period and so it proved with even talks that the economy might be overheating.
Overall a moderately successful attempt but nothing special and a significant miscall 65%
 
Switzerland
I don’t enjoy creating or reviewing the Swiss forecasts because it’s a country where so little usually happens, it is all a bit tedious and there is a temptation to magnify small potential events into larger ones.
I though the picture in 2015 would be more mixed than previously especially from March. I expected this to be reflected in property, banking and pharma.
In fact it was March when Switzerland conceded to sharing banking information with the EU heralded by many as the end of the “Swiss banking model” . There were concerns over property too. With simultaneous fears that it was stoking a bubble investment wise while becoming unaffordable rent-wise. And in April it was reported that Switzerland had attracted the fewest companies in a decade after voters passed measures that aim to limit immigration and started revising corporate tax breaks
A bit of minor shakeup was expected in May but a calmer June to August.  September was also predicted to indicate bigger changes (in Swiss terms that is!). In fact it was October’s election increase in support for the far right that was notable (again within our bounds of acceptability for this level of forecast)
The end of the year though quieter was expected to be tempered by long term concerns.
And regarding the longer economic view: Sergio Rossi to Swissinfo on 6/1/2016 said
The consequences were much more noticeable in the second half of the year. Many companies took decisions that reflected their fears. There was increased pressure on wages, in some cases salaries were partly paid in euros rather than francs, jobs were lost, and certain business activities were moved abroad. The Swiss economy stuttered and consumption declined. Saving money became more important for people, and they went shopping over the border.
Actually, a good result, though as usual one can’t give high scores without dramatic events: 80%

Monday, 1 February 2016

Apologies or the lure of the beach


Until the Syria post today, a whole year had passed since I last posted on this blog. This is partly the nature of the project: i.e. to forecast forward a number of years and then to review progress annually, but it is also, frankly, because I  became bored with the repetitiveness of the project; other interests took over in my life.
 
I shall endeavour to be more motivated this year, with the intention of developing new 2017-2020 forecasts for all the usual countries and markets in the second half of 2016.
 
However, I can make no promises, as, after the first 2008-12 batch was completed,  this really became a labour of love and I am inherently lazy, easily bored by routine and always delighted to be distracted by something new!
 
I also think that in the work becoming more of an obligation (rather than an attempt to prove something as in 2008), my 2013-16 forecasts are of more variable quality. It is difficult to 'get into the zone' needed for such work when one would rather be on the beach.
 
Hopefully, though, I will have enough patience and enthusiasm (and will be able to resist the temptation of the beach for sufficiently long enough) to start by conducting the review of 2015 during this February......
 

Syria : Where next?

First; there is no picture to illustrate this analysis, the subject matter is too serious for a pretty picture. 
 
 
Secondly; I did write a general disclaimer with respect to all my forecasts when I started this blog and, of course, that still stands. But since what follows relates to such a sensitive area of world politics, I want to especially reiterate that warning here.
The forecasts that follow have been prepared based on a specific type of analysis which , so far, has proved successful in around 70-75% of examples so far. That does, however, mean that around 25-30% of predictions have been wrong.
Furthermore this is the first time an analysis of this particular country has been attempted under this project and the choice of date and time on which the analysis is based is still subject to trial. So, while every effort has been made to approach the forecast with due care and attention to the various elements, it is by no means guaranteed that the predictions below will come to pass.
 
Another January 1 foundation chart
Many countries and institutions were legally established on  January  1st and thus share certain characteristics.  They are all, to some extent, linked so developments in one are often reflected in the others. characteristics. However, each such country  is unique in terms of its individual geomorphology, people and political history . So what separates those countries is the extent to which they are affected by international events and what elements of the nation are changed by those events.
Syria (at least based on the foundation date I am using), has some very powerful global themes built into its foundation. Chances are, that if events do resonate to this particular moment, Syria will feel it more deeply.   
Normally the fundamental question I would be asking is when will such key periods occur. But we know the answer to that now. And I don’t generally do hindsight. Nevertheless, a brief recap is appropriate.
 
2009 to 2015
In fact, the conditions for it became perfect in the period 2010-2015. And furthermore there is evidence to suggest that in the case of Syria only, that tied in with a probability of prolonged heightened violence.
It is not surprising then, that Syria got dragged into the events of the 2011 “Arab Spring”. To what extent the challenges to the incumbent Syrian leadership were influenced by the events in Tunisia, Egypt etc and to what extent those events were an excuse for certain parties to implement an entirely different plan is a moot point. Certainly there seems to be a lack of an “unexpectedness” theme, which one would expect for a sudden uprising, while the picture of simmering undercover threats to the nation’s status quo coming to fruition is quite clear. This was coupled with the start of a long period where the leadership would be seen to be pursuing a military agenda.
Tracking the period from 2011 to the end of 2015 shows that Syria responded exactly as might be expected to signifiers
  •  first of conflict involving the leader, then increased resistance,
  • followed by issues relating to chemical weapons
  • and then to the increasing involvement of Islamic militants
  • and the mass movement of the population.
 
2016
It would be good to say that 2016 would show some lessening of the tragic conditions in Syria. But the odds of this are not yet good. There are still critical points to be reached and a continued mix of forces in opposition for some time before there is any sense of the pressure being lifted. The good news is that it seems that, by and large, the worst is over.
There is little change in the themes in January 2016. Airstrikes continue, as does pressure on Assad and fighting in general. There is some pushback against the Islamic militants.
February is likely to see fiercer fighting by the militants, but no let-up in the overall situation.
As the situation continues throughout the spring with no noticeable change in any direction, the issue of the huge number of migrants again comes to a head around April.
And indeed there maybe some shocks in relation to the civilian population in May.  These will lead once more to pressure on Assad.
Matters intensify again around June and July. There is renewed pressure on all sides and particularly in relation to IS.
There is some evidence to suggest that a way out for Assad will be constructed by the autumn.
October sees the focus back on the core Syrian divisions but there is also some sign of a turning point finally being reached in this.
There is a much clearer picture of a radical change in the overall situation around November. Although the events that start now may not be fully completed until the following summer. It is possible that this relates to the beginnings of brokering peace within Syria ( i.e relating to the original conflict excluding IS)
December sees things slip a little and there once again may be some shocks – perhaps even relating to countries supporting the various factions.
2017
2017 sadly sees no immediate end yet to the pressure of IS and related airstrikes.  But there is evidence to suggest that the original disputes between the Syrian government and the rebel army will dissipate or be at least partially resolved.
There is evidence of a change  of environment even by January and that these will be felt by many of the overall population. Perhaps accompanied by some sudden changes in the structure of the country’s government.
March seems to be another critical point when radical changes can be made. However the speed and extent of the changes may have some temporary negative consequences for the general population.
By summer there is really is a dramatic change in the picture.  While IS remains a problem in the background, the original confrontation between the Syrian government and the rebels is now more or less over.
Of course there are residual issues, and a huge job to start reconstructing the country.
However there is support across the country for achieving common goals.
September 2017 looks to be one of the least challenging months since early 2011.
Though there is brief opposition to the leadership in November ( this could of course relate to the original leadership and be part of the resolution of the war)
December sees a lighter picture, reduced airstrikes and the beginning of a new phase, although this will be an uphill challenge.
2018
 
2018 is the first year since 2011 that shows none of the challenging internal indications that characterised the last 7 years . There may still be some confrontation between the leadership and the stronger Islamic elements but the picture overall is much more benign.
January and February seem to be characterised by stabilisation and transformation and a positive frame of mind.
The relationship between the people and the leadership is finally in alignment by March. A new leader, or possibly a partnership with another leader is indicated now.
By May there is a opening up of communications and a lessening of restrictions.
Although the summer is more mixed, it is likely that the may be a wave of migrants returning to rebuild their lives.
September may see some dramatic announcements.( Although the same indicators could suggest  some risks re airplanes)-But the overall picture is still one of optimism and gradual opening up.
The period from October to December is a bit more difficult. The leadership has to face the real challenges that come from a country that has been at war for so long, but nevertheless the overall picture is a dramatic improvement from the picture at the beginning of 2016.
2019-2020
Dealing briefly with the following two years. There appears to be no return to the difficult conditions of 2011-17.
The overall themes are ones of openness and optimism.
However there may some evidence to suggest that there may be a creeping strength in Islamic sentiment, although not militarised. An alternative interpretation to this might be in relation to the position of women – perhaps a reflection of developments elsewhere.
Syria does not seem to tap in too strongly to the major global themes of 2019-20. We should probably therefore turn back now to the countries that will be affected in that period.
N.B. Chart used 1 Jan 1925, 00.00 Damascus. The date the Syrian Federation legally became the State of Syria