Brazil
Readers will know that there is one currency where I have
almost consistently failed to get things right; indeed it was the only country
where I completely revised the base data I was using. That country is Brazil
and 2015 was no exception to my failures.
I thought early 2015 would start with optimism ( albeit
partially illusory). I also saw a risk of flood related problems and
inflationary concerns. The situation for the leadership would be mixed. There
are attempts to improve the economy but there are also unsettling groups trying
to undermine this.
This wasn’t that bad . Rousseff was just beginning her new
term –and things were mixed due to the Petrobras scandal that was beginning to
unravel . There were also inflationary problems – but there were no floods –
instead there were ongoing droughts.
I thought April and May would be mixed but still positive
sentiment. This was trash. The economy was unravelling, with higher
unemployment and inflation coupled with lower growth and March saw anti-government protests
I saw the themes continue in June to August. They did but
they weren’t the right themes!!!
At least I wasn’t wrong in August expecting doubt about the
direction of travel of the government. and short term unsettled events. But
this is little consolation.
I suppose my September forecast was closer to the truth (
but still massively misguided), and I
can take some solace in the fact that the indicators were there even if I
misinterpreted them. What I saw as exuberance was really the inflationary
pressures. By December the country had
had 2 credit downgrades to junk and inflation was the highest in 12 years.
Given that the leader was impeached in December it probably
wasn’t that good for the government contrary to my prediction!! And this was
before we heard about Zika.
Dire: well below chance -10%
Real
I thought 2015 would be a whole new world for the Real-
major debt issues would require adjustment of the value of the currency. That
was true but I wasn’t great on this either – though I did better than with the
country itself.
After falling in 2014 the Real felt no need to stop falling
in 2015. So yes the themes of 2014 continued
but there was no support for the currency. Fortunately I did give some
disclaimers on the environment.
I was right to see debt issues and volatility in July to
September at least.
And I did finally get something right seeing a slight rally
around October, but I thought that would lead to improved conditions in
November. It most definitely did not.
My year end as facing longer term global unstable was a
reasonable estimate though.
55%. Some right, some wrong. But enough noting of the
indicators to be marginally better than a coin toss.
Mexico
I thought 2015 would be characterised by the strength of
purpose of the leadership. This was a reasonable assessment – certainly Mexico
kept its head above water and the government remained stable throughout the
year. There was growth, lowish inflation and continued consumer confidence
throughout the year.
There really was nothing new to note in the first few months
as predicted and I think my assessment of most problems being external in April
and May was good too.
My assessment was somewhat more mixed for the period to
August- with possible sudden events affecting the leadership. The most notable
event was the escape of the drug lord El Chapo and the president’s approval rating fell somewhat
due to this and economic issues which as stated were mainly externally created.
September and October were calmer as forecast.
I also correctly thought that there might be more disruptive
conditions in the last 2 months, and Nieto was forced to focus on initiatives
to reduce the kidnappings and disappearances that plague the country but I was
correct that overall the rewards of economic progress would continue.
90%
Peso
I thought that events elsewhere would affect the trade of the Peso in early 2015 creating instability through
April. This was reasonably accurate with fluctuations which were initially
positive and on balance flat in April.
May and June were expected to be much more tricky
suppressing the Peso value for these few months despite some positive
sentiments ( see Mexico itself) and indeed the currency lost value in line with
many others in this period. Though there were no interest rate changes.
I then said that confusion and uncertainty would reign in
July and August with August in
particular being challenging . This was spot on. But September was not even
worse – but the volatility was more prolonged . There were no interest rate
changes then either though
I can also be proud of my comments that one shouldn’t see
the problem as the Peso itself, it is more likely to be a knock-on effect from
elsewhere.
My October forecast was more vague but still close with more
volatility, and November did indeed see a return to normality.
And finally I got it right re rates in December .
90% - it would have been 100% if I had assessed the rate
changes better. Makes up for Brazil and restores my faith in the techniques.
Venezeula
My forecast for the country in the first 6 months was for a
very difficult situation but with still some positives.
The reality was of course that Venezuela already had
structural problems even before the oil price decrease. The latter exacerbated
them severely. Nevertheless despite the rising inflation, the queues and the
talk of default if the situation continued, the country still continued to
operate without such default and without overturning the fragile leadership
throughout this period.
My forecast by the summer was more severe and indeed the
situation was only getting worse.
I thought there was a possibility ( though not a definite) of change in
leadership around November . In fact early December brought general assembly
elections and the opposition gained the majority ( (the ambiguity is caused by
the fact that presidential elections are not until 2018)undermining the
government’s power to act.
I thought the end of the year looked somewhat better. In
reality the country was close to hyperinflation and default but of course the
change in balance of power created some (possibly misplaced) optimism.
75% ( I probably underestimated the severity of conditions
but it is difficult to say what the people were really experiencing)
Bolivar
Little point in going into detail over the Bolivar.
Basically I saw the whole year as bad with a mix of serious falls in value and
restrictions.
Of course the problem is that there is not one Bolivar. And
the international official one was fixed while the others were depreciating at
a rate of knots.
This bifurcation means that I can’t really claim a very high
score even though my forecast was essentially 100% accurate. So 85%
Argentina
I thought that January would see some continued support for
government despite some very tricky economic conditions, but somehow things
would hold together. February would see a return to uncertainty possibly in
relation to the aforementioned bondholders and would be a tricky time.
In fact the beginning of the year was difficult due to
shortages triggered by the impact of the legal default in July 2014. But the
real difficulty was the suspicious death of Nisman.
I expected matters relating to debt to continue to dominate
in the following months and a sense of not being able to harness the country
into any sort of direction would continue. However I expected calming factors
and by June enthusiasm for a new era ( I was puzzled when I wrote that as the
elections would be months away) In fact
what happened was that Argentina issued some new Bonars to specific investors
agitating the hold- out creditors yet again, but on the other hand the mood was
improving as the expectation of a new government by the end of 2015 was indeed
creating some optimism even though there was still six months to go.
Around August I expected more instability and of course this
took the form of the global market volatility.
I correctly didn’t see much change in the next few months.
The difficult underlying conditions were offset by the optimism for change.
I saw the shift as being in December when I saw definite signs of the people being
split in their views of the government and of the start of a new cycle in the
country. In fact this was when the
elections were finally held and there was a split with the opposition gaining
power and promising a raft of changes :to debt negotiations, capital controls
etc.
Pretty good assessment and timing 90%
Again I’ll cut this one short as my forecast described in
detail a trend throughout the year of slight decline with restrictions
throughout until October. This was of course the reality ( though not quite as
I expected) as the Peso was being tightly managed vs the dollar so that it was
only declining by 10% until the change of government. Of course the reality was
that devaluation pressures were building up.
I didn’t forecast the December devaluation but I did
correctly see a change as the past was left behind and a new environment began
to dawn.
80% - ok but missed the key move in direction in December.
Canada
I expected that the first few months of the year would be
difficult though there were mitigating factors. In fact Canada was beginning to
notice the impact of the global oil price on its economy.
I thought that the effects would be noticeable March to May
as the economic changes filtered through to households and the housing boom and
that credit would be harder to come by. In fact it was slowing demand that was
impacting housing in all but a couple of major cities ( which distorted the
index) and the government cut interest rates twice in a short time to try to
address the general economic slowing.
It is somewhat ironic that I wrote in Canada’s forecast that
August was a time of big exchange movements. It certainly was globally but the
Canadian dollar was only marginally affected vs the US one. Nevertheless there was a concern that Canada
had fallen into technical recession.
I thought September would be significant. It was as the
economy bounced back a little and there were a series of marked shifts in
political sentiment prior to the election.
I thought that the opposition would be strong but that there
was alignment with the existing party, yet I also foresaw the shifts. This is
one of the times when a little more knowledge of the country would have helped
as I wrote as if there were two main parties when there were three. It was this
that created the initial opposition, thus swinging back to the incumbents prior
to October and then shifting again for the election itself. So I was right and
wrong simultaneously.
I also said that the country wouldn’t l have seen the back
of the long term structural economic questions in October through December and
in fact the stats were mixed in the last quarter as the country was split
between struggling areas such as Calgary and booming ones such as Vancover.
75%
Comments