Saturday, January 3, 2015

Predictions for 2015

I used to be in awe of public prognosticators. Anybody who could publish a set of predictions in venues like Time Magazine or Barron's surely must know something about the future. Of course they don't know any more than I do. Not even Nobel Prize winners can predict the future any better than me.

The other side of that coin is that I can't predict the future any better than them. I have learned that my stock market picks are useless. Accordingly, my only investments now are in broad-market index funds. I make no effort to time the market.

My forecasts for larger economic and political changes are slightly better than random. For example, I have long predicted that either a Democrat or a Republican will win the next presidential election--and I have yet to be wrong. Seriously, long before the events occurred, I correctly predicted the collapse of the Venezuelan economy, the instability of the Euro, the decline of China relative to the US, and much more. But none of these were particularly out on a limb.

So with that disclaimer, here are my predictions for 2015. A few of them are pretty safe, and some of them are not much more than guesses. We'll see how well I do a year from now.

They are listed in no particular order.

Enjoy.

  1. Oil will continue its decline for the first half of the year, and then recover to a stable price, probably around $70/barrel.
  2. Interest rates will remain low. The 10-year treasury will end the year yielding less than 2.5%.
  3. The Fed will probably not raise interest rates, but if they do it will be inconsequential. Too much money will be flowing in from abroad for it to make any difference.
  4. Wages will not go up in nominal terms. Workers will not get a raise. The extra-high minimum wages imposed in places like Seattle and Chicago will not be a trend.
  5. While nominal wages will hold steady, real wages will rise because of continuing deflation. The collapse of oil and commodity prices will spread through the economy. Utility costs will decline.
  6. Food prices will decline in 2015 because of successive years of good weather.
  7. Housing will be soft, and rental costs will top out and begin to decline.
  8. A key driver of deflation will be the continued rise of the dollar. Accordingly, prices of imports will go down, forcing a price decline on American manufacturers. The USDJPY will climb to 150, and the EURUSD will fall to parity.
  9. The stock market will not crash, but it will trend lower over the year.
  10. Tsipras (SYRIZA) will win the Greek election, and in consequence Greece will be pushed out of the Euro. This will cause considerable short-term damage to the Euro economy, but it will drive Greece into long-term depression and poverty. Greece will become a third world country.
  11. al-Assad will be overthrown in Syria. The new head of government will realize that the Alawites cannot win a war of attrition and will seek a cease-fire arrangement with its enemies. This will formalize new international boundaries between a truncated Syria (Damascus, Homs, and the coast) and the Islamic State. The Syrian war may continue between IS and the Kurds, and also over Aleppo between IS, remnants of the Free Syrian Army, and the remaining Christian population. The government will stay out of it.
  12. There will be no dramatic events among Trotskyists. All of the the grouplets will suffer a slow decline in membership. There will be no important conventions this year. Jack Barnes will not write a book.
  13. The shit will hit the fan in Illinois after Bruce Rauner becomes governor. The pension & budget crisis is too acute to postpone. I predict (more in hope than any other reason) that Illinois will become a Right-To-Work state, and that the public employee unions will be forced to take significant haircuts.

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