Thursday, April 9, 2009

Let's Predict the Future!

I feel in the mood to predict. I figure I can do no worse than Jim Cramer, or Wassily Leontief.

Within the next year, (let's say April Fool's Day 2010), I expect the following to have occurred on the world stage:
  • The stock market will, in the short term, continue its rise, perhaps into the summer of 2009. The Dow will struggle to break through 9000, maybe even toying with the 10,000 mark. It will not reach it though. The rise will be fueled by unwarranted speculation that "the worst is over" and the economy is starting to "recover". Inflation, however, will start to dampen those spirits, and by next spring, the Dow will have retreated, probably testing if not falling through the lows of early 2009. Therefore, the Dow at 5888 on March 31, 2010. (How's that for breaking all the prediction rules!)
  • The oil industry will report at least one of the "super giant" oil fields has peaked and gone into decline. There will be more reports, now carried in mainstream media, that world oil production may already have peaked at 87.5 mb/d and that the world economies need to prepare for the reality of a relentless decline in the flow of oil. Most people though, will fail to understand the ramifications of this and think that oil prices are too high, continuing to blame the oil companies, their government, or Santa Claus for the price of energy. There will continue to be very little recognition that it is our own highly consumptive ways that is to blame.
  • The price of a barrel of oil will rise to at least the $65 range by early summer, 2009. Without much trouble, it could peak near, or perhaps even top $100 if there is major trouble in the middle east, or, at the height of the summer "driving season" supply is tightened because of storms or the collapse of a major oil field. All bets are off, however, if inflation starts to kick in and the U.S. dollar drops in value. This could be precipitated by OPEC deciding to price oil in Euros, or perhaps a basket of other currencies.
  • IF OPEC decouples the price of oil from the U.S. dollar, watch out below. The value of the stock market could be cut in half again.
  • IF OPEC continues to price oil in U.S. dollars, then I expect the price to have fallen back down to the mid to upper fifty dollar range in March, 2010. Demand will have continued to dampen, based on my prediction of lessening economic activity. However, we will start to see the impact of reduced supply, as the geologic reality of peak oil flow takes effect. Of course, this also will be influenced by the extent to which economic activity drops. Less activity will mean that it will still be possible for oil producing nations to supply the need, and there would be less pressure on prices. The unfortunate consequence of this is that it will delay the day when a majority of consumers understand that peak oil flow is a reality.
  • Steve Paikin will continue to believe that everyone should rightly expect to travel whenever they want.
  • There will no longer be a "Big Three" in Detroit. They will have been replaced by a mid-sized one, or two or three small ones. Their total size will be dwarfed by the Japanese and European automakers, who also will have shrunk in size by at least 15%.
  • It is highly likely that a major terrorist event will unfold to challenge world leaders, and specifically President Obama.
  • There will be at least one reported attempt on President Obama's life.
  • China and Eastern Europe will experience increased social unrest as a result of the economic situation. There will be reports of significant troop movements in China to deal with this unrest.
  • There will be an increase in nationalist sentiment in Eastern Europe, threatening the structure of the European Union.
  • There will be increased factionalism within Iraqi society as Obama attempts to remove U.S. troops. He will find it to be an increasingly difficult promise to keep.
  • Obama will find it very difficult to rally support for more troops in Afghanistan. The Europeans will have become increasingly insular, and unwilling to participate, as social unrest increases on their home turf.
  • Those of us who believe that the combined challenges of climate change and peak oil are the greatest threats to humanity will be greatly disappointed as world leaders focus instead on restoring "economic growth" as the answer to our problems. They will continue to fail to recognize that fueling economic growth without taking into account the ramifications of such growth is the root of the problem.
  • Harper and the Conservatives in Canada will continue to characterise any effort to price carbon as a "tax" that will destroy Canada's competitiveness. They have drawn that line in the sand and will continue to stand behind it.
I look forward to coming back to this list in a year or so and tally my score. Who knows, I may have read the crystal ball correctly on one of these predictions! Here's to hoping I am wrong, and we will all be back in Kansas in a year, sipping Mai-Tai's. ;)

I remind myself once again of the words of Wassily Leontief: "Regarding the projections, the only thing I am certain about is that they are wrong."

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