Housing affordability is attracting the attention of politicians as concern rises that a housing bubble has made homes too expensive. So far, none of the discussions have really addressed the problems. Several key points can be made here from a futurist perspective.
The housing problem…..
Sitting on the left wing agenda is the view that negative gearing of investment properties is a necessary step to making housing more affordable. Government is short of cash. You can see this happening in most liberal democratic countries around the world and should merely be seen as another tax grab. For this reason alone politicians will close the negative gearing window.
Cancelling negative gearing will have the long term effect of driving up rents causing a severe shortage of rental properties. That wont affect the politicians however who vote for the negative gearing “reform” as they will have disappeared into retirement.
Pre-2016 election talk suggested a grandfather clause to existing investment property holders. The time between initiating the legislation to when it goes into effect creates a window for people to grab up properties for investment purposes. The short and sharp buying frenzy in conjunction with this kind of policy or news would be typical of a major long term top for Australian property markets. This kind of event is common in financial markets when changes of trend occur at the end of a long term market. Policy or news has caught up too late. It always results in a major reversal. We might anticipate the peak of the Australian property market would last decades.
Other proposed measures include first home owners being allowed to access superannuation to form a deposit. When first home owner grants were introduced in 2000, property prices for new homes jumped by multiples of the $7000 grant. This reflected the increased purchasing power an extra $7000 had on loan to valuation ratios. If super is allowed into the equation we’ll see property prices once again jump higher as builders respond to improved loan ratios.
Part of the affordability solution……..
One issue that never gets discussed is the supply related issues created by government themselves. In many capital cities around the world, including Australia, housing affordability is often the unintended consequence of regulatory bottlenecks where zoning, building regulations and permits choke the flow of new supply and drive up the cost of housing. Clearly this needs to be addressed and would go a long way towards addressing the affordability issue.Another issue under the microscope where investors hold a property seeking only capital gains by leaving the property untenanted. If governments must be seen to be doing something, a tax on properties untenanted for longer than say 3 months would take the heat off buyers as they realize the benefits renting over buying bring in an overheated property market.
Suffice to say the long term direction of Australian property values are coming to a head in conjunction with other Australian and global social, political and economic issues. Housing affordability is just another issue along with many others whose origins lie decades in the past and whose solution cannot be answered by politicians or central planners
We anticipate US stocks have entered a consolidation phase lasting a minimum of several months.
Stocks have performed strongly off the back of the Presidential election. This has served to clarify where things are heading. Any short term ambiguity has now been cleared away. The recent top and pullback also coincides with the topping phase of the eight year stock market cycle that has continued for over 50 years. Note while March 2017 is the month time window for the peak, cycles of this length can take 1-2 years to complete their cycle top. Take the stock market top in 2000. While the highs occurred by March 2000. This was well before the 8 year cycle high of 2001. The then markets chopped around for another year close to the all time highs before pealing way into their 2003 lows.
The next 8 year cycle low will occur some time in 2025 and by that time stock market will be equal to, or lower than 2009 stock market lows. A lot will have changed by then – politically, economically and socially.
We note the growing political, social and economic cross-currents that have been building over the last 2 decades. This is typical of major tops and is reflected by the difficulty investors and business people have in making business and investment decisions.
So anticipate US stocks pulling back between now and May to August of this year. into the consolidation lows. The pullback should be quite steep and volatile with potential targets of DJIA 19500 – 19900, SP500 2000 – 2100. We note US money supply growth is declining rapidly which underpins the softening stock market.
Following the pullback we will see, once again, markets rise to new highs. The nature of the rise we foresee being accompanied by extremely bullish news. Typically, major corporate tax cuts would fit with this picture, rising money supply growth and a rising, extremely bullish euphoria. This coming run should take the DJIA above 23000 to 25000.
We believe this is the last gasp of The End of the Long Game 2009-2018 and there is a high probability that it is ending in a 1929 style stock market blow off. Ironically the same factors that caused the 1929-1933 Great Depression are also causing the current bull market rally. This will be the peak in a 230 year cycle of human endeavor. We are witnessing history, a history that will stand for generations to come.
We have reached an interesting juncture with this US stocks update. In the next few trading days – maybe as early as Monday 28/11, we anticipate stocks to open higher and then reverse to the downside. Failure to follow through with new highs within 5 trading days would indicate a major top has been made and a quick test of DJIA 15370 (SP500 1810) is due.
DJIA 3rd QTR 2012 to Present
It may be that the so called Trump rally is part of a larger consolidation phase and an even bigger rally is due to get underway after a sharp down move to shake out complacent longs.
Sentiment has become extremely bullish despite gathering storm clouds on the horizon (interest rate normalization, EU bank health, Trumponomics, US economic health). Stocks in the short term have become overbought so we anticipate corrections as a normal part of the process.
Quite likely we will see a low in gold and a high in the US dollar occurring near to this time. The Euro should take out its 1.04 -1.05 lows and gold should complete a low in line with our previous post around US$1180. Again, whether this is just a breather or something more substantial we shall have to wait for further clarification.
The pendulum of government overreach has peaked in most liberal democratic countries around the world (for now). The major political events of 2016 have shown increasing resistance to government given the rising number of breaches in civil liberties and failure of government to identify and respond to the disenfranchised members of their societies.
Many segments of society have felt themselves becoming impoverishment. At the same time they have watched the hubris, greed and failure of politicians to deliver solutions to resolve the various politically made crises. One of the recurring questions that will emerge is the role of government in the lives of people.
By the time politicians’ hubris has completely evaporated, the nature of liberal democratic countries will have changed. We see major risk of political, economic and social upheaval occurring between now and 2028-2033 This phase may extend before social, political and economic stability becomes the norm. As always the pendulum will one day swing again towards increasing government involvement in the lives and affairs of ordinary people.
Gold fell overnight onto major support between US$1180- $1200. We anticipate a spike in gold prices to the US$1370 – $1525 level from near current levels. The time frame for the rally should be relatively short.
We called the US Presidential election (27/07/2016 & 29/10/2016) saying Trump would win. We called the Australian federal election and while we didn’t quite get what we thought would happen, we got second best with the Australian people being the winners (16/06/2016, 28/06/2016 & 24/07/2016).
Expect further political upsets in 2017 with elections falling due in France and Germany.
If US stock markets hold to these levels to slightly lower we can anticipate the birth of a large rally taking markets to new all time highs. Relatively speaking we would expect this coming rally to be weak. We view this as being the last gasp before the conclusion of The Long Game.
In an interview with the Washington Post, Amazon CEO Jeff Bezos reveals what he thinks will be the future of humanity when we eventually colonize space. He talks about a plan for colonizing our solar system with nuclear reactors in space, populations in the millions, and more.
While Elon Musk’s SpaceX is the public face of the private space industry, there are other major players trying to bring humanity closer to the stars. Richard Branson’s Virgin Galactic has been working on its own rocket technologies, and Jeff Bezos, CEO of Amazon, has been revealing more on the work they’re doing over at Blue Origin.
The previously secretive Blue Origin has been announcing more of its milestones in its space ambitions. It successfully landed the same rocket four times in a row, with the end goal of reusable rockets that will lower space travel costs.
The company has unveiled its own rocket, the “New Glenn,” which dwarfs any of the rockets being developed today. Bezos announced that the Glenn will be ferrying astronauts by the end of the decade.
Along with the engineering developments Blue Origin has announced, Bezos has also shared his predictions on human colonization of space, in an interview with The Washington Post.
Human colonization of space
In the interview, Bezos sees humans spreading out across the Solar System. He envisions “millions of people working and living in space.” But to do this, Bezos notes that we will have to figure out how to extract and manage the resources we can get from space, since Earth alone won’t be able to provide the materials for space colonization.
Bezos also says we will have to figure out how to harness nuclear technology in space, citing it as a viable alternative to solar power that will dim out as you move farther from the Sun. In fact, moving out into space would not just be a dream, but an imperative. We will have to move heavy industry outside of Earth, in order to preserve it. He envisions the Earth being “zoned” as residential and light industrial.
But does he think we will see space colonization in our lifetime? “Not in the near term… Eventually Mars might be amazing. But that’s a long way in the future.”
How many things do we own, that are common today, that didn’t exist 10 years ago? The list is probably longer than you think.
Prior to the iPhone coming out in 2007, we didn’t have smartphones with mobile apps, decent phone cameras for photos/videos, mobile maps, mobile weather, or even mobile shopping.
None of the mobile apps we use today existed 10 years ago: Twitter, Facebook, Youtube, Instagram, Snapchat, Uber, Facetime, LinkedIn, Lyft, Whatsapp, Netflix, Pandora, or Pokemon Go.
Several major companies didn’t exist a decade ago. Airbnb, Tinder, Fitbit, Spotify, Dropbox, Quora, Tumblr, Kickstarter, Hulu, Pinterest, Buzzfeed, Indigogo, Udacity, or Jet.com just to name a few.
Ten years ago very few people were talking about crowdfunding, the sharing economy, social media marketing, search engine optimization, app developers, cloud storage, data mining, mobile gaming, gesture controls, chatbots, data analytics, virtual reality, 3D printers, or drone delivery.
At the same time we are seeing the decline of many of the things that were in common use 10-20 years ago. Fax machines, wired phones, taxi drivers, newspapers, desktop computers, video cameras, camera film, VCRs, DVD players, record players, typewriters, yellow pages, video rental shops, and printed maps have all seen their industry peak and are facing dwindling markets.
If we leapfrog ahead ten years and take notice of the radically different lives we will be living, we will notice how a few key technologies paved the way for massive new industries.
Here is a glimpse of a stunningly different future that will come into view over the next decade.
Also known as additive manufacturing, 3D printing has already begun to enter our lives in major ways. In the future 3D printers will be even more common than paper printers are today.
1. 3D printed makeup for women. Just insert a person’s face and the machine will be programmed to apply the exact makeup pattern requested by the user.
2. 3D printed replacement teeth, printed inside the mouth.
3. Swarmbot printing systems will be used to produce large buildings and physical structures, working 24/7 until they’re completed.
4. Scan and print custom designed clothing at retail clothing stores.
5. Scan and print custom designed shoes at specialty shoe stores.
6. Expectant mothers will request 3D printed models of their unborn baby.
7. Police departments will produce 3D printed “mug shots” and “shapies” generated from a person’s DNA.
8. Trash that is sorted and cleaned and turned into material that can be 3D printed.
The VR/AR world is set to explode around us as headsets and glasses drop in price so they’re affordable for most consumers. At the same time, game designers and “experience” producers are racing to create the first “killer apps” in this emerging industry.
9. Theme park rides that mix physical rides with VR experiences.
10. Live broadcasts of major league sports games (football, soccer, hockey, and more) in Virtual Reality.
11. Full-length VR movies.
12. Physical and psychological therapy done through VR.
13. Physical drone racing done through VR headsets.
14. VR speed dating sites.
15. For education and training, we will see a growing number of modules done in both virtual and augmented reality.
16. VR and AR tours will be commonly used in the sale of future real estate.
Drones are quickly transitioning from hobbyist toys to sophisticated business tools very quickly. They will touch our lives in thousands of different ways.
17. Fireworks dropped from drones. Our ability to “ignite and drop” fireworks from the sky will dramatically change both how they’re made and the artistry used to display them.
18. Concert swarms that produce a spatial cacophony of sound coming from 1,000 speaker drones simultaneously.
19. Banner-pulling drones. Old school advertising brought closer to earth.
20. Bird frightening drones for crops like sunflowers where birds can destroy an entire field in a matter of hours.
21. Livestock monitoring drones for tracking cows, sheep, geese, and more.
22. Three-dimensional treasure hunts done with drones.
23. Prankster Drones – Send random stuff to random people and video their reactions.
24. Entertainment drones (with projectors) that fly in and perform unusual forms of live comedy and entertainment.
Driverless technology will change transportation more significantly than the invention of the automobile itself.
25. Queuing stations for driverless cars as a replacement for a dwindling number of parking lots.
26. Crash-proof cars. Volvo already says their cars will be crash-proof before 2020.
27. Driverless car hailing apps. Much like signaling Uber and Lyft, only without the drivers.
28. Large fleet ownership of driverless cars (some companies will own millions of driverless cars).
29. Electric cars will routinely win major races like the Daytona 500, Monaco Grand Prix, and the Indy 500.
30. In-car work and entertainment systems to keep people busy and entertained as a driverless car takes them to their destination.
31. In-car advertising. This will be a delicate balance between offsetting the cost of operation and being too annoying for the passengers.
32. Electric car charging in less than 5 minutes.
Internet of Things
The Internet of things is the network of physical devices, vehicles, and buildings embedded with electronics, software, sensors, and actuators designed to communicate with users as well as other devices. We are currently experiencing exponential growth in IoT devices as billions of new ones come online every year.
33. Smart chairs, smart beds, and smart pillows that will self-adjust to minimize pressure points and optimize comfort.
34. Sensor-laced clothing.
35. “Print and Pin” payment systems that uses a biometric mark (fingerprint) plus a pin number.
36. Smart plates, bowls and cups to keep track of what we eat and drink.
37. Smart trashcan that will signal for a trash truck when they’re full.
38. Ownership networks. As we learn to track the location of everything we own, we will also track the changing value of each item to create a complete ownership network.
39. Self-retrieving shoes where you call them by name, through your smartphone, and your shoes will come to you.
40. Smart mailboxes that let you know when mail has arrived and how important it is.
Even though healthcare is a bloated and bureaucratic industry, innovative entrepreneurs are on the verge of disrupting this entire industry.
41. Hyper-personalized precision-based pharmaceuticals produced by 3D pill printers.
42. Ingestible data collectors, filled with sensors, to give a daily internal health scan and report.
43. Prosthetic limbs controlled by AI.
44. Real-time blood scanners.
45. Peer-to-peer health insurance.
46. Facetime-like checkups without needing a doctor’s appointment.
47. Full-body physical health scanners offering instant AI medical diagnosis, located in most pharmacies
48. Intraoral cameras for smartphones for DYI dental checkups.
Artificial Intelligence (AI)
Much like hot and cold running water, we will soon be able to “pipe-in” artificial intelligence to any existing digital system.
49. Best selling biographies written by artificial intelligence.
50. Legal documents written by artificial intelligence.
51. AI-menu selection, based on diet, for both restaurants and at home.
52. Full body pet scanners with instant AI medical diagnosis.
53. AI selection of movies and television shows based on moods, ratings, and personal preferences.
54. Much like the last item, AI music selection will be based on moods, ratings, and musical tastes.
55. AI sleep-optimizers will control all of the environmental factors – heat, light, sound, oxygen levels, smells, positioning, vibration levels, and more.
56. AI hackers. Sooner or later someone will figure out how to use even our best AI technology for all the wrong purposes.
Future transportation will come in many forms ranging from locomotion on an individual level to ultra high-speed tube transportation on a far grander scale.
57. Unmanned aviation – personal drone transportation.
58. 360-degree video transportation monitoring cameras at most intersections in major cities throughout the world.
59. Everywhere wireless. With highflying solar powered drones, CubeSats, and Google’s Project Loon, wireless Internet connections will soon be everywhere.
60. Black boxes for drones to record information in the event of an accident.
61. Air-breathing hypersonic propulsion for commercial aircraft. Fast is never fast enough.
62. Robotic follow-behind-you luggage, to make airline travel easier.
63. Robotic dog walkers and robotic people walkers.
64. Ultra high-speed tube transportation. As we look closely at the advances over the past couple decades, it’s easy to see that we are on the precipices of a dramatic breakthrough in ultra high-speed transportation. Businesses are demanding it. People are demanding it. And the only thing lacking is a few people capable of mustering the political will to make it happen.
As I began assembling this list, a number of items didn’t fit well in other categories.
65. Bitcoin loans for houses, cars, business equipment and more.
66. Self-filling water bottles with built-in atmospheric water harvesters.
67. Reputation networks. With the proliferation of personal information on websites and in databases throughout the Internet, reputation networks will be designed to monitor, alert, and repair individual reputations.
68. Atmospheric energy harvesters. Our atmosphere is filled with both ambient and concentrated forms of energy ranging from sunlight to lightning bolts that can be both collected and stored.
69. Pet education centers, such as boarding schools for dogs and horses, to improve an animal’s IQ.
70. Robotic bricklayers. With several early prototypes already operational, these will become common over the next decade.
71. Privacy bill of rights. Privacy has become an increasingly complicated topic, but one that is foundational to our existence on planet earth.
There’s a phenomenon called the Peltzman Effect, named after Dr. Sam Peltzman, a renowned professor of economics from the University of Chicago Business School, who studied auto accidents.
He found that when you introduce more safety features like seat belts into cars, the number of fatalities and injuries doesn’t drop. The reason is that people compensate for it. When we have a safety net in place, people will take more risks.
That probably is true with other areas as well.
As life becomes easier, we take risks with our time. As our financial worries are met, we begin thinking about becoming an entrepreneur, inventor, or artist. When life becomes too routine, we search for ways to introduce chaos.
Even though we see reports that billions of jobs will disappear over the coming decades, we will never run out of work.
As humans, we were never meant to live cushy lives of luxury. Without risk and chaos as part of our daily struggle our lives seem unfulfilled. While we work hard to eliminate it, we always manage to find new ways to bring it back.
Yes, we’re working towards a better world ahead, but only marginally better. That’s where we do our best work.
Its clear we are in a cycle of increasing political chaos and uncertainty. This is continuing to escalate. Its happening in liberal democratic countries. National elections are due in these countries (Germany, France 2017), UK (2018). We can anticipate major upheavals along with the US. We are seeing the death throes of the liberal democratic tradition. Worsening economic inequality, the self interest of political elites, political coverups, politicians unable to deliver on their promises, vote rigging, dodgy economics, disenfranchised voters, unaccountable rogue police are just some of the issues to be seen in newspapers and television. Democracy, a human system, like all systems before, is failing.
Next US President
Given the increasing political chaos we anticipate Donald Trump will be elected as the 45th US President of the United States of America. Between now and November we should see a marked swing towards Trump. Viewing the US situation through the lens of cycles analysis we step beyond the character and reputation of US Presidential nominees to see the fabric of a society and economy being eroded through self interest.This process has been underway for over 5 decades.Trump’s election should be seen as the response to a disenfranchised electorate. That’s both within the parties and without. Its an increasingly angry social mood. Voters are angry and one of their few options is to respond at the ballot. Electoral horror at the status quo has emerged with a dual society – the haves and have nots, cronyism, hidden interests, corporatism, the endless wars, spurious economics, indebtedness………..
Like Brexit and many of the problems we are witnessing nightly in the news (EU refugee crisis, police and citizen shootings, etc), many crises have been manufactured by governments themselves.
We witness the unfolding political, social and economic drama of the USA and by extension the global stage since the US ascended to become the global hegemon after WWII. Most people acknowledge things have gone terribly wrong over the last 20 years but nobody knows what to do. There is little or no confidence in the political class, or their technocrat advisors, government institutions, the economy and society at large. We anticipate the continuing breakdown of the status quo an Trump’s election to the presidency is merely a reflection of the zeitgeist of our time. Yet this is perfectly understandable when you step back from the noise of daily media and observe the cycles of history evolving before our eyes.
An historical example of a time when a large scale breakdown of society occurred on this scale was during the phase 1740-1792 leading to the French Revolution. This time however, with globalization, it spans over many countries. At that time we saw increasing political instability with its attendant corruption, economic decay and the polarization of the people against the political elites (king and government). It’s happened many times before as any student of history will testify, is happening now and will happen again as humans consistently fail to learn from their past.
Understanding Cyclic History
We are witnessing in our lifetime the completion of large scale cycles of human endeavor and activity with the attendant dislocation and reallocation of social, economic and political activity and resources. An understanding of the broad brush strokes economically, socially and politically may serve to enhance your perspective on what emerges next. The scale of forces at work in liberal and democratic societies and economies is so huge that the current drama is taking decades to unfold.
This is the topping and completion process of an economic cycle that has been going on for around 224 years. By the time this top and the ensuing drama is finished, it may well have spanned generations of people. On a historical note, we are witnessing the completion of the growth phase of the industrial revolution cycle that began around 1783-5.
And so what does Trump have to do with economic cycles?
The current political chaos will continue to intensify and this will give way eventually into economic chaos. The impending signs for that economic chaos are clearly to be seen and once again it centers on the incapacity of central planners and bureaucrats to perceive the unintended consequences of their mischief. Trump has nothing to do with these economic cycles. He merely reflects the zeitgeist of the times. Like someone surfing a wave, they ride the wave for a period of time then disappear into the footnotes of history. Trump has often appeared at major tops of economic cycles in the last 30 years in US history. Its not surprising then he has reappeared surfing the zeitgeist wave as the US completes the topping phase of this huge cycle of human endeavor.
Trump’s ability to ride the social mood of the time we believe will help him to take the presidency. Whether he will have the power to change the status quo, like Obama who promised major change yet found himself caught in the entrenched self interest of Congress, Wall Street, Big Pharma and the military. Trump may well ride the last vestiges of prosperity in this cycle. Given the growing political and economic storm Trump may well find himself the target of assassination attempts in the next four years. He will be remembered as the President that reigned at the time the US and world peaked in economic activity for many decades to come.
Whether we have a few more months or years of twilight before the downside comes home to roost, suffice to say, from now on we can expect increasingly tough times punctuated by phases of optimism. The current political chaos will continue to intensify and this will give way into economic chaos. The impending signs for that economic chaos are already clearly seen and once again it the focus centers on the incapacity of central planners and bureaucrats to perceive the unintended consequences of their mischief. Will people in future times learn from our mistakes and mistakes of the past? We think not.
In our Australian election forecast of 28/06/16 and 16/06/2016 we forecast the risk of a ‘hung parliament’ or an outright win to the ALP. This was based on the principle of ‘Contrary Opinion’.
It took two weeks to resolve the final outcome of the national election. It left a Liberal government in power but without a majority in the Senate. The result has continued the ongoing risk element in Australian politics. Should government fail to deliver or introduces any form of controversial legislation, we may expect blocking in the Senate. Not quite the ‘hung parliament’ suggested but a second best – with a kind of severe arm lock if government steps beyond its mandate.
The voters got what they wanted. Through the mysterious spontaneous ordering process, the electoral process has communicated the deep level of cynicism Australians have towards politicians. It also reflects that no politician really has any clear solution or way forward for society and economy. And so voters have ensured that politicians can’t get away with too much. Little has been said by politicians that offers any resonance with voters.
Economic, social and political restructuring is needed to set Australia on course for its next phase. The electorate is exhausted by the constant personality bicker of politicians and their inability to tackle the big issues. Politicians have delivered a consistent message for over a decade that political self interest is more important than the people. Accordingly, many believe the economic and social decline experienced by Australians is set to continue.
Unfortunately, without a clear vision from government and a high risk of being blocked by the Senate, Australia remains in an entropic state with a continuing risk of stagnation. This trend may start to accelerate as capital outflows intensify over late 2016/2017 into US dollars. We anticipate inflation in the USA will climb rapidly over the next 1-2 years. Capital will be sucked from the EU and periphery including Australia. This will indeed be the last gasp of the ‘end of the long game.’
As political risk increases in all liberal democratic countries we can expect to see the contrary opinion factor playing a greater role in evaluating risk in elections and other important events.
One example is of course Brexit, while a close call, consensus opinion was that the UK would remain. Similarly, the Australian election consensus has continuously been that the Liberal Party of Australia would prevail. However, as previously posted (16/06/16), the Australian electorate is deeply cynical of its politicians and none of the contenders for the 2016 federal election are offering a way forward.
Economic, social and political reform is needed to set Australia on course for the next phase of its 100 year odd history. Its clear that the electorate is exhausted by the constant personality bicker of politicians and their inability to tackle the big issues. The consistent message for over a decade is that political self interest is more important than the people. Accordingly many believe the economic and social decline experienced by many Australians is set to continue.
Little has been said by politicians that offers any resonance with voters. So with this dissonance there is room for the Law of Contrary Opinion to operate. The law suggests “if everybody thinks one thing then bet the other way.” This law works well at times of extremity. For example, consensus thinking at elections, stock market highs and lows, etc, etc. Traders of financial markets use this tool when market sentiment is strongly biased.
Based on contrary opinion then, expect an upset on July 2nd with either a hung parliament or an outright win to the Australian Labor Party.
Should the “leave” vote win the coming UK referendum you can expect the impact to have global consequences. It will challenge the survivability of the EU. At the same time it will create massive flights of capital around the world as investors seek refuge for their money. Anticipate the USD being strongly bid. This will have a huge impact on US stock markets at the expense of peripheral markets and their currencies. The nature of global economics has been apparent for some time, though not obvious. Brexit will cause this to accelerate.
What is clear is the counter-intuitive nature of the Brexit situation. The narrative being promoted by the “in” vote is not what it seems. Democratic processes to do with EU politics have earned a reputation for not being so straight forward with several countries having the “will of the people” overturned in the last decade or so.
Should the UK decide to remain in the EU, we anticipate this will only serve to delay the inevitably. Namely the demise of the EU itself. A reading of history itself should remind that all political systems fail and a political system built on faulty premises to begin with, fail sooner. Thus, human nature expresses itself in a cyclical manner again and again.
It seems Australian voters want another “hung parliament”. The main parties are both doing their best to lose winning government. Little they say offers any resonance with voters.
The Australian electorate is deeply cynical of its politicians and none of the contenders for the 2016 federal election are offering anything offering a way forward. Economic, social and political reform is needed to set Australia on course for the next phase of its 100 year odd history. Its clear that the electorate is exhausted by the constant personality bicker of politicians and their inability to tackle the big issues. The consistent message for over a decade is that political self interest is more important than the Australian people. Accordingly many believe the economic and social decline experienced by many Australians is set to continue.
Confirming this, we see a lethargic economy and a growing sense of unease many Australians feel about their prospects. This reflects a deteriorating social mood. It won’t be long before this translates into a declining economy. Indeed, capital flows into and out of Australia indicate the tide is definitely running out and despite the best attempts of the RBA, we may soon see the downside of the business cycle in full flight. A good barometer highlighting this is the Australian stock market which remains stalled around the 5300 level ( ASX/SP 200) whilst US stock markets hover relatively near their all time highs.
We are still waiting confirmation that crude oil prices have completed their forecast lows. Notwithstanding one more low, potentially down to our target of US$12 per barrel, we anticipate the recovery of the oil market.
We expect oil prices to recover slowly, reaching as high as US$80 – $95 per barrel before entering a stagnating, equilibrium phase lasting many years and keeping oil prices in a long term trading range between US$30 per barrel and US$60 per barrel. Long term over supply will continue to keep this market under pressure despite the potential for geopolitical shocks occurring from time to time.
The coming oil price movement is typical of a commodity market that has been through a major boom and bust phase. Once we have confirmed the lows are in, we can more accurately define the next phase of the crude oil market.
The US stock market has the potential for large, rapid falls over the next couple of weeks. As long as the DJIA stays above 11258 (SP500 1219.8) the market remains in a correction phase.
Completion of the selloff phase above 11258 (SP500 1219.8) would indicate a potential move to new highs over the next few years accompanied by stronger inflation and strong prospects for the US economy.Such a scenario has the potential to unfold with rising interest rates, a strong US dollar and a strong domestic US economy.
A breach of 11258 (SP500 1219.8) followed by a corrective rally would indicate a major bear market was unfolding and provide the momentum swing to take out the 2009 lows.
While this prediction is valid for the US stock market we see signs the US dollar will continue to strengthen over the course of 2016 leading to a potential top. The strengthening US dollar and rising interest rates will have bearish implications for the rest of the world economy where funds are being sucked from the periphery to the centre.
Crude Oil added 45 points as traders bought up the cheap commodity taking advantage of low prices and the hopes that OPEC members will cut production now that Iran has returned to the marketplace combating US exports. Brent Oil added $1.08 to 29.64. Crude oil prices continued to be hurt by bearish sentiments across the globe as markets remain nervous as to how low oil prices can go. Besides, the supply side remains intact further exerting downside pressure on oil prices.
Low oil prices, weak investment demand and low physical demand are push factors for gold prices to trade lower while bargain hunting will provide a push for gold prices in the near term.
The EIA (U.S. Energy Information and Administration) had reported that the global crude oil production will rise to 95.9 million barrels per day (MMbpd) in 2016 and 96.7 MMbpd in 2017. The global crude oil production was at 95.7 MMbpd of crude oil in 2015. The global oil consumption is expected to average 95.2 MMbpd in 2016 and 96.6 MMbpd in 2017.
Meanwhile, the JPMorgan Chase and Goldman Sachs suggested that crude oil prices could test $20 per barrel in 2016. Royal Bank of Scotland suggests that crude oil prices could test $16 per barrel, while Standard Chartered suggests that oil prices could hit $10 per barrel in the worst-case scenario.
Today’s economies are dramatically changing, triggered by development in emerging markets, the accelerated rise of new technologies, sustainability policies, and changing consumer preferences around ownership. Digitization, increasing automation, and new business models have revolutionized other industries, and automotive will be no exception. These forces are giving rise to four disruptive technology-driven trends in the automotive sector: diverse mobility, autonomous driving, electrification, and connectivity.
1. Driven by shared mobility, connectivity services, and feature upgrades, new business models could expand automotive revenue pools by about 30 percent, adding up to $1.5 trillion.
2. Despite a shift toward shared mobility, vehicle unit sales will continue to grow, but likely at a lower rate of about 2 percent per year.
3. Consumer mobility behavior is changing, leading to up to one out of ten cars sold in 2030 potentially being a shared vehicle and the subsequent rise of a market for fit-for-purpose mobility solutions.
4. City type will replace country or region as the most relevant segmentation dimension that determines mobility behavior and, thus, the speed and scope of the automotive revolution.
5. Once technological and regulatory issues have been resolved, up to 15 percent of new cars sold in 2030 could be fully autonomous.
6. Electrified vehicles are becoming viable and competitive; however, the speed of their adoption will vary strongly at the local level.
7. Within a more complex and diversified mobility-industry landscape, incumbent players will be forced to compete simultaneously on multiple fronts and cooperate with competitors.
8. New market entrants are expected to target initially only specific, economically attractive segments and activities along the value chain before potentially exploring further fields.
Automotive incumbents cannot predict the future of the industry with certainty. They can, however, make strategic moves now to shape the industry’s evolution. To get ahead of the inevitable disruption, incumbent players need to implement a four-pronged strategic approach:
So, in the very short term, all is well. In the long term and even in 2016, Bank of America sees big problems ahead for the Chinese economy. According to their analysts, the regime has to fight multiple battles at once and will ultimately lose to market forces.
“We judge that China’s debt situation has probably passed the point of no-return and it will be difficult to grow out of the problem,” states a report by Bank of America’s chief strategist David Cui.
The report points out that a spike in private sector debt almost inevitably leads to a financial crisis. China’s private debt to GDP ratio went up 75 percent between 2009 and 2014, bringing total debt-to-GDP to about 300 percent. Too much to sustain.
This is “a classic case of short-term stability breeding long-term instability. It’s our assessment that the longer this practice drags on, the higher the risk of financial system instability, and the more painful the ultimate fallout will be,” Cui writes.
For the coming crisis, Cui believes China will probably have to devalue its currency, write off bad debts, recapitalize the banks, and reduce the debt burden with high inflation.
After the events of last August, and after the International Monetary Fund finally included China in its reserve currency basket, the regime completely abandoned the stable currency objective and let the yuan drift lower. The regime promises reform, and even follows through in some cases. But if push comes to shove, it resorts to central planning to mould the market according to its needs, with less and less success.
“It seems to us that the government’s policy options are rapidly narrowing-one only needs to look at how difficult it has been for the government to hold up GDP growth since mid-2014. A slowdown in economic growth is typically a prelude to financial sector instability,” writes Cui, and predicts the Shanghai Composite to drop by 27 percent in 2016.
As crude oil falls below US$28.00 per barrel we see a selling climax developing. The final low on this sell off could be anywhere between $12.00 to $27.00 and would lead to a major turning point for the beleaguered oil market. This will complete our oil market predictions first made in 2011 when we predicted US$12.00 per barrel. The final oil market low may well occur in conjunction with a bottom in US stock markets.
Once the lows are in we will release our predictions for oil for the next couple of years. We will also shortly update our “End of the Long Game 2009-2018” scenario.