Five forecasts after an unpredictable five months in 2024
“FORECASTERS are only there to make fortune tellers look good”. So said Warren Buffett, and who am I to disagree?
But there’s forecasting and there’s forecasting, and although the past is never a guide to the future, every now and again things chime. I’ve long adhered to the cock-up theory of humanity. Basically, everything is a cock-up, but sometimes it is such a cock-up that it works.
I’m very taken at the moment with the perceived wisdom that inflation is beaten and interest rates will soon fall substantially. As ever, the world refuses to adhere to the paths given to it.
Never mind anything else, at the moment there is a simply stupendous build-up of bets against the good old GBP. Gigantic sums of money are betting the pound will fall. In case you don’t remember Harold Wilson’s infamous line: “Of course, the pound in your pocket is not devalued”. This is complete leger-de-main and disingenuous at the very least, if not economically illiterate.
Of course, the opposite is true – goods cost more to import, prices rise and, hey presto, that is inflation. So, the pound in your pocket is no longer enough to buy what it did. On that score, all things being equal, inflation is here for the longer term – especially as there are elections all over the place and no one will want any disturbance in the feel-good factor, which relies on the Federal Reserve and Bank of England loosening the purse strings until next year, when I’m sure everything will get tightened again. So, that’s forecast number one.
Forecast number two relates to Bitcoin held on exchanges. This has reached pretty much an all-time low. Previously, that has tended to herald a rise in altcoin prices, and looking at my crystal ball tells me now is no different (Don’t like the Bitcoin price? There’s another 20,000 cryptos you can choose). The problem is there’s an ever-expanding supply of them and, slowly but surely, their improvement will cease. In fact, unless you are a masochist, you should be out of altcoins by the middle of next year, and preferably before.
Three more predictions. Next, China and India between them have built up some $315 trillion of debt. There are specific reasons this has happened, which are different for both countries. If you wanted me to tell you how this is going to play out, I’d say China, with its centralised economy, will founder, and India, with its entrepreneurial esprit, will spot the problem in time and do something about it.
Number four is a murder story. What company was arguably the greatest engineering firm in the world? Boeing. For 70-odd years it produced exceptional aircraft with massive redundancy safety features. Then, sadly, the former boss of McDonnell Douglas, James McDonnell, got the top slop and everything went downhill.
You only have to remember McDonnell Douglas’s aircraft and what happened to them to understand what I’m talking about. The silly man used to say “we’re flying ‘em whilst Boeing is still testing ‘em”. There was a perfectly good reason for that… Over the last 20 or so years, Boeing has moved its production to South Carolina where there are virtually no unions and rock bottom wage rates – as the saying goes, if you pay peanuts you get monkeys.
Instead of spending money around Seattle – sometimes referred to as ‘jet town’ – on great engineers, Boeing has spent $59 billion on dividends and share buybacks. In doing so, as of now, its reputation is destroyed and the company’s potential for future survival looks less than secure.
In the simplest description of what Boeing is doing wrong, it spent $2.5 billion on upgrading the 737 instead of doing it properly and spending $20 billion on a new and well-engineered aircraft. So, prediction four is if you own Boeing stock, you might want to reconsider – although, this is in no way financial advice. The old advertising slogan “If it’s not a Boeing, I’m not flying”, unfortunately, no longer holds good.
And number five is very close to my economist’s heart. What does interfering with a market lead to? Answer, the exact opposite of what’s intended. I could cite Scotland’s minimum alcohol pricing in passing – did you know it means that supermarket deliveries have to come from England if they include special discounted offers?
I’m indebted to Ben Wilkinson of the Telegraph for this gem. Cornwall, as you may or may not know, decided to do something about second homeowners – so, they banned them. “There’ll be lots more houses for locals!” was the cry.
Unfortunately, the exact opposite has happened. No housebuilder worth their salt wants to build there now and, as a result, house prices are soaring as are rents, thus completely shutting out locals. What used to happen was that developments included a portion of houses for locals. That isn’t happening now – the locals who dreamt up this idea are starting to think about reversing it.
It is a similar story in Scotland, where the Scottish Government’s rent controls have had the opposite effect to what was intended by policymakers. Recent figures from the Office for National Statistics point to the fact that, despite the cap placed on increases to new tenancies, rents increased by more than any other nation or region in the UK.
So, prediction five is that these forms of government intervention in what should be free – but regulated – markets will go. That is, unless dogma overcomes economic sanity, which one can never rule out altogether.
Temple Melville, CEO of The Scotcoin Project Community Interest Company (CIC)
