I always read the astrology columns at the start of the year. Don't know how it helps, except maybe acting as a morale booster, catalyzing an internal belief that this year "I shall overcome", and that "some day" of infinite success will happen sometime during the year. My chances, a great 50:50. With these kind of odds, I may as well play the lottery or become a professional gambler. But then, aren't we all are gamblers without knowing it?
The world may or may not pay heed to the tons of gloom and doom articles floating around. In fact, why should it? Until November of 2015, the clever ones in financial matters were calling 2016 as the year that will trumpet the end of bad times. A year of slow but sure recovery so said the IMF. But then, why would one pay attention to what any authoritative organization or global bank has to say when there is a financial God called Goldman Sachs (GS). No one can afford to ignore what it has to say, even if at times it is completely off the mark. There are many who blame it for the 2008 crisis, the oil gold and commodity bubbles, the Greek debt crisis, the China problem, and even exerting undue influence on the US Senate members as well as the Federal Reserve. For them, GS is a financial terrorist and not God. But then, aren't followers of one God or the other are inflicting some form of terror or the other? Then, does it matter if GS stands guilty as charged? Rather, what matters is that it has painted a depressing but not an entirely gloomy doomy picture for 2016. In fact, the picture is akin to showing a silver lining that all the contrarians are micro focused on.From a selfish perspective, GS has gone optimistic on India and has even put its money where is mouth is by making moderately sizable investments in the Indian hospitality, real estate and start-up segments; the riskiest ones at the moment. My own gambler mode view is that opinions like that of GS has set up 2016 as a match winner for India and the dirty politics of this Country will go all out to loose this victory.
Since I believe that my power to predict also sits on the 50:50 odds, let me do my bit of soothsaying for 2016 like a typical Indian astrologer.
1. The world famous in India GST (Goods and Services Tax) will not happen until 2017. I hope I am wrong, but the introduction of GST will further push up inflation for a couple of years until it starts tapering down. The current regime may be constrained to drive up the already climbing food and retail inflation (kept artificially low by lowering fuel prices and including it in the statistical basket). So it would rather hold off its introduction by blaming it on the opposition.The opposition on the other hand would allow passing of the GST bill in 2017 or thereabouts with a hope to capitalize on a high inflation rate in 2019 (election year) and blame the existing Government for the mess. The current government may have little choice but to make people richer by lowering Corporate Tax and doing away with surcharges on Income Tax to compensate for the rising inflation which may become even more pronounced once GST is introduced. Taxing the rich at a higher rate has never made sense in India as less than a 100,000 pay personal taxes that are greater than Rupees one million. Tax reduction may also be the panacea for not being able to reduce interest rates any further based on existing economic ground reality.
2. Now that China has lost out to Japan on the bullet train, it looks unlikely that much of that US$100 billion commitment to invest in India will materialize. Especially, when the Chinese economy itself has gone defensive. However, China can become a major investor in India rather than continuing as a plain vanilla vendor for Solar Energy projects. Future transactions between India and China would be done using the Chinese Yuan (fixed rate) rather than in US Dollars for obvious reasons. Both nations will rely on each other along with Japan and Russia for economic growth, making the creation of AIIB more critical. It is good for China to have caught the flu. Hopefully, it will realize its economic vulnerability to the US and work towards curing it. Military and technological might is just not enough. It has a huge corruption problem - just like India - it's own Achilles heel.
3. European investment commitments to India too may be constrained based on the debt and refugee crisis it is currently facing along with the possibility of a Brexit. I don't think Britain has an option but to stay with Europe. In many ways, it has cleverly avoided full integration and that's the way it will stay, and it now has many more reasons to justify the same. If social media is anything to go by, many European leaders may also start talking like Donald Trump and that's the only and real danger of 2016 becoming a man-made catastrophe.
4. The rich Middle East nations will not wait to see if Donald Trump makes it as US President to pull back investments from developed markets. The withdrawn funds would go towards filling the void left by dropping Oil revenues in their operating budgets, and as investments in emerging markets with large Muslim populations (like Indian subcontinent, Indonesia, and parts of Africa) that if developed may become bigger oil buyers. At least for the short term, as there is a New Energy Order in the making, where Oil will be replaced by near term expensive but cleaner energy sources, which the emerging markets have in plenty. Unless Oil is kept cheap, the progression towards developing the alternate sources will keep getting faster. (In a first, Qatar waived off penalties that it had imposed on India for off-take shortfalls). The US is more or less self-sufficient in oil (it's even exporting it). It may, if the need arises, once again switch to becoming best friends with Iran to fulfill any energy shortfalls it may have in the near term. Iran too may welcome the move as it realizes that it has a bigger devil than the US sitting at its every (yes every) doorstep, and it has many doors. The OPEC Oil basket is already at US $ 25; maybe like GS predicts, will hit $20 or less, but with demand rising, will touch $35+ by end of the year.
5. Bernie Sanders will take oath as the next US President and this may be good for India too. Trump to his credit has exposed the underlying sentiments of much of the US electorate. But the Americans will look for someone stable rather than a shrewd entertainer who is neither afraid of declaring monetary or moral bankruptcy. The US Fed will at best attempt a second rate hike by June 2016 to push world economics, just as it is improving, closer to the brink. Thereby, create the right conditions for a Liberal Democrat like Sanders to rally people to vote for him. Post which, it will hold off hikes until the next President is formally in the White House. I wish India too institute a constitutional change where a person cannot hold office for greater than 2 consecutive terms.
Maybe after reading this, you may want to follow RBS and go on a selling spree. Maybe that's exactly what every investment banker would want you to do too. I am tempted to say BUY! BUY! But, for now, it's plain and simple bye bye. I may as well go on a vacation, at least, it is enjoyable even if fraught with terror.
Are We Headed For Another Financial Crisis Like 2008 ...
Global Economic Forecast 2016-2017
What Economic Forecasters Got Right, and Wrong, in 2015 ...
http://www.goldmansachs.com/our-thinking/pages/the-new-oil-order/
The battle to retain and even increase global oil market share is intensifying. Both Saudi Arabia and Russia, the world’s top two crude oil producers, continue to ramp up production amid an unprecedented supply glut and associated price collapse for crude that is rocking the world financial syste...
http://flip.it/7oUUv
Articles appearing post my blog:
Oil price: why is it rising despite evidence of global glut?
04 February
The oil price rose on Wednesday and is now back above $35 a barrel, even despite another huge build in US crude stockpiles last week that suggests the global supply glut is only getting worse.
National poll: Sanders zooms into virtual tie with Clinton
Quinnipiac poll is a major shift from December, when Clinton held 31 point lead.
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