2017 Forecast: Skeptically Optimistic
By John Mauldin
One might think that all our newfangled technology would make forecasting the future a little easier. I read just last week that scientists have devised electrical wires only three atoms thick. Imagine how powerful a computer chip made with that wiring will be. Yet all our computing horsepower still can’t predict worth a darn what Washington or Wall Street will do to us this year. In fact, there is convincing evidence is that every model that forecasters us is really bad at forecasting, beyond giving us a vague sense of direction.
Furthermore, the possible outcomes are in the hands of inherently unpredictable individual humans otherwise known as politicians (and not just in the US, thank you very much!) instead of dispassionate market forces. Fancy quantitative models will be of little help.
With some minor updating, they can quickly pass the bills again, with a better White House reception this time.
The decision last week to kick off the year by softening ethics rules was a terrible idea. They accomplished nothing and energized an opposition that was otherwise on its heels. (And I know that many of us are uncomfortable with the concept of a Tweeter-in-Chief, but all it took was one tweet to kill that really bad idea. I mean, Trump stopped it dead in its tracks. Which I believe the vast majority of us will think was a very good thing.)
I also think that this year we’ll start to see a new pattern: Production could keep rising even as prices fall. Conventional wisdom says that producers stop pumping at some point when it becomes unprofitable, but I think that is about to change.
Eventually – in a few years – these techniques will begin to show up in wells around the world, and there will be an explosion of oil.
Energy exploration and production is quickly becoming a technology-driven industry, with the US as world leader. If Trump permits construction of more pipelines and natural gas export terminals, we could see North American exports rise considerably in the next few years.
Those lower prices will create geopolitical challenges as well as economic ones. I don’t know how it will all shake out. We will likely see some big, energy-driven changes in the world order in the coming decades. But that is beyond the scope of an annual forecast.
In my travels, I constantly run into people who tell me they manage Chinese money.
Not trillions, just $50 million or $100 million here and there. It adds up. How much is really out there? I don’t think anyone knows, but it’s a big and growing number.
Yet no one wants to face it, and so the leadership is trying to pull off an increasingly ludicrous shell game.
See the potential for conflict?