2017, Let’s Send in the Clowns!
We enter the first week of 2017 with a certain unease in our hearts that we cannot place even as the Singapore Straits Times Index has done nothing but rise every single of the 4 trading days of 2017 so far, and the Dow Jones came 0.37 points of the breathtaking 20,000 mark on Friday night.
There is no amount of analysis we can do for 2017 even as developed economies in the EU and US never looked rosier since 2008 and the US Federal Reserve prepares for at least 3 rate hikes this year and political instability threatens to rock the developed nations with the Trump presidency and the major elections in Europe’s largest economies—Germany and France.
Do Look Back 12 Months
Yes, we should ditch those 2017 reports just as we ditched Goldman Sach’s 2016 outlook this time last year after their massive fail within the first 5 weeks of 2016, getting nearly every call stopped out. And while we are still reminiscing, it does strike us as profoundly odd as to how we could have been so dismal this time last year (when oil was in its 20’s and stocks and bonds were taking a beating) when 2016 has turned out to be one of the best years we have had in terms of economic data?
From my contractor to my tour guide, there resonates a foreboding for 2017 as the whimsical sad refrains of Barbara Streisand’s Send In The Clowns plays over in my head as I write. A dirge for those who wish they had taken the blue pill.
This is your last chance. After this, there is no turning back. You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes. Remember: all I’m offering is the truth. Nothing more.
— Morpheus to Neo, The Matrix
Yet there is hope abound in the world as many Filipinos and Americans cheer Presidents Duterte and Trump, for the sake of making their nations great again as LKY did for Singapore. The veil of despair has been temporarily lifted for the social classes that have been “marginalised” or left behind by the “broken” establishment.
Yes, we have lots of rational people saying a lot of things right now but, then again, 2016 has proven that the impossible can and does happen, with the mind-bending acts of Brexit and Trump for the US President which we all knew was coming but dare not believe.
The 2017 Certainties
There is no prediction to possibly make for 2017 that would not be a hyperbole of some sort simply because we would be clutching at straws and yet there are some certainties we can safely assume regardless of whatever events transpire.
- Cannot Prepare Enough for VolatilityWe can be sure that, as impossible as it seems, a correction will come and the USD will weaken at some point, yet perhaps not before strengthening to illogical and mind blowing levels. Donald Trump will officially take office on 20 Jan, fear can set in after that.As the impossible happened in 2016, the impossible will happen in 2017 and we have 2 major European elections – Germany and France, to court which could ultimately decide the fate of the European economic and monetary union, 25 years since its creation.The British Prime Minister Theresa May has pledged to trigger Article 50 by March 2017 to join in the melee.Closer to home in Singapore, there is a high chance of a Malaysian general elections which promises to be volatile given the mood of the populace, even with China in support of a less than popular leader.We can be sure that markets are not prepared for a screw up somewhere along the line.
Link: Business Insider
- Violence, Big and Small!
We can be sure that there will be more violence in the world which is an inescapable fact when we have the rise of demagogical leaders like Trump, Dueterte, Erdogan, Putin and more that is highly encouraging for “un-restraining” many formerly restrained folks, diminishing the system put in place for political correctness in society.
From global politics all the way to the little man on the street, feeling helpless and scared in the regime of an authoritarian populist leader. Societal stress levels rising and fractures form as people start saying things that are best left unsaid and socially undesirable behaviours become acceptable (especially when leaders set the example) and boundaries cross into hate crimes.Demagogues also have the propensity to alienate world peace on a larger scale and we probably will not have to wait too long to see with Donald Trump proclaiming an “arms race”, which is likely to boost some stock prices like Lockheed which has suffered since Trump complained about the cost overruns of the F-35.
Terrorism and ISIS remains an anonymous enemy and razing Aleppo to the ground is a good idea to strike fear into any kid thinking of running away to join their ranks.It would definitely take Donald Trump some time to realise that he is fighting an unknown enemy that can emerge from anywhere and not about to go away anytime soon and not hard to imagine it may drive him into a frenzy, flexing an even more authoritarian grip to breed more resentment to continue a vicious cycle.
- Fake News and Post Truth
Post-truth is the word of the year according to the Oxford dictionary and we really do not know what to believe anymore which is a good thing for Donald Trump because many increasingly believe that half the things he reportedly said have been distorted, even if they are (incredulously) true.
“The more worrying phenomenon was a general disappearance of the expectation that politicians should even be expected to stick to the facts…. In 2016 the only rule was “anything goes, so long as it gets attention,” and the most audacious at following it were the winners. Other campaigners have been watching and taking note, a frightening sign that “post-truth” may be around for some time to come”, The Economist
- Vicious circle of populism and nationalism!
We can be sure that the vicious circle of populism will continue and come back to haunt markets because we have Latin America’s Venezuela, Ecuador, Argentina, Bolivia and gang to remind us that fiscal irresponsibility does not work except that we need at least a presidential term to prove it.
Donald Trump, Duterte, Erdogan, Putin and gang are the heroes of the common man, tired of a world where they are seen but not heard, only appreciated is their vote at every election.
Mathematic models have predicted a peak in political turmoil in the 2020’s from “elite overproduction” and we have some years before that for Finland to be the first country to experiment with the remedy of a living wage, 2 years after Switzerland voted against the idea.
And political turmoil will definitely ensue in the coming months with Donald Trump redrawing and withdrawing America’s allegiances, ordering all ambassadors to resign by his inauguration day.
Germany has publicly declared they cannot figure out Trump’s foreign policy goals, China has threatened retaliation for any trade war, Japan has come out to defend Toyota which came under Trump attack, so far.
- Hacks and attacks!
Largest breach ever happened in 2016—Yahoo! Although if the FBI manages to prove that the US elections were indeed hacked by the Russians, that would be another matter. DDOS attacks increasingly prevalent that has taken down Singapore’s phone network as well. We can be sure there will be more as cyber criminals continue to stay a step ahead of cyber security.
- End of Cash
No more €500. No more 500 and 1000 rupee notes. Singapore has already stopped issuing the SGD10,000 note. Next up, the AUD100, USD100 and £50, making it easier to implement negative interest rates i.e. in other words, penalty for holding cash.
- “I don’t think that globalisation is anywhere near the threat that robots are.”—Nobel Laurette, Angus Deaton
- Climate Change
2016 was the hottest year on record but 2017 will probably be slightly cooler as polar ice melt has a cooling effect. The good news is that the Earth was disputably hotter a thousand years ago and 125,000 years ago too. But the bad news is that sea level then was tens of metres higher which means most major cities around the world would be submerged.
As we write, Beijing is reportedly suffering from the worst smog levels it has seen, covering 10.1 million square miles, which is roughly the size of the US.
92% of the world’s population lives in places where air is deemed unsafe, according to the World Economic Forum.
Throw in the lead in the drinking water (not to mention cocktail of drugs) and the antibiotics tainted seafood from China, and we should feel a little more stress about life, in addition to the demagogues running amok as global leaders.
That is not unless, if we dare speculate, the antibiotics and drugs turn out sedative-effects.
2017 Let’s Send In The Clowns
As we had said last year, “it would not be unreasonable to see the world as a lonelier place in 2016, divided in opinions ranging from politics, to refugees, to the economy, to central bank policies”. And it has indeed festered and ushered in a new era of paranoia and fear from all the mind numbing, worst of all, fake news and information overload.
If anything is clear, we should invest in a mental health institute or asylums as we had recommended in Eat, Pray, Love—Stressed Out Singaporeans and the Singaporean economy.
Healthcare is key because there are going to be many things that make us physically sick besides the mental anxiety and stress, not to mention the smog-riddened cities. As I write, London hospitals remain stretched beyond overcapacity, resulting in 3 patients’ deaths and nurses stressed into tears.
Yet drug companies may not be the best places to invest in populist regimes. Hillary Clinton caused a Nasdaq biotech crash of 4.7% with a single tweet on high drug prices.
Tasers, weapons and other security firms are also good ideas put forth in US Elections—To Win The Battle And Lose The War, even if gun sales are dropping. Yet Donald Trump’s tweet on prices caused Lockheed Martin to shed $4 bio in market cap.
Social alienation will continue to spread just as “evaporating people” in Japan has also become good business, with 100,000 people estimated to vanish annually, that a book has been written about it. Vanish or banish or more commonly termed “evaporate”, is an escape from their former lives.
All we can see is a climate of uncertainty setting in upon Trump’s inauguration, more political uncertainty to come in Europe as their elections unfold, more support for nationalistic policies in developed markets as smaller emerging markets struggle to adjust the new world order, some tired of their political regimes and others fearing for their economic future.
Global political fault lines are growing, we now witness countries throwing their lot behind either the China/Russia bloc or the West, as the West breaks up into US vs Europe which really cannot be good for trade or corporations. The outcome of distrust at national levels is obviously bad news for globalisation in the long run and we cannot be sure if the USD dollar will ultimately benefit from trade wars and Gold could see 1,400 against the USD in no time.
From all this, it is hard to envisage spending patterns explode and rampant consumption to continue, not only from the Chinese consumer whom we have been depending on for those rocketing iPhone sales and Louis Vuitton bags. Even real estate investments, except for those in developing countries whose growth teeters on globalisation, would be a tall order in the face of rising inflation.
We definitely need some clowns for some cheer in 2017 in the absence of economic optimism and the massive uncertainties ahead, from global trade all the way to job security.
As the song goes, “Send in the clowns. Don’t bother they’re here.” We can always count on Trump for the next laugh as we bury ourselves deep under the duvet hoping everything would be alright for 2017, for our investments, our jobs, our sanity and health, for the contractor and the tour guide, too.
And, as the song ended.
“But where are the clowns? Send in the clowns.
Well, maybe next year.”