Thursday, November 15, 2007/
It’s time for some medium term predictions. Here are the trends you need to be aware of post-election.
This week we will see a dramatic shift from Greenspan to Bernanke in respect of the 3T formula – truth, trust and transparency. The former Fedhead prided himself on Delphic comments that left everyone guessing at what he meant and unlike our RBA failed to provide numeric targets for inflation – headline or underlying. The latter is going to move towards quarterly targets and longer term two and three-year forecasts designed to put this writer out of business.
I was in Sydney in the last week working on an Australia 2010 Report and SmartCompany readers asked why this column had taken to making short-term predictions rather than the customary longer-term trends. The answer is simply an exercise in arm testing to challenge the proposition that there is no point in projecting beyond the known realities.
So to correct the balance lets put some different trigger points that can be easily watched and subsequently validated. When oil hits US$100 a barrel and gold hits US$900 on the same day expect to see a substantial shift away from equities and into longer term bonds and treasuries. Expect to see investment advisors avoid playing short and long-term option games dependent on the sort of day-to-day volatility that has characterised the international stock markets over the past week.
Small businesses should assume that the post election environment is going to prove more difficult in the tourism market and that a much more detailed business plan will be expected from banks and credit institutions for projects that relate to expansion in the immediate region. On the other hand links with the BRIC economies -Brazil, Russia, India and China will be given more and more favourable attention as these economies take over from the US and Europe as the international growth economies.
Expect to see the big US banks take a short term hit on the sub-prime search for unjustified profits and revert to longer term secure investments in medium to large enterprises that have been supported up until now by angel financiers. Expect to see a continuing investment in high tech stocks that are linked to the green revolution and in particular to alternative energy options.
Contrary to the alarming – but not alarmist – Tsunami warnings that are now coming from more than partisan politicians, the US will not be heading into a recession in its Presidential election year. The big end hedge funds and the money markets have already adjusted their risk ratios to get themselves onto a more steady course and the Fed is still likely to lower rates a couple more times to ensure that domestic manufacturing is given a new start.
Oil exploration is off and running and pressures to open new fields in the North and South of the country will gain the attention of the Republicans eager to promote the appearance of doing something about oil supply lines. The only risk is a rush of Haliburton ideology to the head of state and his mate leading to an attack on Iran and further attacks on the relationship with the new Chinese leadership.
Otherwise we can expect a trend towards smaller and hybrid cars, despite General Motors rush into hybrid V8s that deliver more than 20 miles per gallon in the city.
Expect a Rudd Government to work directly to develop an Australian edge in the manufacture of Hybrids for both Toyota and GMH for export to the US. If (now) unexpectedly we see the return of a Howard Government, expect that Peter Costello will become the PM in exile, shifting treasury policy towards an anti-inflationary delay in all government spending and a substantial cutback in funds to the States.
As a final medium term projection, small business should expect that there will be a major reduction in US retail spending over the holiday season. Australia will see households shifting to gift vouchers and ways of deferring consumption until the New Year sales bonanza based upon cheaper imports for the summer sales.
It will still be a great time to take on more quality staff that can build up customer relationships that move one-time contacts into longer-term customer relationships.