I thought that going over my predictions for 2016 might be fun.
1. Saxo Bank also does predictions and they expect the Russian Ruble to go up 20%. This is related to their prediction that oil prices will go back up and approach $100. This seems goofy to me. I predict that the Ruble will fall from the current 70 to the dollar to 90, a fall of 30%. On my first trip to Russia in 2001 it was 27 to the dollar. The fall in the Ruble is not so much because Russia is weak, but more that the "powers that be" want Russia to be weak.
3. Oil will go down to $30 but then back up to $45. Russia is planning on $40 oil for the next 5 years. This will be bad for Russia, but not catastrophic because of the weaker Ruble. It will be bad for Saudi Arabia with its fixed exchange rate. Bonus Prediction: The house of Saud will fall within 5 years if low oil prices continue that long.
The lowest price for oil in 2016 was $36 per barrel. The highest is right now at $53. Looks like I was close on this one. As for the Ruble, I was wrong. It did reach a high, which from a dollar perspective is a low, of 85 Rubles per dollar, but now it is 60. Saxo was wrong in all its predictions.
5. Russia's adventure in Syria will not go well, but it won't go badly either. Putin feels he has no choice but to fight in Syria as a large portion of the ISIS fighters are ethnic Chechens from Russia. Russia lost the first Chechen War, but won the second. Putin does not want there to be a third. For an interesting discussion of why Putin is in Syria, click here.
Russia did do better than I expected, but that is a function of who was elected US President. If Clinton had been elected, as I expected but did not predict, things would have gone much worse. I would rate this prediction as neither a hit nor a miss. Although the recent cease fire might tip the scale to a clear miss.
7. There will be a settlement in Ukraine because both the West and Russia want one. The Ukrainians would rather kill each other.
I was too early on this one. I will repeat it for next year as a President Trump will probably get this done. The framework is already in place for a settlement.
9. The hard money crowd will continue to predict inflation, they will continue to be wrong. The Fed will, as it did on December 16, try to increase interest rates. While the interest rates will technically be higher in that the rate that the Fed will loan money to banks will go up, in reality the strong deflationary pressures will continue and there will be little increase in rates. I doubt the Fed will reduce reserves by the one trillion or so needed to actually increase interest rates. The dollar will continue to be strong.
I got this one correct and the next year will be more of the same.
Note that my even numbered predictions were not intended to be serious. I will do the same for my predictions for 2017.
So my scorecard for 2016 was 2 right, one wrong, one neutral, and one I was too early on. I hope to do better for 2017.