I had posted my analysis of my 2013 Jan predictions in end of December 2013 here:
But I forgot to post it on my blog, so doing so now: The parts in black are 2012 predictions for 2013, the parts in red are the analysis at the end of the year
Analysis of last years predictions - world long term
I guess it is time to look at what I said last year and what actually happened. My observations are in blue:
WORLD AND USA.
Science.
Current world view seems set to be static for the foreseeable future. Lack of significant progress in solving the unsolved mysteries of the cosmic expansion and dark matter mean the current views, now 30 years old, will continue until we achieve some breakthrough. No progress in the grand unified theory or quantum mechanics is likely and one can safely predict this status to continue till 2050 at least. So its a dead end in our lifetimes. Discovery of the Higgs Boson recently means a confirmation of 50 year old thinking process and a certain death for alternative theories for a decade or more. The reopening of the large hadron collider is more likely to emphasise the mysteries of universe expansion and dark matter rather than solve it.
Unless chance events throw up another Einstein. Unlikely because in the early 20th century, there were 100s of brilliant minds making a 100s of new discoveries of which Einstein was the best. Not so todays – nothing like the same situation.Space exploration is unlikely to advance at even the current pace as the money available for it keeps on reducing. Western economies are unable to raise funds for this for a decade.
The scientific world seems to agree with this - except that new mathematical support for sudden mass increase has injected another unknown dimension into it. We are still far far away from a breakthrough
Although these are predictions where I would prefer to be proved wrong!
How to profit from it – project past events into the future. History will repeat itself
Maintain this
Technology.
The breakneck race of better and better computing devices and more and more integrated networks is likely to continue and be unpredictable even 3 years hence. Still, some points are noticeable.
1.
We are still doing in 2012 what we were doing in 1998, just better and faster and more portable. And more people are doing it. The current internet generation is just a logical progression from the com boom.
2.
Devices will continue into smaller and more portable computers and tablets with ever greater processing speeds with ever decreasing power requirements prolonging battery life.
3.
Cloud computing and apps will progress further.
Where I see us in 2020.
1.
Mobiles. S3/note 2 level will be the entry level phone and will be used by everybody. Prices will drop to where even the poorest can afford it or provided by govt. Likely to serve as money and identity card with biometric tagging of the device to the user.
Proved true within the year
2.
4 tablet segments of 4 inch, 5.5 inch, 7-8 inch and 10 inch will be standard and used by every one including a-pple (i.e I am a 5.5 inch product from a-pple)
Coming true soon !
3.
The difference between a-pple and competitors will drop. Even the cheapest tablet will be better than ipad 4 and everyone will have them
4.
Desktops will vanish even more and become extinct.
5.
Laptops will change into tablet/ultrabook combo – thinner, lighter and dual purpose.
How to profit from it. Sell a-pple.
moved down a lot and languished for most of the year but recently up again - higher that the beginning of the year - some 5% up from the start, but had gone up 10% over beginning of the year - I think it was the right call despite that.
Buy g-00gle and Microsoft stock.
Google and Microsoft up 40% or so from beginning of the year. So right call again
Because a-pple will no longer be able to charge a premium and incremental software improvements which differentiate from the crowd are disappearing. Microsoft has got W8 right and should benefit from future developments in ultrabook tablet combos.
Disruptive technologies
1.
Wearable computing and virtual reality are now having sufficient miniaturization to actually take off. Just like Microsoft in 2002 could not do anything with tablets because of lack of technology but in 2009 could, virtual reality now is in take off mode. In 1998 and recently devices have been a failure because the headgear has been too big and clunky. The google efforts in retinal projection devices will become big in 2013 and beyond with wearable devices with massive computing power, fibreoptic displays using small spectacle sized headsets where pupil sized projection outputs centered using laser positioning and using eyeball movement in addition to head movement will capture a more realistic rendering of the virtual world. It is now possible to have immersive reality experiences and good quality reality rendering to make VR a meaningful technology for gaming and virtual interaction. By 2015 to 2018 I see it being a big hit and optical cabling will be a big part of it, making it expensive. Virtual reality theatres with 3D immersive experience will usher in a new movie experience by 2018. All other movie theatres will vanish. What will start for the rich by 2020 will become a mass phenomenon by 2030.
VR games have made a come back within one year itself. Right call.
2.
Foldable screens and projection technology will do to screens what LEDs did to the CRT. Small watch sized computing devices projecting their output on to foldable screens or holograms in the air will become the rage for those who cannot afford retina projection.
Both foldable and projection screens are becoming big within one year itself. Right call.
3.
Handwriting and voice recognition will progresses and will acquire sophisticated learning capability to adapt to the user’s handwriting and voice. Galaxy note S pen like devices will become the input devices of choice by 2014.
Hasnt taken off - still waiting for better software. But many new pen based tablets have been a hit. So even steven on this prediction
4.
As the benign nature of radiowaves becomes better recognized and less feared, using them to pick up brain activity will take off. With a combination of surface electrodes and electromagnetic probes, “thinking the word” will be converted into the word on a computer the same as handwriting recognition. First technology demonstrations will probably be ready by 2020 as an input device for the computer. Devices like Geordo la Forge’s visor will combine Bluetooth connections between wearable device in your pocket, earphone, retina projection and brainwave scanner for input device by 2020 and beyond.
No progress
5.
The possibility of carrying on a conversation using brainwave input device and audio video output into earphone/retinal projection will take us further into AI linking humans and computers together seamlessly. Such conferencing of multiple personalities from many geographies with AI input on the topic will become possible. So talking to a client in USA by an Indian BPO operator can be done without the Indian accent and with computer support pulling up relevant data. Or a video conference between two world leaders will have input from generals and massively parallel AI to get real time data on say current status of global warming or tensions in Persian gulf. This will set the stage for the truly great thinkers to link their minds in a new way, leading to new ways of thinking and problem solving by 2030.
No progress
6.
Three dimensional printing will become really big. And will become routine use in online shopping to get a touchy feely look.
It is taking off already
All of these predictions mean a complete change in the way we live starting from 2020 and becoming well integrated into life by 2030. Situation is similar to internet starting in late 1990s and completely changing our life by 2013 in 15 years time. Those who are unable to afford these new technologies will be left further behind = great danger for our country. These new devices will fall in price but it will take till 2030 to fall in price. This will maintain the productivity difference between the poor and the rich from now till 2030.
How to profit from it. Piling on to niche companies can make you a lot of money. Look out for these and get in when the technology is still new and untested, before it becomes mainstream and everyone and his aunt know about it like . The next few years are a good time to watch out for such companies – from recession and churning will always emerge the new wave of technological change.
Maintain this
Other technologies
1.
Cars. Nothing new. Will become more expensive. Dont invest in US car makers.
Ford and GM are up 40%. Wrong call
2.
Air travel. Nothing new. Will become much much more expensive. Dont invest anywhere.
The take off of Etihad is an interesting observation and needs further study - the nature of air travel might be changing and also the dynamics might be changing
3.
Software. Trend will be bigger clouds. And smaller and more efficient apps. The trend of free software will continue to disrupt revenue streams. Like free AVG and Windows free antivirus etc eliminated the Norton antivirus, word excel and power point will get eliminated as open office like programs do everything for free. Similarly, free apps will eliminate the paid apps. The trend of people working for free to help other people will eliminate the need to pay big bucks for a software service – [B]internet has started the altruism change in people now rather than driven by self interest[/B]. ERP and data mining software will get simpler and cheaper off the shelf, reducing revenue. The principle of altruism will dominate the open source movement and eliminate the current leaders of paid software and paid clouds.
No progress
4.
Viruses. Data elimination viruses will start disrupting life. At least one major hit by 2020 is likely. Will cripple financial data of a significant number of people and organizations (unlike individual hits currently). And this ruin some/massive number of lives. So don’t forget to have physical assets and hard copies of everything in case it is your demat or online account which gets wiped out.
Thank God this didnt happen yet. But it will.
5.
Television. Internet TV will become routine pay per episode like Netflix. This is a big wave for the future and will destroy cable and satellite providers
No progress
Internet.
1.
It will continue to simplify our lives and eliminate need for human interface.
2.
Internet TV will become really big. You tube will becomes high definition pay tube and the default TV service in USA. The new generation wont know what is cable TV and what is dish TV. Sell media stocks in USA. I don’t know what to buy – maybe netflicks will get into online TV in a big way – you can read this up.
No progress
3.
Getting revenue from internet will continue to challenge people as more and more free services will proliferate. Sell software product sellers.
Wrong call. Adobe up 50% from last year
4.
Organized retail will stagnate and reduce as people start preferring the price advantage of online retail. Buy Amazon and Flipcart.
Amazon up 50% from last year. Right call.
Flipcart is replicating Amazon model of market dominance - but has haemorrhaged money. Anyway only private investors can get in
5.
A few giants like a-pple, Microsoft and Google will be investing more and more into protecting their hardware requirements and get into backend integration of their hardware manufacturing. Software and hardware will merge again like IBM – separation of hardware and software will be a thing of the past. Wintel might become a new company merging Windows and Intel – but that depends on the success of Windows 8 and its projected tablet plus laptop devices. Cut throat competition means S-amsung has to take over a software company (Google plus S-amsung = winning combination?) while A-pple has to buy up Taiwanese manufacturers of its components. Microsoft will try to do it all in USA and import the people instead. This will benefit Indian techies from 2016 onwards. Sell Indian IT for now, buy after 2016 when body shops again come into vogue.
Wrong call - currency movements made it possible for a 40% return for Infosys and its brothers
6.
The need for metropolitan cities bringing highly skilled people together will vanish. Downtown commercial real estate will not keep its value. The needless expense will be eliminated by the internet. While this possibility has been discussed for years, the present recession and cost cutting will ensure its arrival. As the present generation becomes adult (generation Z) metropolitan life will decline in a big way. So sell REITS in USA. Buy logistics companies.
Dow all REITS is flat but with huge volatility up and down.
Logistics up 25-50%
7.
Urban infrastructure will change from being an agglomeration of skilled people into being transport, warehousing and logistics hubs only. This will also reduce the need for long distance commuting and air travel. Buy shipping and air freight stocks. Sell airlines and car manufacturers.
Wrong call as earlier - but maintain my long term avoid on these sectors
8.
Metropolises will no longer have the high paying jobs needed to support life there. This will start a trend of reverse migration and de-urbanization. No fresh construction will be needed. Sell construction majors. Buy truck and van manufacturers and rail road stocks.
Freight car up 10%.
9.
The cities of the future will change from being urban middle class productivity enhancers into being the playgrounds of the super rich. They will be the Las Vegases of the world. Pittsburgh, Chicago, Atlanta, Los Angeles and Detroit will decline. Manhatten will morph from being a center for finance professionals and become a center for the rich and famous. SanFrancisco Bay Area, Las Vegas, Reno, Phoenix and Miami will regain their premium real estate valuations as the retirees move out and the super rich move in. Retirees will be forced to cash out their real estate equity from these places to sustain themselves. The rich will enjoy the good life here.
All these real estate destinations are up handsomely
10.
Elsewhere, this trend will be maximum in London. It will become a playground for the rich from all over the world and as productive jobs get priced out from London because of the rich real estate valuations, the poor and the middle class will move away. Paris, Rome, Barcelona, Madrid and South of France will be other playgrounds of the rich. Germany is already seeing the small businesses of small towns prosper in the last 10 years and the trend will strengthen. London, Manhatten and San Francisco are the safest places in the West to buy up premium property on the cheap at current lower valuations, which are likely to maintain their super luxury tag. Las Vegas is also probably a safe long shot with dirt cheap valuations and massive growth potential. The best place for the same in the rest of the world are likely to be Beijing, Shanghai, Tokyo, Hong Kong, Macau, Singapore, Sidney, and Dubai. Dubai will re-emerge as the hot spot for the rich of the middle east and subcontinent. Good place to buy property on the cheap – best value buy.
London and Dubai performed spectacularly
11.
Internet will continue to level the playing field between developed and backward countries. Buy into emerging markets.
Bad call - emerging markets tanked due to the threat of Fed taper
12.
Financial companies will see major decline as internet banking and trading destroy them further. The present generation will get their tips from online info and buy and sell online. Brokers, financial companies and banks will see decline and loss of jobs.
Banks still thriving - wrong call
Sociology.
1.
Major changes. The next generation Z will have grown up on the internet and social networks.
2.
There will be a major decline in productivity of US people as the new generation Z loses skills to mechanical services of the internet. While the service itself will improve, the need for human input will reduce, making human effort less valuable.
Still maintain this
3.
Education at higher levels will no longer deliver high paying jobs. Their value and fees charged will decline over the next 2 decades – because the fees has to be justified by the job you get by paying the fees. First trends will be visible by 2016. By 2020 even the ivy leagues will be in decline. Education will shift to the social network instead and will be cheap and available without influence of geographic location, social class or other such backgrounds. It will be the great leveller.
Happening right now and maintain this
4.
Generation Z will be permanently stuck in lower skilled and lower paying jobs than generation Y. This will match their newer skills in online and social networked jobs, but will have less differentiation and less difference between one in USA and in developing countries. Nobody will mind their lesser salaries, because the need for money will reduce because of higher efficiency.
Salaries for many jobs still very handsome in USA. CNN Money had a nice article on the well paying jobs - and with training people are still getting very good jobs.
5.
There will be a reverse migration from cities into smaller peripheral communities which in turn will again force people into internet networked jobs.
Not yet
6.
There will be an increasing trend of people helping each other without money – i.e altruism. People will be happy doing things just for the sake of it. This is increasingly seen in the free apps and free internet services like Wikipedia. This will reinforce the lower monetary compensation found acceptable by people. Helping each other will work better in smaller communities rather than in the big impersonal cities. So people with low pay in smaller villages will have a better life than people with low pay in big cities and hence reverse migration will be seen over the next 2 decades. Cities will dwindle, small cities will flourish. The recession in economy will precipitate this major trend starting from 2013, becoming a phenomenon by 2016 and being a massive trend by 2020.
Not yet - not by a long shot
7.
As smaller towns and villages increase in population, many will get local clannish features. Many in USA will try to cut off from the rest of the world and lead more primitive lives. In the lower pay and less attractive life found in cities, many will find this regression acceptable. Enclaves such as this will be easier to maintain in isolation than in the last 20-30 years and many white supremacists and religious right extremists will form such enclaves. This again will reduce the general productivity of the USA per capita, as these backward thinking communities become unproductive and excluded from society.
No indication of this trend so far
8.
The biggest reduction in productivity and pay in US will come from competition with the developing countries like India and China because of globalization.
Reverse of this trend because of Dollar appreciation - Americans still best paid and productive. Wrong call
9.
The social networks will provide more emotional support and life will become more and more internet linked. This will again reduce the importance of money in giving satisfaction. The “likes” from online friends will replace money as a source of satisfaction for a free service provided – say a useful piece of software or an interesting story written or song sung.
Not yet
10.
All of this means – reduction of money as the be all and end all of life, as we move towards a Star Trek like situation where there is no money. So the reduction in productivity, lower paying jobs and reduced importance for money will all come together over the next couple of decades to change life for the middle class as we know it.
Again - no signs of this happening
11.
Class war with the new middle class and the super rich will be a big phenomenon. Middle classes will become massive in size, maybe 80% will be called middle class. They will be poorer than current Western middle class. Rich will form a smaller and smaller proportion as only the super rich will have survival advantage to sustain their richness. Class wars will then erupt. Movements of capital induced by such class wars will be a big thing changing the fortunes of many geographies.
No signs of this happening - in fact we seem to be getting more of the 20th century american phenomenon
12.
By 2016 the stage will be set for the class war without people understanding the underlying economic reasons for the class war – because people are still thinking in the old ways. If the republicans win in 2016, then US will be the place for super rich. If democrats win, then there will be massive flight of capital from out of USA and into enclaves like Switzerland, London, Dubai and other money laundering economies. Hong Kong will be increasingly used by China to tap this floating capital in multiple ways – both as a vacation/residential destination and for funnelling capital into China. In other words, the role of Hong Kong in this regard, which has been traditional for last 100 years, will become more pronounced.
No signs of this happening
13.
English will become the main world language displacing French and German permanently. Spanish and Chinese will be the only other languages.
I maintain this prediction
Medicine
1.
Healthcare will continue to be expensive and as pay levels reduce, it will become more and more unaffordable. This means either a change in the education patterns to make medical education easier or accepting lower levels of pay by doctors.
No signs of this at all
2.
Reduction of US medical education from 8 to 5 years is likely. This will also reduce the fee levels and the hardships involved in medical education.
No signs of this at all
3.
As life dovetails into the principle of altruism, more and more medicine will be practiced for its noble nature like the physicians of 50 years ago and less and less for money. Since the patients will be unable to pay as before, this will be a self sustaining change.
No signs of this at all
4.
So sell the expensive HMOs – but not immediately for many years since these are only long term trends. Also sell the big pharma – again not for many years. For now HMO and big pharma will do very well. Wait for changes – likely by 2016 if the democrats win. Otherwise by 2020. Buy into Indian generic pharma for short term and long term gains.
Lets wait and see
5.
Drug development costs will have to reduce, since people wont be able to afford current costs. There will be fewer new drug developments. The progresses in medicine will reduce its pace over the next 2 decades
Very few new drugs and candidates. Fatigue in antibiotic discoveries. Maintain this prediction
6.
At some point, brainy people will come together in the universities and push a more altruistic model of medical discoveries like the physicians of a 100 years ago. The rewards of the work will be the knowledge of a job well done rather than monetary i.e. altruism again. This will also slow down the pace of medical and biology advances (since money is the best known motivator)
No signs of this at all
7.
The complexity of human biology will require another 100 years at least to unravel – both because of the difficulty of the job and the reduced monetary rewards of doing so.
Maintain this
8.
Human cloning will be attempted by breakaway societies in secret. Since it wont be the far right of USA (they are Christians), it is likely to be funded in secret in European or Chinese/Korean countries rather than USA. But by 2025 at least, the first human cloning attempt will be likely made and will cause massive furore. The complexity of the job being so great, it will be a crude attempt resulting in creation of a sick baby or clone with significant medical problems. It will likely result in greater efforts at policing. Successful human cloning is still a 100 years away at least.
No signs of this at all
Jobs:
1.
Significant changes in job trends will be seen in waves lasting a few years each, only to change into the next fancy as society evolves
Good evidence of changing job trends in USA
2.
Current trend for next many years: Tech jobs and nursing
Right call
3.
As people get used to lower salaries, manufacturing in USA will re-emerge as shipping costs from China will eclipse the local salary costs. This trend is likely by 2020. However, this will more likely be similar to small mill towns of the 20s and 30s – one factory supporting one town kind of situation. This is because the real estate costs of big cities cannot support manufacturing there. Learning these skills in anticipation will be wise for those in their childhood.
Happening as we speak
4.
Sailors, truck drivers, fork lifts and delivery men will proliferate
No signs of this at all
5.
Banks and financial jobs will keep on reducing
No signs of this at all
6.
Real estate, construction, highrise, large scale glazing jobs will keep reducing
No signs of this at all
7.
As cities recede, many city level jobs like garbage men, water supply related jobs etc will reduce. In small towns, people will start doing these things themselves. They will cycle to work and do their own chores and dispose of their own garbage. Greater awareness of their carbon footprint will mean people will do these things out of choice and will be healthier and happier as a result.
No signs of this at all
8.
Average per capita income of USA likely to reduce to 30,000 USD by 2020 and beyond. This is in terms of purchasing power since there will be an inflation event lasting a few years which will wipe out some 20-30% of USD purchasing power somewhere before 2020. Probably from 2016 to 2018 as the fed printing dies down. So even if per capita GDP is 50,000 USD, it will mean only 30,000$ in current terms. We have already seen this situation happening from 2000 to 2012 when per capita income grew less than the GDP growth figures – a disconnect due to globalization.
No signs of this at all - there is no evidence of inflation
9.
The trend of rich getting richer and poor getting poorer will change to the early 20th century pattern of very few super rich and massive poor / poorer middle class population by 2020-2025. The middle class will become massively middle – lower and upper middle classes will converge into one super group.
Majorly happening
10.
Massive population in one social group will use political clout to cut the power of the super rich. This will lead to flight of capital. It will enrich emerging markets and enclaves like Switzerland. As productivity levels across the globe stabilise by 2030-2040, much of the capital will get destroyed as it gets used up in creating infrastructure in emerging markets. By 2030 there will be no enclave for capital to hide – like Swiss banks, channel islands, Bahamas etc. These places will get eliminated as the world converges into one giant super middle class, which is truly middle. By then the central bank fuelled excess liquidity situation would have extinguished itself and thus productivity will dictate the wealth levels.
No signs of this at all
11.
Biggest jobs getting salary haircut: Realtors, finance, lawyers, university professors, doctors happening in that order from 2012 to 2040.
No signs of this at all
12.
Jobs with increasing salary levels: school teachers, tech jobs, nursing, truck drivers.
Happened for Nursing and tech
13.
Single biggest change will be management. The nature of top down management from central headquarters will shift to management of disaggregated workforce through social network based management. The number of middle level managers will decrease, and decrease massively. Thus reducing the cost of companies and also reducing the number of high paying jobs. Also, the few who are middle level managers will also become generic across many different sectors – commanding less salary. So a company selling shaving products online and a company managing a BPO and a software company online will all have their production teams. But subsequent levels of managers will have similar HR functions of ensuring employees meeting deadlines. They will be able to move across categories and their domain knowledge requirement will reduce. The nature of HR management will change for ever. Crossing of employees across different middle level management platforms of a single company, currently possible because of company based retraining and changing of responsibilities, will become much less. Instead, marketing, advertising, HR, company strategy, manufacturing will become even more dispersed in location as well as super specialized function. It is likely that pay levels of middle level HR management will be less than the productive employees with domain knowledge. Domain managers will be fewer than now and it will be difficult to move from lower to higher levels – most people will be stuck in the same job without salary increments.
No signs of this at all
14.
Because of cross utility of management, conglomeration instead of specialization of companies will set in, creating MNC behemoths. There will be few managers in these conglomerates who will receive supra normal salaries and become super rich. Their functioning will also be network based and subject to cut throat competition. Super thinkers will be the only people who can survive this level of competition. Birth in rich family, education in the ivy league – these will lose their value as social networks destroy their value. The many first and second tier employees working from geographically diverse locations will remain stuck in their relatively lower paying jobs for ever. The companies themselves will remain more lean and efficient and hence more profitable.
No signs of this at all
15.
A social network like management will mean there will be little difference between Atlanta, Seattle, Bucharest, Shanghai or Cudallore – as long as the person is capable enough. This globalization will also ensure lower pay for the US worker at the primary level – the primary level can be situated anywhere. It will also mean little difference between where the manager is located – the manager can be anywhere. Meetings will be in chatrooms because they are more productive than face to face – because decisions taken by a decision maker with considered inputs from his team is better than spur of the moment decisions driven by the decision maker face to face – where he has to worry about “saving face” and being decisive. Those who cannot take the right decisions will not be able to force the issue using authority of their position – and will lose their job.
No signs of this at all
16.
The trend of social networks replacing management meetings will take quite a while to take place – it will happen when the generation Z is in their 40s and 50s. So by 2040 or 2050 only.
Politics:
1.
Now that Democrats have won, there is likely to be zenophobia against immigration ( republican right) combined with anti-outsourcing (of the democratic left). At least one major legislation is likely which will impact our IT companies adversely.
Happened
2.
Withdrawal of the US into itself will continue. Defence budgets will fall. An increasing participation of UK in global policing and decreasing US presence is likely. Leasing of aircraft carriers from USA to UK/Europe or by Arab dependencies is likely. A lot more of the role of Arab policeman will be played by UK – and Britannia will rule the waves once more. London will be settled by the super rich and this will boos the per capita GDP of UK to higher levels than France or even Germany by 2020 and 2030 respectively.
Happened
3.
The limitations of drone warfare in policing jobs will become apparent. Those controlling the middle east oil will not be cowed down by drones like the Afghans – who are unproductive tribals without oil or consequence. Iran and the restive populations of the Arab peninsula will not and cannot be controlled by drone attacks. So power projection will continue to require a blue water navy.
Drones evolved more and are multifaceted now - wrong call
4.
Both US and Russia will continue and increase their role as arms suppliers of the world.
Happened
5.
The chances of a major US strike against North Korea is now overwhelming. It is almost inevitable. Only question is when. USA simply cannot tolerate the possibility of a Korean nuclear strike against the US mainland or even Hawai. Only question is when.
Wrong call. But the situation is still evolving, the young un has killed his uncle. Who knows what comes next. Downgrading this possibility but still on watch
6.
In the event of US strike on North Korea, South Korea and Japan will face a war and economic turmoil. The chances of these are quite high but should take 2-3 years to play out. A lot depends on whether this happens or not. If it happens, US presence on the Koreas will increase and so reduction of US forces based in Japan and reduction of US involvement in the region will not happen.
No signs of this at all
7.
If north Korean war doesn’t take place, Japan will be increasingly asked to shoulder responsibilities by USA. Leasing of US carriers and nuclear subs by Japan and shift from US to Japanese soldiers in the Korean and South China seas will trend. This will be needed because of decrease in US participation, but bring increased Sino Japanese tensions
Happening right now
8.
Tensions of Japan vs China will increase surprisingly fast. This will necessitate shift of Japanese capital (largely routed to China through Taiwan) into South Korea and elsewhere to derisk political tensions. USA will increasingly look to Japan and South Korea as counterweight to China because India has failed in this regard. Democrats will never trust India to do its duties.
Happened - including Democratic disdain for India as seen with the Devyani episode.
9.
Return of Republicans in 2016 is likely. Since poor economics and immigration/outsourcing will be the main issues in the next election, republicans are likely to win. And for winning they will have to give up support for outsourcing.
Let us see
10.
This time, both democrats and republicans are likely to have weaker candidates. Hillary will have a tough time if she runs and the republican candidate will be better matched. Hopefully, the republicans would have better candidates than their disastrous primary and the poor final selection in Romney. All of this means a close contest. A lot depends on how good a candidate the Republicans get – because if the candidates are equal, Republicans are sure to win.
11.
Elsewhere, Cameron is likely to continue and a 10-12 year Conservative and assertive UK is likely. This will fuel London’s rise. If labour or liberals win, then London will rise less. Christian democrats are likely to dominate the Euro zone.
German elections happened as predicted
12.
If the republicans return, expect US inflation to rise along with rising interest rates. Dollar will strengthen. US will finally exit the recession in 2018-2020.
13.
If the democrats return, there will be permanent flight of US capital overseas and US will remain in recession.
Economics
1.
I am changing my previous prediction of continuing immigration into USA fuelling growth. With my current thought process in favour of permanent reduction of productivity and increasing size of middle class in the 50,000 dollar per annum bracket, it is less likely that US will encourage more immigration. The lower returns on capital spent on higher education will also mean reduced levels of migration into US riding on US college education.
Wrong call - we are getting more of the same old stuff
2.
Increasingly, same income levels in USA, Mexico, India and China at similar skill levels will inhibit migration. However, there will be continued migration at the highest levels in the 200,000 dollar pa levels of skill. Most migrations will be for the sake of shifting to a better area of law and order. Mostly this will be from people running from Mexican drug wars. From India, migrants will prefer Singapore, UK and Dubai, unless they are in the super bright category who can only get their level of work in USA. Germany and France will also try to attract the highest performers, in the face of UK’s ascent.
Maintain this
3.
US economic output likely to remain stagnant in the absence of immigration. This trend will change only after 2020 or so (not in 2016 as in my previous prediction posted in 2010) – because the democrate won the 2012 election despite all odds because of poor quality candidates from republicans.
Wrong call - US growing now
4.
Growth rates in US from 2012 to 2020 likely to be 2% on average, net of inflation. Sudden inflation in 2016-2018 is likely to wipe out the effect of this growth. So it better to say stagnant GDP of 15-16 trillion dollars.
USA grew 2% but no sign of inflation
5.
Japan (5-6) and Euro zone (15-20 trillion) will also stay stagnant at current levels largely illo 2020 and beyond.
Japan and Euro growing slowly
6.
China will grow at 7-8% reducing to 5-6% after 2020. So by 2020 it will be close to 10 trillion and by 2030 it will reach 20 trillion in output. Likely disruptions in pacific peaceful commerce and the effect of increasing oil prices are big caveats which can limit China to 15 trillion output levels – so 15-20 trillion is a safe range. Current projections for China by most commentators are more optimistic than this because they have extrapolated current rates of growth into the future without taking the effect of prolonged recession in US/Euro/Japan, geopolitical tensions and war like situations around China. They have also failed to account for oil price hikes in Brent and reduced requirement for manufactured products by West as well as emerging economies because of social changes reducing consumerism.
Let us see. Maintain this
7.
Oil will shoot by 2014-2015 when despite global recession, the present overcapacity slack is completely taken up by Chinese and other Asian growth. Brent will increase much more than NYMEX because of competition between Euro and China for the same oil. UK will try to substitute with north American oil by 2015 or so because of the disproportionate expenditure it will incur as it progressively takes over the role of global policeman from USA. Any wars will further aggravate this.
No signs of this at all
Global and US predictions for 2013
Fiscal Cliff = will be successfully climbed in congress.
TRUE
Fed short term rate = same
TRUE
Long term bonds = same for few months as fed easing continues, then rise to about 4% with a bond sell off (aggravated by tax rises for the rich causing flight of capital)
TRUE Major hit - I got the bond sell off right
Dollar index = around 80 for now, likely to reach 85-90 by second half.
TRUE
Oil = 90 Nymex, 110 Brent for now. Fall to 80 Nymex and 100 Brent after bond sell off in second half
Minor miss - oil did fall after the bond sell off, but is back up to 97/110 levels
Dow 13000, fall to 12000 by year end
MAJOR WRONG CALL
Gold 1700 after fiscal cliff, fall to 1400 in second half
Major Hit - though it fell to 1200 on overshoot
FTSE = static for now, 6500-7000 by year end due to influx of capital into UK
Hit
Dax fall to 6000 by year end as German growth slows
Major Miss
SMI rise to 8000 by year end due to influc of capital into Switzerland
Hit
Cac fall to 3000 by year end due to poor growth
Minor miss
Nikkei static around 10,000 due to poor growth, 30% chance of 11-12000 due to stimulus effects
Major Miss
Straits rise to around 3500 due to influx of capital
Miss
Kospi rise to around 3500 due to excellent performance by Hyndai
Miss
Hang Seng steady around 22000-23000. Influx of capital and slowing China cancer each other out.
Hit
Metals Fall due to recession
Hit
Agri Commodities static due to good output
Hit
Weather = mild, no extremes and no freak phenomenon affecting large areas
Hit
Global Assets to buy/sell:
1. ING Global real estate fund after hardening of rupee is over. Short term effects seems to indicate good performance in New York and Hong Kong, although long term trend is down
30% up
2. Gold mining: Sell
Hit
3. Gold in dollars: Sell. Upside limited, downside unlimited
Hit
4. Global funds: sell. Limited upside, neutralized by the rising Rupee
Miss
5. Emerging market: Avoid. India is the best emerging market to invest in. China maybe you can keep Mirae CHina Advantage fund.
Hit
Note: Predictions for India will follow soon
Most of the predictions were general and long term. Some have happened, some have not - but still can.
I have changed my mind about change - it looks like more of the same will repeat for next few decades - change is slower than anticipated.
I majorly missed the US economic performance.
I got the bond and gold calls very very right.
Indian Politics
1.
Next general election will be held in 2014 only – congress will survive by whatever means possible because of poor performance expected in general elections
Happened
2.
Maximum chances of third front coming to power after the elections. Followed by Congress with outside support. Last is BJP.
I am afraid I have to change election prediction - I will explain in the next years predictions for 2014. But chances of Congress forming govt are now nil
3.
Congress will lose seats in Maharashtra and Andhra. Also lose seats in Kerala, Rajasthan
Happened and small states and side player states like West Bengal and Tamil Nadu. Will gain seats in Karnataka
Happened. It might gain to some extent in Madhya Pradesh
Did not happen , Orissa, Chattisgarh
Did not happen, Punjab and Jharkhand over current levels but not enough because mostly the home teams of NDA will still get the majority. Congress will lose or stay steady at current levels in Gujarat,
Happened Rajasthan
Happened, Haryana, Bihar, (where BJP will win with allies, but not by big margins).
These were calculations for central elections, but clearly now the Congress will not gain in MP and CG and will be wiped out in Raj and Guj
4.
Communists will win in Bengal
Seems less likely now and Kerala but only slightly above the 50% mark. Will support third front.
5.
Nitish
Seems less likely now, Navin Patnaik, INLD
Seems less likely now will win but might switch to third front. Naidu will lose. TRS will win and support third front for the sake of telengana
Seems less likely now
6.
Raman Singh, Chauhan, Raje will win
Happened but only slightly above 50%
Partly only true - MP and Raj were swept Raje result is is not sure either – not a good performer
Did not happen.
7.
Modi will win big
Happened and that will be the only big BJP win anywhere. Everywhere else they will limp home.
8.
UP will see 50/50 split of SP/BSP and increased seats for congress because of muslims voting for congress in central election. BJP will lose.
I am changing this prediction for next year
9.
Bihar will also see gains for congress at the expense of Laloo Yadav, again because of tactical voting by muslims. Nitish would still win big overall – so both Nitish and Congress will gain. Nitish might support the third front – but less likely than Navin who is sure to win and support third front.
I am changing this prediction for next year
10.
Maharashtra is likely to see NCP win big. MNS might ally with NCP and cause vote splitting. BJP and Shiv Sena might not gain much despite Congress losing a lot because of a quadrangular contest MNS NCP alliance might support the third front.
I am changing this prediction for next year
11.
Tamil Nadu and Andhra are too difficult to call as far as Congress is concerned and for who will gain more. Whoever wins might support third front.
12.
Because of all this, BJP around 120-130 seats, Congress around 150 seats. That leaves a massive space for alliances.
I am changing this prediction for next year
13.
Chances of Third front 50%. Congress 30%, BJP 20%, depending on who stitched up the alliance and ultimate tallies.
I am changing this prediction for next year
14.
Third front will crash both RE and stock markets. Hence my hesitation in recommending more investments into RE despite it being the investment of the decade – because RE is illiquid unlikje stocks.
Maintain this prediction. RE market already crashed. No fresh commitment to RE. I am changing my opinion regarding 3rd front being negative for stocks. I think Stocks will perform despite 3rd front govt.
Indian Sociology
1.
Two main themes stand out. One is comprehensible. The other is incomprehensible.
2.
What is for sure is that India is going to bypass the phase of urbanization. Better roads and communications mean that India will urbanize from the villages and small towns. This will propel the increase in rural productivity from 500 to 2000 dollars per annum from now till 2020 and then the further increase from 2000 to 5000 dollars per annum by 2030 and beyond. Given our genetic potential, 5000 dollars per annum probably reflects the peak productivity which can be attained by rural Indians. Including urban Indians, 10,000 dollars per capita is probably the best we can expect in the foreseeable future. This means a 5-10 times increase in productivity – a massive opportunity which will move us into Mexico/Russia/Brazil kind of situation.
Maintain above
3.
What is difficult to get a handle on is what the street demonstrations caused by Anna and the recent rape case mean. Most likely is that the newer young people derived from rural migrations, backward castes and from children of lower middle class have a more angry and active personality. Very unlike the earlier upper middle class of mainly higher castes whose educated children only once came out in protests in the anti Mandal agitations – they are more meek and run away by emigration in adverse situations. Those who don’t have the option to run away will lead the future of urban India.
Best possible outcome of this incomprehensible phenomenon has taken place - in the form of AAP. I had no clue.
4.
What it means. Our cities will not improve or become on par with cities of the West and East. Urban RE will remain scarce and sought after. Most people will not be able to afford ownership. Just like currently most people live in the urban villages of Delhi or the lal dora unauthorised colonies - at one third the cost, (or in the juggis of Mumbai), similarly the major part of our people will never live or work in cities. The small towns and villages will develop to the level of the outlying poor quality Delhi area. And stop there. Most of our population will live and work from such areas.
Maintain this
5.
Big cities and the best apartments will be only for the rich and managerial class. Since the majority of our population is going to at best aspire to reach 10,000 dollars of per capita income i.e. 5 lakh rupees per annum, there is no way these masses will ever get to own decent urban dwellings.
Maintain this
6.
But they will be able to afford good quality kothis in tier 2 and 3 cities where land is extremely abundant. The issue of land prices will be less important than the cost of construction. Inflation in the prices of iron, cement and tiles will make more difference than land prices. Since acreage of tier 2 and 3 cities is massively greater than in metros by orders of magnitude, land prices will not increase proportionately to land price increases in metros. The presence of good roads and proximity of infrastructure will determine the rise in land prices here. Blind increases as seen in metros will not occur. Instead increased in prices of bricks, cement and iron will make these houses increase in value – more directly linked to inflation than traditional tier 1 RE
Maintain this
7.
There will be increased migration to the metros where jobs of a higher skill level will be available, but only to the really skilled. The stratification of society based on skill levels will become better ordered because of private sector. Competition for the best jobs, the best schools, the best homes and best locations will be intense and will propel further price rises in the metros. However, the price rises will be unaccompanied by increased quality of civic infrastructure. Only scarcity value will increase.
Maintain this
8.
Criminal activities by the less well off will increase manifold. Hence the rich will live in walled off areas with high security and increasing tendency to do their own chores because the personal servants will become increasingly unreliable. The best skilled people will leave the country because of these problems. Emigration will increase to 1980s levels (before the liberalization). This will reduce the numbers of the highest skilled people and hence there will be a continuous scarcity of ability (as seen today also – i.e. situation wont improve).
Maintain this
9.
Honest people will be few and will be highly valued.
I am so happy to change this prediction - AAP has demonstrated that there is space and availability of honest people - and they are there in the thousands and lakhs and crores - so future of India is bright.
I said above in Dec 2013. But it looks like Kejriwal was not honest after all - only pretending to be honest. So Maintain Prediction in March 2014
10.
The high cost of both real estate and transport will change the workplace location from company oriented to neighbourhood oriented common e-offices. Hubs for offices common to multiple companies will take off – now because the conditions demand it rather than 10 years ago when it was first mooted. Both connectivity and improved office plates in commercial RE (otherwise lying empty) will also help in the transition, as also the traffic congestion, road rage and lack of law and order and safety.
Not happened yet - but has to happen
11.
So a person will clock into his or her local e-office, regardless of whether he works for Wipro/Infosys or GE. He will log his lap top into a LAN and start working. No driving, no Sumo cabs and no safety problems. So person living in Yamuna Expressway will not need to transport himself to his work – his workplace will be just around the corner and he could work for a company in Bangalore or San Francisco. But the e-office will ensure better discipline than the outsourcers/body shoppers working from home (currently) and will be preferred by companies as being next best to physical presence.
No signs of this happening
12.
The local e-office will evolve into a commerce hub integrating office spaces with connectivity, eating out and crèches for female employees. They will have swipe cards to keep employees on the clock, phones for making calls, office automation and courier services. Females will prefer this for its safety and time saving.
No signs of this happening
13.
Companies will gain in reducing their real estate need, office infrastructure needs and also pay less – for the time and cost of transport saved by the employee, company will pay lesser salary. Both employees and companies will gain.
No signs of this happening
14.
This trend will first start from USA as cities dissipate to smaller towns and village communities, as discussed earlier. The management software will be built there, modelled around social networks. And then get transported to India in a big way because conditions will require it. Starting 2016 and culminating 2020.
No signs of this happening. It might happen only in India - since in USA more of the same seems to be on the cards.
15.
This trend will also kill the big commercial buildings – or they will sell at lower prices and lower rent. Any further increases in commercial property prices will be met with lack of occupancy – businesses cannot afford such RE prices.
This has happened - all commercial RE is in big trouble because unaffordable.
16.
Only those who catch these trends earlyand modify their locations and type of buildings being built – the service levels installed and whether it is close to big pockets (of people not wanting to commute) – like Greater NOIDA, Yamuna Expressway, Bhiwadi and Dwarka Expressway – will determine success of commercial buildings.
Maintain
17.
Life will change for ever in these disruptive ways.
No signs of this happening
18.
E-commerce will kill the local durable store. Real estate costs mean they can never match flipcart prices. Phones, refrigerators, washing machines, lap tops and every other kind of toy and gadget will now be ordered and delivered on line – and even cars in the more distant future. The need for warehousing by dealers will reduce inventories and also the heavy real estate costs – with great savings in prices passed on to consumers as well as retained by the manufacturer. There will be demonstration shops in malls for looking at the item – there will be specialization of these malls – say one giant mall where every durable company will demo its products. Purchase will be online with credit cards. This will kill salesman jobs in large numbers as the need to pay commission based remunerations will also go to the company bottom line. Instead, screen presentations of features and benefits of the product in comparision to the competitors will be accessed online through youtube presentations while the person looks at the product and gets its feel. Or he will access you tube on his own tablet. Barcodes on the products will help in retrieving the more specific models – through the bar code scanner. Everything else will be online retail.
No signs of this happening although Flipcart and OLX are slowly changing India
19.
Organised retail will change the food and clothing retail models for ever – this is well discussed in newspapers already, so wont discuss.
No signs of this happening
20.
Law and order: Major challenges exist in this area. It is necessary to recruit people from college educated background into police force. And import police trainers from Western countries to run a modern police force. If our politicians are able to understand this, then things will get better.
No signs of this happening but hopefully AAP will initiate it
21.
I expect political failure in this regard. So law and order will degenerate. There will be complete chaos in the small towns. People will try to escape to cities but face the same problems because the law breakers will also head there. The super rich will try to wall themselves in enclaves and try to escape the law breakers. Prices of properties having good security, good CCTV and guard systems will be very high. Those townships with poor security will not get preferred.
This has happened in UP, Muzaffar Nagar, Naxal areas, MP. But politics has a new hope in the form of Luke Kejriwal Skywalker. The Jedi might return !!!
March 2014 - But looks like he was Anakin Skywalker and turned into Darth Vader
22.
Increasingly, self sufficient townships where everything including jobs, entertainment, schools, colleges and hospitals will be preferred. Standalone projects where commuting is required will be less preferred. It will matter little whether the township is in Delhi, Jaipur, Shimla or a village on a highway – as long as people within have the money to procure security and broadband connectivity for themselves. Those projects without security will be abandoned.
No signs of this happening
23.
Mumbai and Bangalore are more likely to have better security than Delhi. In the long run, these places will win over Delhi.
No signs of this happening - with AAP, future looks brighter for Delhi
Economics
1.
India will not grow to developed country levels. Maximum peak productivity is probably 10-15000 dollars per capita per annum by 2050.
Maintain
2.
Continuous emigration of the highest productive people to foreign countries in search of better security and law and order will cripple India’s increase in prosperity – as the highest productive class continuously bleed out.
Happened in Dubai over last year
3.
Roads will develop little from 2013 to 2016, because of the increased capital required and tendency of Congress and Socialists to spend on populist rather than productive schemes.
Happened
4.
One episode of flight of foreign capital is bound to happen when a crisis of confidence is reached. This is most likely to be in 2014 before elections.
Already happened
5.
Dollar should appreciate to 60 and beyond during the flight of capital.
Happened
Since the Western economies are also likely to be moribund and poor destination for our exports, this collapse of Rupee is likely to be sudden, drastic and cause enormous stress. A good anticipation by present economists and proper preventive action can greatly reduce the effects – but so far the govt. does not inspire confidence.
Happened - including govt incompetence
6.
At this time of currency collapse, inflation is likely. Mostly, it is likely to be imported inflation pushing up the cost of capital, steel, oil and finished products like cars and gadgets.
Happened
7.
Gold outperformance is likely to be linked to this period of rupee depreciation and inflation. During this time, Gold should give good returns. It will be better than real estate for 1-2 years just during this time. Most likely time is in 2014. So selling stocks and buying gold should work at this time. After 2016 or so, gold should fall a lot in both Rupees and in dollars. Gold will cease to be important as an asset class after the rupee depreciatin event and the US inflation event. Both expected to be over by 2016-2018.
Gold was steady in Rupee terms even as it fell in dollars - and from 25000 it went up to 31000 before falling again, during the Rupee collapse of 2013
8.
FDs will give stable returns going forward, because central bank will not be able to lower interest rates.
Happened
RBI and FD rates will have to rise a lot in the 2014 period when dollar will increase in value and there will be flight of capital.
Happened
You should not be in bonds at this time because bond funds will fall a lot.
Happened
Lowering of rates by RBI from 2016 onwards as the markets stabilize should make bond funds give great returns from 2016 onwards.
Maintain and bringing forward this prediction
9.
Stocks will respond to even the half hearted measures taken by the govt and should beat the FD returns in 2013 till 2014.
Stocks gave 9% and select sectors like IT, FMCG outperformed. So stocks gave as much return as FD - but since there was little downside risk and upside potential was not fully realised because of bad budget and tax/spend policies of govt and total mismanagement - with better management, stock would have given 20% easily
There is likely to be a major disruption in stock market in 2014 because of coming together of many factors both internal and external. From 2016, stocks should outperform.
Downgrading this possibility and bringing forward the stock outperformance
10.
RE in NCR should be stagnant till 2014
Happened
followed by a liquidity crisis as massive deliveries in NCR and pulling out of capital by NRIs fearful of currency crash – causing chaos.
Happened to a smaller extent - it was handled better because it came earlier rather than in 2014
Many projects will be undelivered or abandoned and many builders will go belly up.
Thankfully not yet and might be avoided altogether since the disruptions were less harmful
This disruption should last 2-3 years at least.
Maintain
Prices of UC property will collapse.
Only stagnation because came early
But RTM prices will rise because of scarcity value and because nobody will want UC property and all will try for RTM.
Happened in NOIDA and Gurgaon but not in Delhi
People who pull out of stocks in time will be sitting on cash and will be able to buy the RTM.
Did not happen because stocks did not perform as expected
Those hurt in the stock crash will not be able to buy into the crash. Net net, deals in even RTM will dry up because of the doom and gloom feeling. Those planning to sell in this time should anticipate such possibilities.
Maintain
Predicting the rest of India’s decade assuming no wars:
1.
Stocks outperform in 2013.
Happened
Buy stocks now.
Good advice
Keep 30% in FD/bond funds to benefit from 8% plus returns.
Good advice
Hold RE.
Good advice
Sell gold
Good advice
, global funds and other dollar denominated assets.
Bad advice - because the crash of Rupee expected in 2014 came early in 2013 - because I expected taper in 2014 but the "THREAT" of taper in 2013 caused all the harm - more harm than actual taper
2.
Sell stocks and bonds in 2014 beginning. Buy gold. Hold RE.
Bad advice because stocks never outperformed or went to 25000 and the taper is behind us. Dont buy gold because the need was when Rupee had gone to 68. RE there is no option except to hold
3.
Wait out 2014, 2015 and 2016 H1, riding on gold and RE.
Changing this soon in 2014
4.
Sell gold when inflation gets over in USA, probably when republicans return to power after 2016. Buy bonds at their peak interest rate levels around the same time
Changing this soon in 2014
5.
Switch from bonds to stocks as the India and global crisis dissipates.
Maintain
6.
Hold stocks for a phenomenal bull run from 2018 to 2020 and beyond. Switch to new bookings in RE from 2016 – 2017 or so – keeping the new trends of townships, jobs etc as detailed above in mind.
[B][COLOR="blue"]Maintain[/COLOR][/B]
7.
Sell current holdings in RE in 2022 and beyond, at the cusp of the RE bull run which will follow the stock bull run. So 10 year holding period.
Maintain
If war starts before 2014
:Did not happen
1.
Abort the stock and bond holdings immediately. Shift from bonds to FD and gold. Hold RE.
2.
If war starts between 2014 and 2016, it will accentuate the above cycle effects. Ride it out by shifting from bonds to FD, hold current RE holdings and make fresh gold purchases.
Downgrading risk
3.
Likelihood of wars in the vicinity are maximum from 2014 to 2016.
Maintain
4.
My previous prediction of Iran China pipeline have so far failed to materialize. Economics indicate overwhelming likelihood of this happening but it hasn’t so far, despite deployment of missiles by China in tunnels of Aksai Chin. So I am downgrading this as a flashpoint for war.
Iran is not a flashpoint, but India Tibet border remains a bigger flashpoint as everyone knows
5.
US engagement of Pakistan continues to be effective. So complete abandoning of USA by Pakistan and switching to China also has become less likely. Again downgrading this possibility.
Upgrading this possibility since US withdrawing from region. Major nuclear cooperation for China Pakistan underway
6.
Complete degeneration of Pakistan into chaos is also not happening. That is the third major possibility that I am downgrading from predictions made 2 years ago.
Maintain
7.
Main flashpoint seems to be US bombing of North Korea and subsequent efforts by Iran to prevent similar bombing.
Did not happen but recent execution of Kim uncle might presage a major policy blunder by Korea
8.
US seems to be having a wait and watch attitude. In Iran, waiting for pro-democracy forces to topple the regime or reduce its extremist tendencies, based on internet penetration and social networking. In North Korea, waiting for economic collapse similar to Russia. And in Pakistan, waiting for the Jehadi madness to abate in the minds of the masses.
US is succeeding
9.
So far, above US strategy seems to be working. Most likely, North Korea will be the first to try US patience.
Maintain
Predictions for 2013
1.
Stocks up. Possibly 25% return can be expected. Sensex 25000. Main propelling drivers will be some governance improvement and US climbing over the fiscal cliff (happened already after I wrote this) and unleashing another round of liquidity. Stocks should remain steadily up throughout from now till 2014 budget at least. SIP should continue and any dips should be used to buy.
9% - but full potential was 25%. I had already changed this prediction after budget. It was not my mistake but PC's mistake
2.
Best sectors: cyclical and infrastructure, construction, cement, banks.
Major miss - but I had posted follow up that FMCG was better after budget
3.
Avoid: FMCG and durables because of saturation and belt tightening and overvalued share prices.
Major miss - but I had posted follow up that FMCG was better after budget
4.
Bonds: Mild 0.25 % fall in Repo rates is the best that can be expected. RBI unlikely to reduce further. Returns are not enough to justify eschewing stocks in favour of bonds – so if you are overweight bonds, sell now and shift to stocks.
Good advice
5.
FD: Returns of 8% plus will continue. Best safe and high returns available. At least 30% should be here or in PF.
Good advice
6.
Real estate: Stagnant markets are likely. No need to increase exposure at this juncture – but also no need to sell existing investments – hold what you already have.
Good advice
7.
Best RE market (for those underexposed to RE currently) for 2013 is likely to be Bangalore,
Good advice
Chennai, Chandigarh, Bhubaneshwar and certain locations of Mumbai
Bad advice
– although 2014 will be better for Mumbai than 2013 on the back of good stock market performance.
8.
Steady markets will be Gurgaon flats, NOIDA extension, Jaipur, Lucknow, Coimbatore, Mangalore, Kolkata, most of Mumbai, Pune and Dehradun.
Good advice
9.
Falling or steady with slight downward trend type of markets will be in NOIDA central, Kundli, Delhi builder floors and Lal Dora, Gurgaon plots, Dwarka expressway, NOIDA expressway, Yamuna Expressway, Faridabad, Bhiwadi/Daruhera, Neemrana.
Good advice
10.
Gold: Stagnant prices. Rupee strengthening will wipe out the returns of the fiscal cliff being climbed.
Good advice
11.
Dollar: Weak at 51-53 levels for most of the year.
Bad advice because Rupee collapsed. Dollar denominated investment out performed
12.
Oil: Weak. NYMEX 85-90. Brent 100-110. Not much movement
Good advice
13.
RBI repo: maximum 0.25% cut.
Repo back to square 1 almost
Caveats:
1.
Govt falls. This will kill the Rupee, Real estate and stock markets. Gold will shoot up. Same effect as war = do the same things, sell stocks, bonds and buy gold.
I should have said govt FAILS instead - because all these happened because of bad governance.
2.
War involving us, Pak, China, South Korea, Argentina or Iran: Same results as above.
ASSETS FOR INDIA:
Asset of 2013 = stocks
Hit
Asset of the decade = Real estate
Asset of the next 3 decades = stocks
Asset to avoid in 2013 = gold.
Hit
Asset to avoid in the next decade = gold. With 2014/15/16 being short term exception as detailed above. You can avoid gold altogether and ride out disturbances in FD plus RE also.
Asset to avoid in next 3 decades = gold. It will extinguish as asset after 2018 or so.
Value is what humans place on a thing – if a thing is prized, it is priced high. If a thing is no longer prized, it will not be priced. Not even gold.
Looking back, I got a lot of directions right - but my main mistake was that I expected taper in 2014 and the THREAT of taper did the same damage in 2013 - unpredictable.
But the exercise does demonstrate that while specifics cannot be predicted, broad directions, asset of the year, asset to avoid for the year - these broad trends are mainly predictable and can help one to plan shifts in asset allocation. The exercise is therefore still useful - it is entirely possible to get all the specifics wrong and still catch the best assets for the year - as long as proper diversification / allocation methods are still followed.