Ivan’s End of Year Predictions for the Year 2000 30 December 1999

Markets: Early jumpstart in January due to relief that Y2K went OK and in anticipation of a good first quarter with sales of pent-up demand goods such as PC’s; markets will head south late January in anticipation of a fed interest rate hike 12 February; seasonal decline in the spring months but overall a good year. The market may not necessarily react positively to the idea that a republican president will take over – the prospects of tax cuts wiping out a budget surplus and bringing higher interest rates plus a pro-oil policy with higher prices and higher inflation are bad omens for the markets. Wall Street crash must happen at some point in the next few years and it will be bloody; too many young millionaires are too young to remember 1987 and the obnoxious consumption has returned whereas a year or two ago people were still cautious. I don’t know what might trigger it and logic doesn’t matter – a Chinese currency devaluation could. The 1998 shocks were not really logical as the Russian and Thai currency devaluations were not good reasons to trash the US markets when the US economy was strong. Later that year, if you recall, Brazil’s currency (much more important) tanked and the markets shrugged it off.

USA Elections: This is really tough; I dislike both of them and cannot guarantee that I will even vote. It’s between Bush and Gore, because they have the money and party machinery. Gore will give Bush a hard time at the fall debates and may convince voters that Bush is a lightweight. Bush is likeable and is more the man people will want to watch on their TV screens for the next 4 years. The rest of the world fears Gore will act meekly and that the US will be an unreliable ally. Clinton running for Senate will not help Gore and may even hurt; she will lose bigtime to Giuliani. Odds are to Bush because of the TV likability factor.

Latin America: Colombia: There are real problems there with drug lords and guerillas. USA is working on it but not succeeding. This could be a real trouble spot in the year ahead and its government may not survive.

Asia: Real reform has not taken place but there is enough optimism and small reform to carry things through the short term. The region will perform well this year. If China devalues its currency, more likely this year, that could be the excuse for a correction in the US markets. North Korea will take tentative steps toward positive evolutionary change. Taiwan’s coming election results will not matter in the long term; over 10-20 years, Taiwan and China will reach a settlement as both countries become more similar economically. Changes as are taking place in Indonesia bode well for other such states. India and Pakistan – this year’s slamfest was an anomaly; next year should be quieter and I don’t expect the Pakistani general to make issues with India since Pakistan is bankrupt and he realizes Pakistan needs the world’s money more than it needs the distraction of games with India.

Africa: Though there may be some small success stories (ie: Mozambique), the region is off the US map and hopelessly corrupt hindering progress. I still haven’t visited there and don’t know anyone in countries other than Egypt and South Africa. This doesn’t bode well for the region.

Russia: Vladimir Putin reminds me of Count Dracula with his pale face, black cape and his other features. If we needed reminding, we saw again this fall the power of the state-owned media to shape election campaigns and to create a winner as was done for Yeltsin’s campaign last time around. We have also seen confirmation that the communists will stay steady as a 25% force but no more. I expect Putin to be elected Prez as long as Yeltsin hasn’t fired him or as long as the oligarchs around Yeltsin are not sufficiently threatened by Putin to move to get rid of him. Chechnya is a distraction which will be spun in whatever way the Russian media decides by whoever controls it. Russia will slowly improve economically but foreign investment has learned its lessons and will stay away until rule of law is instituted.

Europe: Germany will be the story. Schroeder is making reforms and the fruits of his labor will show, particularly as Berlin construction projects come on line at the end of 2000. Trials of Kohl and his party will help Schroeder too.

Middle East: Israel will sign deals with the Syrians, Lebanese and the Palestinians and most major issues will be resolved (including Jerusalem to a good extent) this year. Israel and the Palestinians are already dealing with Jerusalem issues. (An unexpected sticking point might be Palestinian refugees in Lebanon; it may not be enough to solve this demographic problem to Lebanon simply by throwing money at it and meanwhile these million people have to be put somewhere. I don’t have enough intelligence on this as I write today to know if this has been solved.) Once a deal is announced, Parliamentary and Referendum approval will be stronger than expected (ie: at least 65%). Assuming no major catastrophes or assassinations, these agreements will be executed more or less according to schedule. After Syria, Iraq will sign on to Middle East peace and begin to make its way back into the world even though Syria will use the peace to protect itself against Iraq. Iran, after its elections and after Israel’s deal with Syria, will either follow the ballot and begin to take up Clinton’s and Israel’s offer of more normalized relations or may have violence in the country if the nation’s students feel cheated out of the spring elections. Iran this year will make its first noticeable moves toward positive evolutionary change to follow over the next 5 years. The price of oil will remain steady; the countries in question have finally figured out that it pays not to cheat and the reestablishment of relations between Saudi and Iran has helped calm the waters.

#1 Threat: The shift from state-sponsored terror to free-agents. North Korea, Cuba, Iran, Spain and Afghanistan are out or getting out of the terrorism business. Free agents such as mafias, fundamentalists of all religions (including those masquerading as such) and malcontents of various types are at large and highly dangerous. No doubt we are monitoring many of them and prefer for them to be under pressure while free rather than in jail and/or martyred because that alternative can be worse. I expect some kind of NBC (nuclear, biological, chemical) attack in a major US city within the next few years. Israel will take a hit too. Both countries will not have an address to direct retaliation. Holding a state responsible requires a response – which may be less convenient than suffering the disease itself. The challenge will be for Israel to discount such terror as a cost of its future existence while knowing that a continued war footing would not prevent such incidents, just as the US situation.

Trends: Biotech will regain attention it has lost to Internet. Many Internet companies will shake out having expended their capital during Christmas advertising – only a few brands will survive to attract future rounds of venture capital financing. Meanwhile, other capital will return to Biotech where significant breakthroughs are being achieved, particularly in genetics. Food will take on more medicinal qualities and the wireless telephone will become even more handy and multi-task capable as the new telecom standard is implemented next year.

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