My 2008 forecasts, right globally, wrong locally

Posted on 30 December 2008 with no comments from readers

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After eight years of writing columns for AME Info I have just written my last, and so anybody still interested in my opinions should refer to this blog in future.

Yet looking back at my 2008 forecasts what stands out is that I was pretty much spot-on with the global macro view, and hopelessly off with my local predictions – quite the reverse of what you might expect. So many global analysts got 2008 completely wrong, yet to borrow from my 2008 article on AME Info, I said:

‘The biggest event of the year is surely likely to be a big correction (10-20 per cent) or crash (20-30 per cent) on Wall Street which would trigger a shock wave across the developed and emerging capital markets. It would also most probably hit commodities like oil and gold which have not suffered in the recent credit crunch.

Oil and gold

This could be the point – or shortly afterwards – when the brave investor with cash-in-hand will be richly rewarded. Picking up blue-chip companies when they are temporarily out of favour is the dream of any equity investor; likewise oil and gold assets could be unreasonably sold down with the rest.

Meanwhile, the cash investor has to decide which currency to hold for even cash is not an entirely passive investment. Unfortunately picking currencies is probably the most difficult area of investment analysis, far harder than picking stocks, bonds or funds.

A true contrarian might argue that 2008 will be the year of the US dollar and that in a big sell off investors would be forced to embrace the greenback.

You could also argue that the UK and euro zone will this year feel similar pressures to the US in 2007, and the $500bn emergency liquidity pumped into the banking system last week by the European Central Bank does tend to indicate that something is very a miss in Europe right now.’

Local crashes

This foresight is ruined in hindsight by the nonsense I had to say about the Gulf markets and Dubai. Is this down to being too close to the action or just a case of being a victim of my own propaganda? I don’t know and those who unkindly suggest I am in the pay of Dubai simply do not understand how cheapskate people are in this part of the world.

As a penance for my failure to correctly predict the GCC in 2008, this was my forecast:

‘However, as this column has suggested before for GCC investors the best options for 2008 are closer to home, and that might well be true for currencies as well. Revaluation is still a strong possibility for several Gulf currencies. So add Gulf currencies to local property and stocks for your 2008 portfolio. Never has the mantra ‘go local and not global’ been more appropriate.’

Market bottom?

How horrible: the Dubai Financial Market is down 75 per cent and local property crashed this autumn along with the oil price. Revaluation did not happen but at least the dollar rally brought some comfort to local cash holders.

Please see other articles for my views on 2009. Should you therefore ignore my local forecasts and accept the global predictions? I am afraid you will have to make your own mind up on that – this has not been a good year for market commentators.