Before looking forward, I spent some time over the weekend looking back at some earlier January columns and my forecasts. The one that I ended up focusing on was “Retirement & Energy Independence: Two Issues to Be Addressed,” from January 2012. I opened with a discussion of NFL wild card weekend and the then-titled BCS National Championship college title game.
This year I will make my overall predictions early:
Oregon will win the national championship in the inaugural college playoff season. The SEC West, at least for this season, is not the dominant force that it has been for the past nine seasons.
In the NFL, I am predicting a New England Patriots vs. Green Bay Packers Super Bowl. We were treated to an exciting game on Sunday, November 30 when the Patriots traveled to Lambeau Field in Green Bay. In a well-fought battle at home, Green Bay came out on top, 26-21. A Tom Brady vs. Aaron Rodgers rematch could live up to the pregame hype. On the NFC side, I trust that the Dallas Cowboys would love to upset this prediction. Anyone have a prediction on who the ’49ers will pick as a new coach to replace Jim Harbaugh?
Let’s turn now to the two issues that I felt were not being addressed leading up to the presidential election in November of 2012, “Retirement & Energy Independence.” I wrote, “The first one is the funding of retirement. This is a global issue that goes well beyond the U.S. election. In the U.S. the impending retirement of the baby boom generation needs to be addressed by both parties, particularly with regards to Social Security funding requirements and Medicare, as well as what retirement resources individuals will need as they live longer. These entitlement programs and their funding requirements cannot be ignored.” The recovery from the Great Recession has continued to produce smaller deficits in both the U.S. and U.K. For the moment, continental Europe remains troubled and continues to face the threat of deflation. In the U.S., U.K. and other parts of the world, the shift from defined benefit (DB) plans to defined contribution (DC) plans has accelerated.
We at Asset International have continued to assist our clients with business intelligence and information on the global retirement markets, both with DB and DC plans. Early this year our Strategic Insight division will launch two Simfund Retirement databases for its core clients, followed late in the year with launches in the U.K., Canada and Australia by the Strategic Insight global team. For more information on these product offerings, please contact Jon Hale (firstname.lastname@example.org) or Stephen Moylan (email@example.com). We feel that these new offerings integrated into our core Simfund offerings will be extremely valuable as our clients develop new products and look to benchmark their performance in this important segment of their businesses.
Energy independence for the U.S. came much sooner than anyone predicted back in 2012. On Bloomberg this past July 4th, Grant Smith wrote about the U.S. surpassing Saudi Arabia and Russia oil production in the article “U.S. Seen as Biggest Oil Producer After Overtaking Saudi Arabia.” This has been driven primarily by the technology that has allowed hydraulic fracturing, also known as shale fracturing or fracking. I had written back in 2012, “While there are environmental risks, the majority of the respondents believe that the long-term reward of energy independence from shale gas far outweighs the risks.” What we did not foresee, nor did most economists, was the downward pressure that this technology would put on global commodity markets. In particular, oil production from the Bakken shale, “a 200,000-square mile rock formation that lies below Montana, North Dakota and the Canadian province of Saskatchewan, continues to rise at a breathtaking pace.” (Chad Fisher, Investing Daily, August 24, 2013) The price of a barrel of Brent crude, the international standard, is now significantly below $60 and OPEC has not been able to stabilize the price. This continued price decline will also put pressure on the Bakken shale oil producers. For the moment though, the consumer is living the dream, with a gallon of regular at the pump being below $2.00 in many parts of the U.S.
The extra dollars in the U.S. consumers’ pockets should allow the recovery to continue apace, as the consumer participates along with business to extend the recovery through 2015 and into 2016. In addition, the U.S. dollar is at its strongest position vs. the Euro in more than a decade. And all of this positive economic news is coming amidst the anticipation of the Federal Reserve starting to raise interest rates this year, although modestly. I anticipate that the U.S. economy will stay strong leading up to the 2016 presidential election.
In my next column, I will introduce you to some new small winery gems from California.
Happy New Year!