A currency accord between G-8 nations, political crisis in Germany and a revolt against spam are some of the likely events for the next12 months
'Prediction is difficult,' Nils Bohr, the father of the atom bomb, once observed. 'Especially if it is about the future.'
Bohr's point is a fair one. Not many predictions come true, but that does not mean the effort is wasted. Like sci-fi stories, predictions are not really about the future but about what is worrying us now.
In that spirit, here are 10 things that might happen this year. They probably won't, and nobody gets their money back if they don't, but they are all worth watching.
1) A currency accord. The US won't say so out loud but it would like a softer dollar. Britain wants a weaker pound ' it's running the biggest trade deficit for 300 years. Japan would like a softer yen and Germany and France want a softer euro to boost their flagging economies.
The problem is, not all the world's currencies can devalue against each other at the same time. The G-8 finance ministers will try for a currency accord to avoid competitive devaluations. True, the record of currency accords is mixed. But since when did that stop politicians from trying policies that won't necessarily work?
2) A surprise new president of the European Central Bank. The candidacy of Bank of France governor Jean-Claude Trichet, the leading contender to succeed Wim Duisenberg, is in trouble. Trichet faces a trial over allegations that he was involved in the collapse of Credit Lyonnais in the 1990s. The trial begins this month, not long before the ECB must begin choosing a new president. The French establishment is reluctant to admit it but Trichet's candidacy looks jinxed.
3) A political crisis in Germany. Since his re-election, nothing has gone right for chancellor Gerhard Schroeder. The economy has slumped, there were screams when he raised taxes and his poll ratings have collapsed.
Schroeder looks painfully short of ideas for fixing a country that has spent two decades resisting the trend to smaller governments. There is always a price for economic failure and Schroeder looks to be the man who will pay it.
4) Russia overtakes Saudi Arabia as the world's largest oil producer. Deputy prime minister Viktor Khristenko said in December Russia plans to increase production by 11% this year, taking output to 8.4 million barrels a day. Saudi Arabia was producing 7.85 million barrels a day toward the end of 2002. It will soon be in second place. That will push the flagging Saudi economy closer to terminal crisis.
5) Alternative investments soar. Stock markets look dead and the bond rally has to end some time. People are searching around for something in which they can invest. Property had a good year in 2002, as did gold. That trend will gather strength. Watch for spectacular returns in neglected areas such as forestry and mining.
6) A buyout firm collapses. The world can't go through one of the worst bear markets in history without a significant financial collapse. The banks appear to be pulling through. So do the asset managers.
Buyouts, a boom industry of the 1990s, are based on leverage, using borrowed money to acquire assets. That doesn't sound like a great business model for a slow growth world. There has to be some pain hidden in the system and it is probably here.
7) A recovery in mergers & acquisitions (M&A). Credit Agricole has just agreed to pay e16bn euros for Credit Lyonnais. HSBC Holdings is paying $15.5bn for Household International. Cadbury Schweppes is paying Pfizer $4.2bn for its Adams candy unit.
All of a sudden there are signs of life in the M&A business. Nobody wants to buy something when they think it might be cheaper next week and, as the price of corporate assets tumbled, the deals dried up.
Chief executives now think prices have hit bottom, or are close enough to it to make it safe to buy again. Soon they will think prices are going back up and they will all want to buy before they do.
8) An emerging markets star emerges. The only strong equity markets right now are emerging markets. Russia is up by 36% in 2002, Pakistan by 99% and Romania by 119%. Sooner or later, investors in Europe and the US are going to want to jump onto that bandwagon. The first fund manager, company or entrepreneur who can exploit that trend will make a fortune.
9) A worldwide revolt against spam. E-mail is the greatest innovation in communication since the telephone but spam is making it close to unusable. A survey in Britain by Brightmail estimates four in 10 of all e-mails are now spam. To mangle Karl Marx's most famous quotation, office workers of the world unite, you have nothing to lose but your chain-mail.
10) Many people in many quarters will call the bottom of the bear market. But 2003 will end as it began, with no one certain when the bear market will end.
Bloomberg newsroom, London
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