As we begin the last year of the Obama administration and look forward to the end of the Age of Obama we cannot help but reflect that, despite his imperious decrees and extralegal efforts to change America for the worse, our president is trying to run out the clock.
The president and his media and academic enablers do not very much care what happens. They do care about whether or not the blame can be affixed to Barack Obama. Recall the 9/11 Commission, whose purpose was supposedly to discover the truth about the attack on the World Trade Center.
Perhaps Republicans in their limitless naivete believed that that was what it was all about. Democratic participants knew that their role was to ensure that the conclusions fixed the blame firmly on the Bush administration. They did everything in their power to shield the Clinton administration from responsibility for the terrorist menace that festered on Bubba’s watch. How better to undermine Republicans and to pave the way for Hillary!
If 2016 passes without horrific incident, whether in world politics or in the markets, the cognoscenti will pronounce the Obama administration a rousing success. If, three days after a Republican president takes office, something bad happens, if the markets collapse, if a massive terrorist attack shuts down the power grid, people like Paul Krugman will immediately take to the air and exclaim that it is all the fault of the Republican president.
If the deluge comes about in 2016 the commentariat will have more difficulty blaming it all on the Bush administration or the Tea Party or Ted Cruz, but surely they will try. Their politics is: we're right and they're wrong. Shifting blame is vitally important to the defense of progressive policy.
This much to present some of Doug Kass’s predictions for 2016. Kass runs a hedge fund; thus he looks into the future in order to develop an investment strategy. He puts his money where his mouth is and does not seek monopoly control over the marketplace of ideas.
Kass writes a column for Real Money Pro, has a Tumbler blog and tweets often about his market views. He is willing to let the markets judge his prescience. Besides, his cousin is Sandy Koufax… what better qualification could there be?
I bring up Kass today because his predictions, uncharacteristically, are very bleak. Against the background of optimism that seems fitting for the first day of the New Year, Kass has offered a series of downers. He sees a world that is in far more danger than we all believe. But, then again, really bad things happen when we are fat, complacent and overly confident.
I will offer some excerpts from a summary article. Kass begins with a series of predictions about the increasing threat of terrorism.
Here are two about terrorism:
I fear we'll see attacks that demonstrate how terrorism incidents are systemic and not simply isolated. It could become apparent that we face a broad, aggressive wave of terrorism aimed (as expressed by ISIS) at defeating the West's world domination.
Acceptance of this notion would cause significant disruption in global markets and the world's economies. Shares in airlines, hotels, entertainment companies (especially theme-park related) might suffer the most throughout the year.
The Islamic State destroys a significant amount of Mideast oil-producing countries' infrastructure. This occurs at the same time more violence erupts in the Niger Delta, Algeria suffers from political chaos and a coup disrupts Venezuela's oil production.
While outsized oil inventories initially stem energy-price increases, crude rises above $60 a barrel in 2016 -- sparking, among other issues, fears of reflation. (Energy stocks continue to falter at first, then soar in response to the Mideast hostilities.)
And then increasingly sophisticated hackers pose a great danger:
Middle Eastern, Russian and Chinese hackers successfully invade the U.S. financial system's computers at various points throughout 2016. They consistently launch destabilizing attacks against multiple trading platforms (the New York Stock Exchange, the Chicago Mercantile Exchange etc.) and the overnight electronic settlement system.
This causes a series of temporary multi-day trading halts, shattering confidence in our markets.
Kass believes that we will enter a recession. He does not quite say it, but it looks to me as though the bill will finally come due on the Federal Reserve’s money printing and the Obama administration’s spending and regulation spree.
Too much debt, too little growth, fiscal-policy paralysis, a "spent" Federal Reserve and limited capital spending (which adversely impacts productivity) weigh down stocks in 2016. So do crony capitalism, geopolitical instability a further narrowing of market leadership and a further technical breakdown.
The current U.S. expansion is now more than 70 months old, one of the longest in history. There have been six recessions since 1971, and the S&P 500's average drop during them is 36%. I predict 2016 could see the seventh recession in the last 45 years, with stocks experiencing a 20% decline.
Few asset classes will be spared, and household net worths will suffer. Rising bond prices had the effect of somewhat buffering falling stock and home prices in the last downturn. But we won't be so fortunate this time as stocks, real estate and bond prices will likely all decline at the same time.
Kass might be slightly ahead of the curve on Europe, but clearly the Merkel-led open-arms policy toward Muslim immigration is going to blow up… sooner or later:
German Chancellor Angela Merkel's open-door immigration policy backfires and causes her to resign, while Britain leaves the EU (a "Brexit") under the assault of Euro-skepticism.
Separatist initiatives in Scotland and other countries advance and France's National Front party rises to new heights in the face of immigration fears. Support to Greece and other EU peripheral countries diminishes, causing another emerging-market crisis. European borders are shuttered and trade comes to a halt.
Finally, to ruin your day completely, Kass believes that the presidential election will see Hillary facing off against the Donald. He predicts that Hillary will win in a squeaker.
Today, that is fast becoming the consensus view. But if we follow Kass’s advice and avoid all consensus views, we would have to say that the next president will be neither Hillary not Trump.
Happy New Year!