Matt Nolan

Rough 2011 predictions

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I suppose I should make some falsifiable predictions for the year ahead – so I can explain at the end of the year why I was so wrong 😉

Lets go (note, these are my rough picks – they aren’t associated with anyone else, and they definitely don’t exist in a professional capacity) :

  • NZ GDP growth will near 4%pa by the end of the year.  Inventory accumulation will be a major contributor.
  • Consumption growth will be weaker than economic growth – but will accelerate during the second half of the year.
  • NZ unemployment will hold above 5% – but will be in the lower 5’s.
  • The housing market will remain weak.
  • The Reserve Bank will remain dovish on rates over the first half of the year – but then start hiking in June.
  • Farmers paying down debt on the back of high commodity prices, combined with increasing risk taking/confidence by investors, will see interest rates fall over the first half of the year.
  • National and Labour will compete over “savings plans” which will involve far too much in the way of distortions, compulsion, and poor “incentive” programs for my liking.  As a result I will post on them constantly.
  • National will win the election with effectively the same coalition government as we have now.
  • Aggregate commodity prices will peak in March, but will not decline significantly.
  • Oil prices will rise 10-15%.
  • Australian growth will fall slightly below trend.
  • The US recovery will be lower than expectations in the early stages of 2011 on the back of a slight run down in inventories – however, underlying activity will pick up sharply from the middle of the year.
  • The Fed will not lift rates or cut back on QE.
  • Israel will attack Iran to destroy any nuclear capabilities – and nothing will come from it (have put an entire dollar on this on iPredict – with an order to buy another 100 stocks)
  • Chinese growth will slow to 8%.
  • Portugal will teeter, but the essence of the debt crisis will be forgotten again over the year.
  • Japan will tighten policy too early.
  • Subsidies for solar power will become a more common policy around the world.
  • An international mission to Mars will be announced.
  • Update: India will win the Cricket World Cup.
  • Update:  France will win the Rugby World Cup after disappointing in group play.
  • Update:  Gold price will fall – say it will be lower on December 31 2011 than it was in December 31 2010 in US dollar terms
  • Update:  The NZ TWI will be volatile, but on average unchanged!
  • Update 2: Arsenal will win the PL in 2010/11
  • Update 2: LFC will be top of the PL in 2011/12 at Christmas (but will end up coming 4th)
  • Update 2: Wellington Phoenix will come in sixth in the regular season – but will make a semi final.  They will be in fourth place by the end of December 2011.
Matt Nolan

Methodological individualism and all that jazz

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Tyler Cowen at Marginal Revolution has an interesting post discussing methodological individualism.  As a fan boy for methodological individualism, I felt that his criticism of it as a method went a bit far.  Here I just want to describe why.

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Matt Nolan

I think I’ve found a bubble

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There is a lot of talk about bubbles, and how we need to do something to prevent them.  I find this difficult, as even if we could observe bubbles we also really need to justify why we should lean against them – as long as the cost falls on those getting themselves involved in the bubble I’m not sure what the issue is.

However, if we are going to do things I think I’ve identified a pretty obvious bubble:

The use of the word “sustainable“.

Matt Nolan

All I want for Christmas is … cash?

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So says an article on Stuff.

This makes sense to me, after all having the means to buy what you value the most is useful.  In fact, this is incredibly relevant for my article in the Dom Post tomorrow 😉

Matt Nolan

Another sentence

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The shift from debt-financed consumption to greater saving and investment is also expected to support the household sector’s capacity to repay its debt.

This is from the RBNZ’s Dec 10 bulletin.  This is a good article, but the nature of this specific sentence grates me.  I would suggest reading and enjoying the article for what it is – and viewing my discussion below the fold as a discussion based on an interpretation of this sentence, not a discussion of the article per see.

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Matt Nolan

Sentence to ponder

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Via Stats NZ

Increases in borrowing, interest paid, and investment in housing by households and the private unincorporated producers sectors (sole traders, partnerships) suggest that New Zealand increased its international indebtedness through offshore borrowing to finance housing, among other things.

That is from their new Institutional Sector Accounts, which I’m going to spend a bit of time thinking about.  The key thing to differentiate for me here is – were we spending too much building houses, or simply building up the mortgage in order to consume excessive amounts of non-housing goods.  My impression is generally in the former camp, and I’m hoping that a bit of time looking at this data will give me a clearer idea of which view is more reasonable.

I continue to believe that any adjustment in the NZ economy will come through investment in housing, rather than through a large scale shift in household consumption (which if anything has been restrained in NZ).  In this view we borrowed to build bigger houses, not to buy plasma TVs.  So it will be interesting to see.