Macro Man doesn't do predictions or forecasts. He does, however, do non-predictions, and at the last year
wrote down a list of stuff that he thought would
not happen this year. Given that he is in an introspective mood, now seems as good a time as any to mark his views to market as he tries to determine how he's gonna make money for the rest of the year.
1) Oil will NOT rise 60% in calendar year 2008, or 100% peak-to-trough during the year. Oh dear. In retrospect, Macro Man underestimated the degree to which the three axioms and the dollar down bubble would drive commodity prices, and overestimated the degree to which US consumer demand destruction would cap energy prices. While oil has not yet rallied 60% this year, it is on pace to do so. By any possible criterion, this has to be called a
MISS.
2) VIX will NOT hit single digits again. The first month of the year, this looked like a dead cert to be right. However, since March equities have ground higher, sending VIX deep into value territory for those who believe that the world financial system and economy are not out of the woods yet. All Macro Man knows is that every single option/option strategy that he has purchased since Easter has finished out of the money. Ugh. For now, the
JURY IS STILL OUT on this call, though a grind to 1500 would likely render it a miss.
3) Inflation will NOT die as a macroeconomic issue. Food riots. A hawkish ECB. 15 year high CPIs across Asia. Some US inflation measures at their highest point in more than a quarter century (the chart below shows the
average 1 year Michigan inflation reading alluded to in the weekend special.) This can only be called a
HIT.
4) China will NOT step-reval the RMB.