Sunday, December 31, 2006

It's time for ICBW's annual prediction review and predictions...first, a look at last year's predictions:

  • The focus in Iraq will turn to the corruption and ineffectuality of the newly elected government. The US will reduce its troop presence in the country, claiming as its justification the improving order-keeping capability of the Iraqi armed forces and police. But the insurgency will continue, public safety will be roughly as poor as it is today, the economy will weaken, and dissatisfaction with the squabbling, dealmaking and embezzlement of their elected politicians will sour the Iraqi public on democracy. Iraq will likely be in for a few more years of the same before eventually finding a Saddam-lite/Vladimir Putin-equivalent to de-democratize and restore order.

I apparently overestimated the Bush administration's PR skills. I assumed that they'd adopt the sensible strategy of pretending that everything was going according to plan--regardless of actual conditions on the ground--and simply declaring order more or less restored, to set the stage for subsequent troop withdrawals. Perhaps if they had followed this path, another of my failed predictions below would have been more accurate....

  • There will be neither a military strike at Iran's nuclear facilities (recent reports notwithstanding), nor a test of an Iranian nuclear weapon. By the end of 2006, things will be as they are today--Iran apparently barrelling towards nuclear capability, and the West hemming and hawing over what to do about it.

Spot on, although I concede that this was an easy one.

  • Some kind of joint Hamas-Fatah government will be established in the territories controlled by the Palestinian Authority. It will be about as effective as the current government--that is to say, not at all--at battling the chaos that reigns there. A small-but-steady stream of rockets and mortars will rain down on the areas of Israel bordering on Gaza. Israel will respond with regular incursions. Terrorists will continue to attempt to infiltrate into Israel, and will occasionally succeed. Further Israeli withdrawals, if they occur, will have as little effect as the Gaza withdrawal.

Another spot-on prediction. I failed to predict the whole Lebanon fiasco, of course, but my assessment of the Gaza situation was pretty accurate, if I may say so myself.

  • President Bush's popularity will continue to strengthen during the first part of the year, but will nose-dive thereafter in response to the scandal referred to in my aforementioned prediction for 2005. The Republicans will lose ground, though not control, in both houses of Congress in the November elections.

Well, the strengthening was pretty much a blip of a month or so, and the decline was more of a bouncing-along-the-bottom than a real nose-dive. The "scandal" turned out to be something that started in 2003--the Iraq war--not 2005, and the Republicans lost control of both houses of Congress. So this one was pretty much dead wrong. In keeping with the zeitgeist--and my other prediction above--I blame it all on the Bush administration's incompetence.

  • Interest rates will rise a little, then decline as economic growth slows. The US dollar will resume its descent after its 2005 rally. The housing market will continue to cool. Oil prices will be down slightly, and inflation will remain under control. The major stock market indices will end the year down modestly from their current levels.

This price chart showing treasury bond prices (the inverse of interest rates) fits my prediction nicely. The dollar has indeed descended, and the housing market has indeed cooled. Oil prices were up for most of the year, but are now only slightly above their starting price. Similarly, inflation rose earlier in the year, but now seems to be in a comfortable range. My only real economic oopsie this year was failing to predict a second-half stock market surge--but I fully expect it to be transient (see below).

  • The Conservatives will form the next Canadian government.

Getting this one right wasn't too surprising, but neither was it entirely certain back when the prediction was made.

  • The usual suspects--Chavez, Khamenei and Kim--will remain in power, barring natural or accidental death.

Another easy one--although some might have predicted trouble for Chavez, who was up for re-election.

  • Kofi Annan will remain UN Secretary-General until his term expires at the end of 2006. And despite signs of trouble, Syrian president Bashar al-Assad will also remain in power through the coming year.

Slightly harder than the previous ones--yet still correct.

  • The controversial surprise popular culture hit of the year will be a fictional work (film, television broadcast, play, novel, song, or perhaps some other form) that dares to vividly depict Islamist terrorists of Middle Eastern origin as evil villains.

I had high hopes that this movie would bail me out, but it fizzled at the box office. This docudrama made a bit of a splash, but more because of the controversy it generated than because of its ratings--and it's unclear whether the villains were the terrorists or the bungling politicians who failed to stop them. I guess my finger just isn't quite perfectly aligned atop the pulse of popular culture.

Now for this year's predictions:

  • Any "surge" by US troops in Iraq, if it occurs at all, will be perfunctory and ineffectual. Likewise, any diplomatic initiative aimed at Iran or Syria will be half-hearted and come to nothing. Instead, Bush will rely on congressional pressure to force his hand, allowing him to reduce the American troop presence in Iraq while protesting that the mission would have succeeded if not for the meddling of lily-livered Democrats. More generally, the administration's popularity will improve now that it has a Democratic congress as its foil, although Iraq, and foreign policy generally, will not be the main arena of confrontation (see below).
  • The conflict between Hezbollah and Israel will not flare up again this year, as Hezbollah will be preoccupied with consolidating and increasing its power in Lebanon. Meanwhile, Israel will be preoccupied with the continuing chaos in Gaza, which will spill over into the West Bank as well. The low-level civil war between Fatah and Hamas will continue, with numerous outside interests lining up on one side or the other. Rocket launchings and other attacks from Gaza into Israel will continue, and Israel's response will be sporadically violent, and sufficient to reduce but not eliminate them.
  • Attention in the US will turn away from foreign policy and towards the economy, as (1) the economy slows and (2) economic policy becomes the focus of the Democratic congressional agenda--and of conflicts between Congress and the administration. Trade, taxes, fiscal policy, entitlements and regulation of business will be key flashpoints, against a backdrop of slower growth, a weakening dollar, a continuing real estate slump, and a retrenching stock market. Oil prices will drop slightly, though, and interest rates will decline slightly--although not enough to juice the economy, owing to lingering inflation worries.
  • In addition to the usual suspects all making it through the year (barring accident or illness), Ehud Olmert will surprise many by remaining in power as prime minister of Israel. (Navigating Israel's byzantine political ecosystem is the one thing he's serious about and competent at.)
  • Neither of the two current frontrunners for the Democratic party presidential nomination (Clinton and Obama) will be considered a frontrunner by the end of the year. On the other hand, at least one of the two current frontrunners for the Republican nomination (Giuliani and McCain) will be considered a frontrunner at the end of the year.
  • (This one contributed by someone I know) A scandal will tarnish the sterling, upscale image of Whole Foods.

Over the years, of course, my prediction record has been pretty awful. But as the mutual funds say, past performance is no guarantee of future results....

Saturday, December 02, 2006

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