There’s only one thing I’m worried about for 2018…
This time of year, everyone starts publishing their “Outlook for 2018” pieces.
I always find it interesting reading. And look, mostly it tends to be pretty negative.
But it’s hard to appear smart by saying “everything is going to be awesome.” That’s not how you appear smart. You appear smart by telling people how alive you are to the risks that are out there.
How you alone can see the dangers on the road ahead.
(Fun Fact: Economics, as a profession, was an attempt to get furry end-of-the-world-is-nigh men off the streets.)
So what are the key risks that people are pointing to? And what is the only risk I’m worried about?
Well, China is in the mix obviously. This is the risk that just keeps on giving. It is being ever-greened into 2018, and who knows? Maybe this is the year where the whole turd cart finally goes up in flames.
A stopped clock is right twice a day. A China collapse prediction will have to be right eventually.
And while there are some alarming statistics (but then, show me an economy that doesn’t raise eyebrows these days), it’s hard to make the case that things have gotten substantially worse.
Sure, risks remain. The economy is unbalanced. There’s lots of challenges. But there have been for years. Like decades. We only care now because with each passing year the Australian economy becomes more enmeshed with the Chinese economy.
So yes, could be a risk. But I’m not losing sleep over it.
The other key risk theme is “the everything bubble”. The idea is that a decade of easy money has created bubbles in dozens of different financial markets. The US stock market, in particular, is on a bull run and has some people wondering if we might not be due for a major correction.
(The ASX on the other hand is making us Aussies look like lame-arses.)
So yes, the wheels could fall off that one. But it’s hard to see how, just yet. Typically recessions come through interest rate increases, and so far global inflation is going nowhere, and the outlook for rates remains tilted to the downside if anything.
So yes, it’s a bit bubbly-bubbly, troubly-troubly, but given the nature of financial markets these days, it’s not all that much to write home about, I reckon.
The other risk theme doing the rounds is the Bitcoin bubble. While the crypto story is still in lift-off phase (we had a huge response to our crypto seminar, so we’re running it again. Tune in and you’ll see what I mean) it could reach the stage of ‘systemically important’ at some point.
But yes, it’s the wild west out there. Money is on the surge and you get the sense that there aren’t really all that many people who know what they’re doing.
This presents risks. Of course it does. Maybe a major financial institution takes too big an exposure, just as a major price correction takes hold. Maybe a major bitcoin exchange goes down.
Who knows? It could come from anywhere.
But I personally don’t see anything like that happening in 2018. Cryptos aren’t embedded deep enough in the economy yet to do major damage (which is exactly why it’s time to be taking an interest! They will at some point in the next few years.)
For the time being, crypto risks remain largely contained to the crypto market. So I’m not losing sleep about that one either.
Closer to home, another key risk theme is around the Aussie consumer. Employment is strong, but it’s patchy. Underemployment remains high. As a result, there’s still slack in the labour market. Wages are going nowhere.
All that means is that there’s not a lot of life in the Aussie consumer. That piston is failing, and means that the Aussie economy is unbalanced.
That’s true for now, but the corporate mood in Australia is high. We haven’t see it flow through to employment intentions yet, but corporate Australia seems to be gearing up for a big year in 2018.
So I’m sanguine about that one too.
And so if I’m not worried about any of the key themes economists are pointing to, what am I worried about?
To be honest, my only worry is that I won’t have enough hours in the day to pick up all this money.
I’m worried I might hurt my back unloading trunkloads of cash out of my car.
The way I see it, there are always risks to the global economy. You can always tell that story. But right now, people are clutching at straws. All they’ve got are a bunch of maybes.
The global economy, to me, looks as strong as it has been in years.
Add to that the excitement of cryptos – it’s a whole new paddock in the financial landscape that’s just been opened up. Who knows what treasures we’ll find there?
And then add to that the quickening of exponential technology, and there is bound to be some profound (and profitable) revolution at some point in 2018.
I can feel it.
2018 will be a year for the hungry. It will be a year where confidence and a bias to action will be rewarded.
I’m not saying be reckless. But this could be the year that defines your fortunes.
So stick with me. I think we’re going to make some serious coin this year.
I’m off from the 22nd to the 8th, but I’m not slowing down. I’ll be back in the New Year with more wealth tips, resources and half-baked philosophy.
Thanks for sticking with me. It’s been a lot of fun.
See you on the other side.