Pundits fail to agree on price predictions
BY the end of 1996, crude oil will be selling for US$16 a barrel, $17 a barrel, or $19.58 a barrel, and gold will be $380 an ounce, $420.88 an ounce or $440 an ounce - according to three Hong Kong pundits.
Hong Kong General Chamber of Commerce chief economist Ian Perkin, UBS Securities (HK) managing director John Mulcahy, and Marc Faber (managing director of Marc Faber), yesterday met the Hong Kong Managment Association to review the accuracy of a series of predictions they made 12 months ago, and to issue more.
The most accurate pundit for 1995 was Mr Mulcahy, with 13 points, followed by Mr Faber with 12 and Mr Perkin with nine.
A year ago, Mr Faber said that by the end of 1995 a barrel of oil would cost $18. Mr Mulcahy predicted $19.50, while Mr Perkin said $17.25.
On December 29, 1995, oil was selling for $18.53.
Mr Faber, who has predicted a rise in gold's fortunes, was over-optimistic 12 months ago in his prediction that the precious metal would end 1995 at $420 an ounce, while Mr Mulcahy ($390) and Mr Perkin ($392) were closer with their punts.
On December 29, gold was being quoted at $387.05 an ounce.
Mr Faber predicted that the US dollar would end 1995 at 112 yen, Mr Mulcahy said 115 yen and Mr Perkin 108 yen.
The US dollar actually ended 1995 at 103.47 yen.
Undeterred by mixed success forecasting the price of a barrel of oil, an ounce of gold, the US dollar's ultimate level against the yen, deutschemark and pound sterling, the three told the management association lunch the US dollar probably would gain against both the yen and the deutschemark over 1996.
But the three agreed on little else.
According to Mr Mulcahy, the US Federal Reserve will gradually cut the federal funds rate to between 4.25 per cent and 4.75 per cent, and the Bundesbank will cut German rates further.
The US dollar's stubborn weakness 'in the face of a dramatically improving US environment' had its roots in the current account deficit, which made the US unhealthily reliant on foreign savings.
The only way to reverse this reliance was to shrink the deficit, which could occur in the medium-term through a better US domestic saving rate.
Mr Faber said 1995 had shown countries with weak currencies enjoying strong economic growth, while strong-currency countries had weak growth.
He predicted strong-currency countries might let their currencies soften.
Mr Perkin said 1996 would bring volatility in all markets, and politics would play a more important role in financial markets.
He said the US was about to embark on a presidential campaign, Britain had a lame duck prime minister, Italy's best government in about 20 years had resigned, Eastern European communists were returning to power, and the French Government was pressured.
Despite being furthest off the mark in his prediction for the closing price of gold last year, Mr Faber said a movement upwards was still on the cards - and said gold would end 1996 at $440. Mr Perkin said $420.88, and Mr Mulcahy $380.
Mr Faber cautiously predicted the Hang Seng Index would end 1996 between 6,000 and 8,000. Mr Perkin said 10,500 and Mr Mulcahy 12,000.
