Nine Forecasts for Twenty Oh Nine

Some trends I see either emerging or solidifying in the year 2009. I have restricted myself to only areas of financial markets/economics and software – the two domains that professionally interest me

  •  Touch will become the most important metaphor through which computer hardware will interact with humans. Mobile phones have already evolved to it and now laptops, desktops, media players and media/game controllers will catch up. A vast number of application software will have to be rewritten to better leverage this touch-trend to provide a completely different user experience than before. The lead in this will be taken by software newbies because legacy software applications would not have been architected to handle this stage of evolution
  •  Cloud computing will truly open up Software as a Service (SaaS). Traditional businesses that never contemplated this business model will warm up to it. Data Center Management skills will suddenly be in demand
  • Remote communication paradigms will continue to evolve dramatically, especially in countries where production and consumption (of any kind) is widely dispersed. Personally, I would be extremely keen to see this evolve into a robust telemedicine infrastructure for India
  • User generated content, crowdsourcing and such other metaphors of freely associating a larger population of professionals to embellish what earlier would be done internally by a handful will gain traction. Focus on cost containment will drive this phenomenon forward and some companies will evolve truly clever mechanisms of exploiting this trend, finding applications to functions that will be truly disruptive
  • 2009 will be no better than 2008 in terms of financial asset performance. Excesses, inflated both in terms of intensity and duration, will take substantial time to unwind. Irrationally exuberant optimists may call for a V shaped recovery, but that is not coming. The much ignored asset class – Treasuries – will provide the best returns (both in absolute terms and most definitely in the risk-adjusted measure) amongst all asset classes.
  • The United States of America will undergo changes that will impact its very fundamental structure – mostly the economic mindset at a micro level. The nation needed a wake-up call and the current crisis has provided it. The solid foundation of the economic and entrepreneurial structure of the country will more than adequately ensure that it comes out stellar after the storm weathers out. Pulp economists extrapolating historic growth rates and wealth creation statistics to hypothesize that India/China will overtake the USA as an economic power will have to revisit those flippant analyses. Throughout 2009, we will see the USA metamorphosizing itself through impeccable fiscal and economic prudence, something that the current generation never thought it will have to practice but will thank this crisis two decades down
  • Two businesses will be redefined – one positively and the other negatively. Exchanges that trade financial instruments will see a move from OTC instruments to exchange traded instruments, which will impact their businesses profitably. Additionally, these exchanges will spend a fair amount of resources in building investible indices, which will become their high-margin products. On the negative side, Credit Rating Agencies with their battered reputation will see a lot of competition from hitherto unanticipated quarters. The buy-side will either invest in or will copiously consume services from independent agencies providing credit-rating-like services but without the conflict mired association with the sell-side
  • Mainstream media companies will start on their journey to oblivion. Ad revenue, subscription revenue will move to the blogs as the difference between mainstream media and the consumer media will be further blurred. Media houses know this as much as everyone else does but their very business models – and mindsets – are very deeply buried in the past for the organizations to quickly adapt to this nimble challenge.
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6 thoughts on “Nine Forecasts for Twenty Oh Nine

  1. Subrata, you have a fresh insight and nice balance toward twenty 09. Do you think our country will finally see the dawn of a new cabinet that has what it takes to restore the faith of its people that have been battered by hideous insobriety, corruption and deceit? Your thoughts. . . .

    Stratacus

    • Craig: For a non-American, I have tremendous faith in the people, structure and democracy of the USA. Agreed that a lot of this value has been eroded simply because the nation – and every participant in it, legislators included – lived well beyond means and forgot what an honest day’s work looked like. The ongoing crisis is like a cold shower. I foresee it to not only awaken the American citizen but to also rekindle the American spirit, inculcating it with prudence of all kinds – economic, social et al. Given the strong foundation of the country in work ethic, education, entrepreneurship and the fact that its currency will remain the reserve currency of choice for ages to come, I am quite certain the country faces a new dawn and who better than President Elect Obama and his team to take the nation forward. Happy Holidays and see you in the new year!

  2. My views w.r.t –

    “2009 will be no better than 2008 in terms of financial asset performance……”

    This is because somewhere both non-govt. (private enterprise) and govt. have failed to deliver –

    Pvt. Sector – failed to check over-pricing of deliverables as well as consumables (inflation led exuberance as against real growth-led performance, a classic example is of executive compensation)

    Govts./ Regulators- failed in implementation of regulation or defining policy (with dynamism reflecting the changing realities) – near zero interest rates or equity in home purchases – a large-scale long term rental scheme for housing would have prevented the asset bubble (you can rachet up prices from one retail sale to another, the same is difficult to do with institutional buyers) or the subsequent creation of toxic assets which came about as a result of heavy leveraging of balance sheets.

    The role of all players is not to provide ‘growth at any cost’ but ‘sustainable growth’. Thats from where, I believe sanity will return to the business of capital allocations, investing for returns and progress.

    As I write this, I can already see the inclination of various central banks to cut interest rates to ‘revive demand’ at any cost…..I only hope they learn from the past and don’t end up repeating the same mistakes.

    • Aniruddha: I can only hope that policy makers and entrepreneurs both take cognizance of what has happened – which is also what you refer to – and make a fresh start. Looking back at what happened with Japan in the 1990s, I am not sure if the zero-interest-rate strategy will propel growth. I guess at some point policy makers will have to consider deficit creating strategies as well – either as spenders of last resort or through tax cuts. The thought that keeps me awake at night though is the specter of returning to state directed policies – the India of 1970s.

      Subrata

  3. Great insight. What is your take on the BRIC countries financial future for 2009? will china be able to continue the growth story in 2009?. Your thoughts…

    • Deepesh: A export and commodity centric country like China is bound to suffer. It is very likely that the govt will step up spending (a $586 Bn stimulus package is already out) but unfortunately it cannot continue a forever expanding and accommodating fiscal policy. Something will give. It is easy for analysts to say that China is a great domestic market but its long standing out-bound economic policy will have to stand on its head to be able to exploit internal opportunities. I suspect China will grow at only around 5% this year (I don’t know how reliable numbers emanating from a communist state are). Btw, check out the 10 “Black Swan” events put out by Saxo Bank

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