Blackstone - Byron’s Ten Surprises for 2018 - includes Bitcoin

Blackstone is a big player in the private equity (investment) industry and Byron Wien is a Vice Chairman in the Private Wealth Solutions group. I included an informative video of Blackstone at the bottom of this article. Every year, Byron Wien publishes a list of 10 surprises for the upcoming year to "stretch our minds". The predictions for 2018 were published yesterday. I care, because the topics usually have real global macro impact. It doesn't matter to agree or to disagree, it's the inspiration that matters. It might be relevant to mention that Byron is 85, so his experience is extremely valuable, but I'm not sure if his age allows to embrace the possibilities of blockchain technologies. The full story can be found here Byron’s Ten Surprises for 2018, but it's a rather long story. So I'll directly cut to the blockchain relevant items: Number 15 and 16 In the runner-up list.

15 The regulatory authorities in Europe and the United States finally get concerned about the creative destruction of Internet-related businesses. As a result of pressure from retailers and traditional media companies, they begin an investigation of anti-competitive practices at Amazon, Facebook and Google. The public begins to think these companies have too much power.

16 The risks in Bitcoin are so great that regulatory authorities restrict trading. Among their concerns are: no regulatory oversight; no safety and soundness measures; no recourse in the event of mistaken or miscalculated transactions; high cyber risk; no deposit insurance. (Risk source: Morgan Stanley.)

In my view, point 16 is spot on, but I don't think it's a surprise that authorizies will try to restrict trading. I think it will be a surprise that restrictions will have a counter effect, because I blame the popularity of cryptocurrencies largely to strict regulations. Furthermore, he only refers to Bitcoin and not about the 1000+ Altcoins. Some of these altcoins might exactly be working on solutions for the risks involved in Bitcoin. In point 15 I'd like to mention that blockchain might be the answer to centralized services with too much power. If people want to shift to less powerful companies, they don't have to wait for governments to intervene. Instead, they can go to decentralized blockchain services.

I'm curious about your opinion!

If you're interested - Byron’s Ten Surprises for 2018 are as follows:

1. China finally decides that a nuclear capability in the hands of an unpredictable leader on its border is not tolerable even though North Korea is a communist buffer between itself and democratic South Korea. China cuts off all fuel and food shipments to North Korea, which agrees to suspend its nuclear development program but not give up its current weapons arsenal.

2. Populism, tribalism and anarchy spread around the world. In the United Kingdom Jeremy Corbyn becomes the next Prime Minister. In spite of repressive action by the Spanish government, Catalonia remains turbulent. Despite the adverse economic consequences of the Brexit vote, the unintended positive consequence is that it brings continental Europe closer together with more economic cooperation and faster growth.

3. The dollar finally comes to life. Real growth exceeds 3% in the United States, which, coupled with the implementation of some components of the Trump pro-business agenda, renews investor interest in owning dollar-denominated assets, and the euro drops to 1.10 and the yen to 120 against the dollar. Repatriation of foreign profits held abroad by U.S. companies helps.

4. The U.S. economy has a better year than 2017, but speculation reaches an extreme and ultimately the S&P 500 has a 10% correction. The index drops toward 2300, partly because of higher interest rates, but ends the year above 3000 since earnings continue to expand and economic growth heads toward 4%.

5. The price of West Texas Intermediate Crude moves above $80. The price rises because of continued world growth and unexpected demand from developing markets, together with disappointing hydraulic fracking production, diminished inventories, OPEC discipline and only modest production increases from Russia, Nigeria, Venezuela, Iraq and Iran.

6. Inflation becomes an issue of concern. Continued world GDP growth puts pressure on commodity prices. Tight labor markets in the industrialized countries create wage increases. In the United States, average hourly earnings gains approach 4% and the Consumer Price Index pushes above 3%.

7. With higher inflation, interest rates begin to rise. The Federal Reserve increases short-term rates four times in 2018 and the 10-year U.S. Treasury yield moves toward 4%, but the Fed shrinks its balance sheet only modestly because of the potential impact on the financial markets. High yield spreads widen, causing concern in the equity market.

8. Both NAFTA and the Iran agreement endure in spite of Trump railing against them. Too many American jobs would be lost if NAFTA ended, and our allies universally support continuing the Iran agreement. Trump begins to think that not signing on to the Trans-Pacific Partnership was a mistake as he sees the rise of China’s influence around the world. He presses for more bilateral trade deals in Asia.

9. The Republicans lose control of both the Senate and the House of Representatives in the November election. Voters feel disappointed that many promises made during Trump’s presidential campaign were not implemented in legislation and there is a growing negative reaction to his endless Tweets. The mid-term election turns out to be a referendum on the Trump Presidency.

10. Xi Jinping, having broadened his authority at the 19th Party Congress in October, focuses on China’s credit problems and decides to limit business borrowing even if it means slowing the economy down and creating fewer jobs. Real GDP growth drops to 5.5%, with only minor implications for world growth. Xi proclaims this move will ensure the sustainability of China’s growth over the long term.

Do you agree with Byron?
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