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Michael Maduell – Bold Year-End Predictions from Mid-Year 2016

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I was so busy in the month of December, I did not have time to write my Bold Prediction’s column. That being said, a lot can happen in the next six months. Here are my thoughts on what we’ll end up seeing. Dominating the headlines from a macro prospective include the following trends: low oil prices, Gulf nation reforms, U.S. presidential elections, awaiting the Federal Reserve to pull the trigger and extensive business restructuring in the asset manager space. I was 6 for 6 in my last Bold Predictions at the start of 2015. Let’s see how accurate I will be this time. Here are the bold predictions that I make from mid-year 2016 that I believe will occur before the start of 2017.

The Rate Hike is Delayed, Possibly Fall
The U.S. Federal Reserve will probably not raise interest rates in June, but possibly in the fall. The generally cryptic Federal Reserve has recently (directly) spoken about a possible interest rate hike in June. This information was obtained through minutes of the board’s April 26-27 policy meeting. Real estate markets, consumer loans and other lending institutions are used to low or zero interest rates. The Federal Reserve will most likely continue their conservative play raising rates, or else face a calamitous effect in asset prices.

U.K. Will Avoid a Brexit
The United Kingdom is holding a referendum on June 23, 2016 to decide if it will stay in or leave the European Union (EU). Polls suggest that the U.K. population is nearly perfectly divided on a decision. The idea of the U.K. leaving the EU has exacerbated the fears of the financial elite and large multinational corporations. However, history tells us that countries outside economic and social pacts have survived and done quite well. Norway, which has a massive sovereign fund, and Switzerland have prospered being outside of EU controls. Remember the Scotland vote.

Trump Edges Clinton
Centrism and moderates are on their way out, as voters, consciously or not, become impatient with the status quo. I predict the presumptive U.S. Republican nominee Donald Trump will barely edge out Hillary Clinton in the U.S. election in a game of electoral chess. Trump has already edged out 15+ Republican primary opponents, while Clinton struggles to defeat Bernie Sanders, an avowed socialist, and may have a party fiasco at the Democratic convention in Philadelphia. In polling data, both candidates have high negatives; however, populism is on the rise as many Americans feel disenfranchised.

Revolutions and Turmoil in South America and Hope
Brazil’s President Dilma Rousseff is undergoing an impeachment process. Former presidential chief of staff Jose Dirceu was sentenced to 23 years in prison for corruption, money-laundering and conspiracy related to the Petrobras oil scandal. The policies of Chavez and Maduro have dismantled the golden unicorn of Venezuela – toilet paper is now an expensive commodity. On the bright side, Argentina voted in a reformer and the City of Buenos Aires is raising debt in public markets. This period will be considered the nadir for the South American country.

Saudi Arabian Revelations on Mega Sovereign Wealth Fund
I believe Saudi Arabia will be revealing more updates regarding its plan on its proposed mega sovereign fund. The ambitious Saudi Deputy Crown Prince Mohammed bin Salman is keen on making his country more resilient and diversified. Saudi Arabia is on track to have its mega sovereign wealth fund from the existing Public Investment Fund (PIF). It will be a combination of Temasek and partially a pool of cash from partially-privatized state-owned companies and assets. All this hinges on the proposed successful IPO of Saudi Aramco, which is linked to future crude oil prices.

Oil Levels Out at $50 per Barrel by 2016 End
As more less-capitalized U.S. energy companies go bankrupt, the opportunity for higher oil prices increases. Debt-laden energy producers are shutting down wells. U.S. crude stockpiles must decrease for oil to surpass US$ 60 per barrel by the end of 2016. Short-term outages in Canada or Africa are not enough.

NOTE: These were my internal notes, that never made it to be officially published. I was wrong on some predictions.

The views in this article are expressed by Michael Maduell.
Michael Maduell is President of the SWFI.
www.swfinstitute.org

SWFI First Read, June 21, 2018

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PSP Investments Nears Deal on Azelis

PSP Investments and EQT Partners (through fund EQT VIII) are in exclusive talks to acquire Belgium-based Azelis S.A. from funds managed by Apax Partners. Formed in 2001, Azelis is a specialty chemicals and food ingredients distributor. The transaction is subject to regulatory approvals.

Oxford Properties Wins Rights on Barangaroo Office Development

Melbourne-based Grocon Pty Ltd selected Oxford Properties, the real estate unit of OMERS, as a preferred partner for it’s a A$ 2 billion, 5.2-hectare Barangaroo Central project development. This is an office tower development. Oxford Properties essentially won the rights toward the project (rumored at a price of A$ 100 million), freeing the developer from a high-cost finance deal with Maxcap, a lender.

Investment Management Corporation of Ontario Selects Jean Michel as CIO

The Investment Management Corporation of Ontario named Jean Michel as chief investment officer. This role is effective July 3, 2018. Michel was executive vice president, advisory services to depositors and strategic analysis, at Caisse de Depot et Placement du Quebec (CDPQ).

Wil Warren Named President of Lexington Partners

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Large Public Asset Owners Commit to Goodman Brazil Logistics Partnership

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Canada Pension Plan Investment Board (CPPIB) unveiled plans to commit 500 million BRL (C$ 175 million) in equity for a 20% interest in the newly established Goodman Brazil Logistics Partnership to invest in prime logistics and industrial assets in the key gateway cities of São Paulo and Rio de Janeiro. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Mubadala Supports Two European Aquaculture Transactions

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Mubadala Investment Company is keen on growing exposure to agribusinesses whether in farming or aquaculture. With money from Mubadala and AMERRA Capital Management LLC, Andromeda Group acquired Nireus SA (at 74.34% stake) and Selonda SA at (79.62% stake), two European aquaculture companies that focus on sea bream and sea bass. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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