The seventh surprise is I think the price of oil finally has an impact on Iran. I think it brings Iran to the negotiating table and I think they will come to an agreement with the West on their nuclear arms development policy. I think that Iran realizes that they have very little to gain on that and they have a lot to lose. They want the sanctions lifted. They want to play a role in the economic opportunities that the West has enjoyed. I think they are going to move away from their nuclear weapons policy and I think that is going to be an important positive.
The eighth surprise, and this one I can tell you already is the most controversial, I think it is going to have — the drop in the price of oil is going to have a similar impact on Russia. I think Russia is really suffering under the sanctions. The revenue that they are getting from oil has declined sharply. Their foreign exchange reserve have taken a sharp dip down. I think they are going to become more conciliatory on Ukraine and possibly recognize territorial integrity of Ukraine giving some autonomy to Eastern Ukraine. I think this is — Putin I know enjoys a very favorable approval rating but I think that his abdication on this, his failure to respond effectively to the drop of the price of oil, the economic calamity that is facing Russia is going to cause his fortune to turn around and he will resign by year-end. Almost nobody thinks that is possible.
And I also think finally on this one that the price of oil would be moving up by the end of the year as a result of continuing demand from emerging markets. So I don’t think we’ve seen the last of $70 oil. For it to get back to over a hundred again anytime soon is more conjectural.
Number 9, I think this one, you’re going to have a buying opportunity in high yield bonds. They have taken a sharp hit because while energy is only 7 % of the US economy, it is 17% of the high yield bond market and it is not the whole high yield bond market down and I think there are going to be some big buying opportunities there.
And finally, Number 10, I think the Republicans are going to try to position themselves for victory in the Presidency of 2016 and the way to do that is to broaden their base. So I think they are going to try to prove to be the activist party and subsuming Obama and ObamaCare, they are going to try to pass legislation now that they have both Houses of Congress.
So you are going to see the move on their Keystone pipeline in spite of the Obama’s veto threat. There are going to move on immigration reform and think they are going to even suggest some big changes in the Tax Code. I think they are going to support Jeb Bush as their nominee because he can siphon off some of the Hispanic votes. They voted overwhelmingly for Obama and was 17% of the electorate in 2012. So, I think you are going to see the Republicans reposition themselves as the activist party.
So those are The Ten Surprises for 2015. I think you would agree they are surprises, some of them may be delusionary but we’ll see how they work out. Again they are to stretch your thinking, not to get a high score.
