"2016 Was Weird. Could 2017 Get Even Weirder?" - 10 Things That Won't Happen In 2017

Yesterday, in a mockery of economists' and strategists' recurring fascination with (wrong) year-end forecasts, we presented RBC's 7 "Costanza Trades" of 2017, or those trades which one would never, in their right mind, put on, which is precisely why in today's broken, upside down market, these are the trades one should seriously consider. Indicatively, last year's list of 10 such Costanza trades had 7 winners, some of which (long oil) returned as much as 41%.

Today we look at a different, yet somewhat similar, forecast: a list of 10 things that won't happen in 2017, courtesy of Lombard Street's chief European economist, Dario Perkins.  As Perkins puts it, "2016 was weird. Could 2017 get even weirder" and in an attempt to answer, he shares the following, "humorous" (high conviction, non-consensus) take on the year ahead.

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Things that won’t happen in 2017

Last year we wrote about things that definitely wouldn’t happen in 2016. But as it turned out, the reality of the past 12 months was often weirder and more unsettling than our satire. Rather than learn the obvious lesson from this – economists are even worse at making forecasts than everyone assumes – we have decided to have another go. So here’s our alternative outlook for 2017:

1. Ex in the City: As it becomes clear that the UK is headed for a hard Brexit, the mass exodus from London begins. All the major global banks relocate to Paris, Frankfurt, Dublin and Alba (an Italian town, 50km south of Turin, where TS Lombard just happens to have a small office – the wine and truffles are amazing!). Having learnt from the experience of closing down all the coal mines in the 1980s, the Conservative government hits upon a brilliant solution and establishes the City of London Museum. For £20 a head ($2 USD), tourists get to visit mock trading floors where they can see actors in striped shirts and red braces yelling ‘buy’ and ‘sell’ into very large telephones.

2. Fed Apprentice: With Janet Yellen's term set to expire in January 2018, President Trump begins the search for her replacement. In a televised weekly show, candidates are asked to perform a series of tasks and at the end of each episode the president "fires" the contestant who has performed most poorly (or annoyed him the most). Paul Krugman and Larry Summers both get the chop in week 3 when it emerges they have only one (non-monetary) solution to every problem: infrastructure spending. The eventual winner is a 24-year-old former Miss World with no formal qualifications in economics, who narrowly beats Mr Trump's own wife in the final. Melania accepts the role of vice-chair and her speeches quickly adopt a familiar tone, particularly a very technical 30-page digression on the US Phillips curve. (EXCLUSIVE – click here for her actual speech)

3. Economists Anonymous: After getting subprime, Brexit and the euro crisis all totally wrong, the economics profession embarks on a much overdue period of self-reflection. EA groups are established in all the major financial centres (not London, obviously) so that disillusioned economists can accept their past forecast errors, discuss what went wrong and, most important of all, admit to each other that they don't have all the answers. 'It's OK to say we don't know' becomes the group's mantra. This new enlightenment is soon reflected in the Op-Ed pages of the global financial press, which are no longer just a source of cheap, unwanted policy advice.

4. Potus App: Sick of having to attend tedious policy briefings with 'experts', President Trump designs a simple app that allows him to run the US government without leaving the comfort of Trump Tower. Uber for Potus, as it is soon dubbed, allows the president to make important policy decisions by simple algorithm. Need to deploy the US army overseas? No problem! Send the order via UberPotus and whichever soldiers are closest will respond. But the app is abandoned after Mr Trump confuses it with Twitter, accidentally tweeting his war instructions while simultaneously deploying the Navy Seals to settle a dispute  with Kim Kardashian about whether her dress is really blue or gold.

5. The populist euro: Europe is gripped by populism, but not of the variety Wall Street commentators have been assuming. Instead of national elections in Holland, France, Italy and Germany in 2017, European officials decide to hold one big election via TV vote. Appalled by Brexit and Trump, the people vote overwhelmingly in support of pro-euro candidates with a turnout of 97%. Europe moves quickly and decisively towards full fiscal and political integration. Marine Le Pen, Geert Wilders and Beppe Grillo leave in exile to a small island off the Norwegian Sea, which they promptly declare independent, banning all migrants and failing to see the irony in this policy move. After two weeks, each has formed their own separatist movement.

6. Blackswan crash: After it was revealed that a £1 ($0.005) treble bet in 2016 on Brexit, Leicester winning the Premier League and Donald Trump becoming US president would have delivered winnings of £4.5 million ($20), the world goes low-probability mad in 2017. Sillybet.com takes over from Amazon as the world's most profitable website and investors flock to a plethora of new hedge funds that promise to beat market benchmarks by investing in the extremely unlikely. The Federal Reserve is forced to bail out one of these, Blackswan, after it emerges they staked 80% of their AUM on Brat Pitt getting back together with Jennifer Anniston following his divorce from Angelina Jolie.

7. Carney resigns: After his controversial forays into areas beyond the Bank of England's core remit (eg social inequality, Brexit, climate change ) Mark Carney finally goes too far in 2017 when he suggests that England will ‘never win the World Cup because they're just not very good at soccer'. This annoys the British tabloids on various levels, not least his use of the term 'soccer' when the correct name is obviously 'football'. Member of Parliament Jacob Rees-Mogg, Mr Carney's biggest critic, takes over, but his term is cut short after his immediate 500bp rate hike compounds a Brexit-related property crash.

8. Shang Sky-high: The CCP doubles down and inflates a housing bubble with ‘Chinese characteristics’. The home ownership rate hits 120% as middle class families take out huge mortgages to amass multiple properties in their portfolios. Beijing property prices rise above Monaco’s and someone calculates that the total value of the land on which the Forbidden City sits is worth more than EU’s entire land mass. An academic at Tsinghua University reinterprets Marx’s ‘Capital’ as justifying a property bubble as being in the interests of the proletariat. Chinese companies forget about making stuff and become property speculators, helped by an influx of British advisers. Phil Spencer and Kirsty Alsop move to China to launch ‘Location, Location, Location’ on CCTV.

9. Running Man: After a worldwide economic collapse, American society turns into a totalitarian police state, censoring all cultural activity. The US government pacifies the populace with reality TV. Oh no, hang on, that was just an Eighties’ Arnold Schwarzenegger movie set in 2017. At least there is no chance of that happening.

10. Nobel Perkins: With other sell-side economists, not to mention the Twitterati of global finance, clearly ripping off LSR’s unpatented ‘Things that won’t happen in [Year X]’ idea, Lord Perkins of Kent (as he is to be known) is finally awarded a long overdue Nobel Prize in Economics. The judges admit they have been following his career closely for years, particularly his pioneering work on whether the IFO or PMI is better correlated with German GDP. Perkins becomes a household name after selling the movie rights to Steven Spielberg. Benedict Cumberbatch and Orlando Bloom have a very public falling out over who should play him [Editor – or Rowan Atkinson with his head shaved?]