HP צפויה להודיע על מינוי מג ויטמן למנכ"לית החברה
Where we were wrong, where we hit the bull's eye
Nobody has ever accused us of brimming with optimism, but when we dug out our predictions for 2002, we discovered that while we had been right on the general direction ¿ we were wrong about the intensity of the trends, and we missed a few things. Here goes.
1. Inflation: We got this one dead wrong. At the end of 2001, we predicted that inflation in 2002 would double to 2% or 3%. In practice, it tripled to 6.5%. After 15 years of closely tracking the Bank of Israel in general, and Dr David Klein in particular ¿ it never crossed our minds that he would allow inflation to resurface, and that his monetary policy would deviate from the central bank's norm over seven years.
Klein let us down badly. The sharp interest rate cut at year-end 2001, and his tentativeness in raising it back up, lent instability to the financial markets at the very time they needed a firm hand the most, given the amateurish fiscal policy management of the finance minister.
2. The budget deficit: While Dr Klein managed to surprise us, we had no great expectations of Finance Minister Silvan Shalom anyway. At the end of 2001, the government's official deficit target was lifted from 1.5% of GDP to 2.4%, whence it was kicked straight up to 3%.
We predicted the government would miss that target, and it did. The government ended 2002 with a deficit of 4.5% of GDP. If it hadn't indulged in some dicey financial acrobatics, its deficit would have run at 5% or 6% of GDP.
3. The American stock market was, we predicted at year-end 2001, like our finance minister Silvan Shalom ¿ full of hot air, and still far from adapting to the reality.
Nasdaq is still expensive, we wrote. The steep cut in the federal funds rate might support it for a while, but ultimately the vast gap between financial results and share prices will come home to roost. We hit a bull's eye with that one. Nasdaq lost another 30% during 2002.
4. The Tel Aviv Stock Exchange might generate some positive yields, even though the economy wouldn't recover, we predicted. Wrong. The recession did continue, but egregious mistakes in monetary and fiscal management destroyed the public's confidence, led to sky-high interest rates, and dragged down the TA-100 index by 30%.
5. Real estate asset prices would stop dropping and the rise in rental prices would slow, we predicted. We also foresaw that the interest rate cuts would increase the attraction of real estate properties, but that the big money would be invested abroad.
Indeed, property prices stopped falling, the slope of rent rises moderated and the big money continued streaming out of the country. Interest rates climbed back up, the public's faith in the shekel was rocked and few see real estate as an attractive option.
6. Startups: We predicted that 2002 would be worse. Period. And it was: the number of startups collapsing, and staff cuts by the survivors, reached new heights.
7. Internet was still a thing of interest on the business pages back in 2001, but we predicted 2002 would be a bad year in which any remaining bubbles would burst. Only after all the air escaped could the industry start to recover and take its place as a true economic sector.
Yes, 2002 was a bad year for most Internet companies. Aside from a few that had proven their business models previously, generally speaking, the industry continued to contract, fast. The air is still escaping and there are signs that abolishing overcapacity, and adopting sensible business models, will bring about recovery.
8. Communications still suffered from overcapacity when 2002 began, we said, and demand was far from growing at the same pace. We saw 2002 as the year of the great shakeup, in which most startups would close down, and in which Israel's big telecoms companies would continue, generally, to lose money or earn less. We saw the rally coming in the next year.
Indeed, overcapacity continued to weigh on the industry, dozens of telecoms-related startups in Israel and elsewhere collapsed ¿ although some are surviving, fed on infusions from shareholders reluctant to write them off. Surprisingly, some of Israel's telecommunications companies shifted to the black, most notably Partner Communications (LSE:PTNRq; TASE, Nasdaq: PART ), Bezeq International, Internet Gold and Barak. Losses by the multichannel television companies continued to grow, though.
Broadband: We predicted that the cable companies' entry into high-speed Internet would spur the penetration of broadband. We saw the great jump happening in 2003.
Indeed, the cable companies getting into fast Internet did expedite the penetration of broadband, much faster than expected. The number of subscribers to fast Internet service tripled in 2002 to 200,000. That rate can't be repeated in 2003, but fast growth will continue.
10. Making predictions for 2002 was child's play compared with 2003. We'll have a stab at it tomorrow, though. Stay tuned.