Feb. 29, 2016 (c) Leeham Co.: “The world is changing very dramatically,” says Adam Pilarski, the economist for the consulting firm Avitas.
“It is changing in a way Hollywood couldn’t imagine,” he said. There is uncertainty.
Pilarski, who peppers his speeches to ISTAT with irreverent humor, pointed to Trump, Carson, Cruz and Sanders as changing the rules of the game.
Bernie Sanders admits to being a Socialist, which for Americans is like admitting to being a Communist, Pilarski said.
Red flags are dropping oil prices, China and politics. Pilarski years ago predicted $40/bbl oil, but for reasons far different than today’s reasons.
He said low oil prices for the average people, low oil prices are good. Why doesn’t Wall Street, he asks. The answer: falling oil prices indicate economy is weakening, or so the theory goes.
Why is anyone surprised at the current economic decline in China? Pilarski says nobody should be surprised by slowing growth.The signs were evident for several years, he says.
Growth rates in emerging Asian markets have dropped dramatically compared with 10 and more years ago.
The mystery of The Donald and Bernie is a return to old fashioned politics, Pilarski says. On the one hand, it’s blame everyone and on the other, it’s give everyone everything.
Oil and Aviation
Low oil prices mean higher airline profits–not a surprising relationship. Yet Pilarski says some airline analysts (without naming them) don’t understand this.
The future of oil and its implications: five years ago, Pilarski said oil prices will be below $40/bbl by the time the new airplanes fly (true). Now he predicts oil will begin going up, but to around $70/bbl. The risk is that airlines will expand capacity and labor costs will rise.
The OEMs that invested in new technologies won’t reap all the benefits they hoped because of the lower oil prices, he said.