Some Harbingers of 2000--and Beyond
Predictions are fun but short-term. Looking back at this column’s forecasts at the end of 1998, the surprise is that some actually look good 12 months later.
As an afterthought, I predicted last year that the Dow Jones industrial average would end 1999 at 11,000, up from roughly 9,400. Scary! As of the close of trading Thursday, the Dow was at 11,405.
A year ago, with oil at $11 a barrel, I predicted that oil prices would rise to about $18 a barrel. The direction was right but not the extent--oil prices currently are more than $25 a barrel.
But more about predictions later. It’s more useful at this time of year to pay attention to longer-term changes in the world economy, as reflected in trends that surfaced in 1999.
Such trends are harbingers not of a single year but of a decade and more into the 21st century. Here are three:
Long-Term Trend No. 1: The perceived need for greater security in a time of terrorism and the threat of crime.
The trend surfaced dramatically at the end of 1999 with warnings to Americans from the FBI and the State Department about terrorism coming through the Christmas mail or threatening U.S. tourists and residents in foreign lands. That’s a potent indicator that the personal-security industry, which supplies guards, alarm systems and the like, will keep growing in the next decade as it has in the one just ending.
The security business worldwide will grow to $200 billion in annual revenues in 2010, from $100 billion in 1999, predicts a report by SunTrust Equitable Securities, a Nashville-based investment firm.
Thousands of companies make up the security service industry. Securitas, a Swedish firm that acquired Encino-based Pinkerton’s last year, and Wackenhut Corp. of Palm Beach, Fla., are among the better-known public companies.
Inter-Con Security Systems, a family-owned firm in Pasadena with about $500 million in annual revenue, is a fast-growing provider of security for hospitals, U.S. embassies and sports stadiums. It will handle security for the Democratic Party’s convention in Los Angeles next year.
Long-Term Trend No. 2: The spread of biotechnology into every area of business and society.
Two events in the last year heralded biotech’s growing importance. One was the news that scientists in the United States, Britain and Japan have deciphered the genetic code of a human chromosome.
The cracking of chromosome 22, which contains genes that play a role in immunity, heart disease, mental retardation and several cancers, confirmed that researchers will be able to diagnose and treat human ailments that until now have proved intractable.
The next decade will see the deciphering of all human genes and a coming together of the sciences of computing and biology. This union of information and biology will occur both in software that mimics the processes of genetic codes and also in electrical circuits composed of genetic material. The world is in for radical advances indeed.
The other side of that equation, however, is the prospect of opposition to science’s ability to alter human, animal and plant genetics. European protests against genetically enhanced U.S. food and livestock were a big story of 1999.
In the next decade, we’ll see many more legal, social and theological debates about genetic engineering.
Investors are on to the trend. In 1999, they anticipated biotech’s rise by sending stocks on Bloomberg’s Amex biotechnology index up almost 100%.
That index and today’s biotech industry include a few big companies and many small research firms. Amgen Inc. of Thousand Oaks, Biogen of Cambridge, Mass., Chiron Corp. of Emeryville, Calif.--which is 44% owned by Novartis of Switzerland--and San Francisco’s Genentech Inc. are the large companies.
Notable smaller firms include San Diego-based IDEC Pharmaceuticals Corp., Millennium Pharmaceuticals Inc. of Cambridge, Mass., and Seattle-based Immunex Corp. The next decade will see a more fully formed biotech industry.
Long-Term Trend No. 3: Aging of the population.
That populations of many countries are growing older is not a new idea. But 1999 saw increased concern about the consequences of aging for financing pensions and caring for the elderly.
Peter Drucker, the Claremont University management scholar, said in his 1999 book “Management Challenges for the 21st Century” that “the collapsing birthrate in the developed world is the most important new certainty of our time. There is no precedent for it in all of history.”
In the developed countries, the percentage of people over 65 is nearly as high as the percentage of children under 15. The U.S. population is aging more slowly than those of Europe and Japan because it is augmented by immigration.
An immediate consequence is the rise of vigorous investment markets in Europe and Japan, where the need for better returns on retirement savings is spurring waves of mergers and talk of “shareholder value” among Japanese and European companies.
Immediate beneficiaries are the world’s bankers and investment managers, such as Citigroup, Morgan Stanley, Merrill Lynch, Deutsche Bank, American International Group, Allianz Insurance of Germany, France’s Axa Group, Goldman Sachs, J.P. Morgan and the GE Capital division of General Electric.
These long-term trends are more important than the customary year-ahead predictions, which usually are not very visionary.
This column last year got a couple of things right and several things wrong. It predicted that the U.S. economy would grow 2% to 3% in 1999. It grew 3.8%, creating more than 5 million jobs.
I was wrong in saying that the euro would attract investment and weaken the U.S. dollar. The euro fell fairly consistently from $1.17 a year ago to just about parity with the dollar last week.
I said that Japan would remain in recession but that the rest of Asia would recover. Not very visionary--Japan worked hard at reform, and may or may not still be in recession. Asian economies are recovering.
I predicted big merger deals but focused on the automobile industry, which saw few deals, instead of telecommunications, which saw many big ones as AT&T; Corp. bought Tele-Communications Inc. and made a bid to acquire MediaOne Group Inc.; MCI WorldCom Inc. bid for Sprint; and SBC Communications Inc. acquired Ameritech. In addition, Bell Atlantic Corp. has a pending offer to acquire GTE Corp.
I foresaw troubles over international trade but not the recent uproar in Seattle.
I said that Microsoft Corp. would emerge unharmed from its federal antitrust case, but that won’t be true, given the presiding judge’s scathing findings of fact that have pushed Microsoft into settlement talks.
I suggested that DreamWorks SKG would pull back from building a major studio complex; that prediction looks good, with the firm’s retreat this year from plans to build an elaborate facility at Playa Vista.
And I said that Walt Disney Co. and News Corp. would demonstrate original sports marketing but that their Angels and Dodgers would not win pennants. The marketing was dull, the teams duller. Wait till next year.
James Flanigan can be reached by e-mail at jim.flanigan@latimes.com.
