A popular thing to do this time of year is make predictions about the coming year. I did such a post last year. Here they are if you are interested. I don’t have anything I’d like to change about the prologue of that predictions post.
Predictions are easy to make and fun because we get to project our hopes and dreams onto the blank sheet of tomorrow. The easy things to get right in the near term are the linear ones. The inflection points and random occurrences are very difficult to see in advance. The black swan events, of course, are impossible to know. You know, like the collapse of oil prices that every economist missed.
I’m a little surprised by how right I was in my picks. I got the Super Bowl wrong. Otherwise, I was right on everything else. I guess you can quibble with my stock market prediction a little, but I got the main parts right. The same is true of the election and the economy.
The thing I’m happiest about is the collapse of ebook sales. It looks like that fad has run its course. I read a lot and I mean I actually read. The people who promote ebooks mostly browse and display. By that I mean they skim a book and carry it around to show their friends that they are reading the latest Michael Lewis or Malcolm Gladwell. You can’t do that with a Kindle. For a while they could show off their iPad, but now everyone has them so it is back to books.
After weeks of contemplation, years of study and the proper sacrifices made to my gods, I have glimpsed into the future and teased out some predictions based on my reading of the entrails.
1) The US economy will have one of its best years in two decades. Collapsing energy prices will push all prices down and the Fed will respond with more free money. It is not an accident that every recession is preceded by a spike in energy prices. Big economic booms are preceded by a collapse in energy prices. The high growth in the Clinton years came from cheap gas. In the Reagan years, cheap gas preceded the boom. Gas prices are around two bucks now and will be under it by summer. Growth will come in around 4.0% for 2014.
2) The new money has to go somewhere and housing is the most likely place. We’re already seeing a return of sub-prime lending, mostly in cars, but also in housing. The bankers had time to think up new names and new ways to package it so 2015 is a good time to unleash the hounds. Expect your mailbox to be littered with credit card apps and mortgage offers. I’m already seeing them here in the ghetto so they will be hitting mainstream soon enough. You’re probably thinking that we can’t be that dumb, but yes, we can be that dumb.
3) The DOW will continue treading water as the world adjusts to cheap energy. As we have seen of late, cheap energy is not all good news. Every BTU in the ground has a financial instrument attached to it. Big swings in price mean big ripples through the financial system. When that asset you pledged as collateral is losing value, the bank makes the call and you sell what you can to raise cash.
But, the market will respond to the better economy with a nice run later in the year. The guys at Zero Hedge will be howling in agony, but the great unraveling is not coming in 2015. By conventional measures, like P/E, the market is over valued, but nothing like before the previous crashes. Better earnings will bring the ratios back in line. The DOW breaks 19,000, but finishes just under that new high.
4) There will be no material changes to ObamaCare from the courts or from Congress. The ruling class was sharply divided over it, but they will not go to war over it. That’s what everyone forgets. The people in charge have other concerns besides keeping the rabble under control. They have to keep their own peace. Obama will be gone in two years. They can wait. Plus, it is a great jobs program for the friends and relatives of elected officials. As we see with the tax code, complexity is good for the skimmers and grifters called consultants.
5) The GOP field for president will take shape this year. By the end of the summer, the “Wets” will be led by Jeb Bush. His emergence will chase off minor figures in that wing like Marco Rubio and Paul Ryan. His competition will be Chris Christie, who has no choice but to run this time. Christie is basically Bush-lite, no pun intended. Why have the light version when you can have the real thing? Bush will be the leader by fall, maybe even forcing Christie out before it gets started.
The “Dries” will be more interesting. Rand Paul is the early favorite, but he has a problem. In Kentucky, he cannot run for Senate and President at the same time. With Jeb in the race, my bet is he flirts with it, but sticks with his Senate job. Scott Walker has the best resume, but the worst TV style. Bobby Jindal has the ethnic thing going for him and many in the GOP are looking for a chocolate savior, but the Dries care more about ideas than image. In another age, Mike Pence would be everyone’s second choice and emerge as the consensus choice. Today, he just ends up as everyone’s first loser. Rick Perry will give it another shot, but he has the Dan Quayle disease and he sounds too much like W. John Kasich is the guy who will emerge as the conservative choice in the primary.
Finally, the snake handlers will have a candidate. Rick Santorum filled that job in 2012 and he’s not doing anything now. He plans a speaking tour in Iowa this month so it is safe to assume he runs again. The Evangelicals are not enough to carry a candidate to victory, but they can keep him in the game. Mike Huckabee will also test the waters. He’s been going to Iowa for a while now and he is a much better politician than Santorum. My bet is he emerges as the leader of the Pat Robertson wing this year.
6) The Democrat field will be a little less fun, but still worth watching. Butch O’Malley, the former governor of Maryland needs a job. He’s a Clinton rump-swab, but he also needs money so he will run, hoping to get on the ticket as a second. Jim Webb is running. Joe Biden will run. I suspect we see some others jump in just to get some exposure. The improving economy will do wonders for Crazy Joe as Obama will no longer be as unpopular. Plus, he will have access to Obama’s machine and that means the black vote.
The wild card is Fake Indian. She is the dream candidate for the hard thumping crazies on the Left. Female moonbats have been buzzing about her since she popped out of her teepee two years ago. The thing is, she’s got some skeletons and the fake Indian stuff will get a thorough review if she runs. The Boston media gave it a good leaving alone, but she’s not getting off easy in a national race against a Clinton. I predict she flirts with a run, but decides against it.
What we will begin to see in 2015 is the unraveling of the coalition. Webb will target members of the old Democrat coalition, working class whites. Fake Indian will be the candidate of the faculty lounge radicals, until she makes it clear she will not run. O’Malley will target the young, urban progressives that fill up the audience of John Stewart. Crazy Joe will try to target blacks. Clinton will base her campaign on Wall Street and K Street. My prediction here is 2015 is when we see Butch O’Malley emerge as a serious candidate and legitimate challenger to Cankles.
7) Now for some lighter fare. I like the Patriots to play Dallas in the Super Bowl, with the Patriots winning. The Patriots are an easy pick, given the way they play at home. Dallas is the long shot pick, but we always get something different. Plus, Jerry Jones has suffered enough for that face lift. The gods will let him have one last trip to the big game.
8) The English Premier League will go bankrupt. The dozens of US soccer fans will be so distraught, they will commit mass suicide by drinking their beard oil. Soccer will then be banned worldwide in order to prevent such a thing from happening again.
9) In the other sport I watch, baseball, the Red Sox will return to the post-season with the New York Yankees. The World Series, however, will feature neither team. The Angels will emerge in the American League and the Dodgers will win the National League.
10) On the technology front, 3D printers will hit the market at reasonable prices. By reasonable, I’m thinking under a grand for a home model. They will be the must have Solstice gift for 2015. No one has any need for 3D printing, but that discovery is for another year. In 2015, everyone will be convinced they have to make their own plastic-ware or be thought a Luddite.
11) People will begin to wonder if Apple has a future. It has been a great run, starting in 1998. That’s when Apple became a fashion statement, instead of an expensive and buggy PC. Then they hit gold with the iPod in 2001. The iPhone is 2007 and then the iPad in 2010 kept the magic alive and the profits booming. Steve Jobs has been dead for three years and nothing interesting has come from Apple since then. Jobs was a master showman for this era. I’d put him up there with PT Barnum. The poof who replaced him is not in that league.
Apple still sells a lot of stuff, but that stuff is on the verge of becoming a commodity. Those elevated margins cannot last without some way to keep the fad going. I just got a tablet for $100 from Asus. It does everything you want from a tablet. Why would I spend five to ten times that for an iPad? There’s a reason no one buys Apple desktops. There whole act is about the fashion statement. That’s why their best sellers are their most conspicuous mobile products – phones and tablets. 2015 is the year Apple stops being cool.
12) Blackberry sells itself to Google for parts. They have some great technology and patents. They are dug in deep with the car makers, for instance. The trouble is they can’t sell enough phones to remain profitable. They finally position themselves for a sale in 2015. Karl Denninger has to be institutionalized as a result.
13) This year we see the first widespread race riot in a major city. So far the riots have been localized, but that can’t last. In a major city, the cops will screw up and shoot a black guy that is actually innocent. That will set off a race riot in that city and perhaps lead to unrest in other cities. We’re on the down swing of the race cycle and that means things will get worse until they become intolerable.