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.
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And i hope you fall flat regarding the blackberry prediction, because they are the only “adult” phone maker around, everyone else produces data miners which can as a side feature also make calls.
The Denninger comment is also the funniest thing i’ve read so far this year, hilarious!
What about Russia? Nuland an the Kagans are determined to get their WWIII, the jews got all they wanted so this is just a question of time.
I’m not sure what’s going to happen with Russia. There’s a lot of moving parts to the new Great Game. It’s very hard to forecast the actions of the incompetent. The people running US policy are only good at finding the wrong solution.
I hope your Superbowl tip is better this time. Last years pick nearly cost me my thumbs with local bookies.
Your stirring of soccer always makes me smile. I don’t mind the sport but I love seeing the fans getting their knickers in a twist.
As for the race riot, I would like to think that it would only ever happen once with the rioters learning a nasty lesson they don’t forget. However, there are two things wrong with that thought. The first, that the majority are so terrified of standing up for themselves and the consequences that would follow. The second is that the rioters don’t seem to have the capacity to learn their lesson.
On the subject of Apple, I got an iPhone after getting ripped off on my second Androin phone (Motorola Electrify M, shocking junk). It would be hard for me to go back to a buggy OS with a buggy browser and rotten voice recognition.
Only the Android offers is that the Android GPS app darkens the bsckground at night. The blinding white iPhone at night on a dark dashboard is dangerously idiotic.
Other than that, f*** Android. I’m done. They don’t fix bugs. Ever. Almost a decade in, and they’re still in Beta. Pathetic.
Research and development have in fact greatly shrunken during the fiat money era. Free money is used to prop up government and reshuffle assets, mainly financial assets, not to innovate and develop. All progress is made into the wind of a hostile environment.
Look at the huge Apple earnings, for example. Profits & earnings are at record highs. Fed money is only a small part of this bull market, the rest is due to improving economic fundamentals. I think we’re in a sweet spot economically of low rates, low inflation, and strong growth. The reason why the dollar buys anything worthwhile is because of free market innovation, and innovation is only spurned by encouraging people an companies to invest instead of horde money in the bank, which explains why monetary policy is the way it is. If you suddenly cranked up interest rates from 0 to 16%, the dollar would surge and savings account holders would be happy, but the economy would get annihilated. Companies would find it impossible to borrow and everything would fall apart. Economic policy should benefit risk takers because they are the ones who create innovation and advance the economy.
Alexis de Zman is not to be quibbled with, but #3 may surprise. The shape of the market points higher, much higher, and right away. That is entirely a reflection of financial repression, governments answer to providing for it’s increasing ambition by leaving the payment on it’s exponentially increasing indebtedness minuscule. Zero interest rates rob traditional savers and retirees of at least four hundred billion a year. Pension funds are forced into stocks when they see they will not be able to meet their future obligations while traditional safe investments languish. Even large banks are buying the S&P index. We are likely past the point where wise, decent, and honorable men could provide a politically rational plan to climb down from this. But even Wiley Coyote could not levitate forever. Enter Black Swan.
I look at the market P/E and it is a little over valued, but nothing like before the last two crashes. Improving profits and more free money will push the market up like we saw in 2014. The great unraveling will come, but not until the dollar unravels and that’s not happening anytime soon. The greenback has become the soma of the world economy.
Purely of interest to this side of the Atlantic: ” The English Premier League will go bankrupt.”
Maybe closer to the truth than a lot of people would like to admit over here, but you have to factor in — and you would not understand this — that such is the tribal appeal of football (oh, okay, soccer then) in these islands means that someone, sowmhow will prop the circus up. There has been lot of Russian, Saudi and south-east asian money pumped in to pay inflated wages but the vast bulk of soccer exists, and thrives, below the Premier League. My team plays a rung lower, and do I care about the likes of Chelski and ManUre? No way: they are full of transitional players here for three or four years and lost to other places. No one cares as there are always more unpronounceable names on the horizon who can be persuaded to learn enough English to say “I like zis score goal but it team game” and other such platitudes.
No, I want my team to tread all over some other lesser light, and there is enough support to keep the game going. Football (soccer) here is about tribal passions, not money in the end. Nottingham Forest hate Leicester, Leeds are detested by everyone and so on.
And yes, English fans think Scottish football is hilarious.
Soccer across the country is about the glory at the final whistle, not the money. It can go if it wants, but every fan wants the win more than anything.
The EPL item was for my UK readers. If the traffic stats are correct, I have a lot of Brits reading me for some reason.
Happy New Year to you. As always, an excellent piece, but I am shocked by one omission. No place for Ted Cruz in the Presidential roundup? He’s the Jim Jones of the conservative wing of The Cult. Every mouth breather ready to grab an ancient Winchester and take out the Demon-rats in the name of the Constitution has a hard-on for Ted Cruz. He’s the savior who fights.
My guess is that Cruz will self immolate with the base before the year ends. Cruz’s tough-guy obstructionist shtick will lose all rationale and effectiveness in a Republican dominated Congress that expects and is expected to get things done. McConnell, McCain, and the boys are just waiting to knee-cap him. Cruz’s groveling apology to his colleagues after his latest ineffective stunt was a tell; the old Cruz would never have given an inch.
Cruz will lose his only Senate ally as Mike Lee, facing a tough re-election campaign in 2016, succumbs to pressure from the plutocrats of the Mormon establishment in Utah like old man Huntsman; Cruz, realizing that it takes big money to buy a Presidency, and cut off from the GOP establishment slush fund, will be forced to grovel even further before the likes of Sheldon Adelson, who appreciate his position on Israel but think he’s a vulgar, right-wing nut. By the end of 2015 Cruz will look like the Cuban Newt Gingrich, and will be advocating open borders once the sham border security bill that he sponsors with Rubio, McCain, and Graham lands on Obama’s desk and is signed.
I also predict that the Clintons will go nuclear in 2015. The Clinton machine is already working over Webb, and the election is two years out. Obama’s race held Hillary back in ’08. The Clinton camp did originate the Birther meme and the gay stuff, but they had to hide behind so many firewalls that it was easy for the media to discredit those attacks as racist conservative lunacy. This time the gloves will come off, and there is nothing like a girl fight. Hillary probably sticks a pin in her Elizabeth Warren doll each night before climbing into the sack with Huma Abedin. That’s why Warren is hesitant to declare – she knows what’s coming.
Cruz is not going to run. His old lady works for Goldman and Cruz has a safe seat in the Senate. He gets to play the role of conservative firebrand, while the Goldman cash flows like water into the Cruz bank accounts. Not a bad setup. You don’t give that up to run for president unless you think you can win. He’s a young man, just 45 this year. He would be wise to look down the road at a run in 20 years. Do his thing in the senate. Run for governor of Texas. Then run as the voice of the Right in 2028.
Good picks. Though I noticed for your GOP field conspicuously left out Mitt and Ted Cruz.