01 January 2014

Predictions 2014

1. Tech is going to start to collapse.  The current depression coupled with increasing health care costs, education costs, and an increasing tax burden means that people will stop buying unnecessary luxury goods…  I suspect the tech collapse will be reflected in the stock prices of tech companies, and therefore I predict that the stock prices of the following tech companies will drop 5%+ by the end of 2013:  Microsoft (currently $26.96), Nokia (currently $4.00), LG (currently $37.88), MSI/Motorola (currently $54.88), and Amazon (currently $248.31).

Pure miss on all of these, as the stock prices for all these firms are up at least 10% each.  I couldn’t find data on tech sales (i.e. phone or TV sales) that I could compare year over year, and that was what I really wanted to make a comparison with.  I suspect, but can’t prove, that sales of tech gadgetry are down year-over-year, especially in light of a weak holiday sales season.  If this is indeed true, then we are in the middle of yet another tech stock bubble.  In fact, Amazon’s increased stock price is proof-positive of this, as Amazon is still unprofitable and looks to be so for some time.  Still. By the metric chosen, this prediction is a miss.

2. I suspect that there will be a general period of deflation that is tempered by core inflation.  As noted above, some things are not going to be as pressing over the next couple of years, like having the latest tech.  However, some things will always be in demand.  Since the general debt level is constantly expanding, we will continue to see some general, albeit mild inflation, which will eventually be concentrated in food commodities.  Thus, I predict that the price of food commodities will go up at least 5% by year’s end.  Specifically, I will target wheat, soybeans, and lean hogs.  Prices are currently $7.72/bushel, $14.14/bushel, and $0.87/pound.

Pure miss on this as well.  All commodities are pretty much down.  Wheat is down roughly 20%, soybeans are down roughly 15%, and lean hogs are down around 3%.  It appears that I got the trend exactly backwards, as there appears to a period of general inflation tempered by core deflation.  If you need to live and don’t play the stock market, and are also employed, this isn’t the worst development in the world.

3.  I expect the Federal Reserve to announce another round of quantitative easing.  If you’re keeping count, this will be the fifth round of quantitative easing, or QE5 if you prefer.

4.  I expect Feinstein’s current gun control legislation to fail.  Americans love their guns, and the house is a little too red to bend to the will of pusillanimous progressives.  There will probably be a compromise, and it will likely involve tightening down background checks, particularly in the realm of mental illness.  But Feinstein’s bill, as it currently stands, will not pass.

5.  I expect to have a new Federal Reserve chairman.

6.  I predict that legislation completely nationalizing health care is passed towards the end of this year.

Missed on this one.  ObamaCare is more of a slow-moving disaster than I anticipated.  I also expected that ObamaCare’s supporters would be disappointed by ObamaCare but would demand more government intervention; I missed on that too.

So, 3 out of 6.  That’s way better than last year, when I called the election, kind of nailed a market trend, and then missed on everything else.  However, a mediocre track record won’t stop me from making still more predictions for the future.
For this year, the big economic trend will be deflation and the big political trend will be “wait and see.”  As such, I predict that:

1. The tech bubble will pop this year.  The first tech bubble lasted about three years.  Prices began to take off in ’98, skyrocketed in ’99, then peaked in 2000 before completely collapsing at the beginning of ’01.  History doesn’t repeat itself, but it does rhyme, so my prediction is that the current tech bubble roughly progresses like the prior one.  Prices are ramping up now (see prediction 1, above), which suggests that they will peak later this year and then collapse by year’s end.  Basically, I’m predicting that stock prices for tech firms will peak later this year and then drop by at least 40% of their peak.  I’ll be tracking Facebook, Amazon, Apple, Microsoft, and Twitter. (Incidentally, I’ll be repeating this prediction every year until the bubble pops as I know I’ve nailed the trend and I refused to get nailed on timing.)

2. Food commodity prices will drop by at least 5%.  Corn is at $4.22, Wheat is at $6.05, Coffee is at $1.13, and live cattle are at $1.35. (Source.)

This continues with the deflationary trend.  Janet Yellen has basically committed to tapering while keeping interest rates low, which means that banks and investment firms will have to write a little more off the balance sheet instead of monetizing their debt-inflation, which means—eventually—lower prices.

3. This year will be free of major legislation regarding guns, health care, and war.  It’s an election year and everyone hates congress.  Everyone is especially pissed about health care, war fatigue is basically permanent, and gun nuts are intractable in their defense of the second amendment.  Leftists don’t want gun rights to be a wedge issue, and only a few representatives live in districts where supporting unequivocal bans would not lead to major pushback from citizens.  Conservative leaders, though absolutely mesmerized and worshipful of imperialistic wars, will not want to upset their base by promising to kill off a bunch of their children in largely unnecessary and quite expensive wars.  No one wants to mess with health care right now, as any solution will lead to rather negative short-term consequences.  Even a complete repeal of ObamaCare will still lead to short-term market problems, so conservatives won’t suggest it until after the election.  Since this is an election year and all the voters generally hate the government, it’s unlikely that any politician is going to push for any sort of major legislation, especially of the sort that is contentious.

4. Republicans will make modest gains in the house and senate (but they won’t amount to much).  There are 35 senate seats up for grabs this year, 21 of which are held by Democrats (5 of whom are retiring).  There are also 2 Republican senators retiring.  I predict that the GOP will pick up at least 10 seats in the senate (i.e. win at least 24 seats this year).

The GOP owns the house, having 234 of 435 seats.  There are some modest gains to be made here, but nothing radical as the house is already distributed like one would think.  I predict that the Republicans pick up at least 8 seats in the house.
Of course, GOP gains won’t do much, as the constitution requires a two-thirds majority in both houses to override a presidential veto.  The GOP will not have a two-thirds majority in either house.  Even if it did, no GOP party member will have the requisite pair of huevos to even consider doing anything to overturn ObamaCare.  After all, people only vote if they think there is a problem that needs to be solved, which is probably why democratic governments are so curiously inefficient at solving problems.

Overall, I don’t really see this as being a year of major action since everyone is afraid of the bottom falling out. Also, a lot of the problems America currently faces have been building up for some time.  It is generally the case that the longer it takes to make a mess, the longer it takes to clean it up.  There are exceptions, but not many.  As such, decline is more likely than collapse (though the “bottom” for both is roughly the same) since the current mess was so long in the making.  2014 may very well mark the peak of the American empire and the point in time when America went from debt-fueled “growth” to the beginning of the decline.  As such, I don’t expect anything major to happen.

Anyway, happy New Year everyone!  I hope all of my readers find this year to be personally profitable and full of hope, in spite of the uncertainty and negativity that seems to have taken over the globe.  For those who share my savior, I simply wish to remind everyone that, in the words of the apostle Paul:

What then shall we say to these things? If God is for us, who can be against us?  He who did not spare His own Son, but delivered Him up for us all, how shall He not with Him also freely give us all things? Who shall bring a charge against God’s elect? It is God who justifies. Who is he who condemns? It is Christ who died, and furthermore is also risen, who is even at the right hand of God, who also makes intercession for us. Who shall separate us from the love of Christ? Shall tribulation, or distress, or persecution, or famine, or nakedness, or peril, or sword?  As it is written:“For Your sake we are killed all day long; we are accounted as sheep for the slaughter.”  Yet in all these things we are more than conquerors through Him who loved us. For I am persuaded that neither death nor life, nor angels nor principalities nor powers, nor things present nor things to come, nor height nor depth, nor any other created thing, shall be able to separate us from the love of God which is in Christ Jesus our Lord.