Go on back and read the original if you'd like as I score along from last year's prognostications....
- The virus "response" is collapsing and will continue to: DING DING DING! There are still a handful of people screaming at the top of their lungs and making a spectacle of themselves much like a 2 year old that has been told they cannot have another candy, but the uptake on the latest shots is what it is and the sales job has failed. What's astounding are the people who are trying to re-write history, especially those who threatened others and now try to claim they didn't, or try to claim they did not prognosticate that we would go through a "winter of being dead" if we didn't comply. Well, we didn't comply and we're not dead, and now here are in winter again. I'll leave the rest for the -NAD side of the blog.
- That collapse and the increases it brings in cost will accelerate the detonation of the federal budget via CMS. DING! Over two trillion was spent there last fiscal year ending September 30th and its not stopping either; through November, which is one sixth of the fiscal year (two months) the current total is $306 billion .vs. $291 billion last year. While that is "only" a 5% increase thus far if you think we can keep paying that, uh, no.
- Other schemes peddled as "medical advice" will be increasingly explored. I'm going to call that a "push" and bring it forward, although I could probably take credit for it -- specifically with regard to certain medications. But its not clear that I will "win" that argument thus far, so we'll see.
- Severe dislocations due to mandates through industry. POINT! Its literally all over the place from various firms screaming about "back to the office" to pilot shortages to severe military recruiting problems and, not surprisingly, nursing. All of these had one thing in common -- they all had mandates and some of them (like the military) have now tried to say "oh, come back please, we didn't mean it." Uh huh.
- Cost-shifting in "online shopping" will crack. MISS. It is what it is but the prediction I made as a part of it, which was that the "order today, have tomorrow" game is getting screwed with in a big way, appears to be verifying -- at least in my experience albeit with a few exceptions. I'd say that "time to get it to 'ya", if you're not paying specifically for speed, is up somewhere around 30%. Nonetheless the prediction was it would blow up in people's faces and it did not, so no point for me.
- The market is not done going down. MISS. Surprisingly so too for me, but it is what it is.
- The Omnibus insures inflation is not over either. POINT. Oh I know, last few months "core" is coming in supposedly but let's cut the crap folks -- roughly double the Fed's "primary gauge" isn't "normalized" and reality is what it is.
- Rates are not done going up. POINT. The IRX started at 4.32 (roughly) and is now at 5.2. That's almost a full point higher. The TNX is basically flat, but the curve inversion is worse, and not by a little (in fact on the TNX-IRX it is three times worse), than it was on 12/31/2022.
- Business is going to have to return to employees being functional. MISS. I expected a crap ton of firings and while they're starting now December alone doesn't count. I can't take credit for it when its six months+ late, although look before because I'm carrying that one forward.
- DEI and ESG will be increasingly recognized as DIE. NEAR MISS, but I get the point over Harvard, MIT and UPenn among others. This one's not over either.
- Russia isn't going to be "beaten" and the Ukraine support will vanish. Point. The vanishing is happening (no supplemental yet eh?) and Russia definitely hasn't been beaten. The war's not over yet but anyone who thinks Z's troops were going to stomp Putin (with our assistance or otherwise) has been sadly wrong, and plenty of Ukrainians are dead as a consequence.
- The impact of the Omnibus will be historic, and nasty. MISS. Some of the most-egregious provisions are still in there but not yet recognized, and thus while some have been (and even reversed, such as the near-total ban on drilling) not enough for me to take credit for it, so nope.
- Green energy is headed for the dustbin and firms are in trouble. POINT! Ford, GM and similar are all running away from EVs. So is virtually everyone else, although there's still a brave face on it coming from various quarters. It doesn't work thermodynamically and the cars are piling up on lots among other things.
- DeSantis will either take the RNC pole position or blow up. The latter -- POINT. You have to chuckle when Haley is nearly beating him, and she is. DeSantis is losing by thirty points or more to Trump. I'd say that's "blown up."
- Political shifts are going to increase in ugliness. POINT! Comity? What's that?
- Economic and political disparities in areas between "red" and "blue" are going to produce actual fractures in supply lines and cooperation. POINT! Blue cities screaming about "migrants" that they refuse to get behind blocking at the border, proving without question that their "support" was in fact nothing more than a desire to screw other states? Well.... yeah. Among other things.
- Illegal immigration forces policy changes. Nope. Not yet. There are signs of it, including rumblings about calling up the Guard and putting down crossings by "whatever means must be used" but thus far other than the fencing that Texas put up (and they won a court challenge on Biden's people cutting them too) it hasn't folded back on the government yet, but no point for me.
- Housing is nowhere near done going down. POINT. We ain't there gentlemen; the market continues to remain locked, although I am seeing plenty of price-cuts here it doesn't matter as they're not moving. This is going to be a huge story forward and will be below once again.
- Auto prices, specifically used cars, are going to collapse. MISS but just barely. The various "feelers" at the auction level say I might be off by a month or two and it IS starting, along with the incentives coming back on new vehicles. Nonetheless its no point for me, but I'm going to carry that one forward into next year as well.
So how's this look.... I count twelve points, 1 push and six misses for a hit rate of 12/19 = 63%. Not bad.
On to 2024!
Let's do the two pull-forwards first and then the rest:
- Car prices - kaboom! Its starting already, and some of the biggest collapses are going to come in the EV area. Simply put those who want them bought them and nobody else wants them. You can't get around the charge time and distance requirements and it matters not what you mandate; people do not want them, especially when the credits expire and suddenly they cost wildly more than a gas-powered vehicle.
- Businesses will be forced to cut those who do not produce. The inflation squeeze is not over and the "RIP" meme stuff sounds great but only works when labor is in control of the equation. The tide is turning on this folks, and with the below on the economy if you're one of those people who has played that game you're first to get a pink slip.
- The "great congressional reset" put forward by the current speaker, that is returning to regular order with his extensions expiring, are going to amuse -- and fail. We'll see if he has the rocks to stand firm when the other bills fail to be completed by the end of January. He said "no more extensions and CRs" but when he said that originally I disbelieved, said so in public and still do. Therefore my prediction (for the point) is that no return to regular order, which means there will be at least one and possibly several more "extensions", "Omnibus" and "CRs", which in turn brands the GOP as a pack of liars.
- Silly season, otherwise known as the federal elections for November, will bring multiple surprises -- and upsets. What this means is that to get the point either (1) someone other than Trump or Biden has to actually win (whether by oddity or being knocked out) or (2) a serious third-party challenge must actually get onto the ballot or some state-led action (e.g. barring Trump from the ballot successfully) has to occur and throw the result from what it would otherwise be. If either Trump or Biden wins I do not get the point.
- Congress will not materially reign in spending and a secondary inflationary spike will start to hit before the end of the year. It is what it is and right now Congress is driving a roughly eight percent inflation rate. Oh, you think its 4% right now? Uh, no it isn't; short-term absorption can temper what would otherwise show up but can't stop it, and that short-term stuff goes away. Specifically there is a drawdown on excess reserves that is almost gone and will soon be gone, and there's nothing The Fed or anyone else can do about that. It is serving as a buffer right now but that is ending, and soon. The usual pipeline delay is still there -- which means coming into the elections things get quite interesting.
- There will not be four, five or six rate cuts. No point if there are four or more. Less than four and.... ding!
- There will be at least a 10% drawdown from the closing market price of the SPX on 12/31, and I get two points for a 20% or greater one. If the market goes up in the early part of the year its not 10% from there, its 10% from the 12/31 price. Yes, this means I might by buying some PUTs and no, that's not investment advice although I do consider them "on sale" at the moment with the VIX trading around 13.
- Housing begins to crack in a serious form. It is too early, and this year will remain too early. If you have to move then do so, because selling a bubble and buying one is a net zero, but for the love of God do not take on leverage to acquire real estate in any form at this time. You're asking for it straight up the chute. It will be years before a reasonable bottom comes -- best guess is three to five years out.
- AirBNB and similar are done. Yes, there will still be short-term rentals and places like the Smokies are not going to have them disappear by any means, but the salad days are over and all these firms and their "hosts" are in for some serious financial trouble. $200 a day for a stay and close to that base price again in fees and such, including exorbitant cleaning fees and "expectations" (e.g. "you do the laundry and take out the trash or get fined") are going to disappear as people increasingly decide that a hotel is a better deal (and a lot of the time -- it is!) Anyone who bought one of these with leverage (e.g. has a note on it) is going to get ruined and the recent practice in places like Sevier County of assessing all said properties are commercial (they are) and subjecting them to commercial property tax and other rates should and this year will expand. This in turn means both the revenue and expense sides of the balance sheet for these sorts of properties are going to get squeezed against the owners; anyone in them with leverage is exposed to being financially destroyed.
- A serious revolt begins as regards illegal immigrants (or "migrants" if you prefer.) This probably does not involve mass-violence although it might. It does involve economic revolt in all respects, particularly when it comes to those places that are Democrat-controlled (e.g. cities and similar) and it will come from those who already are trying to claw their way up, meaning already-present Black and Hispanic Americans. Given the upcoming elections this has every possibility of not just shaping state and local elections but national outcomes as well. This is and will remain all about economics - when all is said and done people vote their wallet and that not only never has changed it never will change. This is the biggest threat to Democrat office-holders in November by far; their "open border and handout" policy was crafted in a way to screw Red states and areas but that was always intellectually bankrupt, particularly while Democrat-heavy places extolled their "sanctuary" status. Now they have to deliver on their promise and to do it they must take from those who elect them which is not very popular with said electorate (big shock, right?)
- The Middle East conflict will not be settled; it will instead expand and become a serious problem. I'm not all that good at prognosticating the twists and turns of military insanity, but if you think there's any indication that its going to calm down over the next year may I recommend a psychiatrist -- you need one. Significant disruption to international trade is already occurring and is likely to expand and we, in America, have ceded our authority and capacity to absorb it on an inflation front, having squandered that in the little adventure over in Ukraine. This is already leading to wild increases in container transport prices and it just takes one sunk ship for insurance to become essentially unobtainable for commercial trade. This is not WWI or WWII where even with armed military escort transports were routinely sunk. We lack the capacity, given the ridiculous increase in ocean-bound shipping, to provide such protection (leaky though it would be) even if we wanted to. In short essentially all global trade relies on the lack of military action by belligerents in any focused sort of way on said trade routes and we simply cannot escort same and thus secure it. At the same time we can "see" everything (and so can everyone else) in the satellite age so the premise of "surprise" across oceans is for all intents and purposes void as well.
- America will walk away from Ukraine; while nobody will have "won" Ukraine will have to sue for peace on essentially the terms Russia wanted originally. You can't take and hold ground without boots being there and Ukraine simply has fewer boots available -- and plenty of theirs have run away rather than enlist and fight. This was utterly predictable from the outset; Ukraine is not and has never been a cohesive society. I pointed this out originally when this dust-up started -- there are four "rough" factions within the nation and they all hate each other sufficiently to be willing to slaughter the others, given even a weak excuse. Its been that way for a thousand years and is why the USSR basically allowed them to be "autonomous." Nonetheless whether we or anyone else likes it the Russians have their naval port and will not give it up and unless you're willing to fight a nuclear war over it you're crazy to try.
- We will be forced to deal with the realities of the medical and pharmaceutical business -- and it will start this year. It won't be over and done this year by any means, but the hiding of the sausage is simply untenable at this point and while there is still lots of hand-waving the capacity to absorb it and drive more spending into the health care field on worthless and even harmful actions has now gone so far it threatens the fiscal survival of the nation. The people who refuse to adapt to this and get their own health in order -- which I've been talking about for the last ten years in volume -- are going to have a very bad time of it. Don't be one of them.
- DEI will have a rough year. By December the winds of change will be everywhere. Harvard's issue with Gay is the tip of a very large iceberg. That onion will get peeled and Harvard will be essentially forced to do it by firms that, if they don't, will start boycotting their graduates. There are already winds of this afoot in regards to Harvard's Law School and that is going to spread. Right now these places are all saying "its not about Harvard's students" but that's false; it is very much about their students and what they become while there, whether they entered the college with that point of view or not. This is not limited by any means to three universities and a few fields either; if you look at all the cyber break-ins over the last few years in very large, and allegedly-capable companies it should be immediately-obvious that the basic problem is that competence is absent in places where it shouldn't be. That's the fundamental problem with "DEI" when you get down to it; you are hiring, admitting, promoting, passing and generally advancing on metrics other than competence. This is only possible without getting destroyed by competitors when you can force others to do it too which is why the Ivys getting involved in this has been successful for this long and so has it been in "industry." It may have taken the Israeli/Palestinian issue to force this abject fraud onto the front page but now that it has it won't go away and the notice that it does and will lead to bad outcomes across industries will get noticed. This is not a one year thing but my bet (for the point) is that this is the year in which it gains enough currency to be "a thing" and the pendulum shift becomes unmistakable.
- The big "R" (Recession) will be evident, although possibly not yet declared, in 2024. Note that the NBER is frequently six months or more behind on that, so anything that officially turns down from June onward is unlikely to be officially declared by the end of the year. I will take the point if its evident whether formally declared or not, but will not take it if its nebulous or not in evident bloom by the end of December '24 (in other words, I won't cheat.)
As always I reserve the right to amend and add things from now until 12:01 AM January 1st at which point it is what it is and we go forward with the scoring from there.