Tag Archives: predictions

Correct Predictions

Predicting the future is notoriously hard, and that seems to have so far discouraged potential authors and readers alike.

Predicting is not as hard [1] as, say, understanding theoretical physics or algebraic geometry. There is a simple heuristic I use: assume past trends will continue. Stocks will keep going up, wealth inequality will keep widening, world peace and stability will continue, etc. It also helps to have fundamental understanding of the subject matter of the prediction, as well distancing yourself from personal biases and wishful thinking when making the prediction.

My predictions about finance, the stock market, the economy (both domestic and foreign), bitcoin, and web 2.0 have all come true.

When writing about web 2.0, I knew almost exactly which companies would fail or succeed, owing to my knowledge of the area. I’ve written about two-dozen articles about web 2.0 since 2011, correctly predicting that the valuations of Uber, Dropbox, Pinterest, Facebook, Snapchat, and AirBNB would continue to rise. Not only that, but I knew which companies to avoid. I never praised a company that subsequently failed.

HBD is my guiding principle of investing and predicting: smart people are the engines economic growth and technological progress, and rising real estate and stock prices reward smart people for the economic value they create.

Bay Area real estate, for example, which keeps going up despite the left’s insistence of it being a bubble or due for a crash:

Also Amazon.com, Google, and Tesla stock. In 2013, I was bullish on Tesla when it as at $40; the stock is above $200. Facebook – was bullish in 2012 in the $30′s; now above $110. Amazon – now above $700 on its way to $1,000. Google was $800 not too long ago; recently, it split into two classes of shares worth over $700 each. Nuts.

Now it’s Bitcoin, which as of May 30th, 2016, has already surged 20% in the past week on its way back to $1200:

I emphatically believe it’s going much higher, leaving all the doubters miffed and bemused.

All too often, people will see a chart for something like Bitcoin, Amazon.com stock, or Bay Area home prices and immediately think, ‘This is unsustainable!’ without considering the fundamentals underpinning the rally. Maybe it’s a bubble that will end badly, but in many instances it’s not.

The S&P 500 also gained 3% in the past week on its way to 2300-2500.

[1] A distinction should be made between hardness and tractability. The act of guessing lotto numbers is easy but getting them right is intractable. Playing chess is easy but solving the game is intractable. The act itself of predicting may be easy, but the difficulty in getting predictions correct may be attributable more to the intractability of randomness than insufficient brainpower.

Explaining America’s Economic and Social Stability

Fred Reed ponders the ‘endgame ‘ for America.

Things do not look good. The country is disintegrating. The borders are open, against the will of much of the population. Our universities are in sharp decline, the students a rebellious unschooled rabble portending a peasant future. The economy gutters and standards of living fall. Jobs are few and becoming fewer. Racial animosity is high and rising, with blacks out of control and looting at will.

It is hard to see how this can continue without Something Happening. Yet no sign exists that the tide will abate—that standards and discipline will be reimiposed in academe, that grade schools will cease being indoctrination camps, that immigration will be stopped, that blacks will become calm and content, that some new form of economic order will halt the slide into semi-impoverishment.

He mentions moral decay, economic malaise, and civil unrest as reasons for some sort of cataclysmic change.

I tend to resist doom and gloom predictions about the United States because the economic data doesn’t support it and such predictions have a long track record of being wrong. The ‘something happening’ will likely only be a continuation of the the way things are, but more so. The best prediction of tomorrow or next week is today or last week.

The universities, despite the media attention they get, are only a small part of the US economy, which is mostly consumer and intellectual-property driven. If people keep buying stuff, exporters keep exporting, and high-IQ people keep innovating and creating companies, the economy will likely keep chugging along in spite of the moral decay, as I’ve written about here. Or at least that’s the way it’s been for the past 200 or so years of American history. In the 60′s you had the Vietnam protests and Nixon’s ‘silent majority’ against social changes, yet the economy and stock market not only preserved, it boomed. Racial strife goes back to the inception of the United States – it’s nothing new and it’s not going to improve. That’s not to say I condone this social change, but it’s not going to influence my economic or investing outlooks.

As others have mentioned, the labor market will continue to change, with more ‘gig’ jobs and fewer salaried ones. Technology will make certain things cheaper (food, clothes, electronics), but some services may still remain expensive (college, healthcare, rent, insurance, daycare, phone bill).

Somewhat counter-intuitively, America’s diversity and geographic size may be behind its long-term resiliency, as other countries have suffered from upheaval, civil war, and revolution. It’s this apparent ‘disorder’ and heterogeneity that engenders stability whereas homogeneity may give rise to either nationalism or mutiny. Similar to how prisons try to separate groups to prevent communication and hence upheaval, this system works on a greater scale in America, but automatically. Revolution is more likely when everyone has the same language, same shared interests and is crowded, than if everyone is different and spaced far apart. Geographically, America is a huge country with stark cultural differences between various regions that are spaced thousands of miles apart. Manhattanites and Deep-Southerners for example diametric opposites.

The success of capitalism, markets, and trade is also a major reason for America’s stability, providing enough for everyone of all socioeconomic levels, whereas countries that fail to provide these bare minimums tend to fall under disarray. Also, the reserve currency status of the US dollar allows cheap borrowing to fund social programs to help the underclass, paid for by bond holders.

Related: The Second ‘Great Experiment

What Comes Next

From Free Northerner: The Neoreactionary Bargain

The current social order is slowly(?) collapsing. The money’s run out, inflation and cheap debt are reaching the limits of their ability to mask insolvency, the natives are growing increasingly restless, low-level guerilla war is rising, and our culture and cohesion are breaking down. What can not last forever, won’t. Eventually this social order will be replaced.

What will it be replaced by?

One option is a slow limping decline/dark age. Another is simple collapse and anarchy, possibly an on-going low-level civil war. Another possibility, particularly in Europe, is Islam. A fourth possibility is a leftist singularity. The most likely possibility is a right-wing surge of the native population and the violent expulsion of the elites and invaders.

The evidence, however, suggests the system is not collapsing, or if it is, it’s collapsing very slowly, almost imperceptibly. The reasons for this are:

A strong dollar and insatiable demand for low-yielding treasury bonds owing to America’s unassailable reserve currency status.

Strong consumer spending, strong exports, record high corporate profits & earnings, and low inflation. Compared to the rest of the world, America, economically speaking, is doing pretty well.

The technological and intellectual contributions from America’s best and brightest are enough to offset the societal/moral decay. This is the moral decay conundrum (if things seem so bad, why is the economy otherwise so strong?)

Some good news is, online, since 2013 or so, there has been a backlash against social justice warriors, and it’s possible that the backlash will spread off-line as well if Trump becomes president. And themes of HBD and the ‘art right’ are already gaining some mainstream acceptance. Millennials are losing faith in democracy. Those are some reasons for optimism.

But capitalism is changing, favoring a few winners and more losers. It has always been this way, but in the future the ‘winner take all‘ nature of the US economy and society will become more amplified, resulting in the so-called Hobbesian-Locke dichotomy. Technology and globalization could improve living standards by making entertainment abundant and cheap, as well as better treatments for diseases, but it may not bring the personal fulfillment many seek, as explained by Noam Chomsky in why Trump’s popularity is surging:

“Fear, along with the breakdown of society during the neoliberal period,” he said. “People feel isolated, helpless, victim of powerful forces that they do not understand and cannot influence.”

“It’s interesting to compare the situation in the ‘30s, which I’m old enough to remember,” he said. “Objectively, poverty and suffering were far greater. But even among poor working people and the unemployed, there was a sense of hope that is lacking now, in large part because of the growth of a militant labor movement and also the existence of political organizations outside the mainstream.”

This parallels the state of politics today, as I explain in Intellect: The Universal Solvent where since 2012 neither the Democrats nor Republicans are satisfied, with an unmovable ‘status quo’ prevailing, rendering any meaningful change impossible.

Between 2008-2012, both the right and the left were duking it out over Obama, Obamacare, and OWS, but with Obamacare not going anywhere, OWS a failure, and with the economy and nation in autopilot mode, perhaps a pervasive, almost cynical, centrism has dawned, almost a resignation that change is impossible. From 2008-2012, both the right and the left had high hopes, but now empty handed, with gridlock, the status quo, and ‘politics as usual’ winning.

David Brooks sums up politics as a ‘compromise’ where neither side really gets what they want, as a way of non-violently reconciling differences:

Politics is an activity in which you recognize the simultaneous existence of different groups, interests and opinions. You try to find some way to balance or reconcile or compromise those interests, or at least a majority of them. You follow a set of rules, enshrined in a constitution or in custom, to help you reach these compromises in a way everybody considers legitimate.

The downside of politics is that people never really get everything they want. It’s messy, limited and no issue is ever really settled. Politics is a muddled activity in which people have to recognize restraints and settle for less than they want. Disappointment is normal.

This is especially true since 2008 with the bank bailouts, which no one liked but may have ultimately been necessary to stave off something potentially much worse. Although many on the ‘alt right’ (with the possible exception of this blog) opposed the bailouts, in another sense the bailouts exemplify the ‘anti-revolutionary/anti-democracy’ ethos of NRx and, some what related, utilitarianism and the ‘rational right’, which is that the ‘common man’ is naive and irrational and thus should not participate in the decision making processes. Hence, in his appeal to the uneducated, in some ways, Trump may actually be revolutionary, sorta like a right-wing version of Mao, who also courted the uneducated to support his ‘cultural revolution’, although I much prefer Trump’s revolution to Mao’s.

The rise of Trump, and Sanders, represents a backlash against ‘politics as usual’. We’re all dreaming the same dream that someone, some outsider or messianic figure, will awaken the nation from its autopilot stupor.

Rather than collapse, we will likely see a continuation of the aforementioned trends, but more extreme. That means wealth inequity will keep widening, S&P 500 profits & earnings will keep rising, treasury bond yields will remain low, etc. The entitlement spending problem may yield to a eugenics program, hopefully, to address the problem of people who are net-negative to the economy. In this blog I outline solutions, but the likelihood of any of them being implemented in the immediate future are slim. ‘Formalism’ is a possibly, but given the existing close ties between corporations and government, we may already be closer to that than we think.

But there is also the possibility that the biggest tech companies of Silicon Valley, along with tens of thousands of the most productive people, will secede from the Union, forming a sovereign state, sorta like Galt’s Gulch in Atlas Shrugged or the libertarian utopia in Stranger in a Strange Land. Or, even less likely, in the far distant future they gradually overtake the existing US government. This could be done by filling all the major branches of government with technologists, and then gradually phasing out existing democratic institutions, to be replaced by something that bears some resemblance to America today, but also different in many ways, too, although it’s difficult to describe what that would be.

2016 Predictions

It’s that time of the year again, my predictions for 2016. First, after eight years, the fed did what everyone thought was impossible: they finally raised interest rates, and the market surged. The pundits predicted that the hike would be bearish for equities, but obviously that was not the case as the rate hike was already priced in, and a quarter point isn’t a big deal. The media is almost always wrong. Just remember that.

Predictions:

GOP nominee? Don’t know. It’s either going to be Trump, Carson, or Rubio. Not much of a prediction, I know, but political predictions tend to be harder than economics and finance ones.

Democratic nominee: Hillary, pretty obvious.

2016 US presidential election winner? Tossup. Like prior elections, it will come down to these dozen coveted ‘swing states’. Some sources say Trump can win the swing states; others say he will have difficulty. Hard to know.

Russia and Turkey relations stable. No major geopolitical events, besides the ongoing mess in Iraq, Syria, and Afghanistan.

There will be another major spree shooting in the US; dems push for gun control predictably goes nowhere.

Continued deterioration of SJW narrative (Measuring this is an inexact science. I will go by Imgur posts and Reddit comments to take the ‘pulse’ of the SJW narrative.)

Oil prices rangebound between $30-45/barrel.

US GDP growth, job growth, profits & earnings, consumer spending, employment, etc remains steady. US Economy keeps chugging along without any major problems. Same slow growth and tame inflation that we’ve seen since 2009.

Europe and other foreign markets continue to lag US equities.

Much of Western Europe remains in a borderline recession. Foreign economies remain weak relative to America.

US dollar remains strong and inflation low; no hyperinflation or dollar collapse, sorry zeorhedge.

China bull market resumes.

The 2009 bull market, the second biggest of all time, continues for its 7th consecutive year; posts modest gains for 2016.

My investing strategy, up 27% for 2015, continues to outperform in 2016.

Home prices rise, with Bay Area prices up >5% YOY for 2016.

Valuations for major web 2.0 companies (Snapchat, Uber, Air BNB, etc) keep rising, no ‘bubble’ bursting, sorry libs.

Predictions a housing market crash, web 2.0 crash, or stock market crash will continue to be wrong.

Microsoft stock continues to rally. Same for Facebook, Google, and Amazon stock. Large cap tech and consumer discretionary continue to outperform other sectors.

Treasuries rise despite rising interest rates.

Overall, 2016 will play out much like 2015, which was also similar to 2014. Newton’s first law is applicable to forecasting: a trend will prevail unless an external force acts upon it. In the absence of a catalyst, odds are the trend will continue.

More Correct Predictions (Greece, Facebook, Emerging Markets, Trump)

More Correct Predictions:

1. Most importantly, I was right about Greece being much ado about nothing. The major market indexes have since recovered all their Greece-related losses, as I predicted they would. Greece got thrown another lifeline, kicking the can down the road yet again.

2. Facebook stock keeps making new highs. The Social network is worth over $250 billion, on its way to overthrowing Apple as the most valuable company in the world. Facebook is everywhere, it’s an inescapable part of our lives and is transforming the landscape of information and human interaction, as well as creating the world’s biggest database, The Social Graph, from its over one billion users. This graph pretty much contains the interactions of every user with another user on the site, consisting of countless nodes and is so comprehensive that law enforcement agencies often make use of it. And then there are the billions of dollars of advertising revenue, which keeps growing year after year.

3. The emerging markets are lagging again in agreement with my prediction that they would despite a brief respite earlier in the year. With the exception of China, foreign markets an investment are still awful.

The divergence since May 2015 between the emerging markets (blue) and the S&P 500 (red) is quite obvious:

4. By attacking John McCain’s war record, is Trump trying to sabotage his campaign as a grand finale before dropping out, as I predicted he would? On the other hand, in 2004 the attacks on Kerry’s war record were justified because he embellished a lot of details, he disparaged the Swift Boat operations for political gain, and he disgraced his fellow servicemen with his post-Vietnam anti-war activity. Or maybe Trump is so delusional he thinks attacking McCain will help his campaign in some way. Anyway, this is probably the beginning of the downfall for Trump. While it’s expected of liberals to attack the military, a conservative (as Trump purports to be) should know better than to attack a fellow conservative serviceman, especially someone as beloved and revered as John McCain.