Links 01.2023 // Predictions
On a Personal Note
Happy New Year, y'all!
Let's hope that 2023 will be the first year of the "Roaring Twenties" without any generational crisis.
(I will send my "Portfolio Update" out later this week. Last week was simply too busy...and festive)
Predictions 2023
Technological acceleration x low attention spans make our world feel hyperfast. Hence, annual predictions kinda feel out of place because the time span just seems too long. Can you imagine that just 12 months ago people thought it would be a good idea to pay large sums of money for a jpeg on the blockchain? That feels like forever ago. I mean, we have moved past COVID already like it was nothing. At least in my bubble, nobody talks about this anymore. God bless!
Despite (or maybe because of) this hyperfast reality, predictions remain interesting. I came across this perfect synthesis of some of the core pillars of my own thinking when it comes to the future (obviously, this is due to the fact that I am influenced by the very same books, especially "The Sovereign Individual"). The author indicates three main drivers for unpredictability and puts them into a coherent argument:
P1: increasing technology means key decisions have increasing reach;
P2: key decisions are being made by individuals empowered by new technology;
P3: Large group actions are easy to predict and decisions made by representative members of large groups are easy to predict. But decisions made by high-agency, non-representative single individuals are very difficult to predict;
C: Therefore the world is getting harder to predict because decisions made by a few key individuals are of increasing consequence.
In other words, the "Age of Elon" makes the world so hard to predict. After probably having experienced "Peak Elon" in 2022, I am a bit scared of what (or better: who) 2023 will bring.
But before we move to 2023 predictions, let's look at my Predictions for 2022 from last January:
New Inflation Heights: ✓
Narrative Change around Vaccines: ✓
Bitcoin 100k: ( ⁍᷄⍜⁍᷅ )
FDP Drop: ✓
Nothing to be ashamed of, I would say. Moreover, I can have further victory dances for predicting Argentina as the World Cup winner and Kir Royale as the new trend cocktail (the new season of "Emily in Paris" gave me an early W on this one). But of course, it shouldn't go unmentioned that I updated my inflation prediction by deeming further FED interest rate hikes as "unlikely." Yet, JPow remains as hawkish as ever and so we won't see a FED Pivot until later this year. I'm taking that "L" with more grace than my portfolio.
Anyways, let's finally move to my predictions for 2023. As mentioned last year and as we all know, I usually have plenty of hot takes but I reduced this list to those that are (more or less) relevant to the subscribers of this newsletter. This means that these predications reflect broader economic, political, and financial trends. I will also do a "Prediction Update" somewhen in the summer to see how I am doing. But now, let's go:
Recession, Earnings Compression & Inflation: For my broader macro prediction, I see these three things as pivotal. Let me explain: The 2022 stock market correction has been mainly driven by interest rates and hence multiple (i.e. price earnings etc.) compressions. If the U.S. will now enters into a proper recession, we will see earnings reductions on top of all of this and hence a two-fold compression. I will talk more about these implications in my portfolio update; but obviously, I don't think this is priced in yet (i.e. analyst predictions are over-confident). Plus, I tend to think that this decline won't be the mild recession that most economists are expecting and so I would go rather bold, contrarian, and spicy...and say that we could see a first rate cut by the FED towards the end of 2023 to counter the tanking economy. All of this implies, that inflation levels will remain elevated (> 4-5%) for the foreseeable future.
TikTok Ban: This is rather self-explanatory; but obviously I don't see the tensions between the US and China fading, especially not under the Biden administration and with Xi having consolidated power. As I do not want to predict further war or conflict, I thought this might be the best proxy for the major geopolitical trend of the 2020s: hawkish foreign policy. On top of all of this, ByteDance and TikTok continue to give US legislators ammunition for such a ban. Speaking of social media platforms: BeReal = BeDead in 2023, Zuck will step down as Meta CEO, Twitter under Elon will survive, we have seen Peak LinkedIn, and Discord and Twitch will continue to gain influence.
Final Leg Down for Bitcoin: The FTX bankruptcy still didn't trigger the cascade of insolvencies that we could/should expect after such an event. This means that there is still more pain ahead. There are still plenty of bad actors that need to be flushed out of the system. So, more bankruptcies and price corrections incoming. In my books, Bitcoin will test further lows ($11-13k) and then closer higher than 2022—and hence be ready for a post-halving bull run in 2024.
Political Forecasters are Wrong...AGAIN: DeSantis might have peaked too early, Turkish elections will probably be "too close to call" and everything that comes with that, and the volatility of UK politics is not just a UK phenomenon. If my first prediction about the economy is (at least directionally) right, then we will have more turbulent political times awaiting us. Of course, I hear you! This is a super vague prediction; but it is one about the fundamental difference between risk and uncertainty. I think the political options are much more uncertain (i.e. we do not even know the options) than they are risky (i.e. we are just not sure about the likelihood of given options). In other words, by the end of 2023, our political predictions from 2022 will look completely off.
Jeff Bezos Return: This life ain't enough for a man like Bezos. Once back, he will also become the richest man in the world...again! (Okay I admit, this all might be amazon shareholder copium).
Lastly, this won't be a prediction but a prayer and wish:
Peace,
SG