Links 01.2024

// Bold Predictions

On a Personal Note

Merry Christmas to all celebrating today!

To honor the occasion, I went to the Belarusian provinces to get (once more) stuffed with Shuba, Olivier, and all the other goodies. This won’t help my New Year’s resolutions but it had to be done, y’know. In any case, you can check out my insta for the full story.

Now that the holiday season is also officially over, let’s get straight to business.

Predictions 2023: Final Update

In our final update, let’s look at my predictions from January 2023:

• Recession, Earnings Compression & Inflation: ✔✖

• TikTok Ban: ✔✖

• Final Leg Down for Bitcoin: ✔✖

• Political Forecasters are Wrong...AGAIN: ✔

• Jeff Bezos Return: ✖

Interestingly, all of my predictions have been somewhat directionally correct; but (in most cases) didn’t fully hit the mark. For example, I think in terms of macro I have been spot-on: Many countries saw a recession in 2023 (most notably Germany) and even the US suffered from a significant sector-specific recession, i.e. tech, just think of the layoffs in Google, Meta, Spotify, etc. Plus we saw, as predicted, a multiple compression across all industries in terms of their stock market valuations. Also in terms of interest rates, I have been directionally correct. We saw the terminal FED rate in Q3.2023 and rate cuts starting to be priced in during Q4.2023. It's almost uncanny how well that played out.

Similarly, my prediction of a TikTok ban seems to have been directionally correct; but ultimately did not manifest. For example, the US put in place legislation that prohibited officials from installing TikTok on their phones; yet, those remained isolated initiatives without wider application. In fact, this Guardian piece shows you how close my call seems to have been As you will see in my 2024 predictions, I think the momentum for this ban has faded so I will take an L on this. Nevertheless, most of the other remarks in the social mediation section (i.e. twitter will survive, peak LinkedIn, BeReal=BeDead etc.) seem to have turned out okay.

As for Bitcoin, I think the final leg down did happen some days after I published my predictions; but it wasn’t as bad as I thought it would be. With CZ stepping down as the CEO of Binance, I am pretty confident that 2022-23 flushed out sufficient bad actors for some good Bitcoin predictions for this year.

One of my biggest Ws has been (quite surprisingly!) the political front. As predicted, DeSantis became irrelevant and the Turkish elections became “too close to call.” Combine this with my other takes on the Turkish elections throughout the year where I basically predicted (≠ endorsed) an Erdoğan victory (we all remember my “world’s dumbest opposition” pieces) and you will get a rare case of SG getting politics right.

Lastly, Jeff Bezos didn’t return to Amazon; but his latest Lex Friedman appearance clearly shows that he wants to be operationally involved in his companies (and certainly seems to be more active in the case of Blue Origin). Again, I’m taking the L on this although the prediction did not seem unreasonable in hindsight.

Predictions 2024

Okay, this is what we have been looking for. Let’s get into my bold predictions for 2024. This year, I separated my hot takes into several categories, making things easier to track, I hope. As usual, I will do some updates throughout the year.

• Geopolitics: Right before New Year, I read yet another Mearsheimer interview where he claims that we will see further geopolitical escalation in the upcoming years. And while I have been generally with the Hawks over the last couple of years (e.g. remember my phrase of the “geopolitical window being open”), I will take the opposite side of that trade this year. In other words, I will predict less conflict in the upcoming year. To make this concrete, I predict that we will see peace talks and ceasefires in Ukraine and Gaza, normalization between Saudi Arabia and Israel, and easing tensions between China and the United States until the end of the year. I know that this seems excessively (!) bold; but I just don’t think that geopolitical escalation is on the menu for “the biggest election year in history.” Particularly, the United States will put pressure on Ukraine and Israel to settle during an election year where not only the Republican base but also the median voter is more isolationist than ever. Let me get this straight: This is bad news, especially for Ukraine; but I have a hard time seeing the US debate (and the aftermath of the EU elections) turning out any other way. Moreover, I think that the Saudis and India become increasingly relevant as international powerbrokers—and they have (unlike Russia!) de-escalation on their agendas. Maybe to contextualize my thoughts here in 1-2 sentences: Unlike many “experts”, I don’t think that geopolitical shifts happen as clear-cut as just moving from one equilibrium (i.e. pax Americana) to another one (i.e. multi-polarity). I would rather suggest that the current equilibrium is so unstable that we need some adjustment period before further major disruptions (e.g. Taiwan/China) appear. So, the “Age of Geopolitics” continues but maybe not at the pace as many predict. BTW, if this assumption is wrong, my whole prediction will not only turn belly up but upside down. Then escalations in Taiwan, Lebanon, Korea, Sahel, etc. are on the menu. Let’s pray that I’m right on this one.

• Marco: As usual, I will mainly focus on the United States. As for the world economy, I think there is a widespread consensus that Europe will continue to stagnate or decline and China will continue to struggle with much lower growth rates. I don’t have much to add to this besides the fact that I couldn’t be more bearish on Germany. Leaving that aside, I think that the end-of-year stock market rally might have been too optimistic. I wouldn’t be so sure that we see six (!) rates cutes in 2024. I rather think that geopolitical tensions (i.e. the impact of the Houthis on global trade, etc.) will keep inflation still above the FED target and A.I. can’t yet play the role of being a deflationary corrective. This means that we might see some cooling down in Q1 but as clarity on FED policy emerges, the stock market will use the headwinds of an election year and (if my prediction above turns out right) the geopolitical relief to reach new heights. Overall, this would mean that the S&P500 would outperform its historical yearly average of roughly 8%—with small caps catching up (i.e. Russell 2000). This seems rather vanilla, so here we go on the Magnificient Seven: GOOGL 0.00%↑ & AAPL 0.00%↑ as outperformers; NVDA 0.00%↑ & TSLA 0.00%↑ as underperformers. Rationale: The cloud will be the major driver of the A.I. hype in 2024 (that’s actually a juicy prediction in itself), the excellent positioning of Google in A.I. is not yet fully priced in, Apple will enter the A.I. race (through AirPods and Siri), and a successful launch of the “Vision Pro.” Plus following my remarks on geopolitics, I think there is a high chance that Chinese stocks will outperform with China Tech as one of the strongest asset classes of the year. (Disclaimer: None of this is investment advice!)

• Bitcoin: The big question in the Bitcoin space isn’t any more whether there will be a Bitcoin Spot ETF but rather whether this will be a “buy the news” or “sell the news” event. While I’m not sure whether the final SEC approval will move the price on the day to a significant degree, I am sure that access to Wall Street- sort of capital inflows will pump Bitcoin to new all-time highs sooner than later. Do you read this as a 100k price target? Maybe :-P

• Politics: Obviously, this seems to be the spiciest category in this “biggest election year in history.” Yet, I have not much to offer. I don’t think there is much doubt that Putin and Modi will remain in power and that Labour will wipe the floor with the Tories. It also strikes me as rather trivial to talk about the populist wave that will disrupt the European elections. I think the election in Eastern Germany in September 2024 is maybe the most interesting thing to watch on that front. These might open some interesting dynamics. But again, predictions would be rather boring: I think the German traffic light coalition has reached a point of no return and will ultimately conclude in a disastrous election result for all coalition partners in 2025. That is nothing new. I already predicted this when the coalition was formed. Their legacy will be that they allowed for the rise of the AfD. And to be fair, this should be mostly blamed on the Green. But let’s not get side-tracked and instead talk about the elephant in the room, the U.S. elections. With thousands of experts and pollsters analyzing every minuscule district of any swing state, I am not sure I can add much here. But let’s just say that I think that there is a 30% chance that Biden won’t run..and that he announces that before Super Tuesday. Let’s see how that pans out. As usual, I will add more political hot takes into the mix throughout the year but Trump vs Biden predictions are just lame at this point.

• Sports: Two years ago, I successfully predicted Argentina as the World Champion. This year, Germany is hosting the European Championship and so I am torn between a realistic guess (i.e. France) and what my gut feeling tells me. Having not learned anything from the many years of dating mistakes, I will go with my heart and predict that Germany will win the Euro 2024. Sané is currently the most underrated player in the world. Superb season so far and maybe the only reason Kayne had such a good start in the Bundesliga. Plus, Nagelsmann is an old Hoffenheim buddy. I just must. (That we don’t have to call them “Die Mannschaft” anymore is another plus)

• Culture: After the Kir Royal prediction two years ago, I’m not sure how I can ever top that. And why would you listen to somebody who can’t even name two Taylor Swift songs anyway? My hottest cultural take this year is rather esoteric: I think “poly” (i.e. polyamory) as a lifestyle phenomenon is dead. But luckily not to the benefit of “tradwives”. Instead, we will see a revival of the good old lover, mistress, and gigolo (lol)—rebranded as “secret poly.” Not sure how to measure that, maybe by celebrity couples coming out as “secret poly”…but a banger (no pun intended!) prediction in any case.

Peace,

SG