After recapping the hits and misses and misses of last year’s predictions (I did well on oil, less well on Apple; scored on the movies, struck out in sports), it’s time to look ahead to 2014. The recent budget deal in Congress makes fiscal shenanigans less likely, but the Fed’s decision to begin tapering its bond buying program raises questions about how much steam is left in what has been a breathtaking stock-market rally.
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A lot of 2014 centers on just who might go public and what products might hit it big in an economy that seems poised to be less tenuous than it has been, but still volatile as interest rates creep upward and the employment picture remains shaky. Against that backdrop and in the spirit of last year’s “13 Fearless Predictions For 2013,” here we go…
1) The U.S. Economy
Final figures for GDP for 2013 won’t be in for months, but it looks clear the pessimists lost despite fiscal drag and uncertainty. Both of those are reduced greatly next year, with the budget essentially locked down thanks to Patty Murray and Paul Ryan (and even a bit more, dare we say, stimulative?) The result is that the consensus is again too low and GDP will hit 3.3% growth. Unemployment will fall to 6.3% nationally — good but not champagne-cork popping and labor-force participation will disappoint. The inflation hawks will be disappointed that that the price rises they insist are coming still barely materialize with the CPI edging to near 2%, but not spooking the Fed or anyone else.
Gold manages another down year as new finds and fewer people screaming about “fiat money” lead to the realization that there is a lot of gold out there. Bitcoin goes crazy up and crazy down, ending the year lower than it starts, but becoming a real medium of exchange in the process. Oil defies most experts by rising to $110 even as U.S. production continues to set records. The Brent/West Texas spread shrinks still more. The dollar rises against the yen to 115 thanks to Abenomics. The Eurozone is less stable than people think and the Euro drops to $1.25
3) The cash giants spin
Apple, Cisco and Microsoft all have nearly 1/3 of their value tied up in cash yielding nothing, with topline growth that’s been disappointing. While each is facing pressures to hand back more cash, only Cisco will make a meaningful move to do that. Microsoft will look long and hard at the deal it didn’t do for Yahoo and discuss spinning Bing off to its onetime acquisition target in exchange for a stake in the company. For its part, Apple will do its biggest acquisition ever later in 2014. But the big story will be 100 million iPhones sold in just the first two quarters of its fiscal year, temporarily silencing critics and igniting a rally in shares.
4) T-Mobile and Sprint will not merge
While Sprint may want T-Mobile USA and the German parent company may want out, after exploring the merger, T-Mobile will conclude two things (1) regulators will shoot the deal down (2) Sprint is a terrible company to be acquired by, having decimated the value in Nextel. Dish Network’s Charlie Ergen will try to merge will each of them as well as DirecTV. One of those three deals will happen.
5) Multiple compression …
Some great companies with unsustainable stock valuations will come under pressure as the year progresses and their growth is merely impressive rather than stratospheric. Year-end price-to-sales multiples under 15 mean some modest pain for LinkedIn shareholders, but serious stomach turning for investors in Workday and Twitter. (Historically, no billion-dollar-revenue companies trade much over 10x sales for any real length of time.)
6) … and expansion
But love for Google continues unabated into the new year. While growth is expected to be only around 20% and the company trades above 30 times earnings, faith in the search and advertising giant and a continued bull market will be good for Google. Calls for Google $2000 seem aggressive, but Google $1500 seems more doable. Apple’s strong results will keep it more valuable than Google, but until Apple shows a path to more permanent revenue gains, the conventional wisdom will have Google passing it in 2015.
7) IPOs aplenty
The revenue numbers for everyone will be lower than expected, but the prodigious growth of Square, in particular, will herald 2014′s class of new offerings. Dropbox will debut along with enterprise-focused Box and the two will become intertwined in a bizarre conversation about which is the better company. It will be bizarre because the vast majority of Box’s revenue will come (now and forever) from enterprise customers while Dropbox’s S-1 will reveal it’s nearly entirely based on consumer sales, with some small business adoption.By year end, all of those will be forgotten as AirBnB goes public, illustrating that renting your living-room is a huge business and is later followed by Uber, which has the biggest rise of them all.
8) Sports winners (?)
Because I did so great on this last time… Denver outscores everyone and wins the Super Bowl. Indiana upsets the Heat in a thrilling 7-game series and goes on to win the NBA Finals. Tampa Bay wins the World Series, and again no one watches, with record-low ratings.
9) Movie maadness
We had Lincoln, Argo and Zero Dark Thirty all in one year, huh? This year we get… Well, some good films in Captain Phillips, Gravity, American Hustle, 12 Years a Slave. Somehow that list doesn’t compare so Oscar goes with 12 Years a Slave, which tells an important story (the Academy loves this) and yet manages to uplift in its own way. Steve McQueen gets Best Director, reuniting those awards after the oddness of last year. Chiwetel Ejiofor, Sandra Bullock, Jared Leto and Jennifer Lawrence win the acting awards.
10) Congress goes for it
With nothing much else to do, Congress takes up immigration reform yet again. Republicans who hope to get a bill passed ahead of the elections try their hardest to get something done with the Democrats, but the forces of no eventually thwart a deal and this dies until 2015.
By mid-year, the big issue with Obamacare isn’t the website, it’s that millions of people have signed up for health insurance under the Affordable Care Act and it’s not going away. Again, some Republicans see an opportunity to pass a bill fixing the worst things about the ACA, introducing a “Reforming the 10 Worst Things About Obamacare Act” ahead of the midterms. It fails, but proves critical in the polls in several states as it shows Republicans who want to govern are more than capable of it…
… still, the problem for Americans is that you only vote in your own district. So people mostly send their own congresspersons back to D.C., but with some important changes. The GOP gains 10 House seats and the Senate moves to a 50-50 tie including the two independents who vote with the Democrats. Vice President Biden is less than thrilled that he’ll be called on to break several ties going forward, further embroiling him in partisan bickering and reducing any chance he has of challenging Hillary Clinton in 2016.
12) A bigger iPhone arrives at last
The billion previous predictions calling for a larger-screen iPhone are finally vindicated as Apple delivers an all-new iPhone 6 with a 1920 x 1080, nearly 5-inch diagonal screen. The plastic 5c gets updated to the 6c and the design lineage that started with the iPhone 4 is killed off once and for all. (The 5c becomes the low-priced model in the lineup, falling to $399 abroad, with the U.S. configuration remaining at $449 and including 32GB of storage.)
13) Google Glass goes commercial, but cautiously
Knowing that a full-on commercial launch of a low-priced Google Glass would be met with failure, Google instead releases Glass as a “Beta Edition” for $699, less than half the price of the current Explorer Edition. With a decent supply of apps, early adopters find the functionality very satisfying even while the battery life remains absolutely atrocious. Talk immediately turns to Google Glass 2.0, which is shown just months later, is much more stylish, but has very vague answers about the battery.
14) Electric vehicles rev up
BMW brings the i3 to the U.S. early in 2014, which starts off a big year for electrics in the U.S. Nissan experiences record Leaf sales, up smartly from the 20,000+ of 2013. Chevy shows off an updated Volt, though it won’t arrive till late in 2015. Tesla begins delivery of the Model X SUV as planned, but mockups of the Model E, $35,000 sedan draw raves as the company delivers a record number of vehicles in North America each quarter of 2014.
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