Friday Haymaker
Top Ten Potential Surprises of 2024
Charts of the Week
Unlike U.S oil and gas producers that have, as a result of the shale miracle, been able to dramatically increase their reserves and output, the situation for the leading gold miners is very different. The many years of challenged profitability and related capital spending starvation has created a situation where reserves in the ground are now off by 1/3 since 2011.
Among the many reasons to suspect that the recent inflation cool-down is transitory is due to demographics. As 19th century French philosopher Auguste Comte long ago observed, demographics are destiny. Based on that aspect alone, it’s best to be suspicious that the CPI will hover around the Fed’s desired target of 2%. As my friend Jesse Felder X’d out (Tweeted sounds so much better; thanks, Elon!), there is a tight correlation between the dependency ratio and consumer prices. Because that ratio compares workers to the size of the overall population, that makes sense. Fewer productive workers and more who are merely consuming should exert upward pressure on prices.
“In a time of domestic crisis, men of goodwill and generosity should be able to unite regardless of party or politics.” -John F. Kennedy
“The future ain’t what it used to be.” -Yogi Berra
“Even Napoleon had his Watergate.” -Also Yogi Berra
Top Ten Potential Surprises of 2024
It’s homage time, in this case to the legendary Byron Wien who passed away at 90 this past October. Byron was famous for his Ten Surprises for a given year. Because these were, by definition, non-consensus expectations, the odds were against them being actualized. Based on that, he did make some excellent “calls of the unexpected” over the years.
For example, in his last list of surprises, for 2023, he postulated that the S&P would bottom in mid-year. He was bit off because the S&P bottomed in March but it was still a good prediction. He also anticipated a “financial accident”; last spring’s banking crisis checked that box. Further, he pretty much nailed it with his expectation that the Fed would stay hawkish, more so than other central banks.
Of course, when it comes to divining the future — especially, sticking to outside-the-box calls — there are going to be a few whiffs. One of his worst was that he thought Elon Musk would turn Twitter/X around during 2023. Another was that oil would fall as low as $50, though that wasn’t a terrible miss. Crude briefly traded in the low 60s before screaming to $95 by late September. (After that, it was another precipitous tumble to the upper 60s, leading to the latest oversold rally.)
Another less than stellar anticipation is that China’s growth would re-accelerate, leading to a broad commodity rally. In reality, it was pretty much the opposite outcome. He also thought that unrelenting carnage on both sides in Ukraine would lead to a truce. Hopefully, that one isn’t wrong, just a tad early.
Accordingly, in the spirit of Byron Wien I am initiating an attempt at my own surprises. As you can see, I’m providing more color on these lower-probability events than he did… but, then again, I certainly don’t have his track record or gravitas. Admittedly, my concluding shocker could reasonably be called a triumph of hope over experience. However, for the future of America, and the world, let’s hope it’s not.
David “The Haymaker” Hay