Predictions are a mug’s game. That’s the standard disclaimer on almost every story, column, or post that somehow ends up making predictions anyway.
That said, predictions are often a useful way of identifying the most solidly conventional wisdom. In a speech Friday, Ben Bernanke admitted that the Fed tends to be too optimistic in its growth predictions and too pessimistic about the unemployment rate. Still, Bernanke echoed the broadly upbeat consensus for 2014, citing “the combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation”. Even Nouriel seems relatively cheery: In Roubini-speak, tail-risks are now “less salient”.
As usual, Bill McBride at Calculated Risk has some of the smartest thoughts on the year-ahead. His list of 10 economic questions for 2014 aren’t quite predictions, but they come close. Looking back on GDP since since 1999, he says “it is likely that 2014 will be the best year of the recovery, and possibly (with some luck) the best year since Clinton was president.” The job market, McBride writes, will be buoyed by two long-term trends: rising residential investment and state and local governments that have stopped laying people off. He expects between 200,000 and 225,000 jobs to be created per month in 2014. If that type of growth doesn’t materialize, Neil Irwin suggests we all revisit our economic models.
As for the markets, Josh Brown warns that “the first thing you need to know is that there are less opportunities in the stock market than there were one year ago and significantly less than there were during the year prior.” (A 30% rise in the S&P tends to do that). Brown plots out a few possible scenarios, including a 1994-style slow-mo correction, and a hyper-bullish outcome in which businesses finally start investing, hiring and America experiences a labor shortage. Sudeep Reddy wonders if this may be the year “businesses finally shed their caution.”
Ed Yardeni asks if we’re in for a market melt-up in 2014. His case: the “Great Rotation” of retail investor money from bonds into stocks, coupled with a continuing flood of buybacks could send the market higher. Dan McCrum has more charts on retail investors piling into equities. As McCrum puts it: “What will people do with their clean slates, we wonder? Buy equities is a strong contender.” -- Ryan McCarthy
The Fed
How women organized to make Janet Yellen Fed Chair - Laura Bassett and Ryan Grim
Politicking
Rapid response: high-frequency traders form lobbying group - WSJ
Plausible Theories
Entrepreneurs are like con men, but are delusional enough to believe their own fantasies - James Surowiecki
Crime And/Or Punishment
JP Morgan may pay $2 billion over the Madoff case - DealBook
Charts
America's increasingly effective war on poverty - Jared Bernstein
"Poverty has fallen significantly since 1967" - Center on Budget and Policy Priorities
The war on poverty 50 years later - Annie Lowrey
Wonks
On secular stagnation - Larry Summers
It's Academic
A fierce photo of Carmen Reinhart; plus a new study on recoveries following financial crises - NYT
Pivots
Bill Clinton is a paid pitchman for a private-equity backed for-profit college - Bloomberg
Yikes
America's over-reliance on refrigeration is making us less safe - Modern Farmer
Wow
An anonymous tipster delivered Steve Cohen's deposition on a Bugs Bunny USB drive - William Cohan
Oxpeckers
A primer on what not to say if you want to buy the NYT - Global Times
Servicey
Where to eat in 2014 - Adam Platt
Energy
Fisking the 60 Minutes report on cleantech - Gigaom
Revolving Door
The Carlyle Group has hired former FCC Chairman Julius Genachowski - PE Hub
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