We covered a lot of ground together in 2023. In this issue of the newsletter I’ll update you on some topics I wrote about this year. A lot of things didn’t turn out quite as I’d imagined. Some did.
Nobody reads this newsletter to get rich by learning what’s about to happen in the economy and markets. For that, you’d want to put your money with Hindsight Capital, the unfortunately nonexistent hedge fund invented by the journalist John Authers that gets every call right by investing in hindsight.
Still, I did go out on a limb now and then, prognosticating on topics ranging from the risk of recession to the possibility of a strike at UPS to the question of whether Apple would yank its smart watches off the market. Here’s a look at how a few calls turned out.
In January I wrote that the leftist president of Brazil, Luiz Inácio Lula da Silva, had “no easy choices” after thousands of supporters of his rightist opponent broke into government buildings in the capital, Brasília, to protest what they falsely believed was a stolen election. It’s been a better year for Lula than I expected. Inflation has fallen, and his polls are good. This month, Brazil’s Congress backed his tax reform plan. But it defied him by making it harder for Indigenous tribes to stop deforestation.
In February in a newsletter about regulation of artificial intelligence, I wrote that OpenAI, the creator of ChatGPT, deserved credit for acknowledging that the software could generate harmful outputs “and what’s more, trying to do something about it.” I didn’t realize then that the nonprofit’s board was deeply divided over how quickly to roll out advances in A.I. — as the world discovered in November.
In March I wrote that the pause on student loan payments had become a political trap and that borrowers would react badly if the Supreme Court invalidated the Biden administration’s plan to wipe out $400 billion of the debt. That turned out to be correct. The court rejected the Biden plan, and about nine million of the 22 million borrowers who were supposed to resume payments in October hadn’t paid anything by mid-November, the Education Department announced. What I hadn’t counted on was that the Biden administration would find new ways to forgive student loans or ease repayments.
I was pessimistic about the banking system in May after the failures of Silicon Valley Bank, Signature Bank and First Republic Bank. I wrote that Federal Reserve interest rate increases were tempting depositors to take their money out of banks and put it in higher-yielding money market deposits. There haven’t been any big failures since that trio, but regional banks aren’t in the clear yet. KeyCorp, Citizens Financial, Truist Financial and PNC Financial announced this fall that they were shrinking to cut costs, The Wall Street Journal reported.
“When all hope is lost, hire a woman to take over (and take blame),” I wrote in June, referring to the hiring of Hafize Gaye Erkan, a former Wall Street banker, as the new central bank governor of Turkey. Some observers were saying that Turkey was headed for a financial crisis. (Studies have found that companies tend to bring women on as leaders when business is struggling.) Luckily for her, Recep Tayyip Erdogan, the Turkish president, has backed away from the crank notion that cutting interest rates will cure inflation. He allowed Erkan to raise the central bank’s key interest rate to 40 percent in November, from 8.5 percent when she took office. Inflation is still high, though. Erkan has moved her family in with her parents to save money.
In July I wrote that Toyota had a point when it pushed hybrids over all-electric vehicles. Toyota argued that E.V.s use a huge amount of battery materials such as lithium. It said one can reduce greenhouse gases more by using a pile of those raw materials to make 90 hybrids instead of one E.V. But readers reminded me that there’s no need to economize on lithium use — at least not yet. This fall I leased an E.V., so what do I know?
Also in July, I wrote that California and Florida were struggling with an exodus of property insurers. I was told at the time that California’s insurance commissioner, Ricardo Lara, had not decided if he was in favor of two big changes in rate setting: taking reinsurance costs into account and looking forward, not just backward, to assess risks. In September, Lara pleased insurers by including both of those changes in a reform package. Florida had a light hurricane season this year (except for Idalia). Florida officials said historic reforms were attracting more insurers to write policies in the state.
In September I wrote one of several 2023 pieces warning of an impending recession, an opinion that became more of an outlier as the year went on and unemployment stayed low. If there’s no recession by around next summer, I will happily admit I got this one wrong. For now, I’m sticking with the call.
In October I wrote a newsletter headlined, “In Argentina, the U.S. Dollar Could Soon Become King,” referring to the plan of the country’s leading presidential candidate, Javier Milei, to dollarize the Argentine economy. He won in November, took office this month and immediately embarked on a promised austerity campaign, which includes slashing government spending and devaluing the currency. But Milei, a far-right economist who calls himself an anarcho-capitalist, isn’t moving to replace the peso with the dollar. At least not yet.
Also in October I wrote that sales of most Apple Watches “may well drop 100 percent — to literally zero — the day after Christmas” because of a ruling by the International Trade Commission that they contain parts that infringe on patents held by two other companies. That seemed far-fetched at the time. Surely Apple would make a deal with the patent holders or work around the infringing parts or something. But no. This week Apple said it would pause sales of the models online on Thursday and in stores on Christmas Eve. It added that it “is pursuing a range of legal and technical options to ensure that Apple Watch is available to customers.” Remarkable.
In November I jumped into the OpenAI drama at the peak of the turmoil. At the time of publication, the OpenAI board had fired Sam Altman as chief executive officer, Microsoft had given him a job, and more than 700 of Open AI’s 770 employees had signed a letter saying they might quit to join Altman unless the four-person board resigned. Things got patched up after that. Late on the day after the newsletter came out, OpenAI reached an agreement for Altman to return as C.E.O. Three of the four board members resigned. One of their replacements — and I really didn’t see this coming — is the economist Larry Summers, a former Treasury secretary and former president of Harvard.
Finally, last week I wrote about the anticapitalist Chicago artist Penny Pinch, whose works were about to go on sale last Friday in an auction in which asking prices would start high and then drop hourly. I checked in this week with Allan Weinberger, the director and founder of A Very Serious Gallery in Chicago, where Penny Pinch shows his work, to find out how things went. “Very well,” he told me. The small pieces all sold, at prices from $250 to $2,500, he said. The auction for the big pieces was still going on as of Tuesday. Prices for them were dropping daily rather than hourly. “There’s still quite a lot of meat left on the bones,” he said.
This stuff is just so interesting to me. I’m glad it seems to interest you, too. Please email me your ideas for newsletter topics in 2024 at [email protected].
The Readers Write
Your newsletter on the majlis at COP28 was very enlightening and encouraging to me. I could not but think of the recent efforts by the Catholic Church on synods and synodality. Their discussions take place at round tables — every participant is heard.
Forest Hills, N.Y.
In the 14th century, cooperation was necessary in the Netherlands. The people had to make decisions regarding the dikes and on whose land they would be built. It was accomplished in round table meetings.
Cornelis van Dijk
Quote of the Day
“There has been so much talk of an impending recession for so long that those imbalances, which often result from excessive leverage or risk taking, have not built up. We thought we were talking ourselves into a recession, but we might have ended up talking ourselves out of one instead.”
— Bank of America economists, “How to Talk to Your Family About the Economy Over the Holidays,” a bank research report (Dec. 15, 2023)