As we enter into the new year, I’m in the mood to make a few predictions that are certain to go wrong. I’m warning you in advance that you should assume none of these predictions will actually happen. I’m not in the guessing business and since predictions are basically just guesses, please don’t treat this column as “financial advice.”
Prediction #1: The Dow will flirt with 20,000 by the end of the year.
Although I believe a big market correction is coming. I’m getting a strong feeling that we are in a period like we were in the late 1990s, when Alan Greenspan was famously declaring that the markets are subject to “irrational exuberance.” He made those comments at the end of 1996, yet it was a full three years later before markets started to head the other way.
The Fed is doing everything in its power to prop up the markets, and loose money policies are the flavor of the day. But every time in history we’ve seen loose monetary policy go too long, we see markets have ugly corrections. You would be hard-pressed to find anyone who can reasonably argue that the Fed hasn’t gone overboard printing money. So, will markets tank? You bet. The question is (as always) not if, but when.
There is another sign out there that tells me markets aren’t ready to go south yet. We don’t have that feeling of the average person being “all in” with stocks like we normally see before a market crash. Until we see grandma rushing out to buy tech stocks again, I suspect markets will continue to rise.
If they do rise through this year, a 20 percent gain would get the Dow pretty close to 20,000. I hope that happens, but I’m definitely not betting on it!
Prediction 2: Obamacare will actually start to work.
Now, don’t get me wrong. I deeply believe that Obamacare is perhaps the WORST law ever devised by the bozos in Washington DC. All I’m saying here is that a good percentage of the technical problems will get ironed out in 2014. And here’s the other thing, Obamacare is a really good deal for you if you earn under $60,000 as a couple with no children, and a bit more for those with children. It’s a good deal for folks in those income levels today. That brings up my next prediction . . .
Prediction 3: Obamacare will undergo significant changes, as young people will not sign up, causing rates to skyrocket.
Here’s the core problem with Obamacare. It requires huge participation from young, healthy people. And they aren’t signing up. If they don’t, insurers will be stuck with an older, less healthy pool than they planned for, which will make recent insurance rate increases (more than 50 percent) look like nothing. Higher rates will lead to fewer people paying for insurance, leaving only the sickest who will pay, which, in turn, will jack rates up again, etc.
With the math working overwhelmingly against it, you can expect Obamacare to adjust by allowing plans that provide lower coverage limits, which reduces rates, which, in turn, makes one question why we have Obamacare at all.
Prediction 4: 2014 will be the year that you actually stop procrastinating and get your financial and legal affairs in order.
Yes, I know I’m probably just dreaming on this one, but if you knew what I knew, you wouldn’t let it go another year. As a matter of fact, a really good financial planner can make a huge positive difference in your financial life.
Prediction 5: I’m going out on a limb here, and I’ll predict that Miley Cyrus continues to do the outrageous in order to attract attention.
OK, OK, so this one isn’t much of a prediction. But what the heck – I had to include at least one prediction that is 99.9 percent sure to be right!
Happy New Year everyone.