Since 1986, investing legend and Blackstone Vice Chairman Byron Wien begins each January by attempting to predict
the 10 big surprises of the coming year.
Wien should be given major props for even trying to do what many investing gurus might not. But in the interest of keeping him honest, it’s time to score his 2013 calls.
In the past, Wien has seen about half of his predictions come true. Not bad.
Though this year, he thought that stocks would fall and gold would reach $US1,900 an ounce. And that has to count against him pretty big.
NOTE: We awarded partial credit where partial credit was due.
Wien was correct in thinking that Iran would be a major theme of the year, so we awarded him partial credit. But he predicted that the country would 'announce it has adequate enriched uranium to produce a nuclear-armed missile and the International Atomic Energy Agency confirms the claim.'
In fact, the theme toward the end of 2013 was more toward disarmament, if anything. In June, Iran elected President Hassan Rouhani, who has taken a more open approach to the west. Weeks ago, Iran and the United States reached their first formal agreement in over 30 years. Iran agreed to freeze some of its nuclear program in exchange for decreased sanctions.
To quote the iconic 1998 Adam Sandler comedy Billy Madison, 'I award you no points, and may God have mercy on your soul.' Harsh, but the S&P is up over 1,800, jumping 23% year to date and perenially blowing past its highs.
Wien was wrong on stocks again here, writing that financials in particular would 'reverse the gains of 2012.' Quite the opposite has happened -- financial stocks have had a big year with the XLF rallying 29% year-to-date.
We awarded Wien partial credit for his prediction that 'regulation increases and lawsuits persist as an industry burden.' Two major stories from the year: The appointment of hardline SEC chair Mary Jo White and JP Morgan's legal woes. But neither has had any material impact on bottom lines.
Wien thought that Democrats would sponsor a 'vigorous program to make the United States independent of Middle East oil imports before 2020' and that the price of West Texas Intermediate crude would fall to $US70 a barrel.
Not exactly. WTI hit its low in April at $US86, and is actually up from Wien's call. But once again, he gets points for identifying a trend toward greater U.S. domestic energy production.
In an effort to win the Hispanic vote in 2016, Republicans would make a 'major effort to become leaders in immigration policy,' Wien predicted in January. He wrote that the GOP would sponsor a bill that 'paves the way for illegal immigrants to apply for citizenship.' This call was mostly correct, with Florida Senator Marco Rubio spearheading one effort.
The problem is that the passed Senate bill languished in the House, where it has no chance. And it seems Rubio may have paid a political price too within his conservative base, dimishing his 2016 hopes. Again, immigration reform has been a major theme this year, with many Republicans embracing a 'something must be done' mentality.
'The Shanghai Composite finally comes alive and the 'A' shares are up more than 20% in 2013,' Wien predicted. Incorrect. The index is relatively flat year-to-date, and apart from a major dip in June, hasn't really moved that much.
Wien gets a little bump for writing that 'the new leaders in China seem determined to implement reforms,' which at this point seems true. The country's Third Plenum has introduced a spate of economic and social reforms, though it remains to be seen what will actually be implemented.
Wien predicted corn would rise to $US8.00 a bushel and wheat to $US9.00 a bushel. But commodity prices are down big this year, with corn ($4.18) and wheat ($6.62) down 40% and 16%, respectively.
'The price of gold reaches $US1,900 an ounce as central bankers everywhere continue to debase their currencies and the financial markets prove treacherous,' Wien predicted. Nope. Gold has moved the exact opposite direction since Wien's call, now trading $US1,227 an ounce.
Nailed it. 'The Japanese economy remains lackluster and the yen declines to 100 against the dollar.' Check. 'The Nikkei 225 continues the strong advance that began in November and trades above 12,000 as exports improve and investors return to the stocks of the world's third largest economy.' Check again. The Nikkei is up over 50% year to date, well north of 15,000.
European stocks have actually chugged along like the U.S. market, and are up around 15-25% year to date. But: 'The structural problems of Europe remain largely unresolved and the mild recession that began there in 2012 continues. Civil unrest subsides as the weaker countries adjust to austerity.' Almost there. The problems of Europe persist, though there are signs of life as countries break through recessions.
FINAL SCORE: 2.9/10.0.
To be fair, many of Wien's predictions were in line with many other experts on Wall Street. Unfortunately, that excuse doesn't make money for clients.
Better luck next year.