With the year coming to a close, it’s time to revisit economic predictions made twelve months ago.
First on our list is Vice Chairman of Blackstone Advisory Partners, Byron Wien.
Wien predicted a slew of events including S&P target prices, Chinese GDP and troop levels in Iraq and Afghanistan.
He says that there is in reality only a 50% chance that any of these events comes true. Oddly prophetic, considering half of his 10 have.
Wien's prediction that 10-year Treasuries would hit 5% missed the mark, as did those of many other analysts predicting similar outcomes. As it is, the flight-to-safe-havens, and the mediocre economy has made the 10-year go to 2%.
Number three was a guess that the S&P would return and settle above 1500, before a second half correction as interest rates rose. In reality, by mid-year the S&P only topped off around 1370 before debt-ceiling debates brought all markets into a retreat. Wien also said merger and acquisition activity would gain steam, but that's yet to happen.
The first full redemption. Gold surged to record highs this year in August, topping $1,900 a troy ounce briefly. Economists offered up dozens of reasons, but Paul Krugman seemed to hit it on the head in a Times' Op-Ed:
'The logic, if you think about it, is pretty intuitive: with lower interest rates, it makes more sense to hoard gold now and push its actual use further into the future, which means higher prices in the short run and the near future.'
PREDICTION: China's GDP will slow on currency intervention. The U.S. will become a less central currency.
We're giving this one partially to Wien because he nearly got it. Wien believed the Chinese government would aggressively use its currency to slow GDP growth to 10%, while keeping inflation between 4 to 5%. In reality, the Chinese economy grew by 9.1% in the last quarter while CPI hit 5.5%. But the reason for that wasn't based on the currency intervention, rather a slowdown in the country.
Corn, as predicted by Wien, hit $8.00 during the year, though it has since fallen back down to $6.45 on the CBOT. Wheat and soybeans, however, did not touch the highs forecast. For that, he only earns half a point.
The housing market still faces a massive oversupply, particularly as institutions wait to foreclose on properties in an attempt to not flood the market. But, housing starts finally passed 600,000 this month, growing 15% and topping estimates for 590,000 units.
In April, crude oil prices came within a 27 cents of Wien's $115 barrel prediction. That's about as good of a prediction as an economist can make. Also, as forecast, driving does not wane as auto sales post month-on-month improvements for most of the year.
President Obama announced troop withdrawals from Iraq and Afghanistan earlier this year, even as insurgents maintain a grip on the latter. A large presence in Afghanistan will be maintained -- to the tune of 70,000 plus troop -- but not as large as the 100,000 that were in country from March 2011 to May 2011. Wien also predicted a drawdown in Iraq, which should be completed by the end of this year.
Angela Merkel works to reform Europe, provides additional backing, but doesn't solve long-term problems
Europe has moved from one crisis to another this year as Italy, Greece, Spain, and Portugal all struggle with massive debt levels. Merkel has worked to stave some concerns through a levered European Financial Stability Facility with Sarkozy.
Wien predicted that Bush tax cuts, coupled with the extension of unemployment benefits, would lower the unemployment rate below 9% while GDP surged above 5%. Though GDP growth has quickened, hitting 2.5% when annualized, it's nearly impossible to top the 5% surprise Wien guessed. But, jobless claims have been slowing and, with the rate sitting at 9%, it's possible half of this prediction could come true before January.