Michael Silverman

Predictions for a New Year - 2021

Michael Silverman -

The only way to get better at predictions is making them publicly and measuring the results – here is the list that I’ll check back in on in 2022. Predictions below also include a confidence estimate or range to indicate their likelihood, with 0% being least likely and 100% being certain. 

Investing & Public Financial Markets

  • Free Money & Financial Stimulus Continue, Interest Rates Rise in Q3/Q4 (90%)
    • Governments around the world continue to ineffectively stimulate the economy with free money, not realizing that they are pushing on the string of massive debt overhang and liquidity traps. Official inflation continues to run under 1%/Fed targets while inflation in asset prices continues apace, proportional to the money printed in any given year. 
    • To temper financial market inflation and dollar debasement, the Fed will be forced to raise interest rates .25-.5%, triggering a early/mid-year selloff as the market looks forward to their actual rise in Q3/Q4 during Q1/Q2.
  • Crypto Continues to Rise as Alternative to USD Debasement in Q1, Gets Crushed as Interest Rates Rise and Black Swan Regulatory / Security Event Occurs (70%)
    • Bitcoin will likely rise towards $35,000 in Q1 as the dollar continues to be debased and individuals look for alternatives. 
    • However, a black swan regulatory or security event occurs similar to the lawsuit faced by Ripple/XRP in late 2020 that reduces confidence in the entire crypto ecosystem. This likely coincides with a rise in interest rates towards Q3/Q4 and will put Bitcoin back to $5k per coin and ETH under $250, which will be a buying opportunity if the security and regulatory risks are not existential in nature. 
  • Tesla Stock Continues to Rise in Q1/Q2 on S&P Inclusion, Stagnates or Declines in Q3/Q4 (75%)
    • As additional competitors enter or plan to enter the EV market, market participants increasingly realize that Tesla is a tech company attempting to become a car company, whose tech will become a commodity. While Tesla has a substantial lead in EV technology, most consumers don’t care about whatever variant of autonomous driving Tesla is offering and only care about price. GM/F/FCAU begin to mass produce electric vehicles that aren’t nearly as good as Tesla, but can produce them in volume at more affordable prices. This causes Tesla’s stock price to stagnate as it attempts to grow into its stratospheric valuation.
  • Publicly Traded Rare Earth Metal Companies Skyrocket as Trade Tensions Simmer with China and EV Tsunami Continues (80%)
    • Currently, most batteries are built using the same technology and materials across the board, and if automakers continue their EV plans, there will be a shortage both globally and domestically, of the materials needed to produce EVs in addition to all the other electronics based on rare earth metals. 
    • This could potentially set off micro-conflicts in locations that have high rare earth metal density, with super powers fighting to capture the territories (20%). Occurring along the same lines as oil conflicts historically.
  • Palantir Valuation Doubles Based on COVID Contact Tracing & Data Management Solutions (30%) 
    • PLTR’s valuation will double from current levels ($42b->$80B) as governments around the world reach for a data management solution for COVID and infectious disease management. Valuation expansion will occur alongside the dogma that public health data management is a national defense priority. PLTR is the one of the few pure-plays on this trend. 
  • AMC Goes Bankrupt (80%), Disney or Netflix Buy Them in Bankruptcy (50%)
    • While COVID continues, increased vaccinations open up restaurants and travel to varying degrees, and the last thing everyone wants to do after sitting at home for a year watching TV and movies is go somewhere and pay to do the same thing. AMC runs out of cash and financing opportunities, goes bankrupt with public shareholders wiped out, and Disney or Netflix buy them out of bankruptcy as a cheap, wholly owned, distribution path for their content. Theater attendance begins to recover towards the end of 2021 with full recovery in 2022.
  • ZM Heads Toward $100/Share as Reopening Continues, YoY Comps are Tough to Match and Commoditization by Google and Microsoft Continue (70%)
  • REITs as a Sector Hit Hard by E-Commerce/Reopening Not Living Up To Expectations, Forcing Decade Long Readjustment of Property Allocations (40%)
    • While this trend was already in process, it was likely accelerated by the COVID Pandemic. RE, especially Commercial and Mall RE, will increasingly be redeveloped to suit more services/experiences based businesses over shopping or working destinations. 
    • In a positive, a portion will also be redeveloped towards residential real estate, reducing high rents in great locations for residents.

 Society, Politics, Democracy

  • Electoral Results are Called into Question in January by a Republican Faction, Which Is Temporarily Big News, But Ultimately Results in No-Change to the Results (60%)
  • Higher Education Pushes Students Back to Campus Before Appropriate Vaccination Levels are Reached to Ward off Bankruptcy Due to Tuition Loss, Resulting in High Infection / Superspreading Zones on Campuses (90%)
  • Countries Further Question the Notice Period China Gave the World That COVID Could Develop into a Pandemic, Increasing Nationalistic Tendencies with Many Countries Asking or Demanding Some Economic Payment as Consequence (40%)
    • As the COVID pandemic wanes and countries are left to pick up the pieces with likely slow economic recoveries, nations will look for an external actor to place blame and potential obtain some benefit from, in return for not restricting trade or placing tariffs on imports. 
    • The most likely result will not be tariffs, but increased debt purchases by China of countries that threaten economic retribution. This continues to allow FX reserves to flow as China desires while providing some salve to countries nationalistic tendencies. 
  • Marijuana Legalized at Federal Level (80% if Democrats Obtain Majority Control)
    • Legalization will be promoted/passed under the legitimate causes of reducing the number of incarcerated individuals for marijuana offenses and criminal justice reform, but will actually be passed because the cat is out of the proverbial bag with more and more states legalizing and the strong desire of the federal government to obtain their share of tax revenue on a “vice” that is politically taxable. This kicks off innumerable lawsuits between the states and the federal government over who has the right to tax and collect revenue, especially when publicly traded marijuana companies begin to rise in prominence. This War on Drugs changes to a War on Revenue collection, ultimately creating localized, untaxed black markets after fair market value is reached and taxed. 
  • USPS Starts Becoming Effectively Managed & Charging for Last Mile Appropriately (75%)
    • Independent of 2020’s politically motivated mismanagement of the USPS, one of the strongest levers the government will have in the short term to leverage against Amazon’s dominance is to simply raise the price of last mile delivery. The full cost of Amazon’s business model (as well as UPS and FedEx) is at least partially externalized to the tax payer through last mile delivery prices that are not value-based. 

Technology

  • Apple & Google Preview Their Electric/Autonomous Cars in Q3 as Business Tailwinds Decelerate and Regulation Becomes a Greater Part of the Narrative To Drive Further Stock Returns (60%)
  • Big Tech Regulation – Regulation looks different than most suspect, with governments using a scalpel (business rule regulation) over a hammer (business line divestitures) to reduce big tech dominance. Any divestitures cause short term upheaval in the company’s share prices (2021), but are ultimately reabsorbed overtime (2021-2027), muting their effects (similar to AT&T’s breakup).
    • Facebook
      • WhatsApp (80%) - Less impactful divestiture due to its current lack of ads, but more likely than Instagram given its relative isolation and FB convincing regulators that WhatsApp is the largest messaging and social network in the world. 
      • Instagram (40%) – Most impactful divestiture due to its size and prominence across FB’s ad buying infrastructure, but potentially less likely than WhatsApp after FB’s lawyers get involved discussing the damage it would do to “small businesses and influencers” on the platform, who it states are the primary beneficiaries of FB’s current ad model. 
      • Occulus (5%) – Most impactful over the long term, but very unlikely given the lack of public focus currently on VR/AR. Consistent with our political systems solving for the last crisis and not the coming one, Oculus will likely remain untouched, but give FB the long-term edge it needs to survive as it makes AR/VR the next platform due to its existing scale and reach.
    • Microsoft – 100%
      • Microsoft will escape anti-trust largely unscathed due to its primarily enterprise focus and well-manicured, low visibility corporate profile. It will paint itself as the responsible corporate citizen and IT provider to business across the world, at a time when cybersecurity (Ex - Solarwinds) issues will make politicians reluctant to legislate the sectors that Microsoft inhabits.
    • Google / Alphabet
      • Eliminate Google’s Buying of Search Market (60%) - Google attempts to confuse regulators by stating that it has a number of different bets in different industries and obfuscate its reliance on the money machine that is search. Regulators see through it and attempt to separate or divest all the roads that lead to Rome (Google), including Chrome, Android, the Android App Store, Chromebooks, and money paid to Apple/Firefox and others to maintain Google as the default search engine. 
      • YouTube Divestiture (30%) – Higher chance than an Ads business breakup and easier to convince the public of overall positive consumer welfare given Google’s data collecting practices, poor content moderation, and monetization efforts. 
      • Ads Breakup (20%) - Regulators clumsily break apart the ad business based on where the ads are served (Display, Search, etc.) or country. This simply creates a greater number of entities that have the same inherent issues as before, just on a smaller scale (AT&T Breakup). 
      • Google Subscription (2%) - The entire ad business is broken apart in such a way that Google is incentivize to offer subscriptions for an entirely ad-free experience. They use current Google workspace pricing as a starting point, reversing their data collection practices they have historically used to monetize their user base. 
    • Netflix – 100%
      • No regulation is placed on Netflix given the number of VOD providers in the market continues to multiply. Netflix will be able to state that competition is a browser or App away. However, Netflix begins to argue that vertically integrated competitors such as Disney+ and Prime Video should be divested from their owners due to their unfair advantage in subsidizing content across more verticals than Netflix. This narrative is lost among other more prominent regulation and Netflix’s share begins to decline.
    • Apple
      • Supply Chain Prominence (5%) – It is very difficult to regulate a competitive edge obtained via absolutely incredible operational execution, but governments may realize or perceive Apple’s two-to-three-year hardware technology edge due to simply purchasing all available capacity of a given technology as anti-competitive in nature. Rather than eliminate Apple’s ability to utilize this advantage, there may be a requirement to allow others to participate or share in the technology advances by purchasing manufacturing capacity. 
      • App Store Regulation – (70%) – Similar to Platform Regulation below, App Stores and their restrictions will be more prominently regulated in terms of the rules and restrictions that operators may apply to submitters. Despite some consumer benefits accruing due to integration (Ex – Apple Pay, Login with Apple), regulators will state that the operator of the platforms can’t require the use of a service they also own. Regulators will also crackdown on the “App Store Tax” or the percentage that operators can take of each transaction, particularly for recurring business models or subscriptions where the individual business’s practices are the larger factor in whether the subscriber transacts, rather than one time purchases where ease of transacting is a larger factor. 
    • Amazon
      • AWS Divestiture (30%) – Amazon’s policy of operationalizing each segment of its business so that it is accessible to any other via APIs will come back to haunt it, as politicians realize that they can readily decrease Amazon’s prominence simply by pulling AWS out of Amazon proper. If this asset is divested into an individual public company, expect the stock to skyrocket and capture a substantial portion of the current Amazon market cap.
      • Platform Regulation (55%) – While Amazon will take most of the heat and fallout, governments will begin to realize the power of the platform, and while they won’t break the platform itself apart, will legislate stronger ground rules and protections for merchants on those platforms. This will apply to Amazon, but also to Walmart, Etsy, Shopify and others which aggregate buyers and sellers. This form of regulation is more likely due to overall consumer satisfaction with Amazon and a lack of business/3rd party seller satisfaction.

 Health

  • COVID Vaccines Hit 80% Population Penetration in Developed Nations, Vaccination Passports Required for Travel (70%)
    • Despite initial rollout hiccups, vaccination programs continue and ramp rapidly in Q1, especially within at-risk populations. While there will be other COVID strains, vaccine development technology discovered and improved upon in 2020 allow rapid incorporation of new strains, rendering it a non-issue. Countries will only allow entry with a corresponding record of vaccination.
  • Forced Vaccinations Disallowed by US Supreme Court, But Ability for Business & States to Restrict Service or Benefits Based on Vaccine Status Upheld by US SC (60%)
    • There will remain a portion of the population that chooses not to become vaccinated and forced vaccinations becomes one of the biggest political issues of 2021. The issue will likely land at the US Supreme Court where a conservative majority narrowly renders a 5-4 opinion that forced vaccinations violate individual rights to choose. 
    • The verdict does not discuss whether businesses or states can regulate what an unvaccinated individual can do, which will kick off the second wave of lawsuits in which businesses and states restrict unvaccinated individuals’ ability to interact with society. This will result in the second US SC case in which the same conservative majority will rule 5-4 that it is not the place of the federal government to prescribe rules around individual state or business health mandates or restrictions.