Mexico's economy may surprise you
The only thing I can really say for certain about 2014 is that it's a difficult year to predict. There simply isn't anything that could possibly match my gold prediction a few years ago and my Japan Nikkei prediction last year. So much of the world has had an epic run lately that the opportunity to find what I view as mispriced assets does not seem nearly as obvious. But for the record, I do believe we will continue an upward march as the Japanese government continues to weaken the yen.
A dull but important reminder: I do not invest in any of these predictions—or anything at all outside of my 401(k) plan and the offerings it includes. We at CNBC cannot own individual equities (save for shares of Comcast through our employee ownership program). I also don't buy or sell any options or short anything (though I wish I could have acted upon my negative feelings on gold the past few years). My own 401(k) plan is nearly 100 percent stocks, and in the past 12 months I increased exposure to European equities.
(More predictions: Gas below $3? Boldest predictions for 2014)
That down, here are some of my thoughts for 2014.
The Dow will be "meh"
It's going to be tough for the American stock market to equal the growth of 2013. Though I do believe the economy will continue to march upward, much of that optimism is already priced in. Additionally, many of the things that drive stocks up—the Fed, buybacks and a record year for dividend payouts—will slow down. A continued outflow from bonds should help the stock market mitigate some of that, but I don't believe it will be enough to have another big year for the Dow. I know it's en vogue on Wall Street to love stocks right now, but I just can't get on board. We may see some pain at the beginning of the year, and then we should recover and limp along to around a 5 percent gain for the Dow by year's end.
In no way am I suggesting the Mexican stock market will be this year's Nikkei. I get the feeling the Japanese market had one of those years that only comes around once every two or three decades. But I do like the way the Mexican economy and stock market is looking heading into the new year (and beyond). There is a growing middle class in Mexico that is benefiting from an economy showing increased stability. The Mexican Congress recently agreed to end a 75-year monopoly and allow foreign investment in oil, an important development. However, keep in mind that the Mexican benchmark IPC stock index has more than doubled off the 2009 lows, so some of the optimism may already be baked in. This is really a long-term prediction I am making, but you have to start somewhere.
(More predictions: Where many Americans think stocks are headed)
Rain on the 'cloud'
Before I get to my prediction, can we all just agree to end this notion of so-called 'cloud' computing. A few years ago the idea of running software from a remote computer was new and novel. Now it simply is computing. With the exception of some specialized software I use to analyze my race car, I can't think of any programs I run natively on the hard drive. Perhaps we in the media should start referring to old-school software as "ground" computing instead, because that seems to be the anomaly rather than the norm.
Rant over, my prediction: Be careful of any tech company that's gotten a boost simply because of the "cloud" story. Many of these companies are trading at earnings multiples in the high double or even triple digits (if they have any earnings to make a multiple at all). Can a company truly grow into a valuation of more than 10 times sales? We'll see. And that's not to say there aren't some spectacular companies doing innovative things, but any company that is not running software as a service seems antiquated. Just as all things "dot com" captured the attention and stretched multiples in the late '90s, so too is this notion of the cloud today. I would not be surprised to see some of the multiples contract on the "pure play cloud"–type companies.
Gold = Tired Old Mule
For the record, I like mules. A noble pack animal that serves a purpose, it doesn't need much affection and gets the job done. So perhaps I should not compare gold to mules, because I feel that gold will continue to be the opposite: serve no purpose, needs love and doesn't get much done. It's a boring prediction for me, as my loyal viewers and readers know: I have been negative on gold for more than three years. The reasons I was negative then are the same reasons I am still negative now—a recovering global economy, lack of inflation, currency stability and less need for central banks to purchase gold because of currency stability. Boring or no, people love gold; thus, my need to address my views heading into next year.
(More predictions: Your software is going to get smarter)
I'll add this to the gold story: One thing that has me nervous and could prove me wrong is supply. If prices keep falling, some of the higher-cost gold producers may take production off-line. That could put a floor under the price. By the way, for anybody interested in gold, its history, some of the horror stories involved in mining the middle, and just a great understanding of how the gold market works, I highly recommend Matthew Hart's new book, simply entitled "Gold." It's well worth a read.