Questions for 2025

As we approach 2025, here are some questions to consider about markets, policy shifts and technological progress:

• Will Milei continue his win streak? I was a bit concerned to read this article by Ambrose Evans-Pritchard in the Telegraph about Javier Milei’s currency strategy in Argentina. Ambrose points out that for Milei to be a genuinely free market actor, he must embrace Argentina’s free floating currency volatility instead of trying to peg to the US dollar, no matter how painful the process. If Milei, DOGE and other free market libertarian experiments stumble, critics will seize the narrative, potentially deterring similar reforms elsewhere.

• How fast will the deregulation wave roll out? The new Beneficial Ownership Information LLC filing requirement, due by the end of the year, was suddenly halted at the last hour by a federal court. Penalties for non-compliance to the BOI rule include fines of $500/day and potential jail time. Being out of compliance, even on an inconsequential rule, is an open-ended liability. Deregulation can act like a tax cut. For many, the deregulation wave cannot come soon enough.

• Will low-cost Chinese cars impact global auto pricing? New combustion cars in the US cost around $45k vs $14k in China. Electric in the US is closer to $70k vs $30k in China. This has already impacted European car markets. BYD is the leading Chinese brand to keep an eye on. I don’t see BYD being allowed anywhere near US consumers, but that pricing gap is too juicy to ignore forever.

• How much AI progress will we see? I recently upgraded to ChatGPT o1 Pro, the top tier offering at $200/mo. It’s much slower, but it provides surprisingly “thoughtful” answers to more complex questions. There are rumors about a $2k/mo version on the horizon. It’s a safe bet that 2025 will be another robust year for AI acceleration. Agentic AI is a significant growth theme.

• How far will driverless car tech progress in 2025? Waymo is available in five cities in the US. 2025 seems like a big year for driverless everything acceleration.

• How fast will M&A ramp up? After a very slow few years, private equity and venture could use an uptick in potential transaction volumes. Big tech has not been able to transact due to anti-trust oversight. Much of this is due to a valuation mismatch but the regulatory scrutiny has not helped. We could see a surge in M&A that more than catches up for lost time.

• Will residential real estate correct? I personally don’t think so. Prices have not stopped climbing. Inventory is not necessarily growing. Many signs point to residential real estate staying relatively expensive for a long time.

• Will US equity markets open for 24/7 trading in 2025? Currency, commodity and crypto markets trade 24/7. Many big moves in equity markets happen overnight. How will companies handle earnings announcements that typically happen when the market is closed?

Happy Holidays and a Joyous New Year!

(There will be no article next Thursday. We will resume on Jan 2 2025.)