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Saturday, September 11, 2010

Early Review of Byron Wien's "Ten Surprises" List for 2010

by Calculated Risk on 9/11/2010 11:49:00 AM

I saw this article at CNBC yesterday: Outlook Gloomy at Secret Billionaire Meeting

For 25 years, legendary Wall Street strategist Byron Wien, now with The Blackstone Group, has held summer meetings with high net worth individuals to get their outlook on the global economy and investing. This year’s group, totaling fifty individuals and including more than 10 billionaires, was decidedly pessimistic on the U.S. economy ...
That reminded me to check on Byron Wien's The Surprises of 2010 list.

Note: For anyone not familiar with the list, Wien tries to make predictions that are generally out of the consensus view - he has been doing this for 24 years, and usually gets more than half right.

It looks like this will be an off year for the "Surprises" list ...

A quick review of Wien's possible surprises:
1. The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%. ...
CR: Not Likely.

2. The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy. In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end.
CR: Not Gonna Happen.

3. Heavy borrowing by the U.S. Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%. ...
CR: Not Gonna Happen

4. In a roller coaster year the Standard and Poor’s 500 rallies to 1300 in the first half and then runs out of steam and declines to 1000, ending where it started at 1115.10. ...
CR: Missed on the high, but the general idea of a trading range has been correct so far.

5. Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted.
CR: Right on the euro, wrong on the yen.

6. Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve. Investors focus on the attractive valuations of dozens of medium sized companies in a market selling at one quarter of its 1989 high. The Nikkei 225 rises above 12,000
CR: The Nikkei did rally to 11,200 before falling sharply, but I think this counts as a miss.

7. Believing he must be a leader in climate control initiatives, President Obama endorses legislation favorable for nuclear power development. ...
CR: Didn't happen.

8. The improvement in the U.S. economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum. ...
CR: Not likely this year.

9. When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared. ...
CR: I think this was right.

10. Civil unrest in Iran reaches a crescendo. Ayatollah Khomeini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides.
CR: Sounds good, but very unlikely.

2009 was Wien's best year (he reviews 2009 here), but it looks like 2010 will be his worst.