Every year, Doug Kass creates a list of forecasts. But these are not straight predictions; the basis of Kass’ column is that these are ideas that most people think are very unlikely, which that Doug believes has a better chance of occurring than the crowd does.

Call them “Possible Improbables”

Here’s the list:

1. The Russian mafia and Russian oligarchs are found to be large investors with Madoff.

2. Housing stabilizes sooner than expected.

3. The nation’s commercial real estate markets experience only a shallow pricing downturn in the first half of 2009.

4. The U.S. economy stabilizes sooner than expected.

5. The U.S. stock market rises by close to 20% in the year’s first half.

6. A second quarter “growth scare” bursts the bubble in the government bond market.
7. Commodities markets remain subdued.

8. Capital spending disappoints further.

9. The hedge fund and fund of funds industries do not recover in 2009.

10. Mutual fund redemptions from 2008 reverse into inflows in 2009.

11. State and municipal imbalances and deficits mushroom.

12. The automakers and the UAW come to an agreement over wages.

13. The new administration replaces SEC Commissioner Cox.

14. Large merger of equals deals multiply.

15. Focus shifts for several media darlings.

16. The Internet becomes the tactical nuke of the digital age.

17. A handful of sports franchises file bankruptcy.

18. The Fox Business Network closes.

19. Old, leveraged media implode.

20. The Middle East’s infrastructure build-out is abruptly halted owing to “market conditions.”


20 Surprises for 2009
Doug Kass
TheStreet.com, 12/29/08 – 11:59 AM EST


Category: Economy, M&A, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

21 Responses to “Doug Kass’ Possible Improbables”

  1. Strassertalk says:

    # 18 should have read:

    ‘The Fox Business Network closes’. . . and the CNBC stooges attempt to revive Vaudeville by taking the show on the road after their remake of ‘Half-Wits Holiday’ bombs.

  2. mlomker says:

    Is there anyone that believes bonds won’t collapse?

    Wave analysts are expecting a move down to begin very soon. I agree with #5 that we could be substantially up mid-summer since that may coincide with the end of the A-wave.

  3. NiNM says:

    #9 and #20 both seem more than possibly probable to me.

    You’d have to be nuts to give your money to a hedge fund unless they’ve already changed to become somehow transparent and accountable. I guess that some might be able to stay in business by holding their investors’ money prisoner for decades (no redemptions until 2050 AND ridiculous fees) due to some clause that noone bothered to read.

    Dubai Real Estate? Ha ha ha. Oil — anytime soon? Not likely. Definitely a bull market for terrorists, though. They could also start up a massive slavery/indentured servitude construction service to continue building infrastructure like crazy for a very low cost. Oh, wait, they already do that.

  4. da_rubberbandman says:

    you just don’t turn 28 years of abuse in 1 year

  5. Moss says:

    11 and 13 are definite definitives

    15,17 and 19 are more probable than not.

  6. edhopper says:

    He had decidedly mixed results for 2008.

    Kass’ 20 Surprises for 2008

    1. The Housing Depression of 2007 morphs into the Retail Spending Depression of 2008.

    2. Corporate profits drop by 10% in 2008.

    3. The S&P 500 Index falls by 5%-10% in 2008.

    4. Volatility pushes even higher. Daily moves of 1%-2% become commonplace.

    5. The Federal Reserve eases monetary policy in 2008, with nearly every meeting accompanied by a 25 bp cut.

    6. Growth in the Western European economies deteriorates.

    7. The Chinese juggernaut continues apace. Chinese stock market doubles again in 2008.

    8. The Japanese market puts on a surprising resurgence.

    9. The housing bust accelerates. High profile bankruptcies in 2008 include Countrywide Financial (CFC), Beazer Homes (BZH), Hovnanian (HOV), Standard Pacific (SPF), WCI Communities (WCI) and Radian Group (RDN).

    10. Financial stocks fail to recover.

    11. Research in Motion (RIMM), Apple Computer (AAPL) and Google (GOOG) move into bubble status and their shares double in 2008.

    12. Yahoo! (YHOO) and eBay merge. So do Amazon (AMZN)and Overstock.com (OSTK).

    13. General Electric (GE) will sell NBC Universal to Time Warner (TWX), which will not sell or spin off AOL.

    14. U.S. dollar’s value falls by over 10% in 2008; Gold rises to over $1,000/oz.

    15. The price of crude oil eclipses $135/barrel.

    16. Acts of cyberterrorism occur that compromises the security of a major government. Financial markets will be exposed to hackers.

    17. The Hedge fund community are disintermediated in 2008. Outflows accelerate.

    18. There are several Enron-like accounting scandals in 2008.

    19. Democrats Clinton/Kerrey and Republicans McCain/Crist represent their parties in the Presidential/Vice Presidential contest in November. Democrats grab the White House.

    20. Sovereign Wealth Funds become targets of American politicians.

  7. guidepostings says:

    Just as Warren Buffet and Jeremy Grantham were “early” to exit the bull market in 1998 and 1996, respectively, the same is happening now with wise and prudent bear fund managers. News that Bill Fleckenstein has closed his short only fund does not strike me as the bottom for this bear. You will hear the same thing from the likes of marque short managers such as Jim Chanos, Doug Kass and Steven Leuthold. This is the natural arc of money management. Those that were prescient and captured the initial explosive returns are prudent to pull their powder in for the next move. To me it indicates that the final capitulation has yet to arrive. Irrational exuberance, now irrational armageddon is appoaching. The psychology of the market always remains the same, we just happen to be on the dark side this time. Food for thought.


  8. Mannwich says:

    Now why would mutual funds reverse redemptions into in-flows? If anything, I would expect redemptions to continue and for ETF’s (rightly or wrongly) to do far better than mutual funds at this point.

    Maybe low cost index funds will do well but costly managed funds that have done poorly over the past 10 years? I highly doubt it.

  9. Now why would mutual funds reverse redemptions into in-flows?

    Probably due to #5. I think it is an if #5 then #10 situation with people chasing returns

    And didn’t #19 already happen?

  10. Housing will not recover unless prices go down or wages go up to the historical mean: 2-3x median wage, 100-120x median rent. Anything less is just dreaming.

    Stuff I think is more likely than others may think:
    * after discovering bailout money was used to pay out third-party CDS contracts and the ensuing scandal, all CDS contracts not directly involving the buyer or seller will be nullified, if not all unregulated CDS contracts outright.
    * China will raise taxes on savings to “stimulate” their export economy, and use the proceeds to buy US treasuries, to stave off massive disruptions due to unemployment.
    * (wishful thinking) India will suffer a large loss of outsourced service jobs as tensions with Pakistan boil over, and resulting job losses will stoke unrest which conservative Hindu parties will take advantage of.
    * Banks accepting federal aid will also be required to acquiesce to mortgage
    * GM sells the Buick brand to a Chinese manufacturer
    * Federal gas taxes are raised precipitously in order to pay off bailouts (wishful thinking too)

  11. (er, that’s mortgage cramdowns.. dunno why that got elided :p)

  12. DL says:

    My $.02:

    It is completely outside the realm of possibility that #13 will not occur.

    The majority believes that #6, 9 & 11 will occur.

    Prediction #4 is not meaningful as written; many are expecting Q3 and Q4 to be positive.

    Prediction #12 is not particularly meaningful; there is 0% chance of a chapter 11 bankruptcy in 2009.

    It seems unlikely to me that #6 will occur but not #7

  13. DL says:

    K. Noisewater @ 11:56
    “…all CDS contracts not directly involving the buyer or seller will be nullified, if not all unregulated CDS contracts outright”

    As a legal matter, how does one do this outside of bankruptcy?

    Almost everyone agrees, however, that there should be some effort towards increasing transparency. Moreover, attempts will be made to regulate CDS contracts like insurance products.

  14. Steve Barry says:


    I would suggest cutting this down to 10 and livening it up…the only ones that mildly interest me as being off the beaten track are 1 and 17. The rest are about as interesting as a buttered bagel.

  15. As a legal matter, how does one do this outside of bankruptcy?

    Eminent domain, emergency powers, revelation of nullifiable malfeasance, declaration of recession/depression as a general force majeure event, or some combination of the above…

    Where there’s a will, there’s undoubtedly a way…

  16. Che Stadium says:

    President Obama signs into law a reduction in tax rates on capital gains.

    My exact same prediction about Clinton in 1992 evoked vehement disagreement from some staunch Democrats I knew.

  17. bubba says:

    I’m with SB…the list is useless, not even any entertainment value. Let’s take a look at some of his 2008 calls:

    1. any fool could have “predicted” this.
    2. see 1
    2. see 1, and he was off by 30%

    7 and 8 — oops

    if you had bet on each one of his 2008 calls, you would’ve ended up a net loser…

  18. Pat G. says:

    11 should include; our Federal government.

  19. DL says:

    Dr. Kenneth Noisewater @ 2:08

    “Eminent domain, emergency powers, revelation of nullifiable malfeasance, declaration of recession/ depression as a general force majeure event…”

    I don’t think the courts would go along with that, nor do I think they should. It would amount to an unreasonable seizure of property, it seems to me.

    Regulating CDS’s like the insurance contracts that they are would seem to be a better way to go. (Bankruptcy for those who can’t meet their financial obligations is another option).

  20. doug kass says:

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