Each year, fund manager Doug Kass steals (Morgan Stanley’s) Byron Wien’s list of unlikely events — 25 possible surprises — for the following year.
The surprises are not predictions, but instead represent long shot events with a better than expected chance of occurring — despite generally low public beliefs in their liklihood.
Call them variant perceptions.
Doug notes "I have long felt that developing a variant view (read: surprise) remains an integral part of differentiating one’s investment returns. Mainstream and consensus expectations are just that, and, in most cases, are deeply imbedded in today’s stock prices."
Kass: "The real purpose of this endeavor was to consider positioning a portion of my portfolio in some part based on outlier events — with large payoffs. After all, Wall Street research is still very much convention and groupthink, despite the reforms over the past several years. If I succeed in making you think about outlier events, the exercise has been successful. "
I couldn’t agree more . . .
Here is his list of possible surprises in 2005: