Roast of Doug Kass’ “20 Surprises for 2008”

From, which I don’t read (I can’t stand the shouter).

Anyway, a friend emailed me this list and I couldn’t resist.

My roast is [in brackets].

1. The Housing Depression of 2007 morphs into the Retail Spending Depression of 2008. [This would surprise anyone? It has already started. Just look at the retail sales numbers.]

2. Corporate profits drop by 10% in 2008. [Same for this. I mean the business cycle peaked long ago and profits come down after the peak.]

3. The S&P 500 Index falls by 5%-10% in 2008. [That wouldn’t be a surprise either, given where we are in the business and political cycles.]

4. Volatility pushes even higher. Daily moves of 1%-2% become commonplace. [Yes, Virginia, volatility increases during transition periods (uncertainty) and declines (rising risk premiums).]

5. The Federal Reserve eases monetary policy in 2008, with nearly every meeting accompanied by a 25 bp cut. [Isn’t this already baked into the cake? I mean just look at the Fed Funds futures contracts.]

6. Growth in the Western European economies deteriorates. [Um, it’s been deteriorating for a long time. Maybe this is left over from last year’s list. I hope so, because he should be able to “predict” the past.]

7. The Chinese juggernaut continues apace. Chinese stock market doubles again in 2008. [I’ll take the “under” on that one.]

8. The Japanese market puts on a surprising resurgence. [People have been calling this for years. Eventually they’ll be right.]

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). [I think CFC may be the Enron of this cycle. A LOT of corruption all along the whole perversely incentivized food chain. Many witches to burn. Many barn doors to close now that the cow’s gone.]

10. Financial stocks fail to recover. [I think financials have another leg down. The dumb money needs to get in first (see this post on my old blog), then get forced into a distressed sale situation, thereby returning capital to it’s more rightful owners (i.e. the “smart” money). Buffet should have a field day.]

11. Research in Motion (RIMM), Apple Computer (AAPL) and Google (GOOG) move into bubble status and their shares double in 2008. [If GOOG doubles to a $400 billion market cap company I’ll eat my hat.]

12. Yahoo! (YHOO) and eBay merge. So do Amazon (AMZN) and (OSTK). [I’ll go with the Yahoo/ eBay merger, but isn’t Overstock damaged goods? And why would Amazon want to acquire Overstock? I mean I guess Amazon’s currency (its stock) is damn strong, but just because you have a valuable currency doesn’t mean you trade it for junk.]

13. General Electric (GE) will sell NBC Universal to Time Warner (TWX), which will not sell or spin off AOL. [SW2C]

14. U.S. dollar’s value falls by over 10% in 2008; Gold rises to over $1,000/oz. [So we should be surprised if a long-term trend continues? Dude.]

15. The price of crude oil eclipses $135/barrel. [Ditto. Except there are countervailing forces at work too, such as being post-peak and pre-trough in the business cycle. I don’t bet on oil, at least not where it is now. If Kass wants to go long or make other “super spike” related bets, he can have at it.]

16. Acts of cyberterrorism occur that compromises the security of a major government. Financial markets will be exposed to hackers. [Hasn’t this already happened? Doesn’t it happen all the time and we only find out about it when it can’t be covered up? But I suppose another “event” could be in the offing, especially with an election coming up. Terrorism definitely impacts elections. Who does it benefit? Follow the votes and the money. We certainly know who Bush’s war has benefited. I mean they saw what happened with Gulf War #1 and said to themselves “let’s do it again, only bigger this time.” And look at the gobs of money the energy and “defense” industries made off of this one. Talk about a gusher! Oh, and where are the oil and gas companies? Oh, in “red” states, where the Bush-lovers live? What a coincidence. Ok, sorry for the rant!]

17. The Hedge fund community are disintermediated in 2008. Outflows accelerate. [Someone give me Kass’ PayPal address so I can send him a nickel for using a fancy word. Also, isn’t the word “community” singular? Then why does Kass use a plural verb (“are”)? I shouldn’t nitpick because I make plenty of mistakes, but Kass’ piece gets polished by editors before getting published and my stuff doesn’t. By the way, can anyone think of any words that rhyme with “Kass”?]

18. There are several Enron-like accounting scandals in 2008. [Wow, yes, what a surprise that would be. I’ll bet next he predicts there will be a new president elected in 2008. Oh, wait, look at #19!]

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

20. Sovereign Wealth Funds become targets of American politicians. [Hasn’t this already been happening? And don’t politicians always blame other people for everything “bad” and try to take credit for everything “good.” I mean there’s nothing new here. Just business as usual in Washington. They might bitch about the Sovereign Wealth Funds, but they are not going to stop capital from flowing back to the U.S. to bail out crappily-managed companies.]

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