Doug Kass’ predictions for 2012
Belated happy New Year monkeys! 2011 has come and gone and naturally, the predictions for 2012 have been rolling in. The banks have theirs, so do the talking heads, but Doug Kass has been one of the most ballsy forecasters over the years and with him racking up more hits than misses for 2011, I figured we’ll put his new list under the great WSO microscope of scrutiny.
It’s a pretty bold list too; with his “surprises” ranging from the S&P going over 1527, to Sears going bankrupt, Moynihan resigning, the fizzling of Facebook, and Mitt becoming the 45th US president, so there’s pretty much something for everyone to nitpick here. What do you think monkeys? Will Kass nail it again?
Here are a few highlights:
Surprise No. 1: The U.S. stock market approaches its all-time high in 2012. The beginning of the New Year brings a stable and range-bound market. A confluence of events, however (discussed further in the body of the 15 Surprises for 2012), allows for the S&P 500 to eclipse the 2000 high of 1527.46 during the second half of the year.
Surprise No. 2: The growth in the U.S. economy accelerates as the year progresses.The U.S. economy muddles through in early 2012, but, with business, investor and consumer confidence surging in the fall, real GDP accelerates to over 3% in the second half.
Surprise No. 3: Former Presidents Bill Clinton and George Bush form a bipartisan coalition that persuades both parties to unite in addressing our fiscal imbalances.The Clinton-Bush initiative, also known as "Simpson-Bowles on steroids," gains overwhelming popular support, and despite strenuous initial opposition, it forces the Democrats and Republicans (months before the November elections) to move toward a grand compromise on fiscal discipline and pro-growth fiscal policy.
Surprise No. 8: Cyberwarfare intensifies. Our country's State Department's defenses are hacked into and compromised by unknown assailants based outside of the U.S. Our armed forces are place on Defcon Three alert.
Surprise No. 9: Financial stocks are a leading market sector. After five years of underperformance, the financial stocks rebound dramatically and outperform the markets, as loan demand recovers, multiple takeovers permeate the financial intermediary scene and domestic institutions enjoy market share gains at the expense of flailing European institutions.
Surprise No. 10: Despite the advance in the U.S. stock market, high-beta stocks underperform. Though counterintuitive within the framework of a new bull-market leg, the market's lowfliers (low multiple, slower growth) become market highfliers, as their P/E ratios expand. With the exception of Apple, the highfliers – Priceline, Baidu, Google, Amazon and the like -- disappoint.
Surprise No. 12: We'll see merger mania. Cheap money, low valuations and rising confidence are the troika of factors that contribute to 2012 becoming one of the biggest years ever for mergers and takeovers.
Surprise No. 13: The ETF bubble explodes. There are currently about 1,400 ETFs. During 2012, numerous ETFs fail to track and one-third of the current ETFs are forced to close.
Surprise No. 16: After it is disclosed that Bank of America is being forced to raise an additional $20 billion to $25 billion of capital, Brian Moynihan resigns as President and CEO of Bank of America.
Surprise No. 18: Facebook's IPO fizzles. The new offering is priced at a $70 billion equity capitalization but opens flat and breaks issue price in the first day of trading.
No. 1’s a pretty ballsy call, and while it’s a total cop out to say that I’m still bearish but it won’t surprise me if this happens, I’m still bearish but it won’t surprise me if it happens lol. I think No. 3’s his most batshit interesting prediction here, but I doubt he’s being serious especially since he has a breakdown of how it’s all going to happen. No. 8’s a given, 9 could definitely happen but I don’t know if dramatic would be the word for it, same with 12 and 13, but I really doubt that 18 will go the way he sees it. Every Dick and their dog will want in on IPO day, but three days, maybe a week after? Pfft.
What say you monkeys?
Funny he didn't talk about Eurozone, Gold, Dollar-Yen, US-Iran face-off etc.
I would love for this to happen, but some of it seems incredibly improbable. Moynihan resigning....well that's probably gonna happen. On the other hand the S&P going up like 400 points, I dunno. I do think the U.S. is finally going in the right direction economically, but with the collapsing EZ and increased MENA tensions I imagine there is gonna be a strengthening of the USD which would create some downward pressure on the domestic economy. #3 is too specific, but I wouldn't be surprised is post-November there is some Republican/BDD initiative to finally tackle the fiscal problem. ETFs are evil. I lost so much money with the disparity in silver prices and levered silver ETFs in the past month I will never invest in an ETF again. Futures ftw.
Yea, I can see 8 happening with a frenzy, while 16 is a given at some point as good ole' Moyniyan will be the required scape goat we so often see these days. I gotta say though, Dougie has got some tennis balls and puts them on the line each year. He's one of the reasons I used to watch Kudlow on CNBC, Dougie is entertaining on that show.
Surprisingly nothing about oil, given the proposed EU embargo against importing oil from Iran and volatility in Nigeria. Would love to hear opinions from any of you commodity traders
If No. 9 happens I'd be ecstatic, considering 40% of my portfolio consists of deep OTM calls on BAC and GS.
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