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Blackstone's Rose-Colored Glasses Initiative

Tyler Durden's picture





 

Due to popular demand, and in response to the earlier post by David Rosenberg, we present the Top Ten Surprises for 2010 as laid out by Blackstone Vice Chairman Byron Wien. No commentary necessary.

1. The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%. Exports, inventory building and technology spending lead the way. Standard and Poor's 500 operating earnings come in above $80

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

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%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. Obama says, "The suits are finally listening"

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. Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem. Concern about longer term growth and obligations to reduce leverage at both the public and private level unsettle investors

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. Longer term prospects remain uncertain

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

7. Believing he must be a leader in climate control initiatives, President Obama endorses legislation favorable for nuclear power development. Arguing that going nuclear is essential for the environment, will create jobs and reduce costs, Congress passes bills providing loans and subsidies for new plants, the first since 1979. Coal accounts for about 50% of electrical power generation, and Obama wants to reduce that to 25% by 2020

8. The improvement in the U.S. economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum. In the November Congressional election the Democrats only lose 20 seats, much less than expected

9. When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared. There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous. Trading volume and merger activity increases; financial service stocks become exceptional performers in the U.S. market

10. Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides. Talks with the U.S. and Europe begin but the country remains a nuclear threat. Pakistan becomes the hotspot in the region because of the weak government there, anti-American sentiment, active terrorist groups and concerns about the security of the country's nuclear arsenal

 


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Tue, 01/05/2010 - 12:12 | Link to Comment ShankyS
ShankyS's picture

Was that a New Year's joke? Seriously? Did they legalize hopium in NYC?

Remember this - http://www.usdebtclock.org/ ?

Tue, 01/05/2010 - 12:15 | Link to Comment Gimp
Gimp's picture

Another sign that our politicians and wall street elites are totally out of touch with reality and what is happening to "joe the plumber" on the street. Only thing they missed was that Iran will elect their first female president this year and the war on drugs is over.

Tue, 01/05/2010 - 12:21 | Link to Comment Beauclerc
Beauclerc's picture

Has to be a joke...look for "real" unemployment to reach 30% and three generations living under one roof.  The Health Care Bill needs to include anti-depressants be put into the U.S. water system because people are going to need it for the next few years...

Tue, 01/05/2010 - 12:43 | Link to Comment Steak
Steak's picture

Byron clearly has been listening to Lange too much: http://www.youtube.com/watch?v=3ZW-QVx23_E

"Everything will be perfect, tonight and forever"

Tue, 01/05/2010 - 12:47 | Link to Comment Anonymous
Tue, 01/05/2010 - 12:52 | Link to Comment Anonymous
Tue, 01/05/2010 - 13:02 | Link to Comment Stoploss
Stoploss's picture

I think madhedgefundtrader beat you to this story, i read it about an hour ago. Regardless, if this isnt a joke, i will be bypassing future madhedgefundtrader's blogs. Geez people actually paid for that shit??

Tue, 01/05/2010 - 13:04 | Link to Comment Anonymous
Tue, 01/05/2010 - 15:18 | Link to Comment Cursive
Cursive's picture

This passage offers insight into how the money interests think today:

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

Tue, 01/05/2010 - 13:05 | Link to Comment Ted Smoothie
Ted Smoothie's picture

The guy is clueless.  I guess his 11th - "Pigs begin to fly"  - just missed the cut.  Right off the bat, when he predicted growth of 5%, you knew he was in la-la land.

Tue, 01/05/2010 - 13:22 | Link to Comment Anonymous
Tue, 01/05/2010 - 23:05 | Link to Comment Carl Marks
Carl Marks's picture

Great spirits have always encountered violent opposition from mediocre minds...

Tue, 01/05/2010 - 13:21 | Link to Comment Biggvs
Biggvs's picture

At least the guy can imagine a 23% drop in the S&P (1300 to 1000). I could see a drop of that size happening as the first major leg down from this rally.

Tue, 01/05/2010 - 13:36 | Link to Comment JackTheOffer
JackTheOffer's picture

Gosh, I can hardly wait for all that to be so, so true.  I'm as eager as a puppy.

Tue, 01/05/2010 - 13:45 | Link to Comment Anonymous
Tue, 01/05/2010 - 17:53 | Link to Comment Anonymous
Wed, 01/06/2010 - 17:08 | Link to Comment jmc8888
jmc8888's picture

http://www.frbsf.org/education/activities/chairman/index.html

 

Ha ha, there IS a game. 

Actually it's probably the only thing the fed has done for us that's truly beneficial. 

A game, you can play, and have a little fun.  I haven't played yet, but first through I'm going to set interest rates at 0 percent and see what happens after a prolonged period.

Tue, 01/05/2010 - 13:56 | Link to Comment AN0NYM0US
AN0NYM0US's picture

I was going to make a smartass comment and then decided to look in the archives

(consider the mood of the country/world in January of 2009 - looks to me like Byron Wein is a friggin genius with balls to match)

 

Byron's Top Ten Suprises for 2009

 

1. The Standard and Poor’s 500 rises to 1200. In anticipation of a second-half recovery in the U.S. economy, the market improves from a base of investor despondency and hedge fund and mutual fund withdrawals. The mantra changes from “fortunes have been lost” to “fortunes can still be made.” Higher quality corporate bonds, leveraged loans and mortgages lead the way.

 

2. Gold rises to $1,200 per ounce. Heavy buying by Middle Eastern investors and a worldwide disenchantment with paper currencies drive the price of precious metals higher. In a time of uncertainty, investors want something they can count on as real.

 

3. The price of oil returns to $80 per barrel. Production disappointments and rising Asian demand create an unfavorable supply/demand balance. Other commodities also rise, some doubling from their 2008 lows. Natural gas goes to $9 per mcf.

 

4. Low Treasury interest rates coupled with huge borrowing by the Treasury send the dollar into a serious downward slide. Overseas investors become concerned that the currency printing presses will never stop. The yen goes to 75 and the euro to 1.65.

 

5. The ten-year U.S. Treasury yield climbs to 4%. Later in the year, as the economy shows signs of recovery, economists and investors shift their mood from concern about deflation to worries about inflation. A weak dollar, rapid growth in money supply and record-setting deficits (over $1 trillion) are behind the change.

 

6. China’s growth exceeds 7% and its stock market revives. World leaders credit China’s authoritarian government for its thoughtful stimulus policies and effective execution during a challenging period. The Chinese consumer begins to spend more and save less and this shift is behind the unexpected strength in the economy.

 

7. Falling tax revenues from the financial sector cause New York State to threaten bankruptcy and other states and municipalities follow. The Federal government is forced to step in and provide substantial assistance. The New York Post screams “When will the bailouts stop?”

 

8. Housing starts reach bottom ahead of schedule in the fall, and house prices stabilize after dropping 15% from year-end 2008 levels. The Obama stimulus program proves effective and a slow growth recovery begins before year-end. Third and fourth quarter real gross domestic product numbers are positive.

 

9. The savings rate in the United States fails to improve beyond 3%, as most economists expect. The concept of thrift seems to have vanished from American culture. Peak job insecurity and negative growth drive increased savings early in the year, but spending resumes as the economic growth turns positive in the second half, making Christmas 2009 the best ever.

 

10. Citing concerns about Iraq’s fragile democratically elected government and the danger of a Taliban-controlled Afghanistan, Barack Obama slows his plan for troop withdrawal in the former and meaningfully increases U.S. military presence in the latter. In a hawkish speech he states that the threat of terrorism forces the United States to maintain a strong military force in this strategic area.

 

 

http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_v...

 

(I wonder how Rosies' predictions from January 2009 stand up to Mr. Wein's)

 

Tue, 01/05/2010 - 13:46 | Link to Comment Anonymous
Tue, 01/05/2010 - 17:30 | Link to Comment Hephasteus
Hephasteus's picture

Oh my. Because you don't want to be disillusioned and crushed you are so joyful of those who were disillusioned and crushed. Then when time comes for you to join them you will take the brunt of the crushing. It's like reverse ponzi hell isn't it!!

Tue, 01/05/2010 - 17:33 | Link to Comment Anonymous
Tue, 01/05/2010 - 14:20 | Link to Comment Anonymous
Tue, 01/05/2010 - 14:29 | Link to Comment BorisTheBlade
BorisTheBlade's picture

I want this shit they smoke.

Tue, 01/05/2010 - 15:40 | Link to Comment SimpleSimon
SimpleSimon's picture

I tried, it seems you have to be born with it first.

Tue, 01/05/2010 - 14:34 | Link to Comment Anonymous
Tue, 01/05/2010 - 14:40 | Link to Comment Anonymous
Tue, 01/05/2010 - 14:54 | Link to Comment Anonymous
Tue, 01/05/2010 - 15:02 | Link to Comment crzyhun
crzyhun's picture

You have admire BW for sticking his old neck out. 2009 was easy, sort of. 2010 will be a different matter altogether. Talk about cross currents, more like rip tides. It can drown you. I never use this stuff for more than party humor.

Tue, 01/05/2010 - 15:11 | Link to Comment Anonymous
Tue, 01/05/2010 - 15:39 | Link to Comment SimpleSimon
SimpleSimon's picture

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

As stocks tank, Obama says " The incompetence of the suits at the Fed is evaporating the wealth of the American people in the stock market".

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%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. Obama says, "The suits are finally listening"

As mortgage rates rise, housing prices fall and more people go underwater, Obama says "The suits are destroying the American Dream".

Tue, 01/05/2010 - 16:02 | Link to Comment gookempucky
gookempucky's picture

Coal accounts for about 50% of electrical power generation--they forgot to acknowledge the 25% that includes TIRES and PLASTIC and anything else that burns to turn the turbines. I guess Obama is going to have to instill executive order TC ---Turd Control-this guy is spitting them out everywhere-thats gonna stain the carpet.

Tue, 01/05/2010 - 16:14 | Link to Comment chunkylover42
chunkylover42's picture

Interesting stuff, I guess. Byron is known as a perma-bear and now he's gotten optimistic (more or less), so maybe he's worth listening to.  To me, it looks like he's just a contrarian for contrarian's sake.

Tue, 01/05/2010 - 17:08 | Link to Comment Anonymous
Tue, 01/05/2010 - 20:56 | Link to Comment David449420
David449420's picture

Until they are not right.  Suddenly.  Rapidly.  Catastrophically.

Tue, 01/05/2010 - 16:55 | Link to Comment Stoploss
Stoploss's picture

Anyway you slice it, the bottom line is there are massive outflows occuring, bullishness at all time highs, bearishness at all time lows, VIX is low.

Vix low, time to go.. The bell is ringing...

Tue, 01/05/2010 - 17:59 | Link to Comment Anonymous
Tue, 01/05/2010 - 18:13 | Link to Comment Miles Kendig
Miles Kendig's picture

Byron must have spent the holiday chasing the dragon.

Tue, 01/05/2010 - 18:30 | Link to Comment glenlloyd
glenlloyd's picture

That's some serious rose coloration going on....i mean seriously.

Fri, 12/31/2010 - 11:36 | Link to Comment lexalexander
lexalexander's picture

Well, here it is, 12/31/10. And how many of these predictions have come true? Let's see:

 

1) 5% real growth? No. Unemployment below 9%? No. S&P 500 earnings $80+? No.

2) Fed funds rate at 2% by year-end? Uh, no.

3) 5.5%+ yield on 10-year Treasuries? As of 1015 EST 12/31 it was at 3.3%.

4) S&P index at this same moment is at 1255.33, a few dollars shy of its 52-week high. So, 1015.10? Uh, no.

5) The USD exceeds 100 on the yen? No: At no point in the past 52 weeks has it done so,  and it's currently at 81.225. Euro drops below $1.30? It did during the summer, but it's back up to $1.3397 this morning.

6) The Nikkei 225 over 12,000? Unless you're playing horseshoes and hand grenades, no. The 52-week high was 11,408, and the most recent close was 10,228.92.

7) Congress enacts breaks for nuclear plants? No. In fairness, Obama does seem to be leaning somewhat in that direction, and philosophically, the new House majority probably favors such a move as well. The question is, will Congressional Republicans approve, or even forcefully support, anything that will allow Obama to claim even a modicum of victory? That remains to be seen, but Congressional GOP behavior during the recent lame-duck session does not give one cause for optimism.

8) There was no reorganized White House, there was no regained Democratic momentum, and the only reason the Republicans didn't take back BOTH houses of Congress is that the Republicans nominated some Senate candidates who were so batshit insane that even Republicans couldn't stomach them. Yeah, Christine O'Donnell and Joe Smith, I'm talking to you.

9) Finreg was softer than feared, but financial performance hasn't been substantially affected because finreg was never an issue. Demand was. And demand still sucks.

10) Half-credit. The dissent predicted in Iran hasn't materialized. The problems predicted in Pakistan have, although so far as we know (and we shouldn't bet we know everything), things haven't yet reached a boiling point.

So, to the surprise of pretty much no one reading here, Wien's batting average was .050. In the big leagues, you need a 100 mph fast ball and a curve that can open your beer bottle for you to stick to a roster with an average like that. Speaking of beer bottles, how many did he open before writing this stuff?

 

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