Wien 'surprises' include stock rally, unemployment drop, hacker attack

January 04, 2012

Byron Wien has been publishing a New Year's list of possible economic and political "surprises" for years, often with impressive results. The idea is to identify events that are likely to happen but that the market believes have a low probability of occurring -- and that are therefore mispriced. Since the consensus outlook for 2012 is pretty miserable, most of his surprises are positive. 

Wien is calling for oil to fall to $85 a barrel, for gold to return to $1,800 or for stocks to surpass 1,400 as measured by the S&P 500. Some of these would seem to be mutually exclusive. It's very hard to imagine 3 percent U.S. growth and $85 crude happening simultaneously. But Wein isn't saying all 10 predictions will come true. He's saying that many of these are likely to happen.

Here is Bloomberg's gloss:

The former senior strategist for Morgan Stanley said a year ago that the nation’s unemployment rate (USURTOT) would drop below 9 percent, which happened in November. He forecast gold would surge above $1,600 an ounce and the price of oil would climb to $115 a barrel. The precious metal rose to a record $1,923.70 an ounce while crude futures advanced to $114.83 a barrel.

Wien says his list is made up of events that investors assign 1-in-3 odds of happening but that he says are more than 50 percent likely to occur.

Here are Wien's top 10 surprises for 2012, as recounted by Bloomberg. The one about $1,800 gold was a bonus prediction. 

1.) Crude oil falls to $85 a barrel.
2.) S&P 500 exceeds 1,400.
3.) U.S. real GDP growth exceeds 3%, unemployment rate drops
below 8%.
4.) Barack Obama runs against Mitt Romney for president,
Democrats win House, lose Senate.
5.) Europe develops a broad plan to solve the sovereign-debt
crisis. Greece and Italy restructure their debt. Spain and
Ireland strengthen their finances. A bank meltdown is avoided.
European economy contracts.
6.) Computer hackers attack major financial institutions.
7.) Investors buy currencies of countries “that seem to be
managing their economies sensibly,” such as nations in
Scandinavia, Australia, Singapore and Korea.
8.) Congress reduces the U.S. debt by $1.2 trillion over 10
years, with cuts to defense, Medicare and agricultural subsidies
as well as some tax deductions.
9.) Syrian President Bashar al-Assad is ousted.
10.) Stock indexes in China, India and Brazil surge 15%-20%

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