Thursday, January 05, 2012

Byron Wien's Surprises of 2012

Byron Wien, vice chairman of Blackstone Advisory Partners, yesterday published his list of surprises for 2012 -- following a 25-year tradition he began while still chief U.S. investment strategist at Morgan Stanley.

Byron defines a "Surprise" as an event which the average investor would only assign a one out of three chance of taking place but which Byron believes is "probable," having a better than 50% likelihood of happening: 

The Surprises of 2012 (first four): 

1. The extraction of oil and gas from shale and rock begins to be a game changer. The price of oil drifts back to $85 a barrel and the United States becomes less dependent on Middle East supply. Deposits in Poland, Ukraine and elsewhere prove promising as well.  Increased production from Libya and Iraq and reduced demand resulting from the slowdown in world-wide economic activity contribute to the price decline. 

2. Earnings for American corporations continue to move higher driving the Standard & Poor's 500 above 1400. Raw material prices continue soft and business leaders successfully adjust to slower economic growth by using technology to reduce the labor and logistical component of goods and services sold; profit margins stay high. 

3. The U.S. economy gets its second wind. Real growth exceeds 3% and the unemployment rate drops below 8%. Recession fears and even "the new normal" view of prolonged slow growth are called into question.  Capital spending, exports and the consumer drive the economy, overcoming fiscal drag. The drop in the price of oil and the rise in the stock market improve both consumer confidence and spending patterns. 

4. The recovering economy and the declining unemployment rate help President Obama convince the voters that he didn't do such a bad job in his first term after all. He is viewed as a good speaker but a poor leader who is running against Mitt Romney, viewed as uninspired and whose positions on many issues are unclear. Democrats take back the House of Representatives but lose the Senate in an anti-incumbent wave.

HT: Tom Keyes

22 Comments:

At 1/05/2012 3:24 PM, Blogger juandos said...

Now Byron Wein is pimping for the Manchurian Candidate?!?!

 
At 1/05/2012 3:30 PM, Blogger pkd said...

"Both defense and Medicare are cut significantly; subsidies for agriculture are reduced and tax deductions for oil, gas and real estate partnerships are modified."

I'd like whatever he's smoking!

 
At 1/05/2012 3:34 PM, Blogger morganovich said...

note that byron has an appalling track record with these.

let's look at some gems from last year:

The continuation of the Bush tax cuts coupled with the extension of unemployment benefits has put all working Americans in a better mood. Real Gross Domestic Product rises close to 5% in 2011 driven by improved trade and capital spending in addition to stronger retail sales

The prospect of increasing Federal budget deficits and rising government debt finally begins to weigh on the bond market. The yield on the 10-year U.S. Treasury approaches 5% as foreign investors become more demanding. Spreads with corporate fixed income securities narrow.

Encouraged by renewed economic momentum the Standard & Poor’s 500 rises close to its old high of 1500

etc, etc.

good for a laugh, but invest at your peril.

 
At 1/05/2012 3:58 PM, Blogger juandos said...

You called it m...

From Zer0Hedge on Wien's 2010 calls: Byron Wien's Prediction Track Record: Zero Out Of Ten

Also at Zer0Hedge from two days ago: Time To Fade Byron Wien Again: Here Are Brontosaurus Rex' Predictions For 2012

 
At 1/05/2012 4:06 PM, Blogger sethstorm said...


3. The U.S. economy gets its second wind

4. The recovering economy and the declining unemployment rate


If that happens, it will be a surprise- one that is not likely to happen at even the 33% level. The reduction of work without a requisite replacement of work - for those unemployed - does not count as a recovery. Such reductions are only sweeping the problem under the rug; various unfounded excuses of uncertainty, competitiveness, and skill deficiencies not addressed by businesses training them out.

 
At 1/05/2012 4:14 PM, Blogger Benjamin said...

Yeah, well if the Fed would just go along, instead of passively tightening the monetary noose around the USA economy's neck, then even more good stuff could happen.

The theo-monetarists, who genuflect to gold and worship currency, are still the biggest threat to US economic growth and security.

The Market Monetarists offer true (economic) salvation.

For divine salvation, join Rick Santorum's crusade!!!

 
At 1/05/2012 5:22 PM, Blogger arbitrage789 said...

Any idiot can see that the Dems will lose the Senate.

But win back the House? That is indeed a bold call... but I don't think he's right about that

 
At 1/05/2012 5:40 PM, Blogger PeakTrader said...

I doubt the country will get 3% real growth in 2012.

However, if we do, we'll still underproduce by another $900 billion in 2012.

According to Krugman (in August 2011): "The cumulative loss (from the output gap) since the recession began is almost $2.8 trillion."

By the end of 2012, about $4 trillion of output will be lost in five years, while the national debt increased $4 trillion in the past three years.

It seems likely Romney will win, the GOP will gain lots of Senate seats, and even gain more House seats.

 
At 1/05/2012 5:43 PM, Blogger Paul said...

"For divine salvation, join Rick Santorum's crusade!!!"

~The moron who was swept up in Obama's cult-of-personality campaign in 2008

 
At 1/05/2012 5:49 PM, Blogger Paul said...

4. The recovering economy and the declining unemployment rate help President Obama convince the voters that he didn't do such a bad job in his first term after all.

Sure, what's $4-5 trillion in debt added when he has so much to show for it!

 
At 1/05/2012 5:57 PM, Blogger PeakTrader said...

Charts of the output gap:

http://voices.washingtonpost.com/ezra-klein/outputgap.jpg

http://voices.washingtonpost.com/ezra-klein/ouyputhap2.jpg

 
At 1/05/2012 6:55 PM, Blogger Brad D said...

No way Dems take the House of Reps. Repubs will take the Senate, and have a 60-40 shot of taking the WH.

 
At 1/06/2012 7:21 AM, Blogger Xieouyang said...

It's amusing to see the press swallow and publish these predictions as if they were any good. A look at his track record, as pointed out by other commenters, clearly shows that he is nothing but a charlatan who happens to be in a powerful position so it's thought that he must know something that nobody else does.

 
At 1/06/2012 10:10 AM, Blogger juandos said...

"It seems likely Romney will win, the GOP will gain lots of Senate seats, and even gain more House seats"...

Hopefully Gingrich's actions will derail Obama Lite...

 
At 1/06/2012 10:14 AM, Blogger juandos said...

"But win back the House? That is indeed a bold call... but I don't think he's right about that"...

For what its worth a789 you can take a look at the Charlie Cook guesstimates on yourcall...

 
At 1/06/2012 10:27 AM, Blogger VangelV said...

1. The extraction of oil and gas from shale and rock begins to be a game changer. The price of oil drifts back to $85 a barrel and the United States becomes less dependent on Middle East supply. Deposits in Poland, Ukraine and elsewhere prove promising as well. Increased production from Libya and Iraq and reduced demand resulting from the slowdown in world-wide economic activity contribute to the price decline.

I guess that Byron has not been paying attention to shale gas. The average producer can't make a profit at less than $7.50 gas and the biggest shale gas player in the US has announced a transition away from gas towards liquids. For the record, the transition is not helping much because Chesapeake is still chewing through capital and dependent on external financing.

2. Earnings for American corporations continue to move higher driving the Standard & Poor's 500 above 1400. Raw material prices continue soft and business leaders successfully adjust to slower economic growth by using technology to reduce the labor and logistical component of goods and services sold; profit margins stay high.

Wien is saying that the rail report of a massive increase in raw material shipments is an anomaly. He forecasts prices to be soft. I guess that he expects world activity to slow down but the US to be chugging along. But if their primary consumer is still doing well why would India, Brazil, and China slow down much if at all?

3. The U.S. economy gets its second wind. Real growth exceeds 3% and the unemployment rate drops below 8%. Recession fears and even "the new normal" view of prolonged slow growth are called into question. Capital spending, exports and the consumer drive the economy, overcoming fiscal drag. The drop in the price of oil and the rise in the stock market improve both consumer confidence and spending patterns.

Given the tax and regulatory uncertainty there is no case to be made for a sustained increase in capital investment by business.

4. The recovering economy and the declining unemployment rate help President Obama convince the voters that he didn't do such a bad job in his first term after all. He is viewed as a good speaker but a poor leader who is running against Mitt Romney, viewed as uninspired and whose positions on many issues are unclear. Democrats take back the House of Representatives but lose the Senate in an anti-incumbent wave.

If Romney is the candidate Obama certainly could win because there is very little difference between the two. A more interesting scenario is Santorum winning and destroying the GOP as the Democrats are chosen as the lesser of two evils by angry voters who want neither of the two mainstream candidates.

 
At 1/06/2012 10:56 AM, Blogger Hydra said...

The reduction of work without a requisite replacement of work - for those unemployed - does not count as a recovery.


==============================

The end of Peak Work?

 
At 1/06/2012 10:58 AM, Blogger Hydra said...

Given the tax and regulatory uncertainty there is no case to be made for a sustained increase in capital investment by business.


==================================

There are certain to be taxes and certain to be regulations.

Where is the uncertainty?

 
At 1/06/2012 1:33 PM, Blogger morganovich said...

"There are certain to be taxes and certain to be regulations.

Where is the uncertainty?"

wow. i presume you are joking?

 
At 1/06/2012 5:12 PM, Blogger sethstorm said...

This comment has been removed by the author.

 
At 1/06/2012 5:57 PM, Blogger sethstorm said...


Given the tax and regulatory uncertainty there is no case to be made for a sustained increase in capital investment by business.

No longer a valid excuse.

It's been over 2 years, and one would have to be outright un-American to claim the existence of uncertainty.

 
At 1/06/2012 6:57 PM, Blogger VangelV said...

It's been over 2 years, and one would have to be outright un-American to see that the uncertainty problem is gone.

Not true. Nobody knows what the regulatory burdens will look like over the next decade. If I am going to build a factory I need to know how the healthcare legislation will effect me but any sort of certainty on that front is years away. The same is true of labour laws, corporate taxes, the effects of reform, etc. Obama and his people have been playing the anti-rich card with 'rich' being defined as anyone who earns $250K per year. Why should anyone risk savings opening up a business if the environment is hostile to businesses?

This is exactly what happened during the Great Depression when capital was consumed as depreciation exceeded new investment. It took the death of FDR and demobilization of the military to begin a true recovery more than a decade and a half after the contraction first began.

 

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