Byron Wien Announces Ten Surprises for 2008
 

WESTPORT, Conn., Jan 02, 2008 (BUSINESS WIRE) -- Byron R. Wien, Chief Investment Strategist of Pequot Capital Management, Inc., today issued his list of Ten Surprises for 2008. Mr. Wien has issued his economic, financial market and political surprises annually since 1986. The 2008 list follows:

1. In spite of Federal Reserve easing, and other policy measures, the United States economy suffers its first recession since 2001 as housing starts stay soft and banks are reluctant to lend to anyone where a whiff of risk is apparent. Federal funds drop below 3%. The unemployment rate moves definitively above 5% and consumer spending is lackluster.

Note1: Federal Fund Rate dropped 0.75 from 4.25 to 3.50 on Tuesday, Jan 22, 2008;
                         dropped 0.50 from 3.50 to 3.00 on Wednesday, Jan 30, 2008;
                         dropped 0.75 from 3.00 to 2.25 On Tuesday, Mar 18, 2008;

Note2: The unemployment rate was 5.1% As of Friday, Apr 18, 2008(close of day).

2. Standard and Poor\'s 500 earnings decline year-over-year and the index drops another 10%. Energy and materials stocks hold up relatively well in what is viewed as a correction rather than a bear market. Market conditions start to improve during the summer.

3. The dollar strengthens in the first half reaching $1.35 against the euro and weakens in the second exceeding $1.50. The European Central Bank begins an accommodative monetary policy. Foreign investors flock in to buy cheap assets in the U.S. early in the year but the dollar declines later as several countries holding large reserves diversify into other assets.

4. Inflation rises above 5% on the Consumer Price Index as higher commodity prices and oil finally begin to have an impact in spite of modest wage increases. The 10-year U.S. Treasury yield rises to 5%. Stagflation becomes a frequent presidential campaign and Op-Ed discussion topic.

Notes: The CPI-U increased 0.5% and was 4.3% higher than in Jan. 2007.
                 increased 0.3% and was 4.0% higher than in Feb. 2007.
                 increased 0.9% and was 4.0% higher than in Mar. 2007.

       CPI-U means Consumer Price Index for All Urban Consumers]

5. The price of oil goes down early in the year and up later, sinking to $80 a barrel in the first half as western economies slow and inventories are drawn down, and rising to $115 in the second. Established wells continue to decline in production while China, India and the Middle East increase their consumption.

Note1: oil price seems go up all the time, it was $116.54 per barrel on Apr 18, 2008 at New York market.

Note2: oil price went down sharply after the global economic ressession; it was $33.87 per barrel on Dec 19, 2008 at Nymex January West Texas Intermediate price.

6. Agricultural commodities remain strong. Corn rises to $6.00 a bushel and cotton to $.85 a pound. Gold reaches $1000 an ounce as disillusionment with paper currencies spreads across Asia.

Note: On Monday, Mar 17, 2008, Gold soared to a new record high of $1030 during trading before closing at $1,022 in New York market, still well above the $1,000 high
it hit last week.

7. The recession in the United States slows the Chinese economy modestly but its stock market declines sharply. Investors recognize that paying biotechnology stock multiples for highly cyclical companies doesn\'t make sense. The Chinese revalue the renminbi by another 10% to control inflation and as a gesture to foreign governments participating in the Olympic Games who complain that Chinese terms of trade are unfair. Several long distance runners refuse to compete in certain Olympic events because of continuing air pollution problems.

8. The new Russian President Dmitry Medvedev, under the tutelage of Vladimir Putin, becomes more assertive in world affairs. He insists that Russian oil and gas be paid for in rubles and demands a Russian seat at major world conferences. Russia and Brazil stock markets lead the BRICs. The Gulf Cooperation Council markets begin to attract interest among emerging market investors.

9. Infrastructure improvement becomes an important election theme for both parties and construction and engineering stocks rally in anticipation of huge programs beginning after the new President\'s inauguration. Water becomes a critical problem world-wide and desalination stocks soar.

10. Barack Obama becomes the 44th President in a landslide victory over Mitt Romney. With conditions in Iraq improving, the weak economy becomes the determining issue in voters\' minds. They want to make sure that gridlock ends and Congress gets something done for a change. The Democrats end up with 60 Senate seats and a clear majority in the House of Representatives.

Notes: On Feb 5, McCain finished off Romney with sweeping SuperTuesday wins; on Mar 4, Huckabee conceded, allowing McCain to become the GOP nominee. On Nov 4, Obama beat McCain & became the President for Year 2009-12. Following is the result on Nov. 7:

Mr. Wien believes these surprises, which the consensus would assign only a one-in-three chance of happening, have at least a 50% probability of occurring at some point during the year. In previous years, more than half of the elements of the list have proven correct.

Pequot Capital Management is a private investment firm.

SOURCE: Pequot Capital Management, Inc