Stocks, Dollar, Buffett & Tiger: Kass' 20 Predictions for 2010
Year-end is high season for market and economic outlooks. Douglas Kass, founder and president of Seabreeze Partners Management shared his 20 predictions for 2010 with CNBC on Monday.
1. Corporate profits soar 100% in the first quarter of 2010 from a year ago, while GDP jumps 4.5%.
2. Housing and jobs fail to revive.
“Modest gains in jobs,” Kass told CNBC in a live interview. “Real rates will ratchet higher. We’re starting to see it. It’s one of those due bills from the nation whose deficit is growing in a spectacular fashion.”
3. The U.S. dollar explodes higher.
4. The price of gold topples.
“Gold is going to break $900," he said. "It’s one of the most crowded trades.”
5. Central banks tighten earlier than expected.
"We might see a policy mistake—everyone’s concerned about it," he said. "I think we’ll follow China. China’s already trying to stem the property speculation…So one of the surprises will be a much earlier increase in the Fed funds rates than generally expected.
6. A Middle East peace is upended due to an attack by Israel on Iran.
“What will cause a correction is something that no one’s thinking about. And when I distill all the possible uncertainties that will break the disequilibrium, geopolitical is uppermost in my mind,” he said.
7. Stocks drop by 10% in the first half of next year.
“If we look at the consensus forecast, they’re really clustered in a narrow range," said Kass. "We get a decline and the first surprise is that corporate profits double in the first quarter and then you have an exogenous event, which hurts the market and then we get nothing for the second half of the year.”
8. Goldman Sachs goes private.
“With Warren Buffett assisting," he said. Kass predicts that Goldman Sachs stock will drop back to $125 to $130 a share, within $15 of the warrant exercise price that Warren Buffett received in Berkshire Hathaway's late 2008 investment in Goldman Sachs.
9. Second-half 2010 GDP growth turns flat.
10. Rate-sensitive stocks outperform; metals underperform.
11. Treasury yields fall.
“They will peak in the first quarter—4-4.25—not much more than they are now," he said. "And they drop with slowing growth.”