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Kass: Gold Among Worst Asset Classes of New Year

Just when you thought it was safe to turn on the lights – there’s Doug Kass blowing into his noise maker and yelling,"Surprise!"

We know what you’re thinking… we shouldn’t have been startled.

All month long Kass, a widely followed strategist and president of Seabreeze Partners,has been revealing new surprises from his annual list of Surprises for 2011 on CNBC’s Fast Money.

The latest follow.

SURPRISE #9

Looks like gold bugs are about to encounter some pretty strong insecticide in the guise of falling prices.

"My first forecast is contrary to the high price forecasts by many of the brokerages," he says.

Next year Kass expects the price of gold to plunge $250 an ounce in a 4 week period with gold counted among the worse performing asset classes in the new year.

Sure you can point to a slew of catalysts to take gold higher (deflation, inflation, peace, turmoil) but Kass thinks another catalyst trumps all others– too many bulls and not enough bears.

”The price of gold has risen from about $250/oz eleven years ago to about $1370/oz today - compounding at over a 16% rate annually,” he tells our producers ahead of the broadcast.

"As a result, investing in gold has become the sine qua non for hedge hoggers and other institutional investors - and in due course gold has become a favored investment among individual investors."

Simply stated gold has become a crowded trade. "Wide prices swings are what to expect in 2011," he counsels.

SURPRISE #10

J Edgar Hoover’s pursuit of John Dillinger may look like small potatoes when compared to this next surprise.

According to Kass, expect an insider trading probe that ends with a quite a sting, the likes of which Wall Street probably has never seen.

He says that next year, “several well-known long-only mutual funds (will be) implicated in the sting, which reveals that they have consistently received privileged information from some of the largest public companies over the past decade.”

The consequences, he says, will be widespread and severe.

Expect, “the largest hedge and mutual funds, to go into temporary lock down mode as the hedge fund community's trading activity freezes up.”

"That's going to hurt companies like Morgan Stanley, Goldman and the Merrill Lynch unit of BofA ," he tells the traders.

Yes, we realize this prediction is a little over the top. We also realize that Kass is known to lean toward the bearish side and both of these predictions reflect that pessimism. In fact almost all of his Surprises for 2011 have been negative.

But when Doug speaks, we listen -- largely because he’s had an uncanny track record for being right.

Less than a week before the S&P 500 hit a generational low of 676 on March 9, 2009, Kass went on CNBC and predicted the bottom. Also, on July 6, 2010, he said the market had made its lows for the year and so far, that has also proved to be true.

And when we asked him on December 20th if he was growing ever more skeptical of the rally he told us "I'm getting increasingly bearish, yes."

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Doug Kass
Doug Kass



As you probably know, Doug Kass has been revealing his 'Surprises for 2011' all month long on CNBC’s Fast Money.

Click below for past surprises already revealed on Fast Money



>Doug Kass: Market Ends 2011 At Same Levels As 2010> Doug Kass: This Giant Tech Takeover, A 2011 Surprise
> Doug Kass: Shortage of 'This' Could Roil 2011 Markets
> Doug Kass: Jaw Dropping Prediction For 2011


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* In all fairness Kass divides his predictions into 2 categories possible and probable. Although he didn't say - the insider trading prediction probably falls in the possible category while gold may be somewhere between the possible and probable.




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Trader disclosure: On December 20, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL), (BAC), (FXI); Terranova owns (CRM), (VRTS), (C), (UPL), (PEP), (GS), (OXY), (NKE); Terranova owns Gold puts; Adami owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Adami's wife works at (MRK); Pete Najarian owns (BBY) calls; Pete Najarian owns (C); Pete Najarian owns (GE); Pete Najarian owns (MS); Pete Najarian owns (PFE); Pete Najarian owns (V) call spreads; Pete Najarian owns (YHOO)

For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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CARTER WORTH
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MIKE KHOUW
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BARRY RITHOLTZ
Ritholtz has no disclosures on (AAPL) or (NFLX)

DOUG KASS
Kass has no disclosures on gold

JOE LAVORGNA
LaVorgna has no disclosures

RICH GREENFIELD
***NO DISCLOSURES ON TWX, VZ, GOOG, MSFT, CVC, DWA, RGC

ALEX HAMILTON
Hamilton has no disclosures.

JOE TERRANOVA FAST FIRE SOT
Terranova did not own eBay on 11/24/2010

Late addition:
Seabreeze Partners Management owns (BAC)

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