Hedge fund manager keeps his 21-year tradition of penning top surprises for the new year.
Will gold climb to $3,000 an ounce by late next year? Will the forecast for a first-half-of-2023 downturn and a second-half upturn be flipped on its head? Will oil make a surprise rally in the second half of the year?
Those would all be big surprises, right?
But shouldn’t we be used to surprises by now? Shouldn’t we even be bracing for them? Indeed, as we say goodbye to 2022, one thing is clear: It was a year of “boundless surprises.”
So writes Real Money’s Doug Kass, the well-known hedge fund manager who for decades has penned his annual “Surprises” list in his Daily Diary on Real Money Pro.
2023 Surprises Revealed
For those willing to hear a different — anti-group think — view, Kass has plenty of bets for what could happen over the next 12 months, including Elon Musk saving Twitter at the expense of Tesla (TSLA) – Get Free Report, a shock Apple (AAPL) – Get Free Report merger, a major plummet in Bitcoin’s (~BTCUSD) value and those predicted jumps in gold and oil.
“It was the broad accuracy of my generally downbeat Surprises in 2022 that supports the very reason and rationale why I annually conduct this exercise–as the consideration of my mostly negative Surprises would have saved traders and investors a great deal of money and, alternatively, adopting the notion of some of my Surprises in one’s portfolio could have made traders and investors a lot of money,” writes Kass in his 4,000-word-plus “Surprises” entry. “The purpose of my Annual List is to get readers to think more deeply about a variety of issues.”
It all started 21 years ago, when Kass prepared a list of possible surprises for the coming year, taking a page out of the playbook of his friend and former Morgan Stanley chief investment strategist Byron Wien. Kass spends around a month on the list, whittling it down from about 40 surprises, usually to 15, but this year to 10, with five “also-rans.”
The Accuracy of Last Year’s List
Just how right was Kass in his outlier views for 2022? Four of his five key predictions proved correct, such as his bet that Fed Chair Jerome Powell would turn hawkish but have little luck putting a dent in rising prices over the year (any active investor who also does the grocery shopping can attest to that) or that after an early 2022 rally to new highs, the stock market would roll over (enough said).
Kass also wrote in December 2021 that in the following year Amazon’s (AMZN) – Get Free Report Jeff Bezos and Elon Musk would set records for the biggest loss of personal fortune in a single year, that value stocks would materially outperform growth stocks, and that China’s economy would worsen relative to even the low expectations of the time.
Of course, Kass had some predictions, especially political ones, that didn’t pan out.
But, as Kass notes, the real purpose of his “Surprises”–though a wild ride to read–is a practical one, to “consider positioning a portion of my portfolio in accordance with outlier events, with the potential for large payoffs on small wagers/investments.”
Kass also reminds readers that his “Surprises” are not forecasts, but are potential events with a greater than a 50% chance of occurring–but which are deemed deeper outlier events with only a probability of 25% or less relative to consensus expectations. “In other words,” writes Kass, “my Surprises are anti-‘Group Stink.’”
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