I Wish I was That Optimistic

Doug Kass published his list of possible surprises for 2009 here. I'm reading his annual lists with great interest for several years. What can I say, his 2008 list was great! Unfortunately, there was no deflation in it. And Doug still hasn't recognized deflation as the main current event.

That's the main problem with this list. Surprises 2-6 are contingent on great success of government house market rescue program. Never mind that this program has to be approved by Congress somehow, it's just doesn't exist. I have very high opinion of Larry Summers, I think he is the greatest economist alive, but he doesn't live on mount Olympus and doesn't have supernatural powers. I just don't see how any program can save housing market in the 2nd quarter of 2009. Maybe bulldozing the whole neighborhoods? A lot of them? Of course, lower mortgage rates can help. First of all they would help people who have good credit rating, have a house they can afford and wants to refinance. Give me 4.5% and I refinance. Unfortunately, that would do nothing for the housing market. It would put some more money into hands of people who won't spend them anyway.

Surprise 1 is interesting, but I don't see how to make money off it.

Surprises 7-9 and 11 completely contradict idea of housing market recovery and stock market boom.

Surprise 14 is, again, contingent on recovering economy. Even then, Microsoft is not buying Yahoo!. Somehow I believe Ballmer that they are not interested. Some deal is possible, but Microsoft doesn't sit on a pile of cash anymore, it doesn't have 20 billion ready. It might be able to raise money, but I don't see a reason why. Again and again most analysts, traders and investors make the same mistake: merger of software or internet companies is not 1980s style corporate merger. Software and 'net companies have most of their real value in people, not in equipment and real estate. If you buy Yahoo and dismantle it, you get less than you paid. Much less.

Surprises 18 and 19 are long overdue. It might be a good time to short remaining newspapers. Deadwood press is becoming obsolete.

And surprise 20 is really no surprise. Middle East build up is a real bubble. Need to think if there is some money to be made here.

Full disclosure: at the time of publication author did not have positions in any companies mentioned. Positions can change any time.