Pequot’s Wein Seen 33% Rise In S&P

Posted by Bob O'Brien
‘TOP 10 SURPRISES’ SURPRISINGLY DELIGHTFUL FOR BULLS

The John Milton-esque "paradise lost" feeling that pervaded Wall Street for 2008 is going to give way to something more ebullient in 2009. At least according to Byron Wein of Pequot Capital Management, who said that the base of "investor despondency" that characterized last year’s investing climate, prompting investors to bemoan their lost fortunes, should turn on its head in 2009, when the sense that there’s fortunes still to be made should reign paramount.

Wein’s got a good track record on his side, stretching back to his days as one of Morgan Stanley’s armada of strategists. He predicted the 2008 recession in last year’s outing of his annual "10 Surprises" listing, and forecast a down market, although he missed the magnitude by a wide measure. (Never give the direction and the target in the same forecast, it says in the strategists’ handbook.) He insists that his surprises have about a one-out-of-two chance of being realized.

Would that he’s right, the bulls will tell you. Especially since Wein is calling for a 33% jump from the S&P’s 2008 close, which would carry the index to the 1200-point territory, which - granted - only gets us back to where the market stood in late September, when the S&P got launched on a downleg that obliterated one-third of its value in a span of two months.

One caveat: the economic recovery that would underpin the rally is back-end loaded for the year, not evidencing itself until the second half. Nevertheless, as Wein noted, "the mantra changes" for investors.

Among his other forecasts:
Gold goes to $1200 an ounce on strong buying by Middle Eastern investors fed up with paper currency.
The U.S. dollar goes on a ‘’serious downward spiral" fueled by huge borrowing on the part of the Treasury.
Oil prices return to about $80 a barrel for crude.
The 10-year Treasury yield reaches 4%, as economic worries about inflation give way to concerns about inflation.
The state of New York, starved of tax revenue from the financial services industry, threatens bankruptcy.
House prices drop 15% from year-end 2008, but start a sooner-than-expected recovery in the second half of the year.