Doug Kass
This blog post originally appeared on RealMoney Silver on Dec. 26 at 7:33 a.m. EST.
Next week I will issue my list of surprises for 2008 -- and I will also publish my own review of how well or poorly my surprises fared for this year. But before I do, let's examine James Altucher's bold critique of my list from last year. I was really appreciative of his effort, and I hope that he does the same this year in response to next week's column. Generally speaking, Altucher thought I went out on the limb in a number of my surprises. I did, I always do -- that is why they are called surprises! Altucher was correct in suggesting that Goldman Sachs (GS Quote - Cramer on GS - Stock Picks) did not go private -- there were extraneous credit issues that negated this one! -- and that Citigroup (C Quote - Cramer on C - Stock Picks) failed to split up. He did, however, expect a continuation of large private equity deals and successes into 2007; I vehemently disagreed and wrote that "the fractured mortgage markets will lead to a standstill in deal making as the capital markets (and underwriting activity) will seize up!" The above was my most important surprise, and maybe my most important contribution to RealMoney to date. "The great housing depression of 2007" and the anticipation of instability in the credit markets -- specifically for asset-backed securities -- were probably my best calls in years.
Altucher disagreed strenuously on both issues. He couldn't see how low interest rates and a continuing economic expansion could do anything but stabilize the housing market, and he felt that "enough hedge funds and banks are short the subprime tranche that a short squeeze would buffer any fall."
We now know that housing and subprime were the biggest news items in finance for 2007. The "doomsday scenario" in the derivatives market I envisioned came through despite Altucher's protestations against this surprise.
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