Kass: Checking In on Surprises Past

Surprise No. 9:

Several high-profile housing-related bankruptcies occur in 2008, including Countrywide Financial, Beazer Homes (BZH Quote), Hovnanian (HOV Quote), Standard Pacific (SPF Quote), WCI Communities (WCI Quote) and Radian Group (RDN Quote).

WCI filed bankruptcy yesterday.

Surprise No. 20:

The politics of trade become more fractious (even in the Republican Party) as angst about globalization escalates in the U.S., reflecting inequalities and a cyclical contraction in our domestic economy. Doha dies.

Trade talks have broken down.

Surprises for 2007

Surprise No. 4:

The continued heavy cancellations of home contracts -- which are included in the government releases on homes sold and lead to an erroneous inventory of unsold units for sale -- lead to:

• a dumping of homes on the market in the spring;
• a quantum increase in the months of unsold housing inventory; and
• a dramatic drop in the average home selling price.

Sales of existing and new homes take another sharp leg lower as we enter what I've dubbed "The Great Housing Depression of 2007."

Importantly, the financial intermediaries that source mortgage financing/origination begin to feel the financial brunt of "The Great Mortgage Bubble of 2000-06" after years of creative but nonsensical, low- or non-documented lending behavior.

Res ipsa loquitur.

Surprise No. 5:

Foreclosures steadily rise over the course of the year to nearly 3 million homes in 2007 vs. about 1.2 million in 2006. Deep cracks in the subprime market spread to other credits in the asset-backed securities market as a lumpy and uneven period of domestic economic growth takes its toll. In a similarly abrupt and dramatic manner, credit spreads fly open and revert back to mean valuations, as previously nonchalant investors are awakened to the reality of credit risk.

Res ipsa loquitor (part deux).

Surprises for 2006

Surprise No. 11:

Year 2006 brings three large-scale Long Term Capital-like failures (but not in U.S.-based institutions) -- two in Asia and one in Europe -- precipitated by an astonishingly large derivative loss that two major U.S. and several overseas money center banks are partially on the hook for.

The banking industry is now littered with disasters as financial writedowns move toward a trillion dollars.

Surprises for 2004

Surprise No. 17:

SunTrust (STI Quote) distributes its 122 million shares of Coca-Cola (KO Quote) in a secondary offering.

Reflecting the need to shore up its capital base, SunTrust has disposed of nearly 50 million shares of its much-coveted Coca-Cola stock position.

Doug Kass writes daily for RealMoney Silver, a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass' daily trading diary, please click here.