This blog post originally appeared on RealMoney Silver on March 31 at 8:31 a.m. EDT.

"Never make predictions, especially about the future." -- Casey Stengel

At today's close, we will conclude 2008's first quarter, so it's time to begin evaluating my

surprise list

for 2008.

In late December/early January of the past five years, I have taken a page from former Morgan Stanley strategist Byron Wien (now the chief investment strategist at Pequot Capital Management) and prepared a list of possible surprises for the coming year.

The real purpose of this endeavor is to consider positioning a portion of my portfolio in accordance with outlier events -- with the potential for large payoffs. After all, Wall Street research is still very much conventional and "groupthink," despite the reforms over the past several years.

Mainstream and consensus expectations are just that, and, in most cases, they are deeply imbedded into today's stock prices. If I succeed in at least making you think about outlier events, then the exercise has been worthwhile.

Last year's (2007) surprise list was our most accurate ever. It wasn't the quantity of the correctly predicted surprises that made

2007's list

a remarkable success; it was the quality, as I hit on nearly every major variant theme -- the severity of the housing depression, the turmoil and writedowns in the credit markets, the curtailing of private equity deals and the reawakening of equity market volatility.

The 2008 list could prove even more prescient -- and, importantly, could have saved investors quite a bit of money (especially by avoiding the finance sector). With one quarter of the year now over, here are my grades for my surprises for 2008:

1. The Housing Depression of 2007 morphs into the Retail Spending Depression of 2008. Stubbornly high inflation coupled with a deceleration in the rate of job growth, which turns into job losses by midyear, and an absence of innovation (a creativity void in consumer electronic products and apparel), leads to an unprecedented and abrupt drop in personal consumption expenditures.The Retail HOLDRs (RTH) - Get Report exchange-traded fund declines to $80 from $94. Despite their apparent "value" today, retail stocks, especially women's apparel, are among the worst-performing stocks in the first half of 2008.

Grade B+:

The Retail HOLDRs declined a swift $10 during the first two weeks of January and has recently rallied back to about $90. More importantly, the evidence suggests that the housing problem has clearly begun to affect personal consumption and retail stocks have been among the worst-performing market sectors to date.

2. Under pressure from slowing consumer spending, disappointing capital spending and higher commodities, corporate profits drop by 10% in 2008. Importantly, the pattern of economic activity grows increasingly inconsistent and lumpy, providing a difficult backdrop for corporate managers and investment managers to navigate.

Grade B+:

During the last few months, corporate profit forecasts have been cut in the face of slowing retail sales, reduced capital spending expectations and higher input costs.

3. The S&P 500 falls by 5 to 10% in 2008, and 2007's laggards and leaders continue to be the same laggards and leaders in the coming year.

Grade A:

The S&P has dropped by approximately 10% this year.

4. With a continuation of the credit and liquidity crises and an increased recognition that financial retrenchment will take years (not months), volatility pushes even higher. Daily moves of 1% to 2% become more commonplace, serving to further alienate the individual investor.

Grade A:

Volatility has been the recurring theme of 2008.

5. The Federal Reserve embarks upon a series of moves to ease monetary policy in 2008. Nearly every meeting is accompanied by a 25-basis-point decrease in the federal funds rat,e even despite continued inflationary pressures.Nevertheless, the economy fails to revive as the Fed pushes on a string.

Grade B+:

While the Federal Reserve has been more aggressive than I expected, its impact has been disappointing to most observers. Inflation remains elevated.

6. Growth in the Western European economies deteriorates throughout the year, and the markets in England and France drop at twice the rate of the U.S. market.

Grade A:

The European markets have fallen more swiftly than the U.S. stock market, and their economies have as well.

7. The Chinese juggernaut continues apace, and, despite continued protestations of a market bubble, the Chinese market doubles again in 2008.

Grade F:

Rising inflation, growth fears and a general weakness in emerging markets have crippled the Chinese markets.

8. The Japanese market puts on a surprising resurgence as the world's investors respond to compressed valuations (vis-à-vis peer regions), reasonable multiples (absolutely and against Japanese bond yields), accelerated M&A activity, share buybacks and relative strong corporate profit growth.

Grade C+:

The Japanese market has fallen at half the rate of the U.S. stock market.

9. The administration's proposal to revive the housing market falls on its face (as the housing bust accelerates), and President Bush enlists a well-placed Democrat and former cabinet member to become the U.S. housing czar, who has the primary charge to propose and administer a massive Marshall Plan for housing.Several high-profile housing-related bankruptcies occur in 2008, including Countrywide Financial (CFC) , Beazer Homes (BZH) - Get Report, Hovnanian (HOV) - Get Report, Standard Pacific (SPF) , WCI Communities (WCI) and Radian Group (RDN) - Get Report.

Grade B:

While there were no bankruptcies, there were several bailouts. The housing initiatives have been unsuccessful.

10. Financial stocks fail to recover. No financial company is immune to the eroding market conditions, the spike in market volatility, the uneven direction in commodities and currency prices. Even the leader of the pack, Goldman Sachs (GS) - Get Report, makes several bad bets in the derivative, currency and commodity markets, and its shares begin to underperform its peers as profit forecasts move lower. Citigroup (C) - Get Report halves its dividend, and the shares briefly trade in the mid-$20s. Asset sales and writedowns leave the bank crippled, and in late 2008 (after another capital infusion by Abu Dhabi), Citi is merged with Bank of America (BAC) - Get Report. Its new name is its old name: CitiBank! Bear Stearns (BSC) is acquired by HSBC (HBC) in a take-under (well below today's price) -- as investor Joe Lewis loses nearly $350 million on his near-10% position in the brokerage firm.Mutual fund outflows and uncertainty regarding the integrity of money market funds result in the asset-management stocks being among the worst-performing sectors in 2008. With private-equity deals at a standstill, Blackstone (BX) - Get Report shares trade down close to $10 a share. Late in the year, CEO Stephen Schwarzman and his management group take the company private.

Grade A:

On every account, this surprise was extremely accurate. Goldman Sachs appears to have slipped up; Citicorp markedly reduced its dividend (and its shares are languishing in the low $20s); Bear Stearns


acquired in a take-under, but by

JPMorgan Chase

(JPM) - Get Report

, not HSBC; mutual fund outflows continue apace; and Blackstone's shares are at $15.

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11. With the economy weakening and corporate profits tumbling, investors pay up -- real up -- for growth. The three horsemen -- Research In Motion (RIMM) , Apple (AAPL) - Get Report and Google (GOOG) - Get Report -- move into bubble status, and short interest triples as the naysayers increase their bets. Their shares double in 2008 even as most equities decline.Technology disappoints as it becomes clear by the beginning of the second quarter that "double ordering" inflated recent revenue gains as the weakening consumers' appetite for electronics founders. Rapidly growing biotech names are embraced as their P/Es grow high into the sky and they become the New Big Thing, and market leaders. Housing-centric equities continue to deflate and mop up the rear.

Grade C-:

Not even close!

12. Although private-equity M&A activity remains moribund, 2008 is highlighted by numerous mergers of equals as a weak U.S. economy necessitates the need for a strategy that produces synergies and cuts costs. Yahoo! (YHOO) and eBay (EBAY) - Get Report merge. So do Amazon (AMZN) - Get Report and (OSTK) - Get Report.

Grade B:

Private equity is inactive now, and several medium-sized mergers have been announced.

13. A weakening economy will also hasten a number of divestitures. General Electric (GE) - Get Report will sell NBC Universal to Time Warner (TWX) , which will not sell or spin off AOL.

Grade B-:

General Electric is trimming down but it is not selling NBC Universal.

14. Reversing its recent strength, the U.S. dollar's value falls by over 10% in 2008 (and gold rises to over $1,000 an ounce). Despite the weak domestic economy, foreign reserve diversification efforts and the demand for higher interest rates cause the yield on the 10-year U.S. note to move higher throughout the year.

Grade B:

Our gold and U.S. dollar surprises have already been realized. The yield on the 10-year U.S. note has not increased; it has declined.

15. The price of crude oil, insensitive to a weakening world economy, eclipses $135 per barrel after an "exogenous" event of terrorism, supply disruptions or political upheaval. The $100 level becomes the new $70! Surprisingly, energy stocks react in a muted fashion to the rip in price as, by midyear, the Democratic Party's populist view of a windfall tax on energy companies gains increased acceptance.

Grade B+:

While it's too early to look at the Democratic Party's policy impact on energy stocks, crude moved to $110 per barrel during the first quarter.

16. The Internet becomes the tactical nuke of the digital age. The Web is invaded on many levels as governments, consumers and investors freak out. First, an act of cyberterrorism occurs that compromises the security of a major government (similar to the attacks this year emanating from the Chinese military aimed at the German Chancellery) or uses DoS against media and e-commerce sites.Second, a major data center will fail and will be far worse than the 1988 Cornell student incident that infected about 5% of the Unix boxes on the early Internet.Third, cybercrime explodes exponentially in 2008. Financial markets will be exposed to hackers using elaborate fraud schemes (like liquidating and sweeping online brokerage accounts and shorting stocks, then employing a denial of service attack against the company). Fourth, Storm Trojan reappears.

Grade F:

Nothing yet.

17. The hedge fund community (especially of a quant kind) is disintermediated in 2008. Outflows accelerate, abetting an already conspicuous trend of rising volatility in a market that behaves more like a commodity than ever.

Grade A:

The next shoe to drop is in the underregulated and overlevered hedge fund industry. After only three months, many hedge funds have already bitten the dust or have been rescued (and shored up) by its parent or sponsoring companies.

18. There are several major Enron-like accounting scandals in 2008, causing investor confidence to plummet. These will come in some large financial and industrial (rollup) companies in Europe and the U.S.

Grade A:

SocGen! And a number of smaller ones, too.

19. Democrats Clinton/Kerrey and Republicans McCain/Crist represent their parties in the presidential/vice presidential contest in November. Ron Paul becomes the Libertarian candidate. In a remarkably close election (reminiscent of the Bush/Gore battle of 2000), the Democrats grab the White House.

No grade:

Too early to call.

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. And the new Big Things (and the source of liquidity for the capital markets) -- Sovereign Wealth Funds -- become targets of American politicians (and suppress U.S. equities further).

Grade A:

The Democratic Party is talking the trade protectionism book already.

Doug Kass is the author of The Edge, a blog on RealMoney Silver that features real-time shorting opportunities on the market.

At the time of publication, Kass and/or his funds were short Citigroup, Bank of America and JPMorgan Chase, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.