This piece originally appeared on Street Insight on Dec. 11 at 8:21 a.m., and is being republished as a bonus for and readers. For more information about subscribing to Street Insight, please click here .

This piece was updated Jan. 3 -- Kass' prediction No. 8 has partly come true.

Every December, I take a page from former Morgan Stanley strategist Byron Wien, now the chief investment strategist at Pequot Capital Management, and prepare a list of 25 possible surprises for the coming year.

These are not intended to be predictions but rather events that have a reasonable chance of occurring despite the general perception that the odds are very long. I call these "possible improbable" events.

The real purpose of this endeavor is to consider positioning a portion of my portfolio in accordance with outlier events -- with large payoffs. After all, Wall Street research is still very much convention 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 making you think about outlier events, then the exercise has been worthwhile.

Also, not all of these surprises are stock- or market-related; I also delve into some popular-culture issues in the business world to mix things up!

About one-third of last year's predicted surprises actually happened, up from 20% in 2005. Nearly one-half of our prognostications proved prescient in 2004 and about one-third in 2003 .

Our most accurate sprang from a variant view of prices of a broad range of commodities -- specifically the prices of the CRB Index, crude oil and gold. We expected the CRB Index to approach 375 (it stood at only 326 when the Surprise list was published a year ago and peaked at 368 in early summer); we expected the price of crude to rise to $80 per barrel (exactly the price crude hit in July) and suggested that gold might rise to above $675 per ounce.

  • Gold reached $740 in May 2006. Our expectation of a sharp drop in the U.S. dollar was also realized.

  • We accurately assessed the Federal Reserve's continued interest rate increases (despite the general view that the Fed would pause) earlier in the year. At the same time, our variant view that bond yields would rise in the first half of 2006 and then decline in the year's second half -- in the face of a deceleration in the rate of domestic growth -- was spot on.

  • We were spot on that the rate of growth in retail sales would slow in the second quarter of 2006 and that several highflying specialty retailers like Williams-Sonoma ( WSM) and Urban Outfitters ( URBN) would have disappointing same-store sales, although a large drop in crude oil and natural gas restored retail strength in the early fall.

  • As we suggested, a Long Term Capital-like hedge fund failure did occur, as Connecticut-based Amaranth's losses were on a par with the losses generated at LTC.

  • As forecast, China and India's economic growth surprisingly continued in an uninterrupted fashion, but the outgrowth of weak median incomes for the average American worker stimulated more than 27 separate pieces of anti-China trade legislation in Congress.

25 Possible Surprises in 2007

1. Private-equity deals begin the year in a spectacular fashion, with two separate $50 billion acquisitions in January. A consortium of Silver Lake Partners, The Blackstone Group, Kohlberg Kravis Roberts, Texas Pacific, Bain Capital and Goldman Sachs ( GS) acquire Texas Instruments ( TXN). Kohlberg Kravis Roberts leads a syndicate in the takeover of Caterpillar ( CAT), the 55th largest company in the S&P 500.

Later in the month, one of the largest buyouts in the history of the media and entertainment industry is made by Bain Capital and Thomas H. Lee Partners when they acquire CBS ( CBS) for $30 billion.

In early February, Goldman Sachs (teaming up with Warren Buffett's Berkshire Hathaway ( BRKA)) announces that it is considering a going-private transaction. The Goldman deal is abandoned three months later, as a fractured mortgage market leads to a standstill in deal-making as the capital markets (and underwriting activity) seize up.

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