Doug Kass' 15 Surprises For 2019

White House Politics:

(When asked what he wanted to give thanks for during a press gaggle Thanksgiving Thursday, Trump responded), for having a great family and for having made a tremendous difference in this country. Ive made a tremendous difference in the country. This country is so much stronger now than it was when I took office that you wouldnt believe it… And I mean, you see, but so much stronger people cant even believe it. When I see foreign leaders they say we cannot believe the difference in strength between the United States now and the United States two years ago. – President Trump (Comments on Thanksgiving)


You only think I guessed wrong! … You fool! You fell victim to one of the classic blunders – the most famous of which is never get involved in a land war in Asia – but only slightly less well-known is this: Never go in against a Sicilian when death is on the line! – Vizzini,The Princess Bride

The Economy:

The missing step in the standard Keynesian theory (is) the explicit consideration of capitalist finance within a cyclical and speculative context… finance sets the pace for the economy. As recovery approaches full employment… soothsayers will proclaim that the business cycle has been banished (and) debts can be taken on. But in truth neither the boom nor the debt deflation… and certainly not a recovery can go on forever. Each state nurtures forces that lead to its own destruction. Hyman Minsky

The Markets:

Every new beginning comes from some other beginnings end. Seneca the Elder

Contrary to the expectations of many (including myself), the uncertainties following the surprising Trump presidential election victory, which produced a number of possible outcomes (some of them adverse), was enthusiastically embraced by investors in 2017 and in the first month of this year. A market on steroids was not a conclusion or forecast by any mainstream Wall Street forecaster that year. There was no sell side strategist who expected equities would rise anywhere near the 20%+ gains in the major indices recorded in 2017, nor do I know any who predicted that the S&P Index would make more than 70 individual highs a year ago.

As I expected, that enthusiasm continued in and through most of the month of January, 2018. But, after a year of historically low volatility and ever-rising stock prices, the bullish consensus became troubled as the complexion of the market changed throughout most of 2018 .

As I noted in last years commentary, I thought that the biggest surprise in 2018 would be that extrapolation of the market uptrend didnt work after many years of working, and that we will witness the emergence of multiple non-consensus developments, including:

  • A dramatic drop in the price of bitcoin (to under $2,000)

  • A devastating decline in many bitcoin collateral plays

  • A much higher oil price

  • A slowing (not expanding) rate of economic domestic growth as the tax bill trickles up, not down


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Tags: Donald Trump, White House, United States, The Princess Bride, Hyman Minsky, Wall Street, Washington, D.C., Warren Buffett, Kurt Vonnegut, Thanksgiving