Blackstone Group's Top Ten Surprises for 2010

[scandal 951]

Blackstone Group's Byron Wien Announces Top Ten Surprises for 2010

NEW YORK--(BUSINESS WIRE)--Byron R. Wien, Vice Chairman, Blackstone

Advisory Services, today issued his list of the Ten Surprises for

2010. This is the 25th year Byron has given his predictions of a

number of economic, financial market and political surprises for the

coming year. He started the tradition in 1986 when he was the Chief

U.S. Investment Strategist at Morgan Stanley. Byron joined The

Blackstone Group in September 2009 as a senior advisor to both the

Firm and its clients in analyzing economic, political, market and

social trends.

The Surprises of 2010

1. The United States economy grows at a stronger than expected 5%

real rate during the year and the unemployment level drops below 9%.

Exports, inventory building and technology spending lead the way.

Standard and Poor's 500 operating earnings come in above $80

2. The Federal Reserve decides the economy is strong enough for them

to move away from zero interest rate policy. In a series of

successive hikes beginning in the second quarter the Federal funds

rate reaches 2% by year-end

3. Heavy borrowing by the U.S. Treasury and some reluctance by

foreign central banks to keep buying notes and bonds drives the yield

on the 10-year Treasury above 5.5%. Banks loan more to corporations

and individuals and pull away from the carry trade, thereby reducing

demand for Treasuries. Obama says, "The suits are finally listening"

4. In a roller coaster year the Standard and Poor's 500 rallies to

1300 in the first half and then runs out of steam and declines to

1000, ending where it started at 1115.10. Even though the economy is

strong and earnings exceed expectations, rising interest rates and

full valuations present a problem. Concern about longer term growth

and obligations to reduce leverage at both the public and private

level unsettle investors

5. Because it is significantly undervalued on a purchasing power

parity basis, the dollar rallies against the yen and the euro. It

exceeds 100 on the yen and the euro drops below $1.30 as the long

slide of the greenback is interrupted. Longer term prospects remain

uncertain

6. Japan stands out as the best performing major industrialized

market in the world as its currency weakens and its exports improve.

Investors focus on the attractive valuations of dozens of medium

sized companies in a market selling at one quarter of its 1989 high.

The Nikkei 225 rises above 12,000

7. Believing he must be a leader in climate control initiatives,

President Obama endorses legislation favorable for nuclear power

development. Arguing that going nuclear is essential for the

environment, will create jobs and reduce costs, Congress passes bills

providing loans and subsidies for new plants, the first since 1979.

Coal accounts for about 50% of electrical power generation, and Obama

wants to reduce that to 25% by 2020

8. The improvement in the U.S. economy energizes the Obama

administration. The White House undergoes some reorganization and

regains its momentum. In the November Congressional election the

Democrats only lose 20 seats, much less than expected

9. When it finally passes, financial service legislation, like the

health care bill, proves to be softer on the industry than originally

feared. There is greater consumer protection, more transparency,

tighter restriction of leverage and increased scrutiny of

derivatives, but the regulatory changes for investment bankers and

hedge funds are not onerous. Trading volume and merger activity

increases; financial service stocks become exceptional performers in

the U.S. market

10. Civil unrest in Iran reaches a crescendo. Ayatollah Khameini

pushes out Mahmoud Ahmadinejad in favor of a more public relations

adept leader. Economic improvement becomes the key issue and

anti-Israel rhetoric subsides. Talks with the U.S. and Europe begin

but the country remains a nuclear threat. Pakistan becomes the

hotspot in the region because of the weak government there,

anti-American sentiment, active terrorist groups and concerns about

the security of the country's nuclear arsenal