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October 8, 2008

Surprise, Surprise: What's Ahead?

Let's think about surprises. It seems entirely possible that we see at least some sort of technical bounce in here somewhere, so let's get past that and think about the future. What surprises lie ahead, whether positive or negative? And to be more explicit, let's try not to get hung up in each case whether each thing really is good or bad news, but whether it's seen that way.

"Good" surprises

• Treasury announces first purchases under TARP program
• Fed announces first direct efforts under CP program
• Earlier bottoming in housing inventory in some major markets
• A successful (meaning non-catastrophic) Lehman CDS settlement auction
• A SWF or major Japanese bank making one or more major financial services purchases in U.S. market.

"Bad" surprises

• Further beggar-thy-neighbor nuttiness by EU members, leading to more bank failures and an EMU exit by one or more member countries
• A major U.S. state defaults
• A major LTCM-lite hedge fund unwinding, or the cumulative equivalent of same
• A material decline in the U.S. dollar
• Positive feedback into financials from weakening consumers leads to more bank bailouts and foreclosures than expected
• China hitting a growth air pocket and declining to y-o-y growth below 5%
• One or more major Aaa non-financial issuers is downgraded and at risk of default.
• Commercial real estate loans becomes mini subprime collapse as over-extended companies begin failing

Feel free to add more.

[Update] People are adding some interesting ones in comments. Read 'em.

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