Byron Wien Predicts Recession, President Obama

Recession in the U.S.? $1,000 an ounce gold? A filibuster-proof Democratic Senate? President Obama? If Byron Wien is right, 2008 is going to be one hell of a year.
On Wednesday, the legendary Wall Street guru and chief investment strategist of Pequot Capital Management released his 23rd annual list of 10 surprises he thinks are possible in the coming year.
Tops on his list is the first recession in the United States since 2001, with the housing sector weak and banks scared of lending to anyone who resembles trouble. On top of that, he expects underwhelming consumer spending and the unemployment rate to rise above 5%, with the Federal Reserve dropping the f ederal funds rate below 3%.
Despite a modest rise in wages, Wien is also looking for inflation to rise above 5% as high food and energy prices begin to take their toll. With that, Wien sees the yield on the 10-year Treasury rising to 5% and “stagflation” becoming a hot-button issue on the campaign trail and editorial pages.
On the commodity front, he expects oil to move between $80 and $115 a barrel, corn to rise to $6 a bushel and gold to reach $1,000 an ounce.
Recession in the U.S. will impact China, leading its economy to slow only modestly, but pushing its stock market into a sharp tumble.
In early November, Wien expects to see the junior senator from Illinois elected in a landslide victory while the Democrats gain control of 60 seats in the Senate along with a clear majority in the House of Representatives.
Wien joined Pequot, a Westport, Conn.-based hedge fund, in 2005 after spending two decades as Morgan Stanley’s chief stock market strategist and two decades as a portfolio manager before that.
Wien gives his predictions at least a 50% of happening. In the past he’s predicted Osama bin Laden’s capture and Saddam Hussein’s resignation in an effort to avert war (See “Wien: Osama, Rumsfeld, Cheney Will Be Gone”), but he correctly anticipated that the Fed would not cut rates in the spring of 2007 and that gold would hit $800 an ounce.