With the 2008 stock market suffering one of the worst kickoffs ever, and the threat of a recession rapidly on the rise, a former chief investment strategist for Morgan Stanley, Byron Wien, is already off to a sparkling start with his annual parade of new year’s surprises. If his accuracy remains on track, the bad news is that 2008 will be the year of the bear and the economy will take a drubbing.

When it comes to the risky science of year-ahead crystal ball gazing, especially as it relates to Wall Street, the microscopic vision of Mr. Wien, who is widely regarded as one of the Street’s more incisive thinkers and analytical minds, is not to be taken lightly. Mr. Wien’s issuance of 10 investment-related surprises for the year ahead is an intriguing investment exercise that he’s undertaken 23 years running. This mind-stretching endeavor, the chief investment strategist at Pequot Capital Management says, helps him to reflect on what important, unexpected events might influence the course of the financial markets in the ensuing 12 months.

His definition of a surprise is one that most portfolio managers would assign a one-out-of-three possibility, but which he regards as better than a 50% likelihood. Usually, he says, about half of his projected surprises work out in some way, and his best showings are years in which seven out of 10 predictions come to pass. He has never exceeded seven.

He was right on last year with a number of winning predictions for 2007. Among them were forecasts that gold would reach $800 an ounce, crude oil would top $80 a barrel, Barack Obama would emerge as a leading Democratic presidential candidate, and S&P 500 earnings would rise 10%, which they did in the first half before falling apart in the second half. Also, his top pick among emerging markets was Brazil, which rose 44% in local currency and was up 73% in dollars.

Here are his 10 surprises for 2008.

(1) Despite Federal Reserve easing and other policy measures, the American economy will suffer its first recession since 2001 as housing starts stay soft and banks are reluctant to lend to anyone with a whiff of risk. The fed funds rate, now 4.25%, will drop below 3%, the unemployment rate will definitely move above 5%, and consumer spending will be lackluster. (2) Standard & Poor’s 500 earnings will decline year over year and the index will drop another 10%. Energy and materials stocks will hold up relatively well, and market conditions should start to improve during the summer.

(3) The dollar will strengthen in the first half, reaching $1.35 against the euro, and then weaken in the second half, exceeding $1.50. Foreign investors will flock to buy cheap American assets early this year, but the dollar will decline later as several countries holding large reserves diversify into other assets.

(4) Inflation will rise above 5% on the Consumer Price Index as higher commodity prices and oil begin to have an impact despite modest wage increases. The 10-year U.S. Treasury yield should rise to 5% and stagflation (rising inflation in a period of slowing growth) will become a frequent discussion topic in the presidential campaign and on editorial pages.

(5) The price of oil will go down early in the year and up later, sinking to $80 a barrel in the first half as Western economies slow and inventories are drawn down. In the second half, look to $115 a barrel as established wells continue to decline in production, while China, India, and the Middle East increase their consumption.

(6) Agricultural commodities will remain strong and gold should reach $1,000 an ounce as disillusionment with paper currencies spreads across Asia.

(7) The recession in America will slow the Chinese economy modestly, but its hot stock market will decline sharply as investors recognize that paying biotechnology stock multiples for highly cyclical companies doesn’t make sense. Likewise, the Chinese will revalue its currency, the renminbi, by another 10% to control inflation.

(8) The new Russian president, Dmitry Medvedev, under the tutelage of Vladimir Putin, will become more assertive in world affairs. He will insist Russian oil and gas be paid for in rubles and demand a Russian seat at major world conferences.

(9) Infrastructure improvement will become an important theme for both parties, and construction and engineering stocks will rally in anticipation of huge programs beginning after the new president’s inauguration. Also, water will become a critical problem worldwide, causing desalination stocks to soar.

(10) Mr. Obama will become the 44th president in a landslide victory over Mitt Romney. With conditions in Iraq improving, the weak economy will become the determining issue in voters’ minds. They want to make sure gridlock ends and Congress gets something done for a change. The Democrats should end up with 60 Senate seats and a clear majority in the House of Representatives. A note of caution: Keep in mind it’s all just one man’s opinion.

dandordan@aol.com