“Never make predictions, especially about the future”- Casey StengelForecasting is a dangerous game. Most of the investing industry seems to be obsessed with trying to guess the future. This is the time of year when strategist after strategist rolls out their outlooks for the New Year. Truth be told, it generally is all marketing done because “clients want it”.The general track record for forecasting in the investment industry is abysmal to say the least. For example, when Wall Street analysts first make estimates for earnings of a company two years prior to the actual event they are wrong on average by 94 percent. Even using estimates that go out 12 months, we find them to be wrong on average by 45 percent.Predictions on the performance of the stock market are no better. Take the recent 2008 period. Analysts initially anticipated stocks to be up 24 percent yet stocks actually fell nearly 40 percent. The important take away is this: it is near insanity to base an investment process solely around our seriously flawed ability to divine the future. With that caveat in mind, I am going to give you ten surprises for 2011.Importantly, these surprises are not intended to be hard prognostications but rather events that have a reasonable chance of occurring despite being at odds with the general consensus. I offer them as “possible probable” concepts to consider:1) US economy expands four percent (current consensus is 2.8 percent). Unemployment falls below nine percent. The massively accommodative economic policies employed over the last few years combined with solid consumption and international trade bolsters growth. Economic confidence finally arrives and businesses begin to make multi-year capital plans. Hiring picks up.2) With renewed economic momentum and the return of “animal spirits”, the S&P 500 Index trades near 1450 at some point. The retail investor returns, mergers and acquisitions accelerate and S&P 500 operating earnings near $100. The US market outperforms emerging markets.3) Political gridlock in the US creates little headway in tackling the issues of the deficit. The bond vigilantes and economic growth force yields on the 10-year note over 4.25 percent. Spreads on corporate bonds narrows. Junk bonds, which trade off equities, perform exceptionally well and are the top performing bond class in 2011.4) Commodities diverge in returns. Uranium soars with the shrinking decommissioning of Russia nuke supplies and the surge of new nuclear plants coming on stream - prices approach old highs. Coking coal soars over $300 as Australian (largest producer) floods severely curtail exports. Agricultural commodities jump in price as water scarcity issues create shortages and rising standards of living in the developing world creates immense demand. Farmland prices also appreciate and grocery stores, restaurant and food stock margins contract. Gold goes nowhere - collapsing early in the year as more fundamentally-based assets steal the spotlight, only to rally later as people realise all paper money is still bad. Crude demand from the developing world, Iran issues (see number 7) and the lack of “easy oil” pushes oil over $100 a barrel but not before it falls under $80 due to over-supply concerns. Natural gas mounts a comeback as the shale-gas supply story turns out to be a “great disappointment”.5) Economic strength and rising interest rates helps the US dollar rally 10 percent versus the G7 basket. The euro and yen crater. The Euro sovereign debt issues refuse to go away and are renewed in March after the Irish elections (if the opposition party wins, expect the EU deal to be renegotiated and the debt to be restructured, and if that happens, look for other countries to follow suit). Belgium is the eurozone’s third most indebted country and that country is also facing increasing political turmoil (like the inability to form a government) which creates further uncertainty. Fixing the European problem is like ploughing the sea. The euro approaches $1.10/USD. The yen begins to reach its “Keynesian end-game”. International investors realise they need a risk premium to invest in a country whose public sector debt could reach 300 percent of GDP by 2019.Couple this with falling domestic savings born from an aging demographic and you have a situation where higher yields are forced on Japanese government bonds. Since interest consumes about a quarter of tax revenues, look for the Bank of Japan to begin monetizing the debt at ever increasing rates - leading to major yen weakness. The yen approaches $95/USD.6) The “Land of the Rising Sun” rises again…a lot. The Japanese corporate sector is about to receive a five percentage point reduction in the top marginal rate. It trades at approximately book value and exporters should enjoy a strong tail wind from the depreciating yen (see number 5). Only seven percent of Japanese shares are owned domestically- fears of inflation and a sell-off in the local bond market creates a Japanese retail surge into domestic equities. Look for the Nikkei 225 Index to soar about 15 percent this year.7) Israel has enough and launches an airstrike and a cyber-attack on Iran to halt its nuclear expansion. This propels crude prices.8) US house prices double dip - falling an additional 10 percent. Rising rates (see number 3) and the flood of unsold home inventory plagues any hope of recovery in the housing market.9) Biotech blooms. Great breakthroughs in regenerative therapy, virus treatment and cancer vaccines are rapidly being accomplished under the radar.Look for a major new drug discovery in the realm of curing major viruses, clarity on effective Alzheimer treatments and a new cancer vaccine to get FDA approval this year. Also look for major progress in stem cell therapies. Big pharma will continue to gobble up smaller biotechs and this may be the year of record deals.10) Bermuda’s economy contracts another two percent (after falling five percent for 2010). The main weakness comes from the international business sector as the reinsurance market continues to be plagued by weak pricing, overcapacity and a secular shift to exchange traded products.One major fund administration company leaves the Island choosing to relocate to a more cost-effective jurisdiction. Three additional retailers close their doors and one major hotel is foreclosed on.Happy New Year and thanks for reading.