2010-11-01 04:01:00.8 GMT
By Lu Wang

Nov. 1 (Bloomberg) -- Investors should dump their holdings in U.S. Treasuries as interest rates are due for a rebound, while buying technology shares and emerging-market stocks, Blackstone Group LP’s Byron Wien said.
“We’re getting away with murder in the U.S. with these low rates,” Wien said in an interview on Oct. 30 in New York while attending a conference hosted by The Chinese Finance Association. “You don’t want to hold long-term Treasuries because if rates go up, you could lose money.”

Yields on 10-year treasury notes may almost double to 5 percent as the dollar weakens and the Federal Reserve keeps buying debt to bolster growth, Wien, vice chairman of Blackstone Advisory Services, said without giving a time frame. Gains in U.S. stocks will slow as borrowing costs start to rise and the housing market won’t recover until 2014, said Wien, former Pequot Capital Management Inc. and Morgan Stanley strategist known for his annual “Ten Surprises” forecast.
Speculation that the Fed will announce this week a program of asset purchases known as quantitative easing has propelled stocks worldwide while pushing 10-year yields to 2.38 percent in October, the lowest since January 2009. The Standard & Poor’s 500 Index has risen as much as 16 percent from this year’s low in July while the MSCI Emerging Markets Index of equities in 21 nations has gained 29 percent since its 2010 low in May.

Christmas and Congress

While U.S. stocks may rise through year-end, bolstered by “favorable” Christmas sales and congressional elections, Wien said, further gains may be limited as the economy expands 3 percent next year, trailing growth in China and other developing countries. In response, investors should hold 20 percent in emerging markets while earmarking 10 percent to “high quality” U.S. and European multinational companies, such as computer and software makers, he said.
Wien said any quantitative easing will do little to spur consumer spending and the government should boost infrastructure investment to create more jobs.
Fed policy makers meet Nov. 2-3 to consider steps to boost an economy that’s growing too slowly to reduce U.S. unemployment hovering near a 26-year high. The central bank has kept its target rate for overnight loans between banks at zero to 0.25 percent since 2008, and bought more than $1.7 trillion in
housing debt and Treasury securities last year.
Chances that Republicans will win control of the U.S. House tomorrow rose to a record 93.9 percent on Oct. 29, according to bets placed on Intrade, a Dublin-based online prediction market. Democrats retaining leadership of the Senate was about 55 percent likely, Intrade data show.

Infrastructure and Gridlock

The odds that Republicans will control both the House and the Senate are “very high” and such an outcome will help stocks, he said.  “I don’t believe gridlock is the best possible outcome,” he said. We’ve got a lot to do in this country and infrastructure is being just one of them. It’d be a good thing if we have a system where we could work and accomplish something, but we don’t seem to.”
Wien advised investors to put 10 percent of their portfolios in high-yield securities worldwide, such as mortgages and leveraged loans, and allocate 10 percent to gold and other commodities. The rest should be invested in hedge funds, private equities and real estate, he said.
Blackstone, the world’s biggest private equity firm, hired Wien in August 2009 to advise the company and its clients on the economy and politics as the firm moved to expand its businesses outside private equity.