Doug Kass believes the 666 S&P low was not only this bear market's bottom; but also a "generational" low. As always we are open to hearing both sides of the arguement and unlike most of the punditry Doug actually puts his money behind his mouth. He did make an excellent call for a bottom a few weeks ago; I am not satisfied that we won't revisit it later in the year but as I've been saying I am drinking Kool Aid (leaning long) for now - targeting S&P 870 at this point. I'm also moving quite firmly to the camp of double dip recession as the flood of money unleashed by our overlords will pump up some parts of the economy (basic supply/demand) - this will create excitement, bottom calls, some improvement in economic figures... but then we'll most likely see what is behind the facade later in 2010 as we see what true demand/supply is ex government. That said, I do believe another massive government stimulus package has an excellent chance to be approved by this time in 2010. Gotta keep throwing more money at the problem... B52 Bomber Ben is unleashing the hounds of money creation.
Remember, in the stock market it is all about perception... reality means little for short or intermediate time frames. If everyone wants to believe a bounce in Baltic Dry Index means China is roaring and its a signal of improving economies in 6 months - well then those stocks affiliated with the thesis will jump. Until we get to that point 6 months later, and we see that it was not true. Perception is reality in the stock market.... so when the point comes consensus believes the economy is rebounding in 6 months (a thesis advanced multiple times the past 15 months), the stock market will roar. Even if we find out 6 months later, there is no real rebound. (or alternatively if you throw a few trillion into the US economy, some will find its way into the stock market pumping up assets in an inflationary manner) Remember, just two weeks ago MANY of the same people now claiming "recoveries" were talking S&P 500 and end of days. ;)
Below is Kass' latest piece on TheStreet.com "
Why the Bears are Wrong"
On Feb. 17, I presented a watch list of conditions that, if in an improving trend, would likely indicate that a sustainable up move is possible for equities.
It is time to review this checklist (and add one more factor) to determine the market's standing. Our new grades and those of two weeks ago are in parentheses and will be updated in the weeks and months ahead.
- Bank balance sheets must be recapitalized. Yesterday a comprehensive bank rescue package was introduced. It is obviously too early to consider its full impact, but the details of the program suggest to this observer that it will likely be effective in clearing toxic bank assets. (We grade the package a B+, up from a D+ only two weeks ago.)
- Bank lending must be restored. While bank lending standards remain tight, my view is that yesterday's announcement of ring-fencing toxic bank assets will almost unquestionably succeed in unclogging the transmission of credit. (Grade B, up from a C previously.)
- Financial stocks' performance must improve. Financial stocks have finally awakened from the dead, and the recent outsized move to the upside could foreshadow continued market strength. Historically strong relative performance in the shares of asset managers -- such as Franklin Resources (BEN Quote - Cramer on BEN - Stock Picks), T. Rowe Price (TROW Quote - Cramer on TROW - Stock Picks) and AllianceBernstein (AB Quote - Cramer on AB - Stock Picks) -- presage a better equity market, and Monday's strong group action was conspicuous in its outperformance.
