Doug Kass made a great call in early March when he said the stock market is at a “generational low.”
Since then, though, we’ve lost track of the number of times he’s “flipped bearish,” as Barry Ritholtz describes his latest stance.
In fact, he was getting bearish before March was even over, and since then he’s mentioned several times about how he’s added to his short book, etc. Meanwhile, the market’s just gone up, up and up, except for a few brief dips.
So here he is once again, describing the bearish view that he has “now embraced.”
The bear market argument that I have now embraced is that we are seeing nothing more than a second derivative recovery and that, owing to a temporary replenishment of inventories, the economy is only getting less worse (or getting better from a depressed level). The ingredients for a durable and self-sustaining recovery are missing as an economic double-dip grows more likely in a climate of corporate cost cuts, elevated jobless rates, wage deflation and continued pressure on personal consumption expenditures. Bears, such as myself, reject Say’s Law of Production and view weakening consumer incomes and spending as a poor foundation and as inadequate drivers to improving business activity into 2010.
We know that market timing is a tough game, and this particular market has made fools out of everyone, so Kass is no exception. But eventually, you can’t keep talking about having flipped without acknowledging that you’ve been wrong on the trade.
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