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Kass: Called Market Bottom in 2008; 19 Reasons We're Not Close Now

Real Investment Advice  ( Original )
APR 4, 2018

Doug Kass made a remarkable call into the teeth of the 2008 stock market collapse, calling the bottom with remarkable accuracy. Without further ado, his list of 19 reasons why the worst is yet to come this time around.

It’s easy to explain Monday’s market drop and the decline since late January, 2018 which turned optimism into pessimism.

The reality is that the causalities are multiple and complex – not a function of one or two factors.

  • More Ambiguous Economic Data Around the World
  • Fear that the Tax Cuts Will “Trickle Up” and Not “Trickle Down”
  • Growing Evidence of the Reemergence of “Stagflation
  • Rising Short Term Interest Rates
  • Signs of Credit Strain
  • Higher inflation
  • Signs of Demand Elasticity in Higher End Product Prices
  • The Federal Reserve Has Pivoted to Tightening (and so have most non-US central banks)
  • Uncertainty Surrounding the Mid Term Elections in November
  • A Policy Mistake (Trade War, etc.)
  • Limited G-8 Cooperation in Trade and Other Policy Headwinds
  • Fiscal Irresponsibility on Both Political Sides
  • An Untethered President Who Is Conflating Policy with Politics
  • The Loss of Leadership (and Momentum) of FANG Stocks
  • Recognition of Historically High Valuations and The Emergence of The Possible Fall of Tesla (TSLA) (a former stock market leader and standard bearer for speculative, high multiple stocks)
  • The Collapse of Other Speculative Asset Classes (e.g. crypto currency prices)
  • The Dominance of Machines, Algos and Passive Investment Instruments and Strategies Have Caused Market Instability (Much like Portfolio Insurance disrupted markets in October, 1987)
  • Technicals Have Deteriorated
  • General Fear 

Mr. Market bottomed yesterday exactly where it did in early February – fulfilling the analog to the last liquidity driven decline in October, 1987.

However, most of the fundamental, valuation and other thin reed factors – many of which are discussed above – that have contributed to the recent market selloff remain in place.

A break of the early February low and yesterday’s intraday low seems more likely, than not, in the coming weeks and months.

ORIGINAL SOURCE: Kass: Why The Market Collapsed & What To Expect by Doug Kass Real Investment Advice on 4/4/18