Doug Kass: Why the Market has Hit the High for the Year
Doug Kass of Seabreeze Capital was on CNBC yesterday discussing some reasons why he believes the market has made its high for the year. In contrast to the Schaeffers Research piece posted yesterday, Kass offers his own set of reasons why the market will fall back to the 1300-1330 area. The causes (of which his comments on Ryan are particularly interesting):
- Technicals are becoming negative
- Transports are lagging
- Small caps are lagging
- The VIX is historically low
- Market is overly optimistic about QE3
- Paul Ryan will pose a risk to the market, the fiscal cliff scenarios and potential Fed stimulus
Source: CNBC
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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3 Comments
Kass’s arguments make sense to me, although it is really hard to pinpoint the timing of an equity market top. I think it is 50/50 whether the Fed waits until December or brings out QE3 in September. If the FOMC opts to wait until Dec, then it is likely Kass is right and the market turns down, because a lot of today’s high prices are based on the assumption of QE3 sooner rather than later. The 45 basis point increase in 10 yr T-Note yields and increase in 30yr mortgage rates can’t help matters, and neither will the food price shock. Either a narrow trading range from here, or possibly the start of a downturn.
Agreed. Still not sure why these guys keep putting a specific date or narrow timeframe on their market predictions. Guess you can be like Roubini and just keep predicting as nobody seems to revisit wrong calls from years past.
Consensus view is the fiscal cliff will be postponed for 1 year. Don’t be so sure. Ryan on the ticket increases the chances that both sides will dig in their heels and stubbornly look on as we go over the cliff. Kass argues: http://www.thestreet.com/story/11663327/1/dreaded-triple-top-approaching.html .
“Ryan’s presence could weigh on and reduce the probability that the Federal Reserve will ease further in the weeks ahead. Ryan has previously stated that he would replace Fed Chairman Bernanke at the end of his term in 2014. Besides the stark differences in policy, Paul Ryan’s austere budget views could raise concerns about the trajectory of domestic economic growth in 2013.”