In the spirit of Neal Berger, the hedge fund manager who inadvertently called the market top, I give you Doug Kass (remember I did a quick interview with him HERE?) the hedge fund manager who very advertently calle dthe market bottom…
On the one month and five day anniversary of THIS March 16th, 2009 article and D.K.’s several TV appearances calling for a bottom over the next few days…well, read the man’s words and learn why he manages hundreds of millions of dollars (not in the slimy financial advisor “I’m gonna stick you in mutual funds, annuities, blah blah blah i don’t know how you’re down 30%, the marketing materials never prepared me, or anyone, for this!?!?!” kind of way but as in actually manages that money through active trading and investing):
Today’s column is ambitious and some might think reckless in its objective of introducing an optimistic market forecast and the logic behind my S&P 500 — and SPDRs (SPY Quote) — price targets.
My view of a meaningful upside stock market trajectory in the months ahead is clearly a variant view, but I am familiar with that terrain as I have consistently expressed a negative (if not dire) baseline assumption for credit, the world’s economies and stock markets for much of the past three years.
To add to my relatively bold and audacious expectations and presentation, I will attempt to be precision-like in exhibiting a chart that most closely represents that promising market outlook over the next several months.
Nearly two weeks ago, I suggested that a 2009 market bottom had been put in, and last week I surmised that, in the fullness of time, a generational market low might have been put in for the U.S. stock market.
At inflection points gauging the market’s technical bearings is often useful as is a history lesson, so let’s travel that route.
A deep oversold, worsening sentiment and positive internal divergences almost always provide the foundation to stock market recovery.
And that call was actually preceded by several others incuding one entitled “Bottoms Up, Mr. Market” on March 3, 209 that read:
For the first time ever, I spent nearly a full hour with my favorite host, Sir Larry Kudlow, on CNBC’s “The Kudlow Report” last night.
From my perch, the feature of the show was my call that the U.S. stock market could make a 2009 low this week, a very tough call but a position that I have been edging toward over the past several days.
The lion’s share of the last segment of “The Kudlow Report” was devoted to my analysis of Warren Buffett and Berkshire Hathaway, and my market bottom call is made near the end of the segment.
My contention, as discussed on last night’s show, is that the serious problems have been more than fully discounted in the world’s equity markets. Moreover, while many have grown increasingly impatient with the new Administration’s piecemeal strategy toward addressing the banking industry’s toxic assets, a cohesive deal, under the leadership of Lawrence Summers, will soon be forthcoming and will be effective.
The investment pyramid consists of the three angles of fundamentals, sentiment and valuation. I made this market bottom call based on my expectation of an early 2010 stabilization in the economy (making the 27-month recession the second-longest in history) coupled with an extreme sentiment and valuation swing. (As Dennis Gartman is fond of saying, sentiment and valuation have moved from the top left of the chart to the bottom right of the chart in an historic fashion.)
I am fully cognizant of the magnitude of our economic and credit challenges and that the future is not what it used to be. Indeed, my expectation of The Great Decession, which is somewhere between a garden variety recession and The Great Depression, remains intact and is my baseline expectation.
And since those calls, check out how the market has performed:
Now, Doug, enriched, in stature, trading gains and client assets, by his bet against his typical short-selling strategy, is mainly an experienced fund manager–meaning he’s smarter and tougher than all you reading this and me put together–so when I asked him for a quote, he fired back this deep thought provoking quote:
“ccccchhhhhhanges!”
Who is the man, the myth, the legend of Doug Kass? It’ll probly take a few years for me to convince him to publish a tell-all memoir under my BullShip Press publishing emblem.
For now, D.K., all I can say is:
Posted in Guessing Games, Real Wall Streeters