Seabreeze Capital manager Doug Kass, who successfully called the bottom in the markets last March, is calling the bottom again.
Yesterday, Kass wrote that “the equity market was traveling the path of fear rather than the path of fundamentals”.
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A classic bottom? Perhaps not.
On the Economagic website, one can create a graph of the annual rate of change (ROC) of the ratio of S&P500 to Nominal GDP. When this metric is above +15%, the stock market is in the area represented by tops. When below -15%, the market is close to bottoming. At the end of May, the ROC was at its highest reading in 60 years, substantially above the critical +15% level.
It seems that tapped out, unemployed consumers; the worsening Gulf oil spill; perpetual wars of empire extension and consolidation; and venal, self-servingd politicians running amok are conspiring factors to lead us into a bone-chilling, second leg down in both markets and the economy. A nation in which 70% of its GDP is normally accounted for by consumer spending cannot regain its health or footing until its middle class ceases to be under crippling assault from its quite mad, political and intellectual elites.
As someone once said, "making forecasts is tough – especially about the future!" Sorry, Mr. Kass, but I feel that your recent call will prove to be quite wide of the mark.