From Market Folly:
Noted shortseller and Seabreeze Partners hedge fund manager Doug Kass has had impeccable timing recently. Market timing is a b*tch, but Kass has flipped that statement upside-down and made the market his b*tch. Back on the March lows, Kass was calling 'the bottom' and buying when everyone else was calling for the end of the world. This time around, he's calling for a top in the market for the year and has been assembling a short position. His contrarianism is the polar opposite this time around...MORE...In order for the market to truly recover, many fundamental problems must be addressed. Kass outlines his signs needed for a market recovery and it's a great reference to have. But in the mean time, he lists 10 things that will weigh on the economy:
1. Cost cuts are a corporate lifeline and so is fiscal stimulus, but both have a defined and limited life.
2. Cost cuts (exacerbated by wage deflation) pose an enduring threat to the consumer, which is still the most significant contributor to domestic growth.
3. The consumer entered the current downcycle exposed and levered to the hilt, and net worths have been damaged and will need to be repaired through higher savings and lower consumption.
4. The credit aftershock will continue to haunt the economy.
5. The effect of the Fed's monetarist experiment and its impact on investing and spending still remain uncertain.
6. While the housing market has stabilized, its recovery will be muted, and there are few growth drivers to replace the important role taken by the real estate markets in prior upturn.
7. Commercial real estate has only begun to enter a cyclical downturn.
8. While the public works component of public policy is a stimulant, the impact might be more muted than is generally recognized. There may be less than meets the eye as most of the current fiscal policy initiatives represent transfer payments that have a negative multiplier and create work disincentives.
9. Municipalities have historically provided economic stability -- no more.
10. Federal, state and local taxes will be rising as the deficit must eventually be funded, and high-tax health and energy bills also loom.
He ends this list by stating that he is looking, "over the visible green shoots of recovery toward a hostile assault of nonconventional factors that few business/credit cycles and even fewer investors have ever witnessed.">>>MUCH MORE