Kass Watch: "The Market has Likely Topped"

Doug Kass is at it again this week, no it's not another Joni Mitchell Woodstock story, this time he's going on record saying we've reached a peak in equity markets as of this month.  Doug explains his March bullish call and breaks down his views as to why he believes now its time to cool your jets.

Read the full story at theStreet.com - Click Here

The best part of the article is here -- (Doug's words) My view remains that it is different this time. Again (now for emphasis), the typical self-sustaining economic recovery of the past will not be repeated in the immediate future for 10 important reasons that will weigh on the economy and markets like the governor that controlled the speed of the Good Humor truck I drove when I was in my teens during the summer:
- Cost cuts are a corporate lifeline and so is fiscal stimulus, but both have a defined and limited life.  Cost cuts (exacerbated by wage deflation) pose an enduring threat to the consumer, which is still the most significant contributor to domestic growth.
- 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.
-The credit aftershock will continue to haunt the economy.
-The effect of the Fed's monetarist experiment and its impact on investing and spending still remain uncertain.
-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 the prior upturn.
-Commercial real estate has only begun to enter a cyclical downturn.
-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.
-Municipalities have historically provided economic stability -- no more.
-Federal, state and local taxes will be rising as the deficit must eventually be funded, and high-tax health and energy bills also loom.

Just as I looked over the valley in March 2009 toward the positive effects of massive monetary/fiscal stimulation within the framework of a downside overshoot in valuations and remarkably negative sentiment, I now suggest another contrarian view is appropriate as I look 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.

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Even more important, my forecast of a 2010 market peak reflects that the aforementioned nontraditional influences (and the untoward policy ramifications) will, at the very least, yield a broad set of uncertain economic outcomes that (in consequence and in probability) tilt away from a self-sustaining economic scenario sometime in the following 12 months.

Stocks bottom during times of fear. With the benefit of hindsight, the March 2009 lows represented a dramatic overshoot to the downside. Markets top during times of enthusiasm. I believe that the markets are now overshooting to the upside and that the U.S. stock market has likely peaked for the year.

SOURCE: http://www.thestreet.com/story/10590765/3/kass-market-has-likely-topped.html