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Doug Kass: Sell the Rallies in This Market

Wednesday, 11 May 2011 09:51 AM

Doug Kass, the Palm Beach money manager who is best known for taking bearish positions, says the long climb up from the March 2009 stock-market low is getting “long in the tooth.” He says it’s time to sell the rallies and prepare for a downdraft.

“At best, the upside to equities seems restricted, and at worst, we could see apocalypse soon as the outlooks for both the economy and for corporate profits grow more ambiguous,” he writes on the TheStreet.com.

“For nearly a year now, I have cautioned that a period of lumpy, uneven, and inconsistent economic growth is the most likely outcome, and all the data points I see encourage me to maintain that forecast.”

He cites low bond yields, a double-dip for housing, falling commodity prices, and “worrisome” rotation of investors among sector stocks as signs of trouble to come.

In addition, a bevy of economic indicators are flashing “caution,” Kass writes, while emerging markets that focus on natural resource exports are weakening.

“Err on the side of conservatism as the market's waters look increasingly choppy,” Kass advises.

foreclose200getty.jpg
More foreclosures loom.
(Getty Images photo)
That housing double dip might run a little deeper than some suspect.

Bank of America is suddenly in a hurry to wash its hands of half of its $850 billion portfolio of troubled loans, a target it says the bank will hit within three years.

The job falls to Terry Laughlin, who is in charge of Bank of America’s huge “bad bank” unit, essentially a holding tank for the nearly 6.7 million mortgages it doesn’t want to keep. Those loans now “worth” $850 billion were valued at $1 trillion only a few months ago, according to public official statements.

Meanwhile, foreclosure tracker Zillow.com says that 28.4 percent of U.S. single-family homes are underwater, up from 27 percent at the end of 2010. The site estimates that the home-value bottom is now put off to 2012 at the earliest.

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Doug Kass, the Palm Beach money manager who is best known for taking bearish positions, says the long climb up from the March 2009 stock-market low is getting long in the tooth. He says it s time to sell the rallies and prepare for a downdraft. At best, the upside to...
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Wednesday, 11 May 2011 09:51 AM
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