Tags: Doug | Kass | Toxic | Combination | Threatens | stock | Gains

Kass: 'Toxic Combination' Threatens Sept. S&P Gains

Thursday, 30 Sep 2010 08:55 AM

Strategic investor Doug Kass of Seabreeze says the September stock-market rally — which he says was due to "a combination of algorithms and technical price momentum-based strategies" — may come to an abrupt and painful halt as the month ends.

“I’m growing more fearful on both technical and fundamental grounds,” Kass told CNBC. ”The market is delivering a potentially toxic combination of low volume, poor breadth and weakening financial stocks.”

“These are classical bearish signals.”


Kass also believes the rally happened at least in part because of erroneous investor confidence that the Federal Reserve will somehow act to stimulate economic growth.

”In the last 24 hours we’re hearing from three Fed Reserve presidents that the Fed is hesitant to come into the market guns a blazing,” he points out.

Noting that, "the weaker dollar improves our export base," in the short term, Kass says that in the long run "it encourages uneconomic economic activity such as government deficit spending” and spells catastrophe for the stock market.

“Then we get asset price inflation, which is unsupported by cash flows,” he observes. “And we get huge inflation in commodities."

Bloomberg Business Week reports that the Bank of Tokyo is advising investors to sell the euro against the dollar, betting the single currency will decline to $1.2650, because speculation the Federal Reserve will increase asset purchases pushed the U.S. currency too low.

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Strategic investor Doug Kass of Seabreeze says the September stock-market rally which he says was due to a combination of algorithms and technical price momentum-based strategies may come to an abrupt and painful halt as the month ends. I m growing more fearful on...
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Thursday, 30 Sep 2010 08:55 AM
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