Bears Take Their Lumps

Are you yukking it up?

Then you were definitely positioned long coming into the fireworks. And maybe you faded the folks who seem to control financial mindshare on the internet. Jim Cramer got it right this time, but Doug Kass does not seem to be giving an inch. On August 20th he was urging folks to fight the Fed, and also mocking Fast Money’s Chairwoman who, it would seem, got it right by invoking Marty Zweig:

“Don’t fight the Fed,” a phrase promulgated by Marty Zweig, is one of those nonrigorous “truisms” that may no longer be useful. The markets in August 2007 have had the expected and Pavlovian reaction by immediately soaring; this is just what occurred on Jan. 3, 2001, after another surprise rate cut......Fight the Fed. TheStreet.com

We have been hard pressed to find anyone in the clubby world of blogs who have actually been advocating buying stocks, or increasing net long exposure. The recent group think mind-meld ended up being a linkfest that would send you to an endless circle of bear sites. Perhaps they felt safety in numbers.  And the level of condescension at times was brutal. But in the end, they got it wrong.

We have long enjoyed reading Kass’ work. He got a lot right, but got it wrong in the end. It is a tough business he is in. And to give him credit, he is not hiding today, penning a predictable swipe at Bernanke.

I am not, however, in awe of the Federal Reserve.

The U.S.’s economic problem lies firmly in the consumer/housing market, and the larger-than-expected rate cut will likely promote more inflation, a downward spiral in the U.S. dollar and, most importantly, will likely raise intermediate and long-dated bond yields. TheStreet.com

Perhaps he would be more at home joining the pre-eminent bear site, who must be holding a wake today given their recent posturing.  Shades of June 2003. Practical sure, but not very pragmatic.  Although you can certainly find intelligent life there. But do they ever get constructive? Some of them do, and I would strongly recommend paying heed to the likes of Jason Goepfert.

August 30th
New lows on August 16 numbered over 1,000 on the NYSE for only the second time in history. Expressed as a percentage of all stocks traded, it hit 33%. Again, over the past 20 years that kind of figure has resulted in major lows every time, and even prior to the past 20 years, it has returned very positive expectations. Minyanville

Today he is noting that yesterday’s market internals were last seen in August of 1982 as the bull market kicked off, an interesting comparison. Henry Kaufman’s run ended that month, btw.

As we said less than a week ago…

We appreciate the intelligent discourse the bears bring to the table. They keep us honest......(but) Valuations are reasonable, new consumers are being created worldwide, insiders are buying hand over fist, sentiment stinks and the earnings yield on stocks is 250 basis points higher than bond yields.That might not be the most persuasive or intelligent argument you read this week, but it is our story and we are sticking with it.

The toughest trades to make are often the best. Which camp are you in?

Following Wall Street recommendations can make you money, particularly if you fade it. It looks like this applies to some of the more prominentonline pundits as well.

Ben has a few bullets left, and the next one will finish more of them off. It might be considered a mercy killing at this point.

It would also free up some room in the bear cave. We like to hang out there from time to time ourselves, as long as it is not too crowded.


Kass: ‘Don’t Fight the Fed.’ How Quaint
TheStreet.com

Smart Bears Looking Dumb
9.13.07
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

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