This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Kass: The Loss of Market Innocence

This column originally appeared on Real Money Pro at 8:37 a.m. EDT on June 24.

NEW YORK ( Real Money) --

"It's you who are telling me; opening my eyes to things I'd looked at so long that I'd ceased to see them."

-- Edith Wharton, The Age of Innocence

Risk happens fast.

We all knew that last week was coming, that last week was inevitable.

I (prematurely) cautioned in January-February (and in the ensuing months) that this market day would come -- a day in which the liquidity, so necessary to recover the world's economies from the Great Decession, would come to an end. Or, at the very least, I suggested that its ending would begin to be discounted well in advance of the triggering event.

I worried that a period lies ahead in which both stock and bond prices fall at the same time, breaking the correlation of the last few years.

I argued that tepid global economic growth would render the recovery vulnerable to policy mistakes and exogenous events and/or black swans.

I warned that the Fed's quantitative easing was losing its impact, that trickle-down was helping only a small segment of the U.S. population (i.e., the wealthy) and that the liquidity provided by QE was widening the disconnect between stock prices and the real economy.

I questioned the wisdom of expanding valuations in the face of slowing economic growth, a challenging profit landscape and the diminished impact of central bank easing.

I expressed the argument that structural headwinds were being ignored (over the cloak of zero interest rates and massive liquidity). Despite over four years of easy money, the U.S. was left with still-punkish sub-2% real GDP growth, far from the well-balanced and self-sustaining growth that was sought after by extreme and unprecedented loose monetary policy.

I wrote that the investment world was flat and not even the U.S. was an island and uncoupled from the rest of the globe.

I worried about the eurozone and its incomplete reform initiatives and still-recessionary economic existence.

I was skeptical that China's economy could continue its world-leading growth rates amid empty cities and developments and questionable/sketchy reporting of economic data.

I observed that the market's ramp was exaggerated by high-frequency-trading programs tied into price momentum strategies and ETFs (particularly those of a leveraged kind) that rebalance with frequency.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
Back to Nasdaq


Markets

Chart of I:DJI
DOW 16,027.05 -177.92 -1.10%
S&P 500 1,853.44 -26.61 -1.42%
NASDAQ 4,283.7530 -79.3910 -1.82%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs