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Kass: Time's Running Out for a Rally

Doug Kass

Time is no longer on the side of investors, as the markets are in free-fall.

On Monday, I outlined eight conditions that could give rise to a sharp year-end rally.

1. Obama recommends a massive stimulus.

2. Obama lowers middle-class tax rates.

3. Obama announces his intention to introduce a $25 billion aid package to domestic automobile manufacturers.

4. The new Administration introduces large tax incentives for home ownership.

5. Obama immediately announces Cabinet appointees with the broadest experience and the highest credibility, from both within the two political parties (a team of rivals) and within industry.

6. The Fed cuts interest rates.

7. One or two high-profile hedge funds must fail.

8. The uptick rule is reinstated in order to reduce the negative influence of the quant funds.

While I have confidence that, in the fullness of time, many of the factors will come to pass (especially on the hedge fund front!), not one of them has yet, and the stock market has continued its unprecedented fall.

The more time that goes by without bold and sweeping initiatives being adopted, the more systemic the damage is and the more lingering it will be.

As RealMoney's Helene Meisler reports, "This Isn't Business as Usual" anymore, and she relates that "the damage that has been done is extensive."

From my perch, stocks will inevitably launch an oversold rally, but the business of business has been irreparably damaged as the wealth-destruction from, first, the depression in housing and, now, plummeting stock prices will reverberate, providing a continued negative feedback loop.

Consider the following four data points:

1. Six trillion dollars of wealth has been lost in home prices over the last year and a half.

2. Eighteen trillion dollars of wealth has been lost in global equities in only seven weeks.

3. Deleveraging continues to restrict accessibility to credit.

4. Job losses are accelerating.

The Great Recession is now upon us and will be with us for some time to come.

Stocks don't lie; people do.

Throw away your S&P 500 corporate profit estimates for 2009 through 2011, and disregard the economist you watched on CNBC yesterday morning and the other strategists who talk of mustard seeds and a consumer-led recovery next year -- it's pure pabulum.

Stocks will, at times, afford us trading opportunities, but, for the foreseeable future, we will get no satisfaction in investing opportunities.

Only the most facile traders should be on the playing field.

Know What You Own: Doug Kass mentions the S&P 500, and some of the components that trade on that index include Chevron (CVX Quote), Exxon Mobil (XOM Quote), General Electric (GE Quote), Johnson & Johnson (JNJ Quote), JPMorgan Chase (JPM Quote), Microsoft (MSFT Quote) and Procter & Gamble (PG Quote). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

Doug Kass writes daily for RealMoney Silver, a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass' daily trading diary, please click here.