This Day On The Street
Continue to site
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: Bearish Arguments Are Roaring

A Secular Reduction in Credit Creation and Financial Inventiveness Lies Ahead

Coming out of the last several recessions, aggregate economic activity moved quickly back to peak levels -- but, consistent with the accepted shallow-recovery thesis, it won't be as quick to recover this time. David Rosenberg expresses in Barron's that the secular rise in credit expansion of the past several decades could be a thing of the past in the years ahead, producing a truly different experience this time. While we have to try, it's hard for me to be confident in the certainty and precision of a baseline view, especially within the context of the long and uncertain tail of all the nontraditional headwinds. With financial inventiveness being put on the back burner, unbridled, unregulated and (sometimes) unsavory debt creation will no longer catalyze growth in a world where banks are reluctant to lend, the securitization markets are broken and the shadow banking system is nearly extinct.

While it's fortunate that our financial institutions have reduced the chance of systemic risk by decreasing their balance sheet debt, the U.S. government has taken the banking industry's place. And with that come challenges anew over the next decade.

Like Berkshire Hathaway's Munger argued, those challenges and the bills associated with policy are being ignored -- or investors believe they can get out before they come due.

The credit and stock markets have been buoyed and dominated by the better-than-expected earnings cycle. The replenishment of historically low inventories, the effects of recent and extraordinary fiscal/monetary stimulation, a recovery in residential housing activity and the productivity gains from draconian corporate cost-cutting are favored in influence by Jim Cramer (and others) and have clearly trumped the potentially negative consequences and those due bills of policy.

4 of 5

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
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $127.60 0.00%
FB $83.09 0.00%
GOOG $535.38 0.00%
TSLA $205.27 0.00%
YHOO $44.66 0.00%


DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs