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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Kass: Apocalypse Here?

This blog post originally appeared on RealMoney Silver on April 18 at 7:25 a.m. EDT.

Over the weekend, there were two additional negative data points.

First, China raised bank reserve requirements for the fourth time in order to slow down inflation. Reserve ratios will rise a half point on April 21, with the People's Bank of China pushing the requirement to a record 20.5% for the biggest lenders.

Second, Goldman Sachs (GS) Economist Jan Hatzius cut first-quarter 2011 GDP forecasts from 2.5% to 1.75%. (The firm's projection was 3.5% only a month or so ago!)

A week ago, I wrote a column, "Apocalypse Soon," which outlined, in a comprehensive way, the ingredients for a market fall.

On Thursday in The Edge (my exclusive RealMoney Silver trading diary), I suggested in "Apocalypse Soon? Apocalypse Now!" (reprinted below) that a market correction was looming ever closer.

In Monday morning's opening missive, "Apocalypse Soon," I set the stage for a more cautious market view.

That view was based on a number of factors:

  1. higher oil and input prices;
  2. a debased U.S. currency, lingering budget concerns and political partisanship, which could jeopardize a budgetary compromise (and resolution);
  3. screwflation of the middle class and its inevitable impact on economic growth and corporate profits;
  4. the specter of structural unemployment;
  5. the absence of a recovery in home prices;
  6. the fiscal and monetary "stabilizers" are soon to be taken off;
  7. vulnerability to consensus 2011 growth projections, corporate margins and profitability;
  8. the euro sovereign debt crisis, thought to be contained, has continued to spread;
  9. a relatively anemic recovery exposes the economic cycle to the vulnerability of more black swans (and tail risk), which are occurring with greater regularity; and
  10. investor sentiment has moved to a lopsidedly bullish extreme.
I believe that column "bears" rereading, as it might be one of the times that I will be proven (and have the timing) correct -- and for the right reasons!

Apocalypse soon?

Maybe Apocalypse now.

Both columns "bear" re-reading this morning.

Indeed, since their writing, the market conditions have deteriorated further:

  1. Consumer nondurable issues have outperformed, a classical sign of a more defensive market.
  2. Former market-leading stocks -- namely, Google (GOOG) and Apple (AAPL) -- have begun to underperform.
  3. First-quarter earnings reports have been disappointing and, when combined with No. 4 below, render the $95-a-share consensus S&P forecasts for the year more problematic.
  4. The price of energy products and other input prices show little signs of moderating.
Finally, even though the buy-on-the-dip mentality is very much in place, Mr. Market's technical condition has eroded further. Buyers are not as aggressive as in November 2010's correction, which presaged another up leg - for instance, unlike November 2010, there has not been a 90%-plus up day. Moreover, of late, short-term oversolds have gotten deeper.

Stated simply, get defensive.

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's daily trading diary, please click here.

RELATED STORIES:

At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 17,106.36 +19.73 0.12%
S&P 500 1,991.21 +4.20 0.21%
NASDAQ 4,483.7670 +10.07 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs