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
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Kass: The Default Bull Market

This content originally appeared on Real Money Pro on Sept. 19.

NEW YORK (Real Money) -- Yesterday's decision by the FOMC not to taper was a big surprise relative to market expectations.

Above all, the Fed appears to believe that the economy is too weak to taper -- the Fed downgraded its erroneous domestic growth expectations for 2013-2014 -- and would be unable to survive without the continuation of excessive monetary stimulation.

The Fed calls the June-September bond market selloff "the rapid tightening of financial conditions." It is clear that the Fed is concerned when even a 10-year yield rise to only 3% is enough to jeopardize the trajectory of growth in the U.S. The housing market is (and has been) especially vulnerable.

Jobs data are still weak. As I have continually emphasized, the employment picture remains poor. Labor participation is low and the jobs that have been added are low-paying.

A budget showdown and possible government shutdown loom. Constructive fiscal policy is plagued by political divisiveness and inertia. The burden of growth lies on the shoulders of monetary policy.

I, too, have been fearful of our addiction to interest rates and felt most observers were too optimistic regarding domestic growth (my growth slowing thesis/endorsement) within the framework of failed fiscal policy.

Unfortunately for my shorts, my attention to weak economic growth, tepid corporate sales and profit growth (excluding financials) was wrong in focus.

I thought after four-plus years of quantitative easing investors would get the point -- QE is losing its effectiveness, and we are likely in an extended period of subpar growth that might be accompanied by less-than-average P/E multiples.

What surprises me is that by certain members of the Fed's own admission, the benefits of quantitative easing are increasingly called into question. But that did not keep the Fed from the surprising decision not to taper. I suppose its rationale is that the economy would be even worse without more cowbell. This ignores the downside to this policy -- namely, wealth/income inequality, a depreciating currency and a further abolishing of fiscal responsibilities from our leaders in Washington, D.C.

As mentioned previously, perhaps the Fed is concerned about the upcoming budget negotiations. Perhaps the Fed was surprised to the degree that interest rates rose (and housing stalled) in the face of a mere mention of tapering four months ago.

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
DOW 16,880.36 -31.75 -0.19%
S&P 500 1,970.07 +0.12 0.01%
NASDAQ 4,462.9020 +20.2040 0.45%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs