This blog post originally appeared on RealMoney Silver on Feb. 10 at 7:33 a.m. EST.
Optimism is growing as the rally in equities has broadened over the past few weeks. Many market sectors, including agriculture, materials, commodities and energy, have demonstrated price resilience and even breakouts in certain cases. At the same time, rising interest rates, improving credit spreads and a steepening yield curve are among the signs interpreted by some that a nascent rise in the economy is imminent.
last night on
"The Kudlow Report," one can see the clarity of the business cycle far easier than seeing the clarity of the stock market cycle.
The business cycle remains weak and uncertain, and the likelihood of a second-half domestic economic recovery seems unlikely. There will be no magic bullet, either from President Obama's stimulus package or from Treasury Secretary Tim Geithner's new financial rescue plan.
Over the next 24 hours, the stimulus package and the financial rescue plan will be sliced and diced and interpreted by many. Though a "shock and awe" policy is arguably a necessary reagent to economic stabilization, what ails our financial system (and has contributed to the associated damage that has been incurred) has been broad in scope and has run deep
as the paradigm of decoupling proved to be another fairy tale.
might have temporarily worked for the New York Yankees' Alex Rodriguez, but it will not work for the world's economies, credit system, financial and capital markets.
We need price discovery and time, not borrowing and spending, which brought us to our current state.
We need a continued downsizing of investor expectations and corporations' fixed-cost structure.
Again, a patient suffering from a massive coronary, regardless of his medication, needs time to recuperate.
The stock market cycle, like the business cycle, needs a similar amount of time to recuperate. The trillions of dollars lost in both equities and in home prices have had (and will continue to have) an adverse impact on confidence.
Doug Kass writes daily for
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Know What You Own: Doug Kass mentions agriculture, materials, commodities and energy, and some of the stocks in these respective fields include Monsanto (MON) , Potash (POT) , BHP Billiton (BHP) - Get Report, Peabody Energy (BTU) - Get Report, Freeport-McMoRan Copper & Gold (FCX) - Get Report, Barrick Gold (ABX) and Kinder Morgan Energy (KMP) . For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.
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 founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Long/Short LP.