Uncertainty Prevails

 | Jan 03, 2013 | 12:30 PM EST  | Comments
  • Comment
  • Print Print
  • Print

This commentary originally appeared at 7:41 a.m. EST on Jan. 3 on Real Money Pro -- for access to all of legendary hedge fund manager Doug Kass's strategies and commentaries, click here.

Yesterday was another great example of how difficult (and even silly) short-term market forecasts can be.

I frankly know few who were emboldened to get long in the dark days of last Thursday and Friday.

Although I did expand my long exposure late last week, I experienced premature disaccumulation toward the end of the day on Monday, as it was my view that a favorable outcome was in the process of being discounted.

Even though I almost perfectly forecast the timing and context of how the fiscal cliff would be resolved, I did not have the foresight to stay with many positions as I hedged out much of my long book.

I start the day in a market-neutral mode, and I have no plans to chase the market now.

Warren Buffett famously quipped, "Price is what you pay; value is what you get." And after a near-70-handle move in S&P futures since Friday's close I will take a pass on buying strength.

In looking at yesterday's rally and the uniformity of sector performance, it seemed to me that it likely reflected more of the fact that new money was coming in than a reaction to the deliberations in Washington, D.C.

That said, buying this sort of strength is for momentum-based buyers, and I don't travel in those circles.

The fiscal cliff resolution provided little certainty to the consumer and business for the time ahead. Indeed, one can argue that, although the tail risk of going off the cliff has been removed, there is much uncertainty created for the next two months and certainly a lot more heavy lifting.

I am concerned that the multiplier being applied to the tax increases agreed to this week will be greater than many expect, serving to weigh on domestic economic growth. As well, it is also my view that the trajectory of economic growth in 2013 (and corporate profits) will also be adversely impacted by the manner in which businesses and consumers react to the tax hikes and the growing animosity and contentiousness in Washington, D.C. in the months ahead. Indeed, in the two months ahead, I fully expect the deliberations between the revenge-lusting Republicans in the House and the equally dogmatic and partisan incumbent President and Democratic Senate to have a direct and distinctly adverse impact on economic growth, confidence and profits.

Bottom line: I view the market's strength this week not as a new bull market leg but rather as something far different.

Regardless of view, these are uncertain times and the only thing certain to me is that 2013 follows 2012 and that there are 363 days left in the year.

Of that, I am very certain.

Columnist Conversations

Lang:
Join me later today for a free webinar with my guest Jay Wolberg, a guru on market volatility. We'll talk abo...
"We have decided to include countries with a rating below triple B minus, like Greece and Cyprus, applying som...
The ECB will start buying covered bonds in mid-October, and asset-backed securities in the fourth quarter, ECB...
No movement on interest rates this time. No surprise here, let's hear what Draghi says in less than half an ho...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.