Last year -- on July 6, 2010, Kass said the market had made its lows for the year and his call proved to be extremely accurate. And less than a week before the S&P 500hit a generational low of 676 on March 9, 2009, Kass went on CNBC and predicted the bottom. Now, Kass has predicted that the low of 2011 has been made - on 9 Aug 2011 (incidentally, Singapore's National Day). These are his reasons:
1.Such rapid and sharp declines have historically been followed by "the mean return gains of more than 10% 6 months later and greater than 20% a year later."
2. The S&P 500 is now more technically oversold than at any other time in the last 10years, with its 14-day relative strength index at 16.5 percent. A level below 20 generally attracts buyers.
3. He thinks the historic implication of the S&P downgrade will ultimately be a kind of wake-up call for lawmakers.
4. The ratio between normalized earnings and corporate bond yields has never been more stretched, like in 2009.
5. The economy is still growing, albeit very slowly.
Doug Kass, however, has not always made correct calls. In Aug 2009 for example, he made the wrong call that stock markets would fall again. Instead, they continued to rally. So, it is caveat emptor I guess. But I am hoping for at least one more rally in the near future, and signs are that the 9 Aug low has stayed for most stocks for now.
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