Central Banks Can't Save Europe; Short Rallies

The Street September 16, 2011

Importantly, nothing in yesterday's move reduces the possibility of a worldwide recession in 2012. The clock is ticking in Greece, and it appears inevitable that Greece faces bankruptcy sooner than later, raising a further risk of more contagion in the eurozone.

In terms of the investment take from all this, I remain of the view that after the recent sharp advance, stocks have become less attractive, and I share some of Dan Greenhaus's market observations this morning that there are plenty of outsized investment risks ahead: We have to say, though, the action today feels remarkably similar to 2008. If you recall, the equity market put together numerous rallies of 7% to 15%, following any announcement that suggested policy support for the economy or markets. Remarkably, the rally from late October until early November was 18.5% in force (following a 33% drop). From November 2008 until early January 2009, the S&P 500 rallied nearly 25% (following a 25% drop). Each of these rallies was preceded/caused by some central bank or policy announcement that suggested "all as well." But none of us will forget that it wasn't then -- and it isn't now. -- Dan Greenhaus, BTIG Reflecting these observations and the ambiguous economic news and outlook in the U.S., I am currently in a slightly net short position. I plan to raise my short exposure in any further market rise. Doug Kass writes daily for RealMoney Pro, a premium service from TheStreet. For a free trial to RealMoney Pro and exclusive access to Mr. Kass's daily trades and market commentary, please click here.>To order reprints of this article, click here: Reprints Add Comment Tweet « First ‹ Previous 1 2 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. adsonar_placementId=1341527;adsonar_pid=879768;adsonar_ps=-1;adsonar_zw=600;adsonar_zh=280;adsonar_jv='ads.adsonar.com'; /* only load jQuery if not present */ if(typeof jQuery == 'undefined') { document.write(""); var __noconflict = true; } try { function DM_onSegsAvailable(segs, cust_id) { for (var i=0;i li'); menuPopup.bind('mouseover', popup_open); menuPopup.bind('mouseout', popup_timer); }catch(e){} }); document.onclick = popup_close; #premServ #popup li a, #premServ #popup li ul li a { color: #EAFFED !important; }

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The U.S. Manufacturing Myth: Why China's Rattled!

China is losing its edge. It's now cheaper to make something in Baltimore than Beijing. U.S. manufacturing is surging back! A top analyst at TheStreet has identified a small company at the epicenter of this long-term megatrend. Get its name in our free report called, "The Little- known Industrial Stock With Huge Upside Potential."

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