Doug Kass: Today, Expect Absolutely No Sign of 'Trouble Ahead'
These are my Top 10 'group stink' comments you will most likely hear in the business media. Don't say I didn't warn you.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Driving that train
High on cocaine
Casey Jones you better
Watch your speed
Trouble ahead
Trouble behind
And you know that notion
Just crossed my mind
- The Grateful Dead, Casey Jones
"I can't identify any negatives."
Expect lots of that today, as the herd-like chorus of "first-level thinking" is at near unanimous adoption. Here are the Top 10 "group stink" comments that you will (no doubt!) hear in the business media today:
1. Guests and moderators will reduce their market forecasts to the "first level" of thinking — disregarding the complexity of the investment mosaic. It goes something like this: The S&P Index will likely rise by about +10% with S&P profits up low double digits with some modest declines expected in price-earnings ratios.
2. Banks have a noteworthy setup into earnings — with deregulation, an improvement in net interest income (as the yield curve steepens), robust merger and acquisition activity and low relative valuations.
3. The economy is growing in nominal terms at an above-average rate of growth. It is not:
4. The new Fed Chair will grease the economy by lowering interest rates (regardless of sticky inflation). Ergo, the domestic economy will be "running hot."
5. Every single contributor in the business media will be upbeat on the markets. The same guests seen yesterday, will be seen today... and tomorrow. (See No. 10 below.)
6. Guests will universally say that "I can't identify any negatives." There will be no mention of the equity risk discount, a lowly S&P dividend yield of 1.11% (remember, historically 35% of market returns are dividends), the lack of any fiscal discipline (leading to ever higher deficits) and valuations (based on historical metrics) in the 98th percentile.
7. There will be no mention of an overvalued (and record-high) Shiller CAPE Index or how expensive the Buffett Indicator (market valuation relative to gross domestic product) is. These indicators don't count anymore as we are in a new valuation paradigm.
8. There will be no mention of the risks associated with (leveraged) passive products and strategies and changes in market structure. (There are now more exchange-traded funds listed than individual stocks.)
9. The gamification of the market will be ignored and not addressed. (Well, I suppose it's normal for 70% of all options traded to have a 24-hour maturity!)
10. Dan Ives and Tom Lee will appear on CNBC in support of the equity market and AI investments. They will be unchallenged.
Cue Bob Weir and The Grateful Dead's "Casey Jones"... there might be some trouble ahead.
This commentary was originally posted in Doug's Daily Diary on TheStreet Pro.
At the time of publication, Kass had no positions in any security mentioned.
