Tuesday, April 28, 2009

The Man Who Called the Bottom: What Is He Thinking Now?

Here's the tape from last night's Kudlow Report with Dougie Kass. My old friend remains confident that a generational stock market low is now in place. His recap of his key stock market and economic insights from our conversation follows below.

With My Fav'rite Host
4/28/2009 8:08 AM EDT

I had a segment to myself last night with Sir Larry on CNBC's "The Kudlow Report." Here were my bullet points in last night's show:

* I am confident that a generational stock market low is now in place.

* Our equity markets have now fully discounted a "less worse" domestic economy.

* The next up leg will occur when we can quantify and have a better feel of whether the massive doses of fiscal and monetary policy have gotten traction.

* For the shorter term, the U.S. stock market appears vulnerable to a number of unconventional headwinds. It will be a refreshing pause, likely laying the ground for a higher move in the summer.

* More tangible signs of economic traction are necessary before the markets move toward my 1,050 target for the S&P 500.

* Among the investment clouds are an increased and more costly regulatory burden and the increasingly intrusive role of the public sector. This is a valuation headwind, a P/E ratio-moderating phenomenon.

* Going forward, credit will be less plentiful (especially of a securitized kind), and its transmission will not be normalized for some time to come.

* In the current cycle, several other negative catalysts exist, such as the absence of mortgage equity withdrawals that bolstered 2001-2006 growth. This will diminish the prospects for a 2009-2011 economic recovery.

* The specter of rising taxes and higher interest rates in late 2009/early 2010 could negatively impact the already fragile recovery in the economy and in the markets.

* The weakened state of the consumer is the most significant intermediate-term market/economic challenge. It continues to render the market as near-term exposed and must be closely monitored.

* The threat of swine flu, for now, seems to be more of a sideshow to the above than something that will materially impact equities.