UP AND DOWN WALL STREET DAILY The Market's Formula: A Square-Root Rally

UP AND DOWN WALL STREET DAILY
The Market's Formula: A Square-Root Rally

(Source BARRONS)By RANDALL W. FORSYTH
After nailing a 40% surge since early March, Doug Kass sees "potholes" in the road ahead.
LONG-TIME SHORT-SELLER Doug Kass shocked many of his followers by turning bullish at the beginning of March -- just before the stock market took off on a 40% tear.

Now, with the major averages up sharply from what he called at the time "generational lows," the skipper of Seabreeze Partners sees the road ahead to higher ground strewn with potholes.
Speaking at a conference presented by Barry Ritholtz, the money manager and author of the popular Big Picture blog, Kass recalled that when he made his bullish call in early March, stocks had been through their second-worst bear market ever in terms of price and multiple compression.
Price-earnings multiples had fallen to levels consistent with 6% inflation, while 46% of the Standard & Poor's 500 stocks paid dividend yields exceeding the Treasury 10-year note. Other valuation measures also were rock-bottom; stocks traded at 90% of replacement value while the market's capitalization was just 78% of gross-domestic product. Read Article...
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