Selling Stocks Short; April 8, 2008

The Intelligent Trader; April 8, 2008
Selling Stocks Short

I had the opportunity to meet Doug Kass several years ago at a hedge fund conference hosted by Jim Cramer. I had been following his research for some time and found his writings to be both thoughtful and engaging. He is one of the best, if not the best, short sellers in the marketplace.

RAC
The Intelligent Trader

Doug Kass: Recession Will Run Deep
Blog post originally appeared on RealMoney Silver on April 4.

Will Technicals and Sentiment Continue to Trump Fundamentals?

7:38 a.m. EDT

Thus far, the market's internals are better than after the two previous one-day wonders.

Specifically breadth has remained positive, and volume has subsided into the two-day aftermath since Tuesday's soaring stock market. Sentiment remains another constructive element to the investment mosaic, gauging by the 10-day CBOE put/call ratio -- though lower than the recent peak, it still seems elevated and at levels that have typically been associated with market strength. Moreover, ISI's survey of hedge fund exposure is unchanged over the last four weeks.

Beyond the financials' dead-cat bounce (my view), the prior market leader -- namely, the materials sector -- seems to be the current and possibly future market leadership group.

With the technicals and sentiment, thus far, in relatively sound condition, here are some critical questions for your consideration:

1. To what degree has the market's decline discounted the current economic weakness?

2. How long will the domestic economy remain shaky?

3. And to what degree will it contribute to disappointing corporate profit growth?

I am still mildly bearish on the near-term prospects of the market and a little more bearish on medium intermediate-term outlook.

We Are in a Recession.