Doug Kass Downplays Recent Fears

By on February 7, 2010

Doug Kass recently provided his opinion regarding the economic recovery to this point:

I have expressed my doubts that the domestic economy began a normal cyclical expansion in the spring of 2009 that is capable of matching past recoveries of over 40 months in duration. I strongly disagree with this conclusion as the past cycle was not a traditional cycle. Rather it was an unprecedented credit-driven cycle characterized by an excessive and abusive use of debt/leverage at nearly every level of the private and public sectors. Following the artificiality and unusual nature of the last (“free”) credit cycle, the current expansion, which is now deprived of much of the steroids that formed the foundation of that growth, seems likely to disappoint an increasingly confident cabal of forecasters who project a smooth and self-sustaining recovery.

However, Kass believes that concerns about Greece and Portugal are overblown and last weeks sell-off may represent an opportunity to get back in the market:

Nevertheless, the size of the problems in Greece, Portugal and the other nasty critters must be put in perspective. Greek’s GDP, at only $343 billion, is roughly equivalent to the GDP of the state of Washington in the U.S. The GDP of Portugal is even smaller; at $223 billion, it is equivalent to the GDP of the state of Louisiana. According to Mike O’Rourke, Greece’s total stock market valuation is “slightly more than Citigroup’s.” And, if you add the GDP of Greece and Portugal together, “they will equal the size of one large systemic institution in the United States.”


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