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Doug Kass: The Great Bear Market of 2021-22


The averages are lying to investors. We have been in a profound and significant Bear Market since last summer as numerous individual securities have cratered.

I continue to be bearish and am of the view that we are in a trading sardine market and not an eating sardine market. However, the under the surface schemissing of stocks could mean that investors should be alert to emerging opportunities in a number of individual equities that have already been taken to the woodshed.

“Slowly I turn, inch by inch, step by step…”

– Abbott and Costello, Slowly I Turned (The Niagara Falls Sketch from the movie Gents Without Cents)

Since early summer 2021, an increased number of equities have become unglued from the averages. What some are beginning to realize is that we have been in a Bear Market for many stocks for months – so individual equity opportunities may be developing, suggesting that some of the more bearish market views might be tempered:

Source: Lawrence McDonald (The Bear Trap)

From one sector to another, a systematic Bear Market has engulfed the U.S. Stock Market – even though the senior indexes are down only modestly.

* Stay at home stocks, embraced 18 months ago (e.g., Peloton (PTON) , Zoom Video (ZM) ) are down by 50% to 75%.

* Meta Platforms’ (FB) dramatic decline of -46% (from $350 to $200) is a world leader to the downside – in capitalization terms

* A number of 2021 IPOs are trading lower than their offering prices. The Renaissance IPO ETF (IPO) , which tracks initial public offerings, is -45%.

* SPACs – a flawed concept that inures to the benefit of sponsors and not to investors – which had inexplicable share price appreciation at the get go have been uniformly decimated.

* The promise of EV startups – either thru SPAC mergers or issued independently as IPOs – has evaporated with darlings like Rivian (RIVN) and Lucid (LCID) losing more than 2/3rds of its value.

* Conceptual real estate plays, shot to the moon in price and and have been obliterated in their return to earth – Compass (COMP), Zillow (Z) , Redfin (RDFN) and OpenDoor (OPNDF) are, on average, -70%.

* Other concept stocks, like Avis (CAR) ($545 to $185) have collapsed.

* Gewgaws have been left like orphans – many are -50% or more.

* And then there is (ARKK) ($160 to $65).

It is probable that most/all of the aforementioned sectors and stocks will never return to anywhere near their 2021 share price peaks.

Though I remain bearish on the gewgaws, some recovery in a number of the stocks mentioned is likely.

Though the averages are still being propped up by Microsoft (MSFT) and Apple (AAPL) – the great unwind, described above, in a number of equities is eye catching as so many stocks have declined inch by inch, step by step.

(MSFT and AAPL are holdings in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells these stocks? Learn more now.)

(This commentary originally appeared on Real Money Pro on March 2. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass’s Daily Diary and columns from Paul Price, Bret Jensen and others.)

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