Re-risk … prudently
By Guest Author - September 2nd, 2010, 8:19AM
Bull markets are born out of distress — witness March 2009. Bear Markets are born out of prosperity — witness 2008-early 2009.
Liquidating/de-risking out of equities and acquiring/re-risking into fixed income has been the mantra of most individual and institutional investors over the course of the last three years. Since early 2008, retail investors have sold over $200 billion of domestic equity funds, while purchasing nearly $600 billion in fixed-income products. That gap of over $800 billion is unprecedented as is last decade’s spread in performance of bonds vs. stocks the largest in history. But history tells us that the S&P 500 performs famously in the following decade and ultimately moves contra to a peak in flows.
-Doug Kass
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September 2nd, 2010 at 8:29 am
Mr. Kass, as reported on CNBC by Cramer, advised buying Citigroup at $22 on the way down….Kass also was trying to short REITs all the way up…..He doesn’t follow charts as far as I can see.
September 2nd, 2010 at 10:10 am
Kass: Sell Bonds Short
January 16, 2008
The housing/subslime problems that have moved up the credit ladder now seem to be recognized by most. While counterparty risks with regard to credit default swaps should not be ignored, it is likely that few new problems will arise that are as consequential as those that mired the markets over the last 12 months. Consequently, the flight-to-quality trade might be about over now. As well, improving TED spreads and a lower Libor are moving in a direction that suggests the credit woes are lessening.
(emphasis added)
September 2nd, 2010 at 12:59 pm
After reading the above article he wrote on January 16, 2008, this man has zero credibility.
September 2nd, 2010 at 1:44 pm
Doug has made some pretty good calls as well as bad ones. People tend to remember just the good or just the bad depending on whether they like what he has to say. He basically finds stuff outside historic norms and suggest things will go back to normal. In many cases that will work well.
His current head scratcher is consistenly calling going long TBT. Now I understand the trade, betting on interest rates eventually reverting to the mean. But both the timing (fighting the Fed’s printing press after they publicly stated they want rates low for a long time) and the vehicle to express his view (double short ETF with all of their leakage/slippage issues arent ones to hold for long period) is curious to me.
But I dont discount everything he has to say just because I disagree with some of his views.
September 2nd, 2010 at 4:37 pm
Bull markets are not born out of distress, they are born out of below mean p/e ratios. “De-risking out of equities and re-risking into fixed income”..WTF? People are only now understanding that equities are much more risky that guys like Kass purport. The current reallocation from equities into fixed income is a secular move rooted in demographics and the desire to become more risk averse and income oriented. “But history tells us that the S&P 500 performs famously in the following decade and ultimately moves contra to a peak in flows.” Another pathetic fallacy of double-speak from someone who uses trite and hyperbole in place of fact and data. Whoever follows and invests with this guy deserves every bit of frustration they will realize.
September 2nd, 2010 at 6:51 pm
Ah, history. What history will tell us is that cowboy capitalism destroyed the middle class. That unregulated markets destroyed all in their path, including themselves. That “free-market” fundamentalism, like it’s Islamic analog, set what we recognize as civilization back decades, at least.