Doug Kass

[winston]

Single Best Trade: Hedge fund manager Doug Kass gives his top pick now

My favorite trade is buying (TLT). TLT is the bond ETF iShares 20+ Year Treasury Bond ETF | TLT. It comprises Treasury securities with an average effective duration of about sixteen years with a yield of approximately 5.06%. This ETF is liquid (average daily trading volume of 52 million shares and about $37 billion is managed by the Fund).

I expect the domestic economy to begin to experience decelerating growth and morph into a mild recession in the first half of next year.

Interest rates should decline as the variable and lagged impact of tighter Fed policy should shortly be felt.

The geopolitical problems around the world could lead to a flight to safety - benefitting Treasuries by placing pressure on yields.

What could go wrong? The economy may remain resilient.

Source: The Street

https://www.thestreet.com/investing/sin ... pick%2Bnow

[winston]

Hedge-fund manager Doug Kass has blunt warning for tech investors

by Todd Campbell

Inflation has moderated from mid-2022 when the CPI inflation report showed 9.2% year-over-year growth in June. In September, the measure was up a more manageable 3.7%. But prices aren't falling so much as they're rising more slowly.

And that might be OK if wages kept pace, but they’re not. Real wages, or pay minus inflation, remain negative, so households are still losing ground.

As a result, the savings rate has collapsed to 3.4%, the lowest pace since the Great Recession, and personal savings built because of covid-era stimulus payments have dwindled.

The situation is so dire that credit-card balances in Q3 soared $154 billion from a year earlier. U.S. households owe more than $1 trillion on credit cards at a time when average credit card interest rates have surged to 21%. For perspective, the figure was 12% in 2014.

Worrisome data in the job market are emerging. While many jobs remain unfilled, they’ve declined by 1.3 million over the past year. This year, continuing unemployment claims have increased to 1.8 million from below 1.5 million one year ago.

The risk to technology stocks from an economic reckoning could mean that the so-called magnificent seven companies responsible for much of the S&P 500’s double-digit returns this year are about to fall.

Source: The Street

https://www.thestreet.com/technology/he ... Binvestors

[winston]

Doug Kass: 10 Reasons It Is Different This Time

What could go wrong?

by Doug Kass

1. Stacked or cumulative inflation will weigh on the U.S. consumer -- especially the lower income segment.

2. In part reflecting sticky inflation, interest rates will be higher for longer -- squeezing overleveraged borrowers (especially commercial real estate).

3. Quantitative tightening is about to kick in as RRP (Reverse Repurchase Agreement operations) drains to near zero.

4. Political and geopolitical headwinds are fierce and show no signs of abating.

5. Our growing annual deficit and nation's debt load has not and will not likely be addressed by an unprecedented political partisanship.

6. The unstable tribal mentality of the extremes on the political left and right (what Arthur Brooks calls the Dark Triad Paradigm) dominate our society: the loss of moderation spells more societal troubles.

7. Valuations, based on historical measures, are almost all above the 90%-tile. Rarely do bull markets start from current price-earnings levels.

8. Equity prices have decoupled from interest rates -- the equity risk premium is at a multi-decade low and the spread between the S&P 500 dividend yield and the yield on Treasuries has rarely been wider.

9. Investor sentiment is giddy and the Bull Market in Complacency is worrisome.

10. Like prior periods in history, a changing market structure, including casino-like ODTE options trading, the proliferation of leveraged quantitative strategies and products and a general dependence on price momentum (not value) as a short-term voting machine, represent bona fide threats on possible market instability.

Source: The Street

https://realmoney.thestreet.com/markets ... g=62795946

[winston]

Doug Kass: My Updated Market Outlook

We are not Perma Bears — we aren't Perma Anything. We simply assess risks relative to reward.

by Doug Kass

Many traders and investors who, seeing a new paradigm, embraced the promises of AI — while ignoring the many emerging challenges we have been warning about:
* Rising geopolitical risks
* Higher interest rates for longer
* Prickly inflation and slowing economic growth — "slugflation"
* Reckless and undisciplined fiscal policy that has led to an ever-larger annual deficit and cumulative U.S. debt load
* Heady valuations

Source: The Street

https://pro.thestreet.com/market-commen ... m_content=

[winston]

Doug Kass: I've Been Wrong, But Here's Why I Remain Bearish

Fifteen reasons I continue to view this market cautiously — and you should too.

by Doug Kass

1. Equity performance has been top heavy
2. Corporate profit performance is also reliant of mega-cap tech
3. Corporate profit expectations are unrealistic
4. The market is not broadening out
5. Traditional valuation metrics are generally in the 90% tile or higher
6. The breathtaking reset in valuations (since October) could mean reverse
7. Interest rates are likely to remain higher for longer
8. Equities have rarely been as overvalued against interest rates as they are today
9. Global economic growth is expected to be weak (relative to consensus)
10. Inflation (particularly of a service-kind) will remain sticky
11. Consensus S&P EPS may be too high
12. Political risks are underappreciated
13. Geopolitical risks are unlikely to abate
14. Investor sentiment remains bullish and fear is absent
15. Market structure and investor positioning are potentially toxic market influences

Source: The Street

https://pro.thestreet.com/market-commen ... m_content=

[winston]

Doug Kass: Is the Bull Run Based on a Bunch of Bull?

Investors tend to believe what they want to believe. But fairy tales don't come true... even when it happens to you.

42%, households' allocations to equities is at the highest level in 72 years:

Number of headwinds including but not restricted to economic (slugflation likely lies ahead), policy (fiscal and monetary), political and geopolitical concerns, systemic stability and, the subject of today's missive — serious questions of what is the true level of S&P EPS that supports historically high (above 90%-tile) valuations.

Whether we are utilizing too-high S&P EPS numbers in justifying current valuations.

Source: The Street

https://pro.thestreet.com/market-commen ... m_content=

[winston]

The Threat to the Market No One Is Talking About

by Doug Kass

Over 95% of investors are "long only."

Poor quality of reported S&P EPS.

The Threat of Market Structure
1. Passive Domination; About 75% of trading volume every day
2. Increased Crazy: Meme Stocks
3. Option Speculation Has Intensified: 0DTE (zero days to expiration)
4. Other Technological Advances Raise More Risks; Computer-generated investing strategies;
5. Heightened Risks of Expanded Transparency; Some of it is inaccurate.

https://pro.thestreet.com/market-commen ... m_content=

[winston]

Doug Kass: My 15 Big Surprises for 2025

Surprise #1: Another attempt on former President Trump's life occurs early in his term.

Surprise #2: The "other" romance, between Trump/Musk, doesn't make it past Spring 2025.

Surprise #3: The Trump/Vance Administration is far more successful in carrying out its campaign promises than Trump I or really any recent President.

Surprise #4: Relating to tariffs, while there are continued threats of robust tariffs directed at specific trading partners — they mostly serve as negotiating positions and do not get implemented.

Surprise #5: Amid weakening domestic economic growth, planned austerity measures (and reduced fiscal spending/support), recommended by DOGE, are unsuccessful and abandoned.

Surprise #6: President Trump grows more moderate in tone and policy — and, surprisingly, moves away from his MAGA base.

Surprise #7: AI related equities are adversely impacted by two factors — the inadequacy of supply of electricity and the absence of a killer app or related income stream:

Surprise #8: AI headlines are replaced with quantum computing headlines.

Surprise #9: In 2025 the S&P Index falls by about 15%. The technology-laden Nasdaq drops by over 20%.

Surprise #10: There is peace throughout the world. The Ukraine war is settled and there is peace in Israel. Israel and Saudi Arabia announce a new (and friendly) accord.

Surprise #11: Climate change strikes the U.S. in a 500-year rain and flooding event.

Surprise #12 Private Equity first acquires college football franchises and then some investors plan to purchase entire private universities.

Surprise #13: The U.S. government intensifies its anti-trust cases against big tech and initiates legislation aimed to regulate the shadow banking and private equity industries.

Surprise #14: Warren Buffett's corporate curtain call is the acquisition of the Boeing Company in 2025 — the largest acquisition in Berkshire Hathaway's history.

Surprise #15: Surprises in the sports world abound in 2025:

Source: The Street

https://pro.thestreet.com/market-commen ... m_content=

[winston]

Veteran fund manager sends urgent 9-word message on stocks

by Todd Campbell

The S&P 500 marched over 25% higher since hitting a tariff-fueled low on April 8; however, cracks in the U.S. economy are forming even as President Trump's tariff pause has expired, unleashing a new wave of inflation-unfriendly import taxes.

Weakening employment data and arguably sticky inflation isn't a great recipe for stock market gains, and it doesn't help that August is historically a tricky month for markets.

"Bull Markets Die Hard, so I don't anticipate a straight-down correction".

"Rather, I am expecting a jagged move lower in the weeks and months ahead. I will be reshorting strength. Friday was likely the first shot across the bow."

"The investing world almost universally believes it has discovered a new god in artificial intelligence and machine learning," said Kass.

"AI infrastructure CAPEX is already 20% higher as a % of GDP than what was spent on telecom and internet infrastructure at the peak of the dot com boom."

"Current valuations are a poor launching pad for future investment returns".

Source: The Street

https://www.thestreet.com/investing/sto ... m_content=