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Kass: Harder Than the Average Bear

Stocks in this article: JPM WFC BAC

A description of what has happened in the past and what is now happening is easy; how to respond tactically and how to adopt a reasonably accurate vision of the future are much more difficult.

Positives and Negatives

The largest positive is that most now believe that the Fed and Treasury are pushing on a string as investment, economic and profit expectations have begun to adjust to reality:

  • The Cassandras -- Nouriel Roubini has guest hosted CNBC's "Squawk Box" on three occasions in the past six weeks and is now touring the globe to standing-room-only crowds as an economic consultant! -- are now out in force.
  • The discredited Polyannas -- even "Steady Eddy" Ken Fischer and many other permabull managers are suffering and are getting redeemed! -- are in hiding, however, nowhere to be seen, and, they, too, have turned their back to Goldilocks, as the NBER yesterday put an exclamation point on the U.S. recession.

The largest negative is that stocks are still reacting poorly to weakening results, and those negative but lagging fundamentals will likely to be with us for some time to come.

We all recognize that, in the fullness of time, an unprecedented amount of stimulus will, well, stimulate! The only question is when.

My view is that it is simply too hard to have conviction until we meet the following conditions:

  • stability returns to the hedge fund community, as redemptions slow down, some large hedge funds fail, and money is re-circulated to other investment managers;
  • the slope of the domestic economy's downturn is better understood, as the possible recovery is seen with better clarity; and
  • the volatility in the capital markets diminishes.

Until the above three conditions get resolved, we are likely to be stuck in a broad trading range of plus/minus 10% to 15% for the short term.

We remain in an exquisite backdrop for traders but a difficult and frustrating setting for investors, in which it may be too late to sell and too early to invest for the long term.

At some time in the future (possibly sooner than later), a historic buy-and-hold opportunity will be in front of us.

The current test for investors is to remain solvent until that time is near. has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there from

Know What You Own: Doug Kass alludes to the turmoil in the financial sector, and some of the survivors in this field include JPMorgan Chase (JPM), Wells Fargo (WFC), Bank of America (BAC), Citigroup (C), Royal Bank of Canada (RY), Bank of New York Mellon (BK) and Toronto-Dominion Bank (TD). For more on the value of knowing what you own, visit's Investing A-to-Z section.

Doug Kass writes daily for RealMoney Silver , a premium bundle service from For a free trial to RealMoney Silver and exclusive access to Mr. Kass' daily trading diary, please click here.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd.
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