NEW YORK ( TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.Among his posts this past week, Kass wrote about why the market's trust in the Fed chairman is misplaced, why he shorted shares of Microsoft and some recent good news on the housing market.
Blind Faith in Bernanke Is Misplaced
Originally published on Friday, Aug. 31 at 2:07 p.m. EDT.
Come down off your throne, and leave your body alone. Somebody must change. You are the reason I've been waiting so long. Somebody holds the key. But I'm near the end, and I just ain't got the time. And I'm wasted, and I can't find my way home. Come down on your own, and leave your body alone. Somebody must change. You are the reason I've been waiting all these years. Somebody holds the key. -- Blind Faith, Can't Find My Way HomeI find it hysterical and almost ludicrous that market commentators, investment strategists and investors continue to voice blind faith in the Fed chairman. Ben Bernanke's poor forecasting capabilities rival those of his predecessor Alan Greenspan, and that is not a good thing for investors who hold onto the premise of a self-sustaining domestic recovery. As I have written repeatedly over time, Bernanke got the housing bubble wrong, he failed to anticipate the recession in 2008 and the role and systemic risk of derivatives (which Buffett calls financial weapons of mass destruction), and he didn't recognize until 2010 that the U.S. unemployment problem was nearly as much structural as cyclical. And he is now wrong on the benefits of further quantitative easing. Three years after the Great Recession and after the implementation of QE1, QE2, Operation Twist (and its extension), U.S. real GDP is growing at only about a 1.7% rate. In reality, more cowbell may actually be counterproductive in penalizing the savings class, creating a disincentive for banks to lend and by putting more pressure (as commodities rise) on the middle class (which I call screwflation). Low interest rates have become a blunt instrument for generating growth, but the growth problem lies not in the level of interest rates -- rather, the problems have been long in the making and are structural (in the categories of employment, education, etc.). I am not being a skeptic; I am being a realist. What ails the U.S. economy is not liquidity; it is confidence. We don't need any more bond buying or quantitative easing, which is no longer positively impacting the real economy; we need progrowth fiscal policy that addresses fundamental economic issues that have been several decades in the making.