This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

10-Year Yield Watch and the Fed: Best of Kass

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 the posts this past week were entries about the 10-year yield and the Fed.

Please click here for information about subscribing to RealMoney Pro.

10-Year Yield Watch
Originally published on Friday, July 5 at 9:32 a.m. EDT.

Here is my view of what the 10-year yield should be.

The time to have shorted bonds might have been in 2012 when no one wanted to.

As I exhibited in my Value Investing Congress presentation on shorting bonds in May over a year ago, over time, as many have observed, the 10-year yield typically trades between 0.8x and 1.0x times nominal U.S. GDP.

If we assume that real growth is about 2.25% and inflation is at 1.40%, then we have nominal growth of 3.65%.

I believe strongly that structural headwinds and the residue of the depth of the last recession will continue to constrain growth, so 0.8x (at low end of the range) seems a more reasonable multiplier -- 0.8x 3.65% = 2.82%, not far from the current yield of 2.69%.

That said, as I wrote in beware the interest rate cliff, I believe many market participants are underestimating the vulnerability of the U.S. economy to our addiction (in the private and public sectors) to lower interest rates.

It is different this time.

Very different.

The Fed Is Between a Rock and a Hard Place (Part Deux)
Originally published on Wednesday, July 3 at 10:33 a.m. EDT.

The Fed has already said too much and has been too transparent.

The Fed could be jammed if the economic data continues to come in OK (even on the surface).

Oddly, a weak jobs report may be what the Fed is hoping for. With a strong number, how exactly can it do anything but taper and maintain any credibility?

The Fed has already said too much and has been too transparent.

Fed Chair Bernanke being "puzzled" by the interest rate spike because he placed more value in the stock of bonds held by the Fed then flow and momentum forces just shows how much of an academic he truly is. It is akin to a trader staring "puzzled" at his screens over the rise in Apple (AAPL) to $700, Tesla (TSLA) to $120, General Electric's (GE) crash below $7 bucks, Greece trading like a AAA credit, etc., and then running to the library to try to understand it from an academic perspective.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs