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 items about why bond yields are continuing to trend lower, the uneven playing field for investors and the inquiry into Ocwen.
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Bond Yields Continue to Trend Lower
Despite some positive domestic economic releases, bond yields continue to trend lower this week -- the yield on the 10-year U.S. note is back down to 2.67% -- and the gap between rising P/E ratios and the market's message of future subpar domestic economic growth continues as well. Several reasons why the (beginning-of-the-year) consensus expectations of rising fixed-income yields continue to be wrong include:
- Liability-driven pension plan buying.
- There is a developing correlation (over the near term) between rising bond prices (and lower yields) and declining equity prices. So if a stock market correction develops, bond prices will likely climb (and yields will likely continue to contract).
- Evidence that the important housing sector continues to pause and the continued ratcheting down of domestic economic growth forecasts for the first six months of 2014.
- Competition from surprisingly low European yields, as the European Central Bank considers the start of a broad-based asset purchases and other conventional and unconventional easing policies.
- Demographic trend support (as the maturing baby boomers seek the safety of income).
- The failure of trickle-down economics to support the stead of the middle class (who are still experiencing only modest income gains).
- Fear that accelerating inflation -- the CRB index is up 11% year-to-date -- will impede growth.
- Rising fear of geopolitical risk (now in the Ukraine) is putting a flight-to-quality bid under bond prices.
- Growing evidence that the recovery in the Japan and China's economies are more muted than previously expected.
At the time of original publication, Kass was long TBF, BTT, BKN, ETX, VCV, VPV, VGM, NAD, NMA, NMO, NRK, NPI, NPM, NQU and NQS; short TLT, BAC, WFC and JPM.
A Twisted Sense of Investment Fairness
Originally published on Wednesday, April 23, at 9:27 a.m. EDT.
Ocwen Probe Ramped Up
Originally published on Tuesday, April 22, at 9:30 a.m. EDT.
At the core of the probe is that, according to Lawskym, "Hubzu appears to be charging auction fees on Ocwen-serviced properties that are up to three times the fees charged to non-Ocwen customers." Those fees "ultimately get passed on to the investors and sturgugling borrowers who are typically trying to mitigate their losses and are not involved in the selection of Hubzu as the host site."
- I expect the company to deal directly with the New York Department of Financial Services rather than making public statements and being tried in the court of public opinion.
- It is unclear how many homes Lawsky's claims address. My guess is that the tripling in fees refers to a small group of homes.
- My belief is that if Hubzu charges more to properties serviced by Ocwen, it likely has to do with additional services provided compared to non-Ocwen properties by Altisource.
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