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.
Last week, Kass wrote on The Muppets Take the Fed and closed-end municipal bond funds.
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Yellen's Testimony Tanks
To some degree, Yellen's statements are laughable.
- "Inflation sub-target" -- I thought the target was 2%?
- "Slack in the labor market" -- aren't we right near the 6% target?
[Read: Yellen’s Denials About Inflation Will Curb Fed’s Independence] Below is an old pictogram: Insert your favorite central banker or master of the world economist for Dr. Bunsen Honeydew and make poor Beaker the taxpayer. BTW, does it get any better than this description of Dr. Bunsen Honeydew in relation to our ever increasingly "transparent" central bankers? Dr. Bunsen Honeydew, Ph.D. is a Muppet character from "The Muppet Show," performed by Dave Goelz. He is a bald, green-skinned, bespectacled, lab-coated scientist who would do periodic science segments from "Muppet Labs, where the future is being made today." The character has no eyes -- only completely transparent, lensless glasses.
[Read: Yellen, Icahn Comments Put a Lid on Small-Cap Stocks] All's seemingly well, post all those bailouts and explosion in government debt. Government debt was a real issue back in 2008; now that it has more than doubled, it's not relevant. Beaker, however, is confused. Dr. Bunsen Honeydew: "I knew we were right. This is what progress is all about! Let's do even more!!!" Beaker's stocks are higher than ever; he concedes to the all-knowing and extra-confident doctor. Uh, oh! "Exogenous event" strikes. Dr. Bunsen Honeydew: "Well, that was surprising. Let's rework our models. This won't hurt."
Trade, Don't Invest
- A record low approval rating for any U.S. president since World War II
- Mounting geopolitical risk in Syria, Iran (which will not agree to curb its nuclear programs), Iraq (which is now a terrorist state), and the escalation in the war between Israel and Hamas
- After five years of ZIRP and QE, a still subpar (and weakening) global economic recovery
- An elusive and imbalanced prosperity that has benefited the wealthy and has failed to improve the stead of the middle class.
- Step back and err on the side of conservatism now.
- Maintain larger-than-normal cash positions.
- Be more diversified across company/sector lines than is typical for you.
- Trade opportunistically (with less frequency), and unless your time frame is measured in years, avoid investing for now.
[Read: Maximizing Retirement Savings Through Smart Tax Planning] I own 14 closed-end municipal bond funds, and I have six of these names on my Best Ideas list. These funds are still at a larger-than-historic discount to net asset value and generate excellent (pre-tax equivalent) yields. As I have noted (and in support of the evident value), Nuveen recently announced a partial tender (10%) at 98% of net asset value for four of its funds. This asset class, highlighted in January in my "15 Surprises for 2014," could provide investors with not only a great risk-adjusted return but also a potentially large absolute return.
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