These blog posts originally appeared on RealMoney Silver on Jan 30.
My Trading Strategy Today -- 7:19 a.m. EST
All eyes on the
My strategy? A contrarian one -- and just on a trading basis.
I would buy the weakness that would possibly result from only a 25-basis-point cut. To me, a 25-basis-point cut would be an indication that, based on what the Federal Reserve sees, economic conditions are not as bad as the ursine crowd believes.
I would sell the strength that would possibly result from a 50-basis-point cut. To me, a 50-basis-point cut would be an indication that the cumulative 125-basis-point cut in rates over the last week indicates that there is much more trouble ahead.
If there were a limited or opposite response to my two scenarios, I would do nothing.
All In on TLT Short -- 8:23 a.m. EST
I am all in on my
iShares Lehman 20+ Year Treasury Bond
my single favorite short
Employment Strong, GDP Weak -- 8:56 a.m. EST
The economic argument continues apace today, with employment strong and GDP weak.
From my perch, the economic permabulls are dead wrong.
Two years ago, I expressed concern that the housing market was about to collapse, even though employment was strong and interest rates were low. Housing bulls neglected to properly gauge the squeeze in affordability (home prices divided by household incomes), not a typical variable looked at.
Today, the economic permabulls are looking at classical lagging indicators (employment, etc.). This, too, is wrong as the debt-deleveraging process (read: unavailability of credit) is the new factor in the economic equation.
We stand at the
doorstep of a recession
One final observation.
I haven't seen this observation anywhere yet, but the inventory liquidation in fourth quarter 2007 reduced real GDP by about 1.2%, which could portend a better first quarter.
That helps to explain the continued weakness in bonds after the GDP release.
At time of publication, Kass and/or his funds were short the iShares Lehman 20+ Year Treasury Bond, although holdings can change at any time.
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.