The 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 his posts this week, Kass discussed why housing data bode well for a recovery, how he is investing to bet on such a recovery, and why he is increasing his short position in bonds.

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Pending Home Sales
Originally published on Thursday, April 26 at 10:43 a.m. EDT.
  • The reading was better than expected.
  • March pending home sales were better than expected, rising by 4.1% as compared to a 0.4% increase in February and vs. expectations of a 1% bump.

    The year-over-year change was up 10.8% (compared to a small base a year ago).

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    This is the highest reading in two years, and pending home sales typically foreshadow existing-home sales by several months.

    A durable multiyear recovery in residential real estate markets is central to my thesis of a self-sustaining U.S. economy and why I am short bonds.

    The observations I have recently made and the national data on housing are confirmation of an industry upturn, which is supported by record housing affordability, a compelling home ownership vs. rent equation, the beginning stage of clearing shadow inventory, underproduction of new homes since 2008, pent-up demand as demographic/household formation trends continue, an improvement in the jobs market, improving confidence indicators and a slow easing up in mortgage lending.

    The U.S. home market is splintered and bifurcated, which represents to this observer that a recovery in home prices is imminent.

    The importance of the housing industry cannot be overstated. Consumer confidence and spending has been held hostage, to some degree, by a sharp drop in home prices, which is now coming to an end.

    At the time of publication, Kass had no positions in securities mentioned.

    How to Play a Recovery in Housing
    Originally published on Friday, April 27 at 12:21 p.m. EDT.

  • I am using Berkshire, BofA and Ocwen.
  • Over on Columnist Conversation, Ken "IBD Man" Shreve suggests some housing plays.

    As I have previously mentioned, I am playing the prospects for a durable housing recovery with Berkshire Hathaway ( BRK.B), Bank of America ( BAC) and Ocwen ( OCN).

    Of the three, Ocwen's price likely presents the best risk/reward ratio.

    I have bought more of each of these stocks during the week's trading.

    At the time of publication, Kass was long BRK.B, BAC and OCN

    Expanding Bond Short
    Originally published on Thursday, April 26 at 9:40 a.m. EDT.
  • I sold more TLT at $117.45 this morning.
  • Today's initial jobless claims were slightly weaker than expected at 388,000 (a five-month high and the fourth month in a row above forecasts) vs. expectations of 375,000 and 389,000 a week ago, and interest rates are falling across the board.

    I am using the bond strength to expand my short position further -- I sold more iShares Barclays 20+ Year Treasury Bond Fund ( TLT) at $117.45 this morning.

    Let me explain my reasoning.

    The recent claims figures are consistent with May-June payroll gains of about 150,000 a month (weather payback from strength earlier in the year). But, from there I expect a return to back toward the 200,00-per-month level based on the strength of regional ISMs, the employment component of the national ISM, corporate profit growth, final sales growth, consumer confidence readings and intentions to expand (capital expenditures), among other factors.

    At the time of publication, Kass was long TBF and TBT, and short TLT.

    Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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