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 past week, Kass summarized his current bearish view of the market and economy, explained why he remains short shares of American Express, and opined that the tide may be turning for investors who are short the Treasury bond ETF.

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Summing It Up
Originally published on Friday, Sept. 14 at 12:26 p.m. EDT.
  • Memories are short, and I remain short the market.
  • It is always a good idea to succinctly summarize one's views.

    It is good for me, and I hope it helps subscribers.

    The investment world is growing more dangerous, as the economy recedes (manufacturing activity; third-quarter 2012 EPS will be challenging), inflationary expectations rise and valuations expand, for a potentially toxic combination.

    At the same time, the Fed continues to embark upon a policy that, in the world of financial assets, places equities as a potentially attractive relative investment at a time when many individual and institutional investors are underinvested.

    Quantitative easing by the Fed (buying mortgage-backed securities) will not likely do too much to stimulate aggregate demand for housing or for the resuscitation of the jobs market -- all of which are weighed down by structural issues.

    Although the Fed's actions will do little to change the tepid domestic economic recovery, the Fed can (and is likely to) disturb inflationary expectations in the near term.

    Inflation is taxation without legislation; it is not market-valuation-friendly and could, if severe enough, choke off the consumer (at a point in time when this is the last thing the U.S. economy needs).

    Nearly everyone I listen to is being swept up in the current euphoria and is explicit in their willingness to ignore the obvious risks that have not been cleaned up by Helicopter Ben -- namely, the fiscal cliff, diminished profit expectations, rising inflation and the growing likelihood of a business-unfriendly Democratic presidential win.

    I am either stupid or disciplined. (Don't answer that!)

    Time will tell.

    I believe memories are short, and I remain short the market.

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


    AmEx Shares Continue Their Slump
    Originally published on Thursday, Sept. 13 at 12:02 p.m. EDT.
  • I remain short.
  • Of all the financials I monitor, American Express's ( AXP) shares have been among the worst performing.

    I remain short based on my expectations that billings will disappoint in the current quarter and in the second half, as the European and Chinese economies and faltering high-end spending weigh on the company.

    At the time of publication, Kass was short AXP.


    The Winter of Love
    Originally published on Wednesday, Sept. 12 at 4:25 p.m. EDT.
  • Could the tide be turning for TLT shorts?
  • The iShares Barclays 20+ Year Treasury Bond Fund ( TLT) shorts did not experience a summer of love, but is winter is shaping up to be a different story? This has been a tough nut to crack lately on both sides of the playing field. The bulls finally yielded today in the fight between the bearish head-and-shoulders pattern vs. the bullish cup-and-handle pattern. Kind of like TLT's own version of Thunderdome. Two patterns enter, one pattern leaves.

    The drop today pushes TLT below the handle portion of the cup-and-handle pattern, which was the bulls' strongest technical argument. I was long a few useless call spreads from last go around, which has been stopped out, but the $127 straddles have now begun to work.

    Remember last time, I was looking for the bounce off the horizontal blue line for a short entry, and that was a point of short coverage. This time, we are testing from a much lower level, a failed bullish technical pattern, a stochastics that is not yet oversold and a stronger setup for the bearish head and shoulders. Basically, I don't think the bulls bounce on the blue line this time around. This is the line in the sand for me on TLT. A break there puts $114 into play by the first quarter of 2013, if not the end of the year.

    If you are short, then the horizontal green line, which was previous support, becomes your alert level. I would set stops just above this level or an alert at that price.

    At the time of publication, Kass was long TLT straddles.

    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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