Here are Doug Kass' top thoughts on some of the biggest stories of the week.


Doubt Is OK; Not so With Certainty

Doubt is not a pleasant condition, but certainty is absurd.

As expressed in my opening missive, there is more uncertainty of outcomes in all breeds than I can recall in my investment career.
 
The only certainty, as I constantly write, is the lack of certainty.
 
It is laughable how many preach market wisdom with such certainty and often with an overriding self-confidence that I sometimes find nauseating. As I mentioned earlier, many of those did the same glib delivery of optimism in early 2000 and late in 2007.
 
Read as much as you can, listen to as many as possible, but make your individual investment and trading decisions thoughtfully and within the context of your personal time frames and risk profiles.
 
I try to couch my investment conclusions with caveats and words such as likely, may and could, recognizing that I may and often am wrong.
 
Keep in mind that prices are elevated and, according to my calculus (more on this next week), reward vs. risk seems unattractive, with downside as much as four times greater than upside over the next 12 months.
 
Position: None .
 


Lay of the Land

I consistently have used bonds, as reflected in iShares 20+ Year Treasury Bond ETF ( TLT) , as a market tell.
 
Today TLT is up a dollar.
 
The 10-year U.S. note yield is five basis points lower to close to 2.10% and the 2s/10s spread has flattened to a new yearly low (see Tweet of the Day a bit below).

As a consequence, the popular financial stocks (at least in the business media) seem vulnerable.

 
Though I am adding small to my Allergan  ( AGN) , Wells Fargo ( WFC) and Radian Group  ( RDN) longs, the dip buyers may be tested in the days ahead.
 
Against a tide of investor optimism and complacency, it has paid to be contrarian recently and might continue to do so.
 
Maybe it's even "different this time!"
 
Position: Long RDN, AGN, WFC (all large); short BAC, C, JPM, TLT, MET, LNC, GS, MS.
Originally published Aug. 29 at 10:23 a.m. EST.
 
Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings. This week he blogged on:
  • How Amazon-Whole Foods is doing
  • How to trade consumer staples

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