Tags: Kass | short | bearish | S&P

Doug Kass Liquidates Short Stock Positions, But Remains Bearish Long Term

Wednesday, 26 Jun 2013 10:58 AM

By Dan Weil

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Hedge fund manager Doug Kass, president of Seabreeze Partners, has closed out his short stock positions, but is still negative on the market in the long term.

"I said when the [Standard & Poor's 500 Index] was at 1,650-1,660 [last month,] that I expected a break under 1,595 support and then a wish lower of 30 or 40 points, at which time I would cover my shorts," he tells CNBC.

"This occurred [Monday] morning," when the S&P 500 hit a low of 1,560.

Editor's Note:
Billionaires Dump Stocks. Prepare for the Unthinkable.

Kass says he's now market neutral.

"From here we watch, we wait for economic data and for corporate earnings results," he explains, noting that the S&P 500 is likely to fluctuate in a range of 50 to 75 points in either direction over the next month.

But he remains bearish for the long term. "I've long thought that expectations for the economy and profit growth were inflated," Kass claims.

"Most of all, I've consistently warned that the interest rate cliff represents the greatest market headwind, even more than the fiscal cliff."

And, of course, interest rates have surged in the past week. The 10-year Treasury yield hit a 22-month high of 2.66 percent Monday.

"My greatest concern is that there is almost a universal view that stocks have almost limited risk from here," Kass notes.

"It is unclear to me how the U.S. economy is going to handle a rise in rates."

For the short term, other experts see a chance for stability in the stock market too.

"People are still digesting the news from the [Federal Reserve], making mental adjustments for different levels of interest rates and what those might imply for securities' prices over the next several quarters," John Carey, a fund manager at Pioneer Investment Management, tells Bloomberg.

"I'm encouraged the market has stabilized a little here."

Editor's Note: Billionaires Dump Stocks. Prepare for the Unthinkable.

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