Tags: Kass | bullish | stocks | cliff

Doug Kass Turns Bullish on Stocks, Expects Fiscal Cliff Solution

Monday, 19 Nov 2012 12:12 PM

By Dan Weil

Stocks will soon rebound from their recent swoon as it becomes clear the government will avert the fiscal cliff, says hedge fund manager Doug Kass, president of Seabreeze Partners.

From this summer until now, he was bearish on the stock market. The Standard & Poor’s 500 Index has dropped 8 percent from its September high.

Kass tells CNBC that the business media has missed the “conciliatory” attitudes of both Democrats and Republicans on the fiscal cliff — $607 billion of spending cuts and tax increases that will begin Jan. 1 if the government doesn’t act.

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

“The market’s fears of the fiscal cliff are overblown,” Kass says.

He thinks Congress will reduce the $607 billion fiscal contraction to between $150 billion and $225 billion. “This won’t create that much fiscal drag because of the gain in business confidence, increased hiring and higher capital spending that will result from a compromise.”

Government debt will likely be reduced by $3 trillion over the next 10 years, Kass says. “That’s really good for capital markets.”

But former Federal Reserve Chairman Alan Greenspan says things may not go so smoothly. “The markets are very shaky,” he tells Bloomberg.

“The markets will crater if we run into any evidence that we can’t solve this problem. If we get out of this with a moderate recession, I would say the price is very cheap. The presumption that we’re going to solve this problem without pain is grossly inappropriate.”

Editor's Note: See the Disturbing Charts: 50% Unemployment, 90% Stock Market Crash, 100% Inflation

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