Tags: Kass | Fed | stock | correction

Doug Kass: Fed's Mandate Is Now to Elevate Stocks

Thursday, 09 May 2013 08:03 AM

By Dan Weil

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Hedge fund manager Doug Kass' repeated forecast this year for a stock market correction obviously hasn't proven to be correct so far, and he blames it on the Federal Reserve.

"Where I've gone wrong, and I'm being a little facetious, is that I didn’t realize the Fed's mandate had gone from employment and inflation toward elevating the Dow and the S&P 500," he told CNBC.

Both indices closed at record highs again Wednesday.

Editor's Note:
 
Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

"The earnings landscape continues to be challenging, and the market hasn’t cared because global monetary policy is dominating the revenue and earnings lethargy," said Kass, president of Seabreeze Partners.

"We're in a P/E [price-earnings]-driven market, and these are always far more difficult to assess than earnings-driven markets." That's because the P/E-driven markets move on the basis of sentiment and psychology, Kass explained.

Meanwhile, he says he remains short Berkshire Hathaway stock. "The company has GDP-like growth ahead of it and issues of succession," Kass noted.

"I have a lower intrinsic value number than most. People are playing it for banks and housing. I think both sectors are overextended."

Many others agree with Kass as to the source of the stock market's strength.

"This is a QE [quantitative easing]-fueled market," Steven Bulko, a portfolio manager for Lombard Odier Investment Management, told Bloomberg.

"You’re just not seeing sales based on allocation into any other asset class because of the relative unattractiveness of everything other than equities. That’s putting in place a firm bid to the equities market."

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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