KASS: Actually, I'm - I would say I'm actually growing more negative for the first time. I - you know, I said back in March of 2009 that we were in the process of forming a generational low. I said back in early July that the double dip concerns were misplaced and that the scale's tipping back on the bullish side. And now I think we're right at the top end - I basically think that we're range bound (ph) bordered on the downside and around 11, 11.5 times next year's forecast from the upside around 13 times where we are now. So I'm actually for the first time, net short.
KEENE: Let's come back. Doug Kass with us, Seabreeze Partners, of course, writing for TheStreet.com in his free time as well.
7:13
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7:21
KEENE: Douglas Kass with us, Seabreeze Partners as we look at a more cautious view on the equity markets. Doug, is the solution a weaker Dollar? Is this the age-old traditional solution to depreciate yourself out of a crisis? Does that get it done?
KASS: I think - I'm not sure. You know I'm not a - I'm a specialist on individual stocks, not on the macro stuff. My guess is that everyone is trying to debase their currency at the same time. It will have negative consequences down the road.
KEENE: Well -
PREWITT: Well, speaking of - you mentioned individual stocks. How would you take advantage of the boom in the farm belt this year?
KASS: It's really remarkable but the stocks are extremely extended and I'm considering, and I'm risk averse right now, in looking for opportunities to short, I would not be inclined to chase this trend. Very hard - you look at the market and it's very hard to see a sustained market advance for example without bank stocks, without financial stocks. And you could think about the toxic combination of fundamental sentiment and policy the industry faces, it's hard to see that group moving.
KEENE: Long ago and far away, just a few years ago, you were a housing analyst at Kidder, Peabody.
KASS: You remember that firm?
KEENE: This is - well, I remember you as sick as I remember you being there. Doug Kass, tell us about housing with your decades of perspective. Should we focus on unit dynamics or price dynamics right now?
KASS: Housing is such a tough call, Tom, because of this foreclosure hiatus. It seems to me that the death knell to the housing cycle - well, let's just start by saying that affordability as we know is at a multi- decade high. The benefits of home ownership vis-a-vis renting a home are at a 14 or 15-year high. Interest rates are at generational lows. And the production of new homes over the last two-and-a-half years are at record lows. These are the ingredients considering the demographics, the normal growth in households formations for a strong cyclical recovery. But it's different this year. It's different this time in housing. You know, we've come out of a period in which we had the egregious use of credit. Credit was available at very low levels and you had a new marginal buyer in the asset class speculators who had no intention of dwelling in the homes, which created the bubble. So you know, I did the sports metaphor.
You know Casey Stengel was considered, according to Sporting News, the fourth best manager in the history of major league baseball. And from 1948 to 1960, he won 7 World Series, 10 pennants with the New York Yankees. But it was a raucous locker room. There's a lot of drinking, womanizing, just like the credit market in the last ten years. He left the Yankees in the 1962 went to the New York Mets. You know what his record was? 40 and 120, 40 wins and 120 losses.
KEENE: Yes.
KASS: So similarly, you know - we're stuck with this indigestion and deleveraging -
KEENE: Right.
KASS: - in the housing cycle. And this foreclosure moratorium is going to serve to reduce the availability of mortgage credit over the next six months. It's not what the doctor ordered.
KEENE: Well -
KASS: So the normal, cyclical recovery is going to be substantially muted by, and haunted by this shadow inventory -
KEENE: Doug - thank you so much. Douglas Kass with us, Seabreeze Partners on the Economist, Casey Stengel.
7:24
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