I Wish I Were as Optimistic as Doug Kass

Doug Kass published his list of possible surprises for 2009 here. I have been reading his annual lists with great interest for several years. What can I say, his 2008 list was great! Unfortunately, there was no deflation in it. And Doug still hasn't recognized deflation as the main current event.

That's the main problem with his current list. Surprises 2-6 are contingent on the great success of the government house market rescue program. Never mind that this program has to be approved by Congress somehow, it's just doesn't exist. I have a very high opinion of Larry Summers, I think he is the greatest economist alive, but he doesn't live on mount Olympus and doesn't have supernatural powers. I just don't see how any program can save the housing market in the 2nd quarter of 2009. Maybe bulldozing whole neighborhoods? A lot of them? Of course, lower mortgage rates can help. First of all they would help people who have good credit rating, have a house they can afford and want to refinance. Give me 4.5% and I would refinance. Unfortunately, that would do nothing for the housing market. It would put some more money into the hands of people who won't spend it anyway.

Surprise 1 is interesting, but I don't see how to make money off it.

Surprises 7-9 and 11 completely contradict the idea of a housing market recovery and stock market boom.

Surprise 14 is, again, contingent on a recovering economy. Even then, Microsoft (MSFT) is not buying Yahoo! (YHOO). Somehow I believe Ballmer that they are not interested. Some deal is possible, but Microsoft doesn't sit on a pile of cash anymore, it doesn't have 20 billion dollars ready. It might be able to raise money, but I don't see a reason why. Again and again, most analysts, traders and investors make the same mistake: merger of software or internet companies is not a 1980s style corporate merger. Software and 'net companies have most of their real value in people, not in equipment and real estate. If you buy Yahoo and dismantle it, you get less than you paid. Much less.

Surprises 18 and 19 are long overdue. It might be a good time to short remaining newspapers, like NYT and WPO. Deadwood press is becoming obsolete.

And surprise 20 is really no surprise. Middle East build up is a real bubble. Need to think if there is some money to be made here.

Full disclosure: At the time of publication author did not have positions in any companies mentioned. Positions can change any time.

Comments

[maelstrom:]

Well done Alex

2008 Dec 31 08:00 AM

[Gtarras:]

"Give me 4.5% and I would refinance. Unfortunately, that would do nothing for the housing market. It would put some more money into the hands of people who won't spend it anyway."

as a former finance PhD drop-out, and believer in research, I could not disagree more... there is plenty of evidence, the statement is wrong, you can start here:

https://www4.gsb.colum...

2008 Dec 31 08:41 PM

[Gtarras:]

https://www4.gsb.colum...

2008 Dec 31 08:42 PM

[bostongekko:]

Gtarras, have you published your outlook for the U.S. economy anywhere? I find your commentary on other people's work to be insightful and would enjoy reading your take on things.


On Dec 31 08:41 PM Gtarras wrote:

> "Give me 4.5% and I would refinance. Unfortunately, that would do
> nothing for the housing market. It would put some more money into
> the hands of people who won't spend it anyway."
>
> as a former finance PhD drop-out, and believer in research, I could
> not disagree more... there is plenty of evidence, the statement is
> wrong, you can start here:
>
> https://www4.gsb.colum...

Jan 02 02:11 AM

[wpdragon:]

Hold on Mr. Kass! Your list was OK., but #15 was for the birds. As a Democrat who has been sickened by the shameless and despicable shilling by Kudlow for the RNC and Cheney/Bush for the past 8 years, he can take his mustard seeds and Goldilocks and finger stabbing into the camera and shove them where the sun don't shine. We don't want Kudlow in the Democratic party again, he can just go hang out with his hero in Crawford TX and stay the heck out of AMERICA!

Jan 02 01:03 PM

[bobbobwhite:]

Kudlow is a far larger shill than even Cramer is. Nothing he says has anything remotely to do with reality, but he continually uses his specious statistics as though they were golden arches over heaven's door. Kudlow is the best example of "sold out" I could ever come up with, if you leave out Condoleza Rice.

And, we all know the old line about statisitics and lies. Now, that line IS very true. Too bad Larry doesn't agree; he would be so much better off.

Jan 02 03:20 PM

[Greg Pinelli:]

Drop out hardly describes your comment...Of course it would be a waste..the same people who couldn't aford $1250 a month+taxes+insurance.... the same ones who couldn't afford $150 less.....


On Dec 31 08:41 PM Gtarras wrote:

> "Give me 4.5% and I would refinance. Unfortunately, that would do
> nothing for the housing market. It would put some more money into
> the hands of people who won't spend it anyway."
>
> as a former finance PhD drop-out, and believer in research, I could
> not disagree more... there is plenty of evidence, the statement is
> wrong, you can start here:
>
> https://www4.gsb.colum...

Jan 03 08:17 PM

[NOWHEREMAN:]

I especially like #7.

A man who calls it as he sees it. IMO

Jan 04 01:05 AM