Doug Kass Tells Barrons His ‘Favorite Short For The Next Decade’


I like this.


An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

By Sam Ro and Simone Foxman, Business Insider,

This week’s issue of Barron’s has a great interview with Doug Kass, the legendary investor who famously predicted that stocks would bottom in March 2009 and that they would go nowhere in 2011.

Among other things, Kass talks about what he’s short.  But one short stands out.  From Barrons:

Finally, my favorite short of the next decade is the U.S. bond market, for those that possess deep enough pockets, have the fortitude and the patience. I am long ProShares UltraShort 20+ Year Treasury [TBT], which is the inverse, double-short bond ETF. Over the past 2½ years, bonds have achieved a near 60% total return. A remarkable feature is the consistency of positive returns and the absence of many drawdown years of consequence. Nevertheless, they should be viewed as a return-free asset class that is very risky. The 10-year yields under 1.5%, less than half the yield during the recessions in 2001 and 2008. That means I am paying over 65 times earnings for a 10-year-bond, a rich price even by Amazon’s or LinkedIn’s standards.

This is a position he revealed during a big presentation at May’s Value Investing Conference in Omaha, Nebraska.  According to Market Folly, Kass identified seven key factors that could be “disruptive to the bond market”: 1) “the flight to safety premium erodes;” 2) “a muddle through economy might gain speed in the years ahead as domestic growth moves toward potential;” 3) “Federal Reserve policy is likely on hold—natural price discovery in fixed income;” 4) “inflation on the ascent;” 5) “housing is embarking on a durable multi-year recovery;” 6) “stocks versus bonds—the approaching reallocation trade;” and 7) “U.S. fiscal imbalances are not being addressed.”

In a series of charts and data tables, he demonstrates how these factors create a huge opportunity for investors willing to go against the grain.

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