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Doug Kass: Market Is 5% to 8% Overvalued

Thursday, 5 Apr 2012 | 10:49 AM ET

“I suspect the market is 5-8% overvalued,” says famed market timer Doug Kass.

Kass appears to be among the growing number of market skeptics who worry that stocks will pullback sharply as Operation Twist draws to a close.

“The US monetary cliff at June’s end has grown more conspicuous with the publication of the Fed Minutes on Tuesday," he says. "It’s going to scare a lot of investors out of risk assets.”

Combine that development with the slew of other headwinds such as politics, fiscal imbalances, high unemployment and other challenges that Kass has identified in the past and, all told, he concludes that the path of least resistance is lower.

Is the Liquidity Rally Over?
Doug Kass, Seabreeze Partners Management, explains why he thinks now is the time to get defensive, with the Fast Money traders.

And Kass tells us the way he'd play the next leg is “raise cash and get defensive."

How do you do that? Kass, a CNBC Contributor and president of Seabreeze Partners, has a few ideas.

“Stocks that I like are the large free cash flow generators that have dominant global franchises and therefore protective moats. (Although) they’re conservative companies, I like the reward versus the risk because the P/Es have been deflated over the past 5-10 years.”

Names Kass likes include IFF, Pepsico, Procter & Gamble, Clorox, and Colgate. “They seem boring but they’re starting to perform better than the overall market.”

“My problem with the market is I fail to see who will be the incremental buyer that takes the S&P to 1500,” he says.

What do you think? We want to know!

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* Doug Kass is also a contributor to the Street.com, Jim Cramer’s Real Money Pro web site.




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Trader disclosure: On Apr 4, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Karen Finerman is long AAPL; Karen Finerman is short APPL CALLS; Karen Finerman is long BAC; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long HPQ; Karen Finerman is long RIMM; Karen Finerman is long GRPN PUTS; Karen Finerman is long SPY; Karen Finerman is long IWM; Karen Finerman is long MDY; Pete Najarian is long AAPL CALLS; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long C; Pete Najarian is long JPM CALLS; Pete Najarian is long MS CALLS; Pete Najarian is long INTC; Pete Najarian is long YHOO; Pete Najarian is long SBUX CALLS; Pete Najarian is long COP; Pete Najarian is long PEP; Pete Najarian is long HPQ; Pete Najarian is long AIG CALLS; Pete Najarian is long TFX CALLS; Pete Najarian is long SCCO CALLS; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long MSFT; Guy Adami is long BTU; Guy Adami is long NUE; Tim Seymour is long BAC; Tim Seymour is long INTC; Tim Seymour is long YHOO; Tim Seymour is long CSCO; Tim Seymour is long WMT

For Mike Khouw
Nothing to Disclose

For Doug Kass
Kass Owns IFF
Kass Owns PEP
Kass Owns PG
Kass Owns CLX
Kass Owns CL

Dennis Gartman
Pending

CNBC.com with wires.

  Price   Change %Change
CL
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CLX
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IFF
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PEP
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PG
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