Doug Kass Shorts Bonds, Says Safety Premium Too Great
Forget stocks, famed market timer Doug Kass says investors should be playing the bond market – from the short side!
In fact, Kass is so bearish on bonds , he says selling them short may be the trade of the decade.
Kass, who is president of Seabreeze Partners and a CNBC Contributor, doesn’t tend to be terribly dramatic, nor does he often invoke the use of superlatives, so we were intrigued – especially when he told us his short position was the largest position he has ever taken in his partnership.
“Not only has the stock market gotten far too negative on US economic growth,” he says, “so has the bond market.” And as a result, bonds are mispriced - they're far too expensive.
And that's happened because investors are so skittish that “good news is being ignored and bad news is being amplified.”
However, if you parse through all the economic data Kass says you’ll find data point after data point suggesting the recovery is getting incrementally stronger.
To support his thesis, Kass points to the latest numbers from the Labor Department released Tuesday which showed U.S. companies in March posted the highest number of job openings in nearly four years.
Known as the Job Openings and Labor Turnover survey, or JOLTs, it said employers advertised 3.74 million job openings in March. That's up from a revised 3.57 million in February.
The March figure was the highest since July 2008, just before the financial crisis erupted. It also showed that more people quit their jobs in March.
"It's just one more reason why I believe we're in a self-sustaining recovery," he says.
And although he remains bullish on stocks - something Kass told us about on April 25th - he recommends shorting bonds because, “the flight to safety premium in bonds is huge today. That’s something that's going to dissipate -- dramatically.”
What do you think? We want to know!
* 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 May 8, 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 AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long RIMM; Karen Finerman is long HPQ; Karen Finerman is long AVP; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDX; Brian Kelly is long WFC; Brian Kelly is long T; Brian Kelly is long VZ; Brian Kelly is long ADM; Brian Kelly is long USG; Brian Kelly is short KRONE; Brian Kelly is short FTSE 100 Futures; Dan Nathan is long jan 450 puts AAPL; Dan Nathan is long BAC MAY 7 PUTS; Dan Nathan is long C JULY 32/27 PUT SPREADS; Dan Nathan is long MS MAY 16/15/12 PUT FLY; Dan Nathan is long IBM JULY 200/185 PUT SPREADS; Dan Nathan is long RIM JAN 20/25 CALL SPREAD; Stephen Weiss is short MT; Stephen Weiss is short CMI; Stephen Weiss is short JCP; Stephen Weiss is short NFLX; Stephen Weiss is long AIG; Stephen Weiss is long JPM; Stephen Weiss is long QCOM
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