Journalist and Investor Doug Kass Says Buy Financials - Not Me

The Street journalist Doug Kass (he's also the founder and president of Seabreeze Partners Management, Inc.) says that financials are cheap and poised to rebound. He may be right but I'm not going close to them. I'm not convinced things aren't going to get worse before they get better.

The Street journalist Doug Kass (he's also the founder and president of Seabreeze Partners Management, Inc.) says that financials are cheap and poised to rebound.  He may be right but I'm not going close to them. I'm not convinced things aren't going to get worse before they get better.  I have several reasons for thinking this:

  • I don't believe the banks are through the woods yet.  Their are still tens of billions if not trillions of bad debt and leveraged instruments out there.
  • The mortgage market isn't getting any better and this will put further pressure on all of those mortgage backed securities.
  • The economy continues to weaken and many are discussing recession.
  •  Even if the market does improve, the days of easy bank profits from mortgages are over.  The collatoralized debt market has been discredited, and with it comes an end to a real estate fueled boom that padded the bottom lines of many banks.  It will be years before they can recover the earnings power that just went out the window.

I think financials are like the Nasdaq in 2001.  The Nasdaq lost more than half its value and really hasn't made up much ground.  Don't expect miraculous recoveries from the financials either. 

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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Comments

  • Sobchick

    January 16, 2008

    Kass is a contrarian who tries to draw attention to himself by making outrageous predictions. He got killed shorting the market for most of 2007, before calling for a massive end of the year rally which obviously didn't materialize. He is betting on a dead-cat bounce, but the intermediate term fundamentals are, as you state, still very, very poor.

  • Greg Harrison

    June 03, 2008

    It is amusing reading this article since Kass said last week that he had just turned bullish on financials for the first time in years. CNBC never questioned him. Around the time of this article Kass said on Kudlow's show that one could now "recklessly buy financial stocks."

    Kass is an arrogant egomaniac.

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