Doug Kass: Investors Ignoring Enormity of Brewing Crisis

CNBC ^ | 02/18/11 | Lee Brodie

[TigerLikesRooster]

Doug Kass: Investors Ignoring Enormity of Brewing Crisis

Published: Friday, 18 Feb 2011 | 6:15 PM ET

By: Lee Brodie Producer

With Wisconsin in the throws of a budget crisis and more pros predicting multi-billion bond defaults, is a serious crisis coming?

Strategic investor and CNBC contributor Doug Kass sure thinks so. And the founder and president of Seabreeze Partners says you’re probably underestimating the enormity of the problem.

As a topic, we know municipal bonds is enough to make you glaze over – but Kass isn’t talking about yields or hard to understand finance.

He simply believes the financial health of local and state governments is extremely precarious and the ripples generated by the fallout will be much worse than you realize.

[TigerLikesRooster]

P!

[RU88]

Don’t tell me we’re running out of beer! s/

[proxy_user]

Who writes this stuff?

It’s not “the throws of a budget crisis”, it’s “the throes of a budget crisis”. And the headline makes it sound like they are about to run out of beer.

[OwenKellogg]

Did you just get back from vacation?

Thanks for the ping.

[Oztrich Boy]

O NOES!!!

The Pub With No Beer

Well, the publican's anxious for the quota to come,
There's a faraway look on the face of the bum,
The maid's gone all cranky and the cook's actin' queer -
What a terrible place is a pub with no beer!

Oh, it's lonesome away from your kindred and all
Round a campfire at night, where the wild dingoes call
But there's nothin' so lonesome, so morbid or drear
As to stand in the bar of a pub with no beer.

The stockman rides in with his dry, dusty throat,
Goes up to the bar, pulls a wad from his coat,
But the smile on his face quickly turns to a sneer
When the barman says suddenly, "The pub's got no beer!"

There's a dog on the verandah, for his master he waits,
But the boss is inside, drinkin' wine with his mates,
He hurries for cover and he cringes in fear,
It's no place for a dog, not a pub with no beer!

Then in comes the swagman, all covered with flies,
He throws down his roll, wipes the sweat from his eyes,
But when he is told he says, "What's this I hear?
I've trudged fifty flamin' miles to a pub with no beer!"

Oh, pity the blacksmith - first time in his life
He's gone home cold sober to his darlin' wife
He walks in the kitchen; she says, "You're early, my dear,"
Then he breaks down and he tells her that the pub's got no beer.

[TigerLikesRooster]

From hibernation.:-)

[Bean Counter]

yep. Here locally, our City Council acts like they live in an alternate universe. They are simultaneously facing at least a $2 Million deficit in City Finances, they are in mandatory arbitration with both Police and Firefighters, and are busy playing private developer by spending $50 Million on a project that nobody wanted and benefits only the small group of investors who could not find the money to do the project themselves.

The Stock Market is cruising along right now but look at the volumes. A lot of the activity is from Companies buying their own stock, and the constant stream of money from the Fed in the form of QE-2. God only knows what the markets will do when the money tap is turned off, but one thing is for sure, we will find out just how strong the economy really is then.

[taildragger]

From the Article....

"It's true that he leans on the pessimistic side but he's also widely followed for his market timing - he correctly called a bottom last summer and also predicted the crisis lows in March 2009."

And if my memory is correct ( I don't have a source) he warned everyone to get out of any excess real estate they have.

I see a Finanical Planner friend on a regular basis, and we discuss exogenus events and what effect they have on the markets. "Dougie Kass" has been discussed on many occasions in the past.

Not advice, but Mr Kass's track record may be worth looking into.

[dblup]

“Who writes this stuff?”

It’s everywhere. Makes a guy want to throe up.

[Larry Lucido]

Should have said "fermenting crisis." Then we could have a shop with no cheese.

[CPT Clay]

bump

[Young Werther]

A Brewing Crisis! Koffee Anon’s fault!

[T-Bird45]

Who writes this stuff?

It’s not “the throws of a budget crisis”, it’s “the throes of a budget crisis”. And the headline makes it sound like they are about to run out of beer.

I'm in your corner, proxy. Please allow me to plant our Grammar Nazi flag in the thread! Fly it proudly anytime required for stupid writing.

[GOPJ]

Thanks for the ping.

[taildragger]

I have been thinking about this and Dougie Kass has backed into something big...

We are witnessing the destruction of the Public Sector Unions and they cannot be fixed. We are also witnessing phase 1 with these employees and Unions of the E.K. Ross 5 stages of grief, they are at Anger.

Dougie noted the states have 3 trillion in liabilities, if you use Corporate Accounting Principles. The "Rule of 72's" is working backwards for the states now. I.E. money doubles by your percent return divided into 72, 72/10 =7.2 yrs. Well it works backwards, The state and local debt is mounting precipitously and with the collapse of Housing and their tax structure based on their value is tangentially collapsing state and local revenues. If so maybe we should thank Barney Frank as in retrospect they are hoisting themselves by their our petards via the CRA, but back t Dougie Kass and Glenn Beck....

Glenn noted that Obama would bail out all the Union Pensions, but since then with the Tea-Party GOP taking over the House he can't do a Porkulus for the State/Local Unions. Obama can't bail them out so all they can do it community organize and act like Communist Thugs. It ain't gonna work, people got a gut sense budgets need to balanced just like at home even if they do not know accounting.

But what may come of this is the Unions members realizing their leadership in regards to pensions and retiree health care screwed them, they will be pissed. They are not their yet. But when that happens they maybe doubley pissed at Obama because the greater fixer and all they invested in him turns out to be nothing but a B@LL$&1t artist. Even worse Dougie noted that this potential collapse of the Muni Bond Market will tank the economy, and make people even more pissed @ Obama

This is GM all over again, Liabilities that cannot be fixed, except this time their will be no Federal Bailout, they cannot prime the pump anymore, @ the State Level or Federal Level. Tangent to this the loose money to keep the musical chairs going to try to float all the markets, can't last much longer either.... Buckle up...

[stayathomemom]

Don’t tell me we’re running out of beer! s/

I'm not a beer drinker, but with all the news coming out of Wisconsin, that was my first thought. I think it's time for me to step away from the computer and go read a book....

[dennisw]

Throes..... exactly! Spelling isn’t the problem because spell checkers are used universally. Proper usage is

[dennisw]

All the GOP governors are dancing around the public sector union pension problem. They are testing the waters and moving incrementally because>>> The only real solution is a claw back of pension payouts to those already retired. Not re-jiggering pension formulas for those still working. If that pension money (given by counties, cities and states) was paid into 100% independent private funds then what can we do. But when funds like CALPERS can take present tax monies to make up for shortfalls.... This must be stopped by whatever means necessary. Best thing is to have these governments go bankrupt and redo the pension payouts

So great for Scott Walker and Chris Christie. Let me see what you have next year and following years

[fightinJAG]

The numbers don’t lie. There is no way around government defaults at several levels.

The only reason the federal government won’t/can’t default (technically) is that it can print unlimited amounts of funny money.

But I just don’t see a way around a big crash coming. And if these nitwit “teachers” in WI are any indication, the civil unrest of the “We Want Mo o’ Yo Money” crowd will esclate and being very harmful.