Hedge-fund luminary Doug Kass, president of Seabreeze Partners Management, isn't too impressed with the Federal Reserve's massive easing program of the last six years.
"The Fed has made a mockery of fundamentals," he writes on TheStreet.com.
"Never before have investors (and global economies) been so dependent on extreme policy and have comfortably embraced their confidence in the Fed's ability to successfully extricate from that policy without any unwarranted and adverse consequences."
That dependency and comfort aren't good for financial markets, Kass says. "There is limited honest price discovery as the price of many asset prices has been distorted."
Interest rates are part of the problem, Kass writes. "Ultra-low interest rates are the father of mal-investment, and bubbles are the outgrowth and children of easy money. . . . The Fed and investors are like the frog being boiled slowly. At some point both will be jumping out."
The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008.
Tad Rivelle, chief investment officer for fixed income at Trust Company of the West, offers more mild criticism of the Fed. Its stimulus has failed to boost the economy in synch with financial markets, and it must raise interest rates next year to avoid a crisis, he says.
"Kicking the can only means that the inevitable de-leveraging will be more painful," Rivelle writes in a commentary
. "When the endgame comes, leverage will be forced out of the system, and asset prices will fall," Rivelle says.
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