Tags: Kass | Fed | policy | fincl

Doug Kass: 'Fed's Dovish Policy Will Continue to Disadvantage Savers'

By    |   Tuesday, 24 March 2015 07:20 AM

Stock and bond market participants may have jumped for joy over last week's dovish policy statement by the Federal Reserve, but some problems lurk, says star hedge fund manager Doug Kass, president of Seabreeze Partners Management.
 
"The Fed's dovish policy will continue to disadvantage savers and allow for the continued domestic exclusive prosperity (and holds with it adverse social and economic ramifications)," he writes in an article for TheStreet.com.
 
Low interest rates, of course, limit savers' income.
 
In its statement, the central bank said, "The [Fed's policymaking] Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term."
 
To be sure, some sectors of financial markets should flourish, Kass says. "Most importantly, to me, is that the outlook for closed-end municipal bond funds, my most favored asset class, get another six to 18 months of new or extended life. I am a buyer on any weakness."
 
Financial-services stocks look good, but are unlikely to rise much for a few months, "until there is better clarity on the yield curve and lending activity," Kass writes.
 
Meanwhile, star economist Edward Yardeni, president of Yardeni Research, says the conventional wisdom that central bank easing sparks inflation doesn't hold now. "Repeat after me: easy money is deflationary," he writes in a commentary provided to Newsmax Finance.
 
"I know that's hard to believe since we've all been taught that easy money is inflationary. However, easy money has been provided by the world's major central banks for so long that it seems to have lost its ability to juice up demand."
 
And why is that?
 
"So many borrowers have borrowed that they are maxed out," Yardeni explains. "Easy money can also stimulate supply, especially in recent years because producers overestimated the ability of easy money to boost the demand for their goods and services."

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Stock and bond market participants may have jumped for joy over last week's dovish policy statement by the Federal Reserve, but some problems lurk, says star hedge fund manager Doug Kass, president of Seabreeze Partners Management.
Kass, Fed, policy, fincl
352
2015-20-24
Tuesday, 24 March 2015 07:20 AM
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