By Chris Kidd, Special for USDR
Financial guru, famed short-seller, and financial writer Doug Kass was a recent guest of Price of Business contributor co-host and Chris Kidd. They joined POB host Kevin Price, on the Houston business radio show, for an insightful discussion on the investment world and Doug’s new book, Doug Kass On The Market: A Life on TheStreet. Kass, who manages the hedge fund Seabreeze Partners, is well known for his columns on TheStreet.com and RealMoneyPro.com, where he writes with other financial experts like Jim Cramer, Stephanie Link, and others. Click here to hear the entire interview.
“Invest with your head, not over it.”
Doug has been writing a daily blog on TheStreet.com since 1998. “I’ve written probably 50,000 columns and over 40 million words as you know,” Kass noted. His life experiences extend far beyond the financial realm though. He has won a million dollar horse race, been a concert producer, and was actually a philosophy major at Alfred University before pursuing his MBA at Wharton. His love of music and sports can frequently be found in the contents of his daily articles on TheStreet.com.
Chris Kidd, who as a financial coach teaches his clients about investing and financial management, asked Kass what his advice was for the average investors who don’t have the time or inclination to be active investors. Doug advised, “Most investors are best served by using passive index firms.” He also urged them to be a skeptic.
Kass continued, “When your booker tells you that the US is an oasis of prosperity and that we’re insulated from the goings-on around the world such as the recession in Japan, Brazil, Italy, and the chaos in Russia. I think you have to consider John Donne’s quote ‘No man is an island entirely unto itself.’ And when your broker tells you to ignore global macroeconomic events, I think should consider the Great Recession of 2007 and 2009 and its causes. When your broker tells you to rejoice in the rearview mirror of the last quarter’s earnings of your investment, because there’s more to come, please consider this is a lagging indicator and not a leading one. And also consider that the bottom line has been importantly influenced by financial engineering. When your broker tells you to exalt in the heightened M&A activity, mergers and acquisitions activity, consider whether you would consider whether you would own any of those companies’ stocks. Above all you have to be objective, independent of view. You have to avoid being a permabull, a permabear. Permas get attention but aren’t money makers. And always, this is really important, assess the reward-to-risk scenario. What is the upside, what is the downside of every investment? And consider your risk profile and timeframes. So, invest with your head, not over it.”
Chris Kidd recalled 2007 when Kass raised some red flags way before anyone else, prior to the market collapse that occurred in 2008. Doug said, “I spent two years on the Kudlow Report, with Larry, debating the permabulls and trying to explain what was in front of my eyes, which they neglected to see. Some of the malinvestment that we saw back then is starting to manifest itself today which concerns me as well.”
Doug Kass shared some of his insights on short-selling, which he covers in greater detail in his book. I realize short-selling is not for most people, because you have to employ the discipline taking a lot of short-term small losses in order to stay alive.
Kevin Price posed the question “What would you say is the fundamentally biggest mistake the amateur investors makes?” Doug’s reply was, “The most important credo is a simple one. It’s easy to write about; its hard to implement, especially for the small investor who gets involved with emotion over logic. And that is it’s important to stop your losses and let your profits run.” Price and Kass joked that the advice sounds so simple, but is hard to execute. Closing the interview, Chris Kidd tried to get Doug Kass to give a “sneak peek” at favorite pick for 2015, but Doug cleverly replied, “You have to wait till my surprise list comes out in two weeks, Christopher!” Kidd ended the interview with a story relating Doug’s book: “I once heard a man say that he paid $200 a book for $200, and a guy he was with said, ‘I can’t believe you paid $200 for a book!’ and his response was ‘Well, I didn’t pay $200 for a book. I bought a man’s life, and what this guy learned over all these years of experience, I can learn in a few hours.’” The book Doug Kass On The Market: A Life On TheStreet is available on amazon.com.