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Legendary investor Doug Kass argued that shorting bonds might actually be the “trade of the decade,” despite the fact that it is a contrarian view, according to Market Folly.In fact, Kass is so convinced about the profitability of shorting bonds that he has taken the largest position in his partnership.
His big presentation on “The End of a Bond Bull Market from an Equity Investor’s Perspective” at this week’s Value Investing Conference in Omaha, Nebraska, identified seven key factors that could be “disruptive to the bond market”:
- “The flight to safety premium erodes
- A muddle through economy might gain speed in the years ahead as domestic growth moves toward potential
- Federal Reserve policy is likely on hold—natural price discovery in fixed income
- Inflation on the ascent
- Housing is embarking on a durable multi-year recovery
- Stocks versus bonds—the approaching reallocation trade
- U.S. fiscal imbalances are not being addressed”
In a series of charts and data tables, he demonstrates how these factors create a huge opportunity for investors willing to go against the grain. Do you agree with his conclusion?