The Best of Kass
Among his posts this week, Kass discussed why housing data bode well for a recovery, how he is investing to bet on such a recovery, and why he is increasing his short position in bonds.
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Pending Home Sales
Originally published on Thursday, April 26 at 10:43 a.m. EDT.
March pending home sales were better than expected, rising by 4.1% as compared to a 0.4% increase in February and vs. expectations of a 1% bump.
The year-over-year change was up 10.8% (compared to a small base a year ago).
This is the highest reading in two years, and pending home sales typically foreshadow existing-home sales by several months.
A durable multiyear recovery in residential real estate markets is central to my thesis of a self-sustaining U.S. economy and why I am short bonds.
The observations I have recently made and the national data on housing are confirmation of an industry upturn, which is supported by record housing affordability, a compelling home ownership vs. rent equation, the beginning stage of clearing shadow inventory, underproduction of new homes since 2008, pent-up demand as demographic/household formation trends continue, an improvement in the jobs market, improving confidence indicators and a slow easing up in mortgage lending.
The U.S. home market is splintered and bifurcated, which represents to this observer that a recovery in home prices is imminent.
The importance of the housing industry cannot be overstated. Consumer confidence and spending has been held hostage, to some degree, by a sharp drop in home prices, which is now coming to an end.
At the time of publication, Kass had no positions in securities mentioned.
How to Play a Recovery in Housing
Originally published on Friday, April 27 at 12:21 p.m. EDT.
Over on Columnist Conversation, Ken "IBD Man" Shreve suggests some housing plays.
Of the three, Ocwen's price likely presents the best risk/reward ratio.
I have bought more of each of these stocks during the week's trading.
At the time of publication, Kass was long BRK.B, BAC and OCN
Expanding Bond Short
Originally published on Thursday, April 26 at 9:40 a.m. EDT.
Today's initial jobless claims were slightly weaker than expected at 388,000 (a five-month high and the fourth month in a row above forecasts) vs. expectations of 375,000 and 389,000 a week ago, and interest rates are falling across the board.