Doug Kass Probably Does Not Understand QE
Doug Kass is a guy I admire a great deal. He graces my “quotes and wisdom” page and he is a must-follow on Twitter. But he just does not get QE, to be charitable.
Let me explain. Let’s start with yesterday’s “mea culpa,” about why he has been so wrong on the stock market in 2013. It is not actually a mea culpa at all. What he is actually saying is that he has been totally right about the fundamentals, but the market has not cared, because of Fed and other central bank QEs. It reminds one a lot of another rich man complaining about quantitative easing at the recent Ira Sohn conference, Paul Singer.
Of course, this is not Kass’ first mea culpa for being too bearish. Here he is from 2011. The reality is, aside from strategic decisions to get bullish because he is in part a technical (or at least very pragmatic) guy, he has been pretty bearish for a long time, and largely because he doesn’t like QE and doesn’t think it does anything good.
He is just wrong. A tweet today prompted this post, in which he echoed a recent theme that QE widens the gap between the haves and the have-nots. That is a new tactic or theme though, and immediately he laid bare the real concern, which is that Bernanke is screwing the savers. That’s what he is really upset about. And that is a class issue, and an age issue (Kass is twice my age). Because the reality is, even an old person living on a fixed income is not a have-not if he or she has money to invest in bonds for income! That person may be income poor, but income is not the same as wealth. And the real have-nots (and there are millions of them) are the elderly who rely only on social security, and have no other significant savings.
So essentially, Doug defines the “have-nots” as the poorest of the haves, and excludes the impact of QE on the real have-nots. QE helps debtors. And the poor are the debtors. The poor are those with revolving credit card debt they only pay the minimum on. The poor are those still in adjustable rate mortgages. The poor, more often than not, particularly as defined by net worth, are the young. The young, too, are those looking maybe to buy their first house, and who will benefit potentially for 30 years from epic low interest rates.
So let’s be clear what is going on here. A lot of rich, older people, who are otherwise very smart and very sophisticated, hate QE, and whether they know it or not, it is for ideological and/or class and/or age-related reasons. You can either choose to believe them because they are smart and have a big megaphone, or you can recognize their human biases for what they are.
In an era when federal taxes on the wealthy are at a long-term low, in an era when we are all worried that baby-boomers are going to bankrupt us all with their use of Medicare, in an era when inflation-adjusted spending on public-schools just fell for like the first time in thirty years, in an era of sequestration cutting services for the poor and the young, in an era when colleges are charging ever-more tuition, in an era when many Millennials can’t even find jobs and many still live with their parents…in such an era…, is it so f**king horrible that there is actually one policy out there that does, on balance disproportionately benefit the young and the actually poor, over the “savings class?” Is it, Paul? Is it, Doug?