February 20, 2008 / 11:24 PM / in 10 years

Seabreeze's Kass says its time to short retailers

NEW YORK (Reuters) - Doug Kass, who famously shorted “everything related to housing” in 2007, said he is betting on severe selling-pressure in retail stocks even as the Federal Reserve and Treasury Department take aggressive actions to avert a U.S. recession.

Consumers, faced with too much debt and now rising prices on goods and services, are “spent up -- not pent up,” Kass, founder and president of Seabreeze Partners Management, told the Reuters Housing Summit on Wednesday.

“I think this year is the time to be short all retailers,” said Kass who is shorting everything from Wal-Mart Stores Inc(WMT.N) to Tiffany & Co (TIF.N). Seabreeze deals exclusively in selling stocks “short” on a bet that they will decline.

The Fed’s aggressive interest-rate cuts have been negated by the fact that the consumer’s two most important assets -- homes and stock prices are under siege, Kass said.

“It is really remarkable if you consider in the last seven years that the consumer has expanded their mortgage debt by $10 trillion, taking mortgage debt as a percentage of disposable income from 62 percent to 102 percent,” he said.

“That’s more than the increase in the prior 47 years. Period.”

Kass is shorting upscale jeweler Tiffany, home-goods retailer William-Sonoma Inc (WSM.N), fashion apparel Polo Ralph Lauren Corp (RL.N) and mid-priced jeweler Zale Corp ZLC.N.

    No retailer is immune to the housing and credit crises, not even Wal-Mart, the world’s largest retailer, Kass said of another short position he holds.

    Some investors and analysts believe Wal-Mart could become a beneficiary of the U.S. slowdown as consumers downscale purchases.

    “That’s a fairy tale,” Kass asserted. He said investors shouldn’t lose sight of Wal-Mart’s major customers, who have been engulfed in the subprime mortgage crisis.

    (For summit blog: summitnotebook.reuters.com/)

    Editing by Tim Dobbyn

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