The Best of Kass

NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

Among his posts this past week, Kass discussed how he was piggybacking on a well-known JPMorgan Chase investor and how he was adjusting his trading positions over the course of the week.

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Piggybacking on Dimon's Insider Buy
Originally published on Friday, July 20 at 4:42 p.m. EDT.

The JPMorgan chief has bought 500,000 shares of JPM.

Break in!

JPMorgan (JPM) CEO Jamie Dimon personally buys 500,000 JPM shares.

I just piggybacked and am long JPM now. He paid $34.22 for the position, and I am paying $34.05 in aftermarket now.

Position: Long JPM

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A Bit of Housekeeping
Originally published on Friday, July 20 at 8:19 a.m. EDT.

Here's a quick roundup for this past week.

I wanted to start the day with some updated housekeeping items, as I have been in and out of the office (and writing) throughout the week.

Downgraded Market Outlook

I modestly downgraded my "Fair Market Value" calculation on the S&P 500 index on Monday and Tuesday. I also reduced, to 50%, the recommended exposure in the "long-only" Kass Model Portfolio.

Optimism has expanded, in line with rising prices, in part because second-quarter earnings results held up better than the pessimists expected.

Nevertheless, this should be noted: Although about 65% of the earnings reports beat consensus, consensus was low, and had been lowered throughout the quarter.

I never view consensus forecasts as meaningful -- they are crafted by investor relations departments, and beating them is much like Monty Python's Twit of the Year contest (easily jumped over). Moreover, despite the earnings "beats," 65% of the top-line sales forecasts missed.

Revenues Lead, Profits Lag!

Earnings beats and sales misses are what one would expect in a balance-sheet recession. Companies are not hiring or spending, so costs are in control (for now) in a sluggish economic setting. There is no reason to expect things to get better in the third quarter, as you can't shrink your way to higher profits indefinitely. At some point, profits flatten out.

We're seeing a deepening crisis in Europe, a continued slowdown in China and India, coupled with a near-15% rise in the Commodities Research Bureau Index (grains and oil ++) since early June. All of these likely signal worsening profits, threatened margins and moderating personal consumption expenditures in the second half.

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