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The Best of Kass

The Fed's preferable inflation gauge, core personal consumption deflator, is rising (+1.6% vs. target of +2%), and owners' equivalent rent was troublesome at +2.1%, the most in three years.

The TIPS market smells out higher inflation, with the difference between nominal 10-year Treasury yields and the TIPS yield at 2.5% compared to 2.1% during the first 10 months of 2012.

If these numbers continue to rise, the Fed will likely be less friendly than many think.

Finally, industrial production for September was +0.4%, twice as good as expectations, but the August figure was revised down by -0.2%.

Production of motor vehicles and parts fell by -1.5% for the second month in a row.

Production of machinery, electronics, computers and mining all rose.

The year-over-year increase in the capacity utilization rate matches the slowest pace in two and three-quarters years and follows weakening business capital spending, sluggish durable goods orders and the global manufacturing slowdown -- all of which are adversely influenced by fiscal inertia and tax and regulatory uncertainty.

At the time of publication, Kass held no positions in securities mentioned.


Profit-Taking in AIG
Originally published on Friday, Oct. 19 at 10:24 a.m. EDT.

  • After AIG's big run, I would expect some profit-taking on the news.
  • AIG (AIG) is weaker based on the CEO's statement that the government will likely sell its stake by year-end.

    This should be no surprise.

    After AIG's big run, I would expect some profit-taking on the news.

    But I plan to buy a helluva lot of AIG stock on the secondary offering in November-December period.

    Indeed, I plan to make it my largest long.

    At the time of publication, Kass was long AIG.

    Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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