This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Unfounded Fears; Lackluster Growth: Best of Kass

The simple fact is you can't live in fear of 1929 or 1987, regardless of what charts someone posts in their similarities. Even if you hate this market, stay flexible to taking some short-term long-side plays while waiting for the bearish catalyst to finally show some teeth and find some footing.

Parsing the Beige Book
Originally published on Wednesday, Oct. 16 at 2:29 p.m. EDT.

In the Fed's Beige Book, the economy was described as expanding "at a modest to moderate pace," which covered the period of September through early October, thus capturing a few weeks of the partial government shutdown.

Here are some relevant comments from the release:
  • Consumer spending continued to increase and activity in the travel and tourism sector expanded in most Districts.
  • Business spending grew modestly in most districts.
  • Employment growth remained modest in September. Several Districts reported that contacts were cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act (Obama care) and fiscal policy more generally.
  • Demand for nonfinancial services rose and manufacturing activity also expanded modestly.
  • Residential construction continued to increase at a moderate pace. By comparison, non-residential construction again expanded at a slower rate.
  • Residential and CRE activity varied across districts, but largely continued to improve.
  • Financial conditions were little changed on balance, with lending activity remaining modest in most Districts.
  • Price and wage pressures were again limited.

The bottom line is that the U.S. economy is growing, but at a still lackluster rate of about +2%. It's becoming more likely that the Fed will wait until January when Federal Reserve Chairman Janet Yellen has full rein to decide what's next with its policy. Assuming this is the case, the Fed will have a $4 trillion balance sheet by then -- up from $3 trillion at the end of 2012 -- with no change in the average rate of job gains and what is still a +2% growth rate.
[Read: <a target="blank" data-add-tracking="true" href=""><em>The Dangers of Complacent Retirement</em></a>]

The Fed members' econometric models will say "keep on going," which they probably will. But practical common sense should call for some "look in the mirror" introspection so they can see that what they are doing isn't working. Not to mention it will likely cause a mess when it's time to reverse (as we saw over the summer with just the mention of it).

In response bond yields are dropping -- ProShares UltraShort 20+ Year Treasury (TBT) is down $1.50-plus.

At the time of original publication, Kass had no positions in the investments mentioned.

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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs