Amazon-Whole Foods; Harvey's Dark Cloud: Best of Kass
Top thoughts on stocks and the markets from TheStreet's Doug Kass.
Amazon-Whole Foods: My Financial Analysis
Originally published Aug. 30 at 8:04 a.m. EST
I have been working on the financial implications of Amazon's
(AMZN) - Get Report acquisition of Whole Foods Market
(WFM) , which just closed.
The transaction, according to my analysis, will be dilutive to both this year and next year's earnings.
This year's dent to earnings will only be about $1.50 (reducing the 2017 EPS estimate to about $2.00).
By my calculation, Amazon's estimated 2018 sales will jump by an additional $15.5 billion but its 2018 EPS will likely be reduced by approximately $3.50 (bringing the pro forma estimate to about $7.00 for next year).
Position: Short AMZN (Small).
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A Market Silver Lining From Harvey's Dark Cloud
Originally published Aug. 29 at 9:43 a.m. EST
Let me start by stating the obvious -- Hurricane Harvey is a terrible natural disaster that has harmed untold numbers of families.
Many have opined that the rebuilding effort will add a couple tenths of a point to domestic GDP over the next 12 months. It probably will.
But what I want to touch on briefly is an important upside - the magnitude of the hurricane's damage reduces the chance of a debt default to almost zero.
Let me explain.
President Trump has said that he only will sign debt and budget bills that incorporate the financing of a wall between Mexico and Texas. This proclamation has presented a possible crisis in the minds of many market participants.
However, in all likelihood Trump now will be forced to approve a temporary (maybe three months in duration) debt ceiling increase and budget bill as it likely will be batched by Republicans (led by Senate leader McConnell and House Speaker Ryan) with a large relief package for Hurricane Harvey, even if the funding of the wall is not included.
In other words, the president now has an "out."
And so the market has an out, as there likely will be no debt crisis in the September and October time frame.
Position: None.
Doug Kass fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:
- How doubt is OK.
- How 3 consumer staples ended up in his best ideas shorts.
Click here for information on RealMoney, where you can see all the blogs, including Doug Kass'--and reader comments--in real time.
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Action Alerts PLUS, which Cramer manages as a charitable trust, has no positions in the stocks mentioned.
