Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.

My Takeaways and Observations

Originally published July 27 at 6:02 p.m. EDT

Another strange day, with old relationships -- stocks (especially European bank stocks), bonds, precious metals, currencies and so forth -- breaking down and inconsequential in intraday or full-day action. To be honest, it's as if there is a "higher power" buying and buoying equities. (And I am not a conspiracy type of person!)

The day started with a tale of two companies -- Apple (AAPL) - Get Report and Twitter (TWTR) - Get Report .

I have been using defined risk instruments -- specifically, SPDR S&P 500 ETF (SPY) - Get Report puts -- given the strength of the markets. But Wednesday, for these reasons, I shorted SPY at $217.20.

DuPont (DD) - Get Report , yes. Coca-Cola (KO) - Get Report , no. Though a bit extended near term, DuPont remains my favorite large-cap long, Coca-Cola my favorite large-cap short (low risk, conservative and good reward vs. risk).

Midday's "The Good, The Bad and The Ugly" -- a new daily column? Gluskin Sheff's David Rosenberg responds to my post via email -- value-added.

The Federal Open Market Committee -- much ado about nothing.

Flattening spreads and rising bank stocks (reduced upside, larger downside) lead me to short financials for a trade.

Previewing Potash (POT) .

An item that I didn't write about was the Equity Residential (EQR) - Get Report warning that New York City's luxury rental business has turned south. Peak NYC Real Estate?

Up, down, up, down, up, down -- ending flat. Overall, an "inside day."

QQQs (Nasdaq) over SSSs (S&P), further aided by Facebook's (FB) - Get Report after-the-close blowout (to the upside) in profits.

  • The U.S. dollar faltered.
  • The price of crude oil fell another $1 on top of days of losses. No correlation at all with stocks.
  • Gold up $20 to $1,341. A two-week high.
  • Agricultural commodities: wheat flat, corn +4, soybeans +13, oats -1.
  • Lumber -2.
  • Bonds ripped higher, with iShares 20+ Year Treasury Bond ETF (TLT) - Get Report up $1.90.
  • The yield on the 10-year U.S. note dropped by six basis points to 1.50%. The long bond was 21%.
  • As mentioned earlier the 2s/10s spread dropped to 78 basis points, within three basis points of the lowest spread since 2007.
  • Municipals were well-bid. Closed-end muni bond funds gave up a bit despite the gain in taxables.
  • Junk bonds were higher.
  • Banks continued to rally. I shorted Financial Select Sector SPDR ETF (XLF) - Get Report near day's end.
  • An awful Deutsche Bank (DB) - Get Report profit report sent the shares nearly 4% lower.
  • Insurance stocks were hit on higher bond prices.
  • Retail universally was lower after some tentative signs recently of technical improvement.
  • Crude oil's decline hit energy stocks -- another group that appeared to have improved technically. Maybe not so much.
  • Media was mixed.
  • Staples were weak, led by lower guidance at KO.
  • Biotech was up 3%, led by good news from Allergan (AGN) - Get Report .
  • Ag equipement was mixed. Deere (DE) - Get Report was lower but my short Caterpillar (CAT) - Get Report continues its strong climb.
  • (T)FANG featured an earnings-inspired run from FB after the close.
  • In individual names, Apple was higher, Twitter lower and Oaktree Capital Group (OAK) - Get Report was down nearly 4% in reaction to earnings. which I will get to tonight.

Here are some valuable contributions on our site Wednesday:

    Jim "El Capitan" Cramer on four stocks that upset the short community.

    Tom Graff on the Fed.

    Rev Shark invokes The Happenings. We'll see the Fed in September.

    "Big" James Gentile on when good earnings really aren't.

    Ed Ponsi "Scheme" on the tale of two Apples.

    Position: Long DD, HIG, TWTR, OAK; short SPY small, QQQ small, XLF small, NFLX small, KO, CAT small, MET, LNC.

    Time to Short Financials

    Originally published July 27 at 3:39 p.m. EDT

    The long end of the bond market is rallying hard now after the Federal Open Market Committee statement, with iShares 20+ Year Treasury Bond ETF (TLT) - Get Report up $1.30.

    I suspect this is due to further curve flattening as the long end knows that the domestic economy can't easily handle any further interest rate hikes. (Look what recently happened to refinancings!)

    The 2s/10s spread is now down to 78 basis points from about 81 basis points on Wednesday.

    This spread is only 3 1/2 basis points higher than the narrowest level the spread has been since 2007.

    This is not good for banks, which, as I have observed, have held up well in recent days.

    Accordingly, I am taking a trading rental, shorting Financial Select Sector SPDR ETF (XLF) - Get Report at $26.37.

    Position: Short XLF small.

    At the time of publication, Kass and/or his funds were long/short XXX, although holdings can change at any time.

    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.