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 CAT is still a dog
- How to sound like a broken record
Click here for information on RealMoney, where you can see all the blogs, including Doug Kass' -- and reader comments -- in real time.
Originally published May 19 at 10:57 a.m. EDT
Narrowing My Net-Short Position Even More
Originally published May 19 at 12:12 p.m. EDT
I covered more of my short of the SPDR S&P 500 ETF (SPY) - Get Report as the index hits its session lows around 30 minutes ago. I also sold more of my ProShares Short S&P 500 ETF (SH) - Get Report , which is an inverse S&P 500 play.
All in all, I've moved back to a medium-sized net-short exposure. I remain negative in my view, but flexible in my practice.
Position: Long SH (small), Short SPY (small)
Cutting My SH Long and SPY Short in Half
I often trade around my core positions, and I'm doing so Thursday.
With the Dow industrials down more than 100 points this morning, I've moved from being "Over My Skis" short to only heavily short by cutting my large short of the SPDR S&P 500 ETF (SPY) - Get Report in half. I also halved my large long of the ProShares Short S&P 500 (SH) - Get Report , which is an inverse play on the S&P 500.
I've done this for one principal reason that bears little relationship to my ursine market view.
As accustomed as I am to daily volatility, stocks' recent gyrations have been very extreme in our market, which is without memory from day to day. As such, I want to reduce my "value at risk" (VAR) down to "I Can Still Sleep at Night" levels as the weekend approaches.
But I also continue to see the market as extremely vulnerable, so I'm cashing in on some of the recent weakness.
Position: Long SH, Short SPY
CAT Is Still a Dog
Originally published May 19 at 10:38 a.m. EDT
I put CAT on my "Best Short Ideas" list in November 2014 at $106 a share, and it's remained there ever since.
This morning's sell-off stemmed from another round of weak CAT retail sales, which I believe supports my ursine position.
Position: Short CAT
I remain fixed in my negative market outlook, and I'm treating all rallies as events to be sold.
I Admit I'm a Broken Record, But ...
Originally published May 19 at 7:57 a.m. EDT
I've also recently expanded my geographic interest when it comes to shorting. I used to just short the S&P 500 and other U.S. indices, but now I'm short on the iShares China Large-Cap ETF (FXI) - Get Report , and last week I also shorted the iShares MSCI United Kingdom ETF (EWU) - Get Report .
To me, the immediate threats that face markets include slowing growth and rising inflation (with "stagflation" possible in 2016). The historic gap between stocks' GAAP and non-GAAP earnings also represents a headwind, as does Wall Street's over-acceptance of non-GAAP accounting. (Not to mention the fact that the S&P 500 is currently trading at 24x GAAP earnings).
There are numerous other headwinds that I see as well, as I noted here and here yesterday. As I've previously written, rarely have there been so many possible economic, market, political and geopolitical outcomes (many of them adverse) that could upset returns.
Now, as Jim "El Capitan" Cramer often shouts from the investment rooftops, there's always a bull market somewhere. (Maybe fertilizer stocks?) But we might need a magnifying glass to find one over the balance of 2016 as evidence grows that the S&P 500 is in the process of putting in a broad, important top that began in May 2015.
Of course, I noted yesterday that shorting the market isn't a strategy for everyone. But a conservative position -- with larger-than-historic cash reserves -- seems to be a reasonable plan for most players as Wall Street's risk-vs.-reward quotient sours.
Position: Long SH, POT, MON (small); Short SPY, FXI, EWU
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.