Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.
Today's Takeaways and Observations (Early Edition)
Originally published at 2:33 PM EST on April 4, 2016
I started the day today by dissing the banks.
Here are my takeaways and observations for the session:
- So far, it's an inside trading day.
- The U.S. dollar is unchanged. Now that the bulls have embraced a lower greenback and the currency has dropped materially, it's probably time for some dollar strengthening.
- Crude oil dropped by 62 cents at last check to $36.17 a barrel, but natural gas rose by a nickel.
- In agricultural commodities: wheat is -3.75, corn is unchanged and soybeans are -5.25, but but pats are +1.75.
- Lumber is -5.20.
- Bonds were lower in yield and higher in price. (The iShares 20+ Year Treasury Bond ETF(TLT) - Get Report is up 10 cents.)
- The 10-year U.S. Treasury yield is down two basis points to 1.77%. The 30-year yield also declined two points to 2.60%.
- Municipals are well bid, and closed-end municipal-bond funds have edged higher again.
- The high-yield-bond market is flat, with the iShares iBoxx U.S. Dollar High Yield Corporate Bond ETF(HYG) - Get Report and the SPDR Barclays Capital High Yield Bond ETF(JNK) - Get Report down by about 5 cents each.
- In terms of sectors, banks have managed modest gains.
- But life insurers (the object of my disaffection), continue to roll over, led by MetLife(MET) - Get Report and Prudential (PRU) - Get Report . My long of Hartford Financial(HIG) - Get Report was down 20 cents a share at last check.
- Old tech continues to be led by IBM(IBM) - Get Report , which is up another 75 cents. Big Blue is continuing a strong surge that it's seen since an analyst upgrade.
- Retail was mixed, although my one short -- Nordstorm(JWN) - Get Report -- is conspiculously weak (down $1.50). My long of Macy's(M) - Get Report has faded by nearly half a dollar a share.
- Biotech is climbing out of its rut. with the IBB +2%. Allergan(AGN) - Get Report is an upside star (+$8.50), but Valeant Pharmaceuticals (VRX) continues to fall.
- In terms of my old biotech basket, Acadia Pharmaceuticals(ACAD) - Get Report continues to soar. Celgene(CELG) - Get Report , Cempra (CEMP) , Gilead Sciences(GILD) - Get Report , Nektar Therapies(NKTR) - Get Report , Portola Pharmaceuticals(PTLA) - Get Report and Sage Therapeutics(SAGE) - Get Report are also all-stars.
- Energy stocks are a bit stronger but well off of their day's highs, as crude has slipped in price.
- Consumer staples have given back a bit today after several weeks of a currency-inspired rally. My long of Procter & Gamble(PG) - Get Report is down 40 cents, but my short of Coca-Cola(KO) - Get Report is down 15 cents.
- Media has chilled after a good run. Comcast(CMCSA) - Get Report and Walt Disney(DIS) - Get Report were both down 20 cents at last check.
- The TFANGs are uneven. Facebook, Amazon(AMZN) - Get Report , Netflix(NFLX) - Get Report and Alphabet/Google (GOOG) - Get Report , (GOOGL) - Get Report are all lower, but Tesla Motors(TSLA) - Get Report is +$14 on the heels of large orders.
- CRABBY is also unpleasant, with most components other than BGB trading lower.
- My short of Facebook (my only trade of the day, and my Short Trade of the Week) is doing well. It was down $3.50 a share at last check, although it was even lower earlier in the session.
Position: Long BGB, M, PG, HIG, Short SLB, XOM, GM, F, MET, LNC, NFLX (small), TSLA (small), FB (small), JWN, KO (small), SBUX (small)
Peak Autos (Redux)
Originally published at 11:10 AM EDT on April 4, 2016
Auto stocks continue to be conspicuously weaker today for the second session in a row, and the sector represents one of my largest short exposures.
As I noted last month, my key reasons for shorting autos include:
"-- J.D. Power figures recently quoted by The Wall Street Journal showed that leasing as a percentage of monthly auto sales hit an all-time peak of 32.3% in February. That's around four times a recent low in 2009, as well as some 50% higher than a recent peak in 2007.
-- An extended period of low interest rates has "pulled forward" auto sales, profits and stock prices. Who's left to buy cars?
-- Incentives on new cars are accelerating. That's typically a sign of a future sales drop and below-consensus industry profits.
-- Anecdotally, too-liberal financing programs have begun to lead to rising delinquencies.
-- The development of new mobility technologies and autonomous cars poses a potential intermediate-term threat to U.S. car manufacturers.
-- With so many leases coming off, a wave of residual writedowns could lie ahead."
-- Doug's Daily Diary, Buckle Up! Ford and GM Are Value Traps (March 9, 2016)
Position: Short F, GM
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.