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 28 at 5:39 p.m. EDT
I had a hectic day and a hectic week! All over the place, literally.
On investment process, I'm keeping it real. Beware of taking heads who have high conviction in their commodities price forecasts.
A breakdown in the price of crude oil, Equity Residential's (EQR) - Get Report warning Thursday regarding a glut of high-end New York City properties, the Atlanta Fed's GDPNow reduction of its second-quarter real growth in the U.S. and Ford's (F) - Get Report weak guidance all contribute to my ursine theme that corporate profit and economic growth expectations are too high.
Good stuff from subs Kevin and Kim G.
Double D on the Fed, housing and the economy.
Radian Group's (RDN) - Get Report results were radiant. I added to the name, which is now up by almost 30% from its purchase and inclusion in my Best Ideas List. I will have an update on the quarter tomorrow.
Another day, another recovery in stocks from the morning's lows. Stocks closed at their highs.
- The U.S. dollar was weaker.
- Crude oil dropped by nearly $1 to $41.10. The causality between energy prices and junk bonds and equities have disconnected recently.
- Gold rose by $7 to $1,333.
- Agricultural commodities: wheat -3, corn -3, soybeans -7.
- Lumber -3.
- Bonds were weaker despite poor economic data and a downbeat Atlanta Fed GDP forecast. I believe that the fixed-income market is discounting a recession.
- The 10-year U.S. note lost one basis point in yield to 1.50% and the long bond was flat, yielding 2.22%.
- The 2s/10s spread was relatively flat at 79 basis points.
- Municipals were up small. Closed-end muni bond funds were mixed.
- Junk bonds acted junky.
- Banks and insurance stocks were mixed and brokerages were lower. Financial Select Sector SPDR ETF (XLF) - Get Report was up eight cents -- a new (small) short based on the flattening in the yield curve and the prospects for deteriorating domestic economic growth.
- Autos were lower on Ford's negative guidance and outlook.
- Oil stocks weakened off of crude oil's continued dive.
- Retail stocks, save Home Depot (HD) - Get Report and Lowe's (LOW) - Get Report (which were stronger), faltered.
- Agricultural equipment gave back recent gains; I missed shorting Caterpillar (CAT) - Get Report (which I wanted to execute) but was not around this morning.
- Media was lower, and was old tech.
- Staples picked up a bid after recent weakness.
- Biotech was flat after spirited action yesterday.
- (T)FANG featured big rips by GOOGL and AMZN after the close and post earnings.
- In individual stocks, Apple (AAPL) - Get Report continued to gain (up $1.50) and DuPont (DD) - Get Report might have an appointment with $70a share.
Here are some value added contributions on our site Thursday:
Jim "El Capitan" Cramer on Ford and peak autos. Thanks for the shout-out, Jimmy!
Ben "Goldfinger" Cross on the Federal Open Market Committee, gold, aluminum and Ford.
Big Jim Gentile on autos -- fuhgetabout 'em!
RevShark on the prospects for a market breakout.
The Divine Ms M on the subsurface "action."
Position: Long HIG, DD, RDN, TWTR, SDS, SPY puts; short SPY small, QQQ small, NFLX small, JWN small, MET small.
A Reminder of a Golden Swan
Originally published July 28 at 6:51 a.m. EDT
Back in October 2014, in "Could the Dissolution of OPEC Become a Golden Swan?" I offered the view that the power of OPEC to manage oil prices would wane and that there was a significant risk for a rapid drop in the price of crude oil.
The price of crude oil ultimately took (to many) a totally unexpected dive that few anticipated, falling to about $30 a barrel. It subsequently rallied to over $50 and is now back to $41.77 per barrel Thursday morning.
In this column I put my general observations together to form a conclusion. I did not use a complicated regression analysis or any other complex and exacting form of forecasting to come to my conclusion.
I and others have found that projecting the price of any commodity with precision is a difficult -- a near impossible job. The reality is that most talking heads make their pricing conclusions either based on a non-vigorous fundamental approach or by gazing at the charts.
They are basically guessing.
Neither approach is useful.
Neither approach is productive.
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.