Here are Doug Kass' top thoughts on some of the biggest stories of the week.
My Takeaways and Observations
"Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves."
-- Matthew 7:15-20
Examining reward vs risk in the church of what is working now. I have seen this enthusiasm before -- it almost always ends badly.
And beware of false icons and prophets (see quote above). You shall know them by their fruits -- that sour readily.
A short-based investment theme to consider this year -- demand elasticity (rising product prices could ding demand) in a slowing economy. Within the theme I am short Disney (DIS) - Get Report , Apple (AAPL) - Get Report and Starbucks (SBUX) - Get Report .
Please look at Peter Boockvar's focus of S&P's current price to book value compared to history.
Up +45% in 33 days -- I cashed in on Dillards.
The market was up from the get go today. At 2:15PM near the day's high.
Rs over Ss and Ns.
A lot of interesting rotation. Into financials and retail and out of FANG (as an example).
* The U.S. dollar weakened again.
* The price of crude oil rose by +$1.40 to over $47.75.
* Gold -$2.60.
* Ag commodities: continued weakness. Wheat -12.50, corn -7, soybeans -12 and oats -5. Hard to see ferts rallying in the face of this.
* Lumber flat.
* Bonds got schmeissed. Yields rose by 6-7 basis points. The ten year is back to 2.32%.
* 2s/10s spread increased by four basis points to 93 bps.
* Municipals weakened.
* Junk bonds drifted higher as crude oil rallied.
* Banks were an upside and so was insurance and brokerages.
* Retail stellar. My opener on Wednesday will discuss strategy.
* Oldtech stronger, across the board. Optical space continues +.
* Consumer staples better on a weakening US dollar.
* Media mixed.
* Biotech traded poorly but Allergan AGN +.
* Big pharma stuck up the joint.
* (T)FAANG looks tired (especially of an Alphabet-kind).
Here are some value added contributions on our site:
1. Jim "El Capitan" Cramer on today's rotation.
4. Reese's pieces.
Position: Long SDS, SPY puts, SQQQ, AGN, DD, HIG; Short SPY, QQQ, SPY calls, DIS, AAPL, SBUX, AMZN .
Originally published July 25 at 2:54 p.m. EST
Let me make an important observation/opinion at midday.
In the Church of What Is Working Now
There is literally no critical discussion of the numerous market and economic outcomes, downside risks, inflated valuations and economic realities in the business media anymore.
Indeed, the ursine crowd is ridiculed and traders/investors are chasing price as they worship at the altar of momentum.
The last time there was such a universality of bullish opinion that I can remember was in late 1999/early 2000 and in the Summer of 2007.
While I don't think it ends anywhere as badly -- reward versus risk and upside versus downside is nearly never discussed.
Instead, blanket and often fictional statements and glittering generalities (e.g. earnings are great) are the mainstay of their discussions.
The machines, algos and momentum traders (individual and institutional) rules the day, but this ends very badly (though there is no way of knowing the timing).
And when it does, as was the case in the 2008-09 period, the talking heads will likely have forgotten what they are saying today.
My Diary is not an advice column.
But my strong advice is to look at every investment and trade you have on and determine upside/downside in an objective and unemotional manner.
Originally published July 25 at 1:01 p.m. EST
Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings. This week he blogged on:
- How biotech is having sharp reversals
- How crude is surging
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, is long AAPL and SBUX.