NEW YORK ( TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Silver readers in "The Edge," his daily trading diary.This week, Kass wrote about his hopes for Yahoo!, discussed the lessons he learned from the markets this week and examined what history can tell us about the S&P 500's current rally. Please
Will Yahoo! Catch Up?
Originally published on Jan. 21 at 9:28 a.m. EST. As I mentioned yesterday, dysfunctional Yahoo!'s shares have been well behind its peer group over the course of the last few months. With eBay ( EBAY) and Google's ( GOOG) great numbers, I continue to expect (pray!) for a catch-up in Yahoo!'s shares over the near term. At the time of publication, Kass was long Yahoo! common stock and call options, and long EBAY common stock. > > Bull or Bear? Vote in Our Poll
Seven Lessons Mr. Market Taught Us This Week
Originally published on Jan. 21 at 7:41 a.m. EST. When investing or trading, it's important to live and learn. Here are some of my key takeaways, thus far, from Mr. Market this week:
- There are substantive risks to momentum-based investing. Even in a bull market, mo-mo investors in Coinstar (CSTR), F5 Networks (FFIV) and other highfliers, including several industrial plays such as U.S. Steel (X) and Freeport-McMoRan Copper & Gold (FCX), as well as traders/investors in commodities such as gold, which is among the most crowded long trades extant, learned this tough lesson over the past couple of days.
- While the overall market's price action suggests limited downside risk, there might also be limited upside reward, as the price action in certain market-leading stocks suggests that a lot of the good company-specific news and that of the economy might have been discounted. (I continue to see a sideways market in 2011.)
- The market's unrelenting advance is not likely unlimited, as trees don't grow to the sky. The uninterrupted advance since last summer could grow less consistent and more challenging as monetary stimulation wanes, as we pass the easy compares and as the bills of our fiscal imbalances come due.
- If investing/trading in highfliers, particularly in light of a relatively low VIX, buy protection. Consider cheap protection by purchasing out-of-the-money puts. If you are short, consider the cheap protection of buying out-of-the-money calls.
- The recipe for investment success in the coming months might lie with a more flexible and opportunistic trading strategy (and through the identification of group rotation) rather than a buy-and-hold strategy. (Sell the rips and buy the dips in early 2011.)
- While bottoms-up S&P 500 profit projections remain elevated, the path to smooth and self-sustaining earnings growth does not remain a certainty. For example, profits at several high-profile financial companies disappointed vis-a-vis consensus. As well, higher input costs are beginning to call into question the general vulnerability of corporate profit margins in the quarters ahead.
- Always be prepared for surprises, and be diversified -- that's why I do my surprise list every year -- case in point, the Steve Jobs announcement at Apple (AAPL).