The Best of Kass

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 Pro readers in his daily trading diary.

Among his posts this past week, Kass discussed how Ocwen plans to reduce its taxes significantly, some economic warning signs on the manufacturing front and why the market could be headed for a top.

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Heading to the Islands
Originally published on Thursday, Aug. 16 at 11:21 a.m. EDT.
  • Ocwen's mortgage servicing is now mentioned as a Virgin Islands corporation.
  • In an 8-K filing today, Ocwen ( OCN) has outlined a new five-year support services agreement with Altisource ( ASPS). (This replaces the transition agreement that occurred right after the spin out in 2009.)

    This was expected.

    The more interesting disclosure was that Ocwen's mortgage servicing is now mentioned as a Virgin Islands corporation (previously it was Florida-based). This is consistent with the company's comments on the second-quarter conference call the the corporation's effective tax rate would drop significantly. But it has happened sooner than previously expected.

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    This will allow OCN to reduce its effective tax rate to close to 10% from the current rate of 34%.

    If effected for all of 2013, this would add about 65 cents a share to the full-year estimate.

    At the time of publication, Kass was long OCN.


    Whither GDP?
    Originally published on Thursday, Aug. 16 at 10:36 a.m. EDT.
  • Is August domestic economic growth starting off slowly?
  • Yesterday, I mentioned that we have to watch the regional manufacturing data closely for August after New York's weak data yesterday.

    Today's Philly print at -7.1 (the fourth-consecutive negative monthly read) should give some that are expecting an acceleration in the rate of growth some pause. Backlogs were down, as was the average workweek. Prices paid were higher.

    Importantly, the six-month business activity outlook fell by seven points to 12.5, the lowest print of the year. Let's closely watch the upcoming regional manufacturing releases in order to determine whether the recent growth scare is accurate.

    I expect bonds to rise a bit in price and move lower in yeild (after the big price drop and yield rise over the last few weeks) and for stocks to struggle as a new bit of uncertainty has been introduced.

    At the time of publication, Kass was short SPY and TLT, and long TBT common and calls.


    More Fast Times at 'Fast Money' High
    Originally published on Wednesday, Aug. 15 at 7:45 a.m. EDT.
    Linda Barrett: "Did you hear that surfer guy pulled a knife on Mr. Hand?"
    Stacy Hamilton: "No he didn't. He just called him a dick."
    Linda Barrett: "People exaggerate so much around here."
    -- Fast Times at Ridgemont High

    Let's go directly to the video tape.

    It was a fun time with Judge Wapner and the CNBC "Fast Money Halftime" gang yesterday.

    The subject of my segment was, as discussed in Tuesday's opening missive, the possibility that the S&P 500 was tracing the dreaded triple top.

    I started by saying that it was fun being together again with Weissy, BK, Guy "Spicoli" Adami and "Downtown" Josh Brown.

    I was particularly excited to be on with John Taylor, Halftime's guest host, who changed the face of musical history when he reunited with his group, Duran Duran, back in 2001! (I don't think too many got my joke!)

    Judge asked me why we should be worried when the S&P was on the cusp of a four-year high.

    I cited both technical and fundamental reasons.

    First, the S&P appeared to be making a triple top as it is now approaching the highs of early April and May. The triple top is scary to those who are technically inclined, but not, perhaps, as scary as if Carrot Top was approaching Mr. Market!

    Secondly, the stalling out and punk pin action of the Transportation index (IYT) and the Russell (IWM) are worrisome.

    Thirdly, investment history shows that over time, buying equities when the VIX is below 15.0 rarely pays off.

    But I hastened to add that fundamentals, not technical discovery or technical analysis, are my market weather vane, and on that front there are many reasons to be concerned.

    The fundamental outlook is stormy, with slowing global growth being ignored in favor of the hopium of more Band-Aid monetary policy initiatives. The global monetary put might be overstated as the impact of easing is waning in its impact. Importantly, since June 1, 52% of the incoming domestic economic data were worse than expected, 11% were in line and 37% were ahead of consensus.

    The subject du jour, of course, was Paul Ryan's appointment by Governor Romney as his vice presidential ticket mate.

    I made the case that the Ryan decision, the growing economic ambiguity around the world and other factors could produce near-term market pressures.

    Judge asked me what the market downside might be. I suggested that, unlike the summers of 2010 and 2011 when I went on "Fast Money" suggesting that the lows of the year might be made on the S&P, I interpret the conditions in the summer of 2012 differently. To me, a yearly high might be put in place in August. In response to another question, I thought a move to 1300-1320 in the S&P was a possibility in the correction I foresaw in the months ahead.

    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.