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 explained why Thursday's economic data were mostly disappointing; noted a significant analyst change on Yahoo!; and identified what he thinks has been buoying stocks recently.

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Data Review
Originally published on Thursday, Sept. 27 at 10:33 a.m. EDT.
  • Mostly disappointing.
  • Let's look at this morning's economic data, most of which was disappointing and signals subpar economic growth ahead (at best)/stall speed risk (at worst).

    Bottom line: Data were consistent with a slight increase in the rate of real GDP growth from the punk +1.3% revised second-quarter 2012 reading. As I have written, this should produce a challenging last-half earnings picture, which will likely restrain share buybacks and dividend increases.

    Second-quarter 2012 real GDP was revised lower by 0.4%, to +1.3%, with consumer spending, fixed nonresidential investment -- while consumer confidence is improving, we can't say that for business confidence as tax and fiscal cliff uncertainty looms coupled with the mess in Europe -- and inventory accumulation (drought induced but should reverse in the fourth quarter) responsible for the revisions.

    The August durable goods report was weak and reflects the aforementioned drop in business confidence. Down 13% month over month -- expectations were for -5% and July was +3.3. Most of the disappointment was in the volatile private aircraft sector. Adjusted for transportation items, -1.6% compared to consensus exptecations of +0.2%. Core capital goods orders (defined as orders minus defense and aircraft) rose by +1.1%, though July was revised down by 2%, to -5.2%. Again, this indicated that the corporate sector is uncertain and unwilling to move much on cap spending and hirings.

    The one shining moment this morning was initial jobless claims, which, at 359,000, were 16,000 less than consensus and 26,000 less than the prior week. This is the best reading since midsummer. Continuing claims were also positive, continuing a four-week drop.

    The claims number likely supports monthly payroll increases of 130,000-150,000, which would, if reached, underpin 2% real GDP but would not be enough to lower the unemployment rate.

    This is a pace of growth that also will insure continued Fed support.

    At the time of publication, Kass had no positions in stocks mentioned.


    Yay for Yahoo!
    Originally published on Thursday, Sept. 27 at 8:45 a.m. EDT.
  • Goldman reestablishes its buy rating on the name.
  • Yahoo! ( YHOO) is trading higher in premarket trading after Goldman Sachs reestablishes its buy rating.

    Goldman cites that Yahoo!'s parts are worth more than the sum.

    A longtime bear on Yahoo!, Goldman believes that the uncertainty of Alibaba's stake value has been lowered, the firm also feels that Mayer (the new CEO) will add value and that the Yahoo! Japan stake has risen by nearly a third since late May.

    The brokerage sets a price target of $22.

    I have been steadily adding to this name in the last week.

    Separately, my buddy/friend/pal, Gamco's lynx-eyed Larry Haverty, had a positive spin on Yahoo! this week on Bloomberg TV in a lengthy defense of the name.

    At the time of publication, Kass was long YHOO common stock and calls and was short GS.


    Put It This Way
    Originally published on Monday, Sept. 25 at 11:41 a.m. EDT.
  • It is the global monetary put, not the performance chase, that is buoying stocks.
  • I continue to have value-added email exchanges with Jim "El Capitan" Cramer and my friend/buddy/pal "Fast Money's" Pete Najarian -- both of whom are supportive of the view that its the performance chase that is supporting stock prices over the last month.

    Many subscribers agree with Jimmy and Pete, as judged by their observations in the comment section.

    Let me make it clearer what I think is now supporting equity prices.

    From my perch, it's the anticipated liquidity of the global monetary (easing) put, not the performance chase, that continues to buoy the markets -- even as several European governments drag their feet in the face of the still-apparent sovereign debt crisis in the eurozone.

    Despite more reluctance overnight on the part of Spain's Deputy Prime Minister to commit to an ESM aid package (until he finds out how much the ECB will commit to the purchase of Spanish bonds, a truly ridiculous request!), the news that Greece's deficit shortfall will require more debt forgiveness (opposed by Germany), the likelihood that the bank sector union will take much more time and the ECB/Bundesbank's examination of whether Draghi's bond buying proposal is legal, the euro and U.S. stocks are higher, and Spanish and Italian bond yields are virtually unchanged.

    But from my perch, while the global monetary put can protect and serve as a shield against the tail risk of a big stock downer, it remains my expectation that more easing will have little positive impact on the real economy. And when the liquidity high of investors wears off, the market will resume its southerly course.

    Already, the market appears to be hesitating in recent days.

    At the time of publication, Kass held no positions in securities mentioned.

    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.

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