GM in Reverse; December Retail Sales: 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 the posts this past week were entries about General Motors and the December retail sales data.

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GM in Reverse

Originally published on Wednesday, Jan. 15 at 9:14 a.m. EDT.

Hold on there auto bulls.

Last night General Motors (GM) traded up 4% on the initiation of a $0.30-per-quarter dividend.

This morning the shares have reversed after downbeat guidance.

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GM's disappointing outlook follows the same pronouncement from Ford (F) recently.

Here are the highlights of GM's guidance this morning:

F14 company guidance:

  • Adjusted EBIT to be "modestly improved, with improved underlying operating performance more than offsetting increased restructuring expense"
  • EBIT-adjusted margins will be similar to 2013

Management commentary:

  • CEO Mary Barra: "We continue to perform well in the two most important markets in the world, the U.S. and China. We're taking advantage of our strength in these countries to restructure and make the investments necessary to grow profitably in other parts of the world."

Vehicle launch plans:

  • Following 18 vehicle launches in 2013 in the U.S., the company will introduce 15 new or upgraded models in that market this year. In China, GM and its joint venture partners will introduce 17 new or upgraded models in 2014. The company also announced plans to open four additional plants in China through 2015, enabling production of up to 5M units annually.
  • Outlook issued in conjunction with the auto industry conference in Detroit

I have been emailing back and forth with Stephanie Link and Jim Cramer and have read their comments on the guidance. They have convinced me, and I agree that GM should be bought.

I am buying at $39.50 in premarket trading now.

At the time of original publication, Kass was long GM.

Parsing the Data

Originally published on Tuesday, Jan. 14 at 9:35 a.m. EDT.

Retail sales in December were better than forecast, but if we include the November downward revisions, the two months taken together are about in line.

Sales ex-autos and gasoline were higher by +0.6% vs. the estimate of up +0.3%, but November was revised down to a gain of +0.3% vs. the original print of up +0.6%.

The core measure of sales, which also takes out building materials, rose +0.7% vs. the estimate of up +0.3%, but last month was revised down -0.3%.

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Within the report, sales of electronics fell in both November and December and were very mixed at department stores. Online retailing, of course, took more share with a +1.4% increase after rising +1.6% in November. Clothing stores saw a sales gain of +1.8% after dropping -0.5% in November.

Bottom line: Because the December beat was offset by the November miss, fourth-quarter GDP estimates should not change on this number. We know from many retailers that have spoken that the holiday was extremely competitive and challenging.

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Most important, today's retail data signals that Friday's December jobs report likely exaggerated the weakness in the jobs market.

Tactically, I am considering going back  -- yesterday I bought and sold ProShares UltraShort 20+ Year Treasury (TBT) -- and taking a small TBT long rental to hedge my interest rate risk in my closed-end municipal bond fund exposure, but I have not yet done anything.

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.

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