NEW YORK (Real Money) -- 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.
This past week, Kass wrote about how consumer confidence is looking more solid, how mortgage companies are settling outstanding deals before year-end, and why Kass is shorting the Nasdaq (QQQ) .
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Solid Confidence Numbers
Originally published on Friday, Nov. 14, at 11:15 a.m. EST.
We're seeing a good consumer-confidence number Friday from the University of Michigan/Reuters survey: 89.4. That compares with the analyst consensus of 87.5 and the prior month's figure of 86.9.
Current and future conditions readings were higher.
The bulk of the better number came from the reduction in inflationary expectations.
As we know, this consumer-confidence number is importantly influenced by lower oil prices and inflationary expectations.
The trend in confidence has been higher for the last 12 months -- though this hasn't translated yet into improving consumption.
Signposts of an Ocwen Settlement
Originally published on Nov. 14, at 8:09 a.m. EST.
After the close last night, Ocwen (OCN) announced that it had mutually agreed with Wells Fargo (WFC) to terminate its previous agreement to acquire a portion of the bank's mortgage-service business ($39 billion worth of servicing about 185,000 loans). Ocwen will receive back its $25 million deposit from Wells.
The agreement was originally signed about 10 months ago. One month after the agreement was signed, the New York Department of Financial Services' Benjamin Lawsky objected to the transaction, and it was put on indefinite hold.
It is unclear whether the decision was a function of requests -- perhaps in preparation for a final settlement -- or whether Wells Fargo felt it had waited too long and wanted to prepare for putting its 2014 year-end books "in order."
My guess is that Wells Fargo decided it had waited too long -- and that, even if a settlement were made with New York State, it would be unclear if Ocwen could proceed thereafter with the transaction in a reasonable time frame.
Importantly, I expect Ocwen and New York State's DFS to come to a conclusion and settle Lawsky's complaints in the reasonably near future.
As previously written, there are signposts that indicate that a settlement could be near. These include a $100 million estimated settlement charge in reported third quarter (which I suspect will be raised slightly in the final agreement) and the possibility that Lawsky will enter the private sector in early 2015.
Equally important, I expect the final settlement to allow Ocwen to grow through additional service platform acquisitions -- albeit at a more restrained pace than in the past.
If I am correct in my view, Ocwen will then be more than a melting ice cube that has only run off value. Some growth opportunities will open back up, and that should be coupled with large expected cost savings by the second half of the year.
Should Ocwen's shares get punished on this news, which was not entirely unexpected, I plan to be a buyer. After all, a deal with Wells was never included in my numbers, nor those of others.
Position: Long OCN
Pressing My QQQ Short
Originally published on Monday, Nov 10, at 10:02 a.m. EST.
This is for two reasons.
Firstly, old media is overbought and subject to the headwinds of a rising U.S. dollar.
The charts of Amazon (AMZN) , Priceline (PCLN) , Facebook (FB) , Twitter (TWTR) , Netflix (NFLX) , eBay (EBAY) and Google (GOOGL) are all rolling over. Indeed, First Trust Dow Jones Internet Index (FDN) has been underperforming the broader markets since early March of this year.
I would sell Alibaba at this point (around $117).
Position: Short QQQ