Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.


My Takeaways and Observations

Originally published at 4:33 PM EST on April 14, 2016

Another win today for the bulls. Started weak, ended flat.

I started the day yelling

I ended the day explaining the sale of a portion of my Blackstone/GSO Strategic Credit Fund  (BGB)  holdings. 

In the middle of the day, I cautioned about that cigar and recommended an excellent post by "Double D." 

I added to my Apple  (AAPL)  short and sold down my BGB position.

  • An inside day in the markets.
  • The U.S. dollar strengthened for the second day in a row.
  • Yesterday's crude oil reversal lower continued today, down 53 cents to $41.23. 
  • Natural gas got smushed, down by seven cents.
  • Gold was lower by another $21, to $1,227, after it was down by $12.60 on Wednesday.
  • After yesterday's monster move higher in agricultural commodities, we settled down today: wheat -1.75, corn +0.50, soybean -9.50 and oats flat.
  • Lumber was down $4.60.
  • Bonds reversed yesterday's gains, with iShares 20+ Year Treasury Bond ETF  (TLT)  down 63 cents. The 10-year and the 30-year barely moved. Yields were up by one to two basis points.
  • Municipals flatlined.
  • High yield was dead flat, but BGB slipped by 15 cents.
  • Banks continue as the world's fair; I will have more on the sector in the next day or two.
  • Brokerages were again better. Morgan Stanley  (MS)  was up 29 cents and Goldman Sachs (GS) rose $1.06.
  • Life insurance continued to rise, though my long Hartford Financial Services Group  (HIG) was a laggard.
  • Autos were flat after a spectacular day yesterday.
  • Consumer nondurables reversed yesterday's weakness, though my short Coca-Cola  (KO)  drifted lower.
  • Old tech had small minus signs. No biggie.
  • Biotech, an area where I am seeing a lot of bottom fishing, came up short, showing little price movement. Maybe the continued Theranos controversy hurt the space. Bill Miller at Legg Mason is buying Valeant  (VRX) , helping to stabilize the name. Allergan  (AGN)  stunk up the joint for the third day in a row, down $4.   
  • My former biotech basket was mixed, though spec Intrexon  (XON) continues to roar higher.
  • Retail was mixed. My long Macy's  (M) was down 67 cents and my short Nordstrom (JWN)  was down 69 cents.
  • (T)FANG was modestly higher, but my short Tesla (TSLA) was down $2.67.
  • NOSH was mixed nuts.
  • CRABBY was hurt by BGB but helped by Citigroup  (C) and Bank of America  (BAC) .
  • Potash (POT) was lower on a downgrade, Radian Group  (RDN) continues to inch higher, AAPL was flat and Twitter  (TWTR)  was up 15 cents on a lot of technical excitement. DuPont  (DD) , my favorite long large-cap, was up 38 cents.
  • Starbucks  (SBUX) , a short, was a bit lower despite the CEO's protestations.

Here is some good stuff on RealMoneyPro:

  1. El Capitan flying high on Delta
  2. Ben "Goldfinger" Cross on gold. Bobby Lang chimes in on Goldcorp  (GG) . 
  3. Tim Melvin does a filter on good dividend payers
  4. RevShark on dips
  5. Divine Ms. M is, well, divine.

Position: Long BGB, DD, M; short TSLA small, NFLX small, SBUX small, AAPL small, JWN, GS small, KO


Book of Boockvar ('Peak Autos' Edition)

Originally published at 10:02 AM EST on April 15, 2016

Here's more on U.S. industrial production and "Peak Autos" from Peter Boockvar:

"U.S. industrial production fell 0.6% m/o/m in March after dropping by the same amount in February. March expectations had been for just a 0.1% drop.

Manufacturing production led the miss, unexpectedly dropping 0.3% off of a weaker-than-expected base (as February was revised down by three-tenths and January by one-tenth). Auto and auto-parts production fell 1.6% m/o/m, while the y/o/y gain slowed to 5% from 9.1% in February. That's likely a response to growing inventories and moderating sales.

Machinery production dropped 0.4%, with February and January revised down sharply after upward revisions to late-2015 data. Utility output was also down due to pretty benign weather, while mining production fell another 2.9% m/o/m and 13% y/o/y (for reasons that we all know). The overall softness led to capacity utilization dropping to 74.8% in March -- the lowest level since August 2010.

The bottom line: Industrial production has fallen to its worst level since February 2014. Weakness in mining, machinery and oil and gas are certainly the main catalysts, but now we might also have a slowdown in auto production.

I think that with the automotive industry's large dependence on consumer credit, we can forget about another Federal Reserve rate hike this year if auto sales continue to moderate."

Short F, GM

Position: None

Homer Simpson's Advice to Investors 

Originally published at 8:03 AM EDT on April 15, 2016

"Hello. I'm Leonard Nimoy. The following tale of alien encounters is true. And by true, I mean false. It's all lies. But they're entertaining lies. And in the end, isn't that the real truth? The answer is: 'No.'"

-- Leonard Nimoy, The Simpsons

As I wrote Thursday, Wall Street's narrative always seems to change when players want to rationalize the market's price action:

" 'Narrative' has become the new code word for the market's rationalization of our current, questionable economic conditions.

Consider the narrative that we heard yesterday about the latest Chinese trade data and the U.S. dollar's direction. Both seemed to partly fuel stocks' advance yesterday.

Should we call this Positive Data Mining? Let's take a deeper look at some of the challenges that the real economy faces, but that stocks seem to be ignoring."

-- Doug's Daily Diary, Yell and Roar and Sell Some More

Such is the case with global economic activity these days, particularly in China, where investors have heralded the latest Chinese trade data and last night's macroeconomic releases as evidence of Asian stabilization and/or turnaround.

But my diary has long been populated by statistics that show the global economy's deceleration and too much supply vs. demand -- although stocks have recently ignored both concerns and continued to advance.

Are they serious? Healthy skepticism has been replaced by a "bull market in complacency" in the belief that "price is truth." But as Grandma Koufax used to say: "It takes two to lie, Dougie. One to lie and one to listen."

D'oh!

Beware of the bull market in complacency, where the irrational is confidently rationalized.

Or, as Homer Simpson once put it:

"Oooh, look at me! I'm making people happy! I'm the Magical Man from Happy Land -- in a gumdrop house on Lollipop Lane! ... Oh, by the way -- I was being sarcastic!"

-- Homer Simpson, The Simpsons.

Position: Short FXI

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.