Kass Is Bearish, Housing Isn't as Strong as It Looks: Best of Kass

Doug Kass fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

  • How he remains manifestly bearish
  • How housing isn't as strong as it looks

Click here for information on RealMoney, where you can see all the blogs, including Doug Kass'--and reader comments--in real time.


 
My Takeaways and Observations
 
Originally published May 25 at 4:05 p.m. EDT
 
Peak Housing? No follow-through from the homebuilders Wednesday.

Peak Bank Stocks?

Ali Blah Blah--aka Alibaba (BABA) --is a downside highlight Wednesday. See my post.

Small short adds and small long adds.

I remain manifestly bearish--but, as I have previously noted, so many are defensive (light or short) and investor sentiment has soured. I am mindful and have learned to be more reactionary in my trading book.

First time long time--bought some SPDR S&P 500 ETF (SPY) puts. Defined risk!

Slightly off the day's highs at the close--we almost repeated Tuesday's advance and market character during the day.

Rotation is clear as day--out of high beta and into financials.

  • The U.S. dollar weakened.
  • Crude oil rose by nearly a beaner to $49.50. Nat gas climbed a penny.
  • Another weak day for gold, down $5.50 to $1223; I wrote upon the subject yesterday and previously.
  • Agricultural commodities: wheat +2, corn +7, soybeans +31(!), oats +1.
  • Lumber +5.
  • Bonds fell. iShares 20+ Year Treasury Bond ETF (TLT) down half a beaner.
  • The yield on the 10-year U.S. note was unchanged, with the yield at 1.86%. The long-bond yield rose by two basis points to 2.67%.
  • Municipals were flat and so were closed-end muni funds.
  • The high-yield market was bid for. iShares iBoxx High Yield Corporate Bond ETF (HYG) up 15 cents and SPDR Barclays High Yield Bond ETF (JNK) up a nickel.
  • Blackstone/GSO Strategic Credit Fund (BGB) was three cents higher and appears to be challenging the recent highs.
  • Banks were the standout group despite no normalization in the yield curve.
  • Insurance was broadly higher. My long, Hartford Financial Services Group (HIG) , lagged--I added.
  • Brokerage stocks on fire. Morgan Stanley (MS) up 40 cents and Goldman Sachs (GS) up $4.
  • Retail rallied after being sold off for weeks. Shorts Nordstrom (JWN) was up 20 cents and Foot Locker (FL) up 75 cents.
  • Energy stocks followed the rise in crude oil. Schlumberger (SLB) was up $2.
  • Old tech was led by an outsize gain in IBM (IBM) , up $3, but Intel (INTC) , Microsoft (MSFT) and Cisco (CSCO) all were stronger.
  • Media lagged. Comcast (CMCSA) and Disney (DIS) were up only modestly.
  • Staples were higher, but not materially so. Nevertheless, my Consumer Staples Select Sector SPDR Fund (XLP) short (Trade of the Week) is stinking up the joint.
  • Agricultural equipment was strong, with Deere (DE) up 80 cents and Caterpillar (CAT) up $1.30.
  • (T)FANG looks like it is being rotated out of.
  • NOSH was lower, save O'Reilly Automotive (ORLY) .
  • CRABBY was led by Citigroup (C) but hurt by Alleghany (Y) .
  • In individual stocks, Apple (AAPL) continues its forceful move, up $1.75. It is now in my shorting range. Stay tuned. Potash (POT) recovered from yesterday's loss. Twitter (TWTR) had a dead-cat bounce. DuPont (DD) , my large-cap fav, looks like it has a mission at $70. My fav short, Coca-Cola (KO) , is flat. Oaktree Capital Group (OAK) is better; I have been buying.

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