Cisco, Allergan, Facebook: Doug Kass' Views

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 (Early Edition)

Originally published Nov. 3 at 3:44 p.m. EDT

I have been warning about weakening breadth and narrow leadership for weeks and months.

What have we gotten? As of Thursday, eight straight days (in a row) down for the first time since 2008.

But, with stocks suffering from election uncertainties and given the gauge of fear/greed, the highest put/call since Brexit, etc. I am expecting a short-term trading rally at any time. But I don-t see the move as sustainable and this sort of trading is only for the facile with an ability to quickly respond.

I also suspect, for the first time, we have "weak shorts" in the market. While it doesn't look that way now, this could hasten the trading rally.

This is all predicated on a Clinton presidential victory, the Democrats regaining the Senate and Republicans holding on to the House.

The market, as judged by the spike in VIX, is on tenterhooks in fear that there are more Clinton disclosures over the next few days.

My strategy and timing of that strategy.

The Gospel According to Richard Fisher.

Valeant all the way back to where the stock started before the asset disposition news.

Shorted more JPMorgan Chase (JPM) on a move over $69. Here is some fundamental input from Boston on the name.

Thus far a relatively range bound day; at 3 p.m. ET Thursday we were at the day's lows.

I view lower prices as a short-term opportunity.

Rs (Russell Index) over Qs (Nasdaq).

  • The U.S. dollar strengthened.
  • The price of crude oil continued to roll over: down $0.66, to $44.68.
  • Ag commodities: wheat down $0.05, corn up $0.02, soybeans up $0.03 and oats down $0.04.
  • Lumber up $5.
  • Bonds got schmeissed (iShares Barclays 20+ Yr Treas.Bond ETF (TLT) down a beaner) after staging a two-day recovery. The 10-year U.S. Treasury rose by 2 basis points in yield while the long bond advanced by 4 basis points.
  • The 2s/10s spread rose back to 100 bps.
  • Municipals were flat to higher.
  • Junk bond prices edged a bit higher as well. Blackstone/GSO Strategic Credit Fund (BGB) up $0.02.
  • Banks were mixed. Our Trade of the Week made a morning move higher -- and then dropped to new daily lows. I added on the short side. Financial Select Sector SPDR Fund (XLF) up by $0.08.
  • Insurance was very strong after a Lincoln National (LNC) beat (I remain small short). Hartford Financial (HIG) lacked this time.
  • Brokerages are surprisingly strong, led by Goldman Sachs (GS) .
  • Old tech down - with Cisco  (CSCO) , Microsoft (MSFT) and Intel (INTC) lower.
  • Retail still stinking up the joint with Nordstrom (JWN) , Target (TGT) , Foot Locker (FL) et al. notably weaker. I added to a poorly performing J.C. Penney (JCP) today.
  • Awful sentiment in biotech, pharma and generic -- for obvious reasons.
  • Biotech was a biowreck, breaking support levels. Allergan (AGN) , Valeant Pharmaceuticals (VRX) , Merck (MCK) etc. lower. Speculative biotech like Sage Therapeutics (SAGE) , Portula Pharmaceuticals (PTLA) , Acadia Pharmaceuticals (ACAD) , Aerie Pharmaceuticals (AERI) all lower.
  • Big pharma mixed to higher.
  • But generic drug makers hit by potential government collusion charges (Mylan (MYL) down $3) hit by potential government collusion charges. Teva Pharmaceuticals (TEVA) down by 10%.
  • Consumer staples were better on a weaker currency. In the space, I continue to buy Campbell Soup (CPB) .
  • Media higher. Disney (DIS) strong but cable weak (Comcast (CMCSA) and Time Warner (TWX) ).
  • (T)FANG continues to be problematic. Facebook (FB) had little bounce, nor did Alphabet (GOOGL) . Both down by $7 or more.
  • Here are some value added contributions on our site:

1. Jim "El Capitan" Cramer in an insightful column on management credibility.

2. My pal Divine Ms. M invokes Billy Joel as she goes to extremes.

3. RevShark says fuhgetabout it!

4. Dan Dicker digs a dry hole.

5. Gary Morrow says Citigroup has no momentum.

Positions: Long HIG large, JCP large, CPB, 10-year U.S. notes. Short SDS, C, JPM, XLF, MET small, LNC small, JCP puts, DIS small, SBUX small, CAT small, TLT small .


Highlights of BancAnalysts Association of Boston Conference

Originally published Nov. 3 at 1:34 p.m. EDT

Here are some highlights from JP Morgan's presentation at the BancAnalysts Association of Boston conference:

  • The bank expects fourth-quarter revenue from card, commerce solutions and auto to be down (by about $200 million, quarter over quarter) on higher acquistion costs.
  • JPM expects the fourth-quarter revenue rate to be lower (quarter over quarter) and to increase next year.
  • Results will depend on the number of new accounts originated.
  • Credit card net charge-off guidance: 1 -- FY 2016 about 2.60% (compared to previous guide of 2.50% in the medium term as it's investor day). 2 -- FY 2017 about 2.75%

None of this should be "market moving."

Position: Short JPM .


Bond Market Bounces Back

Originally published Nov. 1 at 2:54 p.m. EDT

As I "hoped," the bond market has fully reversed from the schmeissing early Tuesday morning.

The iShares Barclays 20+ Yr Treas.Bond ETF (TLT) , which was down $1.40, to $129.88, at the lows, is now up $0.30, to $131.50, in an apparent "flight to safety."

I purchased physical 10-year U.S. notes in my personal pension plan today when the bond was yielding over 1.87%. That yield is now all the way down to 1.815%.

And speaking of fixed income, I have said to keep an eye on the junk bond market. The four-day skid in high-yield bond prices continues apace this afternoon, with iShares iBoxx $ High Yid Corp Bond ETF (HYG) and SPDR Barclays Capital High Yield Bnd ETF (JNK) trading at the day's lows.

With SPYDers trading down $2.07, to $209.80, I would guess that we are at or close to the day's lows (hunch).Position: Long 10-year U.S. notes, short TLT small .

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long CSCO, AGN, CMCSA, GOOGL and FB.

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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