Citigroup, JPMorgan Chase, Macy's: Doug Kass' Views

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


Refreshing My Tactical Strategy

Originally published Nov. 8 at 7:59 a.m. EDT

Over the past several days, I have made several quick, tactical moves that I would like to recount and briefly explain.

As most are aware, I had been net short for some time, but last week (about midweek) I covered all of my index shorts into the seventh and eighth consecutive down days for the S&P 500.

On Thursday and Friday I began to accumulate a long position (for rental, trading purposes). As stocks faded on Friday I expanded that long position.

I did this in the belief that we faced a likely Clinton victory, negative investor sentiment had grown extreme, and we were deeply oversold. Furthermore, I expected a 30- to 60-handle rally in the S&P.

Yesterday, I reversed the position and took long profits based on the belief that the 45-handle rip in the S&P Index had likely borrowed from a post-Clinton victory.

Late in the day and as euphoria erupted, I took a small short rental, which I still have on my books.

I start the day with a small net short exposure.

While I have no view on the next 10 to 15 S&P points, looking out over the next six to nine months I remain negative in my market view.

Position: Long SDS; short SPY small .
 
 

 
Summary of Macy's Conference Call
 
Originally published Nov. 10 at 11:15 a.m. EDT
 
Here's a summary of Macy's ( M) conference call:

  • Average unit retail up 3.5% in 3Q.
  • Gross margin flat Y/Y 39.8%.
  • Comparable inventory down about 3%.
  • SG&A up 5.2% Y/Y related to lower asset sales gains this year.
  • May repurchase debt to improve its credit ratios.
  • Currently above its targeted debt-to-EBITDA ratio of 2.5 to 2.8.
  • Signed a contract to sell Union Square building (New York City) for about $250 million, expects transaction to close in January.
  • Will be leasing the men's building back for two to three as it completes this construction.
  • Will book the about $235 million gain in January 2018.
  • Company also exploring options for downtown Minneapolis, Chicago and Herald Square in Manhattan.
  • Signed a contract to sell its downtown Portland property.
  • Transaction expected to close during 4Q w/ proceeds of about $54 million and the book gain of about $36 million.
  • Additionally, company sold give locations to General Growth Properties (GGP) for a total of $48 million last week.
  • In total, company has closed or announced plans to close eight stores as part of the 100 stores discussed last quarter.
  • Expects comps on an owned-plus-licensed basis to be down about 2% to 0.5% in 4Q.
  • Expects at least a 100-basis-point improvement in the gross margin rate for 4Q.
  • Sees daylight in its Brooklyn construction, and as a result the timing for booking the gain is getting delayed more into 2017.
  • Still tracking to its guidance for capital expenditures of about $900 million.
Position: Long M .
 
 

 
My Premarket, Post-Election Trading Action
 
Originally published Nov. 9 at 7:33 a.m. EDT
 
In premarket trading I have done a lot of trading and squared up my book.

I sold my ProShares UltraShort S&P 500 ETF (SDS) long on strength and I covered the balance of my SPDR S&P 500 ETF (SPY) short on weakness.

I have also covered all my financial shorts--Citigroup (C) , JPMorgan Chase (JPM) and Financial Select Sector SPDR ETF (XLF) --on the early-morning weakness.

Finally, I have sold my S&P futures purchased slightly after midnight (essentially taking off my Index short exposure) into the schmeissing at it appeared that Trump was going to win the election.

I am in market-neutral mode (and at "sleeping levels") with a very low gross exposure.

Position: None.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long C.

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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