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. 17 at 3:41 p.m. EDTThe consideration of the contrary has been a theme all week. And here in " Don't Run With the Crowd: Embrace the Contrary."
- The U.S. dollar, as discussed above, continued to rip higher against the euro. I am concerned. Mark Grant is concerned. The market is not concerned.
- The price of crude oil (down $0.20) settled lower after yesterday's robust gains.
- Gold fell $9 as it continues to break down--closing in on $1,200.
- Ag commodities: wheat up $0.07, corn up $0.04, soybeans up $0.05 and oats up $0.02.
- Lumber up $7 following the big housing number this morning.
- Bonds schmeissed ... iShares Barclays 20+ Yr Treas.Bond ETF (TLT) down $1.50.
- The yield on the 10-year and 30-year notes and bonds rose by about 5 basis points.
- The 2s/10s spread steepened by 2 basis points to about 125 basis points.
- Municipal bond funds traded lower. Closed-end funds got hit.
- High-yield was flat, though Blackstone/GSO Strategic Credit Fund (BGB) rose by $0.05.
- Banks continued to be the "world's fair" but to this observer it is getting heady and panicky. My finger is on the short Financial Select Sector SPDR Fund (XLF) button. But not yet.
- Insurers outperformed, but my long Hartford Financial (HIG) underperformed.
- Brokerages up big again. Very over-bought.
- Autos mixed.
- Energy stocks, some profit taking.
- Retail strong after Wednesday's weakness. Led by Best Buy (BBY) and Home Depot (HD) .
- Biotech was marginally higher, led by Allergan (AGN) and Celgene (CELG) . Valeant Pharmaceuticals (VRX) still in the regulatory cross hairs.
- Big pharma down--but barely.
- Old media led by an analyst upgrade in Microsoft (MSFT) .
- Consumer staples plagued by a strengthening U.S. currency. Investment short, Coca-Cola (KO) , can't get out of its own way ... a good thing.
- Consumer discretionary was mixed.
- (T)FANG had a good second day in a row--but stocks off their highs as Netflix (NFLX) turns red.
- Apple (AAPL) a bit lower after a great day Wednesday.
1.Jim "El Capitan" Cramer on banks. I am less positive than Jimmy--believing that it is late in the financial stock move.
2. Rev Shark on market manipulation.
3. Homie Mike Norman.
4. Tim Melvin explains his search for value.
5. Sossi drinks the Kool-Aid, err ... the Pepsi!
Long HIG large, JCP large, SDS large, GLD small
I see $29 before $31.
While this is not an exciting short, it may be a low-risk short.
The first quarter was a beat but forward guidance for the January quarter disappointed--estimated revenue down by 2% to 4% and estimated earnings per share of $0.55 to $0.57 were both well below expectations.
The biggest headwind appears to be in the service provider segment, which will show up in lower routing sales with orders down by 12%. Flat cloud revenues are a concern as well; data center switching is exposed to the public cloud and represents one-quarter of sales.
I expect that at the company's next analyst meeting Cisco will reduce rather considerably its long-term sales forecasts from about 4.5% to 2.5%.
So, while the shares are inexpensive relative to Cisco's mature peers at 14.5x 2017 forecasts, its enterprise value/free cash flow may continue to decline to 8x.
Conversely, I am expecting the Nasdaq to recover somewhat (I covered my PowerShares QQQ Trust (QQQ) short Monday).
I also expect bonds to rally in price and decline in yield.