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 Dec. 8 at 4:16 p.m. EDT
Was Wednesday "FOMO" or something else?
- The U.S dollar was quite strong. This will likely pressure multinational company profits.
- The price of crude oil rose by $1.05 to nearly $51 a barrel.
- Gold fell by $5 to $1,172.* Ag commodities: wheat down $0.08, corn down $0.04, soybeans $0.24, oats unchanged.
- Lumber down $6.
- Bonds pressured. The 10-year U.S. note yield rose by over 5 basis points and the long bond by 7 basis points. (The Generational Bottom in yields appears quite safe).
- The 2s/10s spread widened by 5 basis points to 129 basis points -- a new high. Good for financials with an imbalance of rate sensitive assets over liabilities.
- Municipals fell after a strong day on Wednesday, and closed end muni funds were broadly lower.
- Junk bonds were little changed. (Blackstone / GSO Strategic Credit Fund (BGB - Get Report) down by $0.08 after recent strength.)
- Banks still the "world's fair."
- Insurance more of the same, higher. I added to (HIG - Get Report) .
- Brokerages fab, led by Goldman Sachs (GS - Get Report) , again.
- Retail was storng led by Urban Outfitters (URBN - Get Report) , Kohl's (KSS - Get Report) and Nordstrom's (JWN - Get Report) , JC Penney (JCP - Get Report) inched higher.
- Old tech was mixed. I covered Cisco (CSCO - Get Report) yesterday.
- Biotech was slightly higher but Celgene (CELG - Get Report) and Gilead Sciences (GILD - Get Report) were laggards.
- Big pharma can't get going.
- Consumer non-durables were lower. I added to (CPB - Get Report) .
- Autos were flat after a sensational Wednesday.
- Media stronger, led by Disney (DIS - Get Report) (short small).
- (T)FANG lagged. Amazon (AMZN - Get Report) , Tesla (TSLA - Get Report) and Netflix (NFLX - Get Report) lower.
- In indiviudal stocks--Radian (RDN - Get Report) was radiant (rising by nearly 5% to over $16), DuPont (DD - Get Report) (a new high), Oaktree Capital (OAK - Get Report) flat and Apple (AAPL - Get Report) (short) up for the second day in a row.
1. Jim "El Capitan" Cramer on the great business thaw.
2. Carley Garner on the euro.
3. Ben "Goldfinger' Cross on gold.
4. Mike Norman is on my (ursine) side.
5. "Meet" Brett Jensen isn't scared of the president-elect.
Long: TZA small, SDS small, VVX small, HIG large, JCP large, GLD small, RDN, DD, OAK, CPB large
VIX closed at 11.50 on Tuesday (down 0.64). Here is the one-year chart.
Over the next few days I plan to go long volatility:
For some time relatively outlandish outbursts and vitriol from President-elect Trump have been dismissed by the markets. But, based on the events and the president-elect's comments/ideas over the last four weeks I continue to believe that Donald Trump will make volatility and uncertainty great again as we move closer to his inauguration.
- Without commenting on right or wrong, the recent attacks on United Technologies (UTX - Get Report) and Boeing (BA - Get Report) introduce a degree of business uncertainty and potential market volatility. Trump's rejection of Friedrich Hayek's economic principles, which are based on as little arbitrary interference as possible and staying away from picking winners and losers, and instead favoring what appears to be the adoption of "crony capitalism" -- so foreign to the beliefs of many Republicans and Democrats -- in time can be market-upsetting/unfriendly and could lead to difficulty in implementing policy.
- The baton pass from monetary to fiscal stimulation seems likely to be less seamless than the consensus assumes. Donald Trump is no Ronald Reagan. (More on Monday.)
- According to Goldman Sachs, policy uncertainties are great while financial conditions are tightening.
- The Bull Market in Complacency as measured by investor sentiment (bullish) and the VIX (low) is intact and even is strengthening in the last 10 days. The crowd, certain in a bullish view, is now uniquely well-defined.
- Fear and doubt have been driven from Wall Street. Not only is sentiment moving toward the bullish extreme, but so are the talking heads in their self-confident and bullish banter. Interestingly, many had the poop scared out of them at the thought of a Trump election victory.
- Markets are technically overbought.
- With fear nearly nonexistent, the ratio of reward versus risk (upside/downside) may have shifted unfavorably for investors.
The current setting seems to be a classic point of time to embrace the contrary and fade the consensus on volatility.
Stay tuned for my volatility trades. I am trying to time a good entry point and chose the proper vehicle to accomplish my trading goals.