Jobless Claims and Trimming GLD: Best of Kass
A gold brick

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's selling some Allergan shares.
  • How he's feeling about the jobless claims.

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


 
Selling Some Allergan Shares (but Keeping Others)
 
Originally published Jan. 10 at 1:12 p.m. EDT

Allergan (AGN) has rallied more than $5 a share from the day's lows to $222.30 at last check after CEO Brent Saunders appeared on CNBC just now.

I initially bought AGN on Dec. 23 at $194 a share, but the stock has risen almost $30 since then. That's quite a lot of progress over less than three weeks, but trees don't grow to the sky.

So, I'm tactically selling off a portion of my shares now in the hope of replacing them at lower prices in a possible market correction. My 12-month price target for the stock remains at $260.

This is my first sale of AGN, which I consider a long-term investment. Click here to read my rationale for buying the stock in the first place.

Position: Long AGN.

 
Jobless Claims and Fed Speak
 
Originally published Jan. 12 at 9:23 a.m. EDT

Initial jobless claims totaled 247,000, or 8,000 less than expected, but up from 237,000 last week. These are extraordinarily low numbers, but with the holidays being an influence we will wait for coming weeks to see what's real. Smoothing this out, the four-week average is at 257,000 vs. 258,000 last week. The low in the cycle was 250,000 back in October. After rising last week to their highest level since September, continuing claims fell by 29,000.

Bottom line: While influenced by the holidays, the pace of firings remains modest as employers hold on tight to their qualified employees at a time when it's real tough to find good ones.

Separately, newly voting Fed member Patrick Harker, president of the Federal Reserve Bank of Philadelphia, told us where he is on the dot plot. I noticed that he does have a bit of a sense of humor in spelling it out as he said in his speech, "After December's meeting, that makes a brisk average of one 25 basis points per year for the last two years. But I see three modest hikes as appropriate for the coming year, assuming the economy stays on track."

On the economy, Harker said, "The labor market is strong and we're creating jobs at a good pace ... Inflation is moving back up to our 2% goal, and growth is solid. We're starting 2017 off on a good foot."

While Harker is a voting member, the short end of the Treasury market is not responding as it only matters what Janet Yellen, Stanley Fischer and William Dudley think. Those three currently are soaking in the econometric concept of a low "neutral rate." Having Fed members try to model that out is the epitome of central planning, but that's what they do.

Position: None.
 
Trimming My GLD Long
 
Originally published Jan. 12 at 10:28 a.m. EDT

In late December I initiated a SPDR Gold Shares (GLD) buy at around $109 (and added GLD to my Best Ideas List). I viewed GLD (gold) as a reasonable contrary play and a potentially solid candidate for a January bounce.

In that column I made some observations:

  • GLD made a dramatic move from $125 to $107. It was a straight shot down that was materially unexpected.
  • As goes life, the sharp decline led to an extreme move in extremely pessimistic trader sentiment towards the commodity.
  • I hope to see a minimum retracement back to $115, which was the launching pad for the last move up in June. It was also that $115 level that it came down to and tested and gapped down from.
  • GLD spent quite a lot of time lower since November and then a few weeks in bottoming.
  • GLD appears now to be breaking its downtrend.
  • The Russian "incident"may accelerate the improvement in the price of gold that I suggest above.

Now trading at $114.85, the price of GLD is sufficiently close to my $115 and first objective (mentioned above) and I am halving my GLD long by moving from large to medium in size.

GLD remains on my Best Ideas List.

Position: Long GLD.

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