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


Takeaways and Observations: Second-Quarter Start

Originally published April 3 at 5:27 p.m. EST

"I would say that (today) the averages are faring better than the average stock -- on average.

If you know what I mean!"
-- Kass Diary, Consider this Yogiism!

 
With opening day yesterday and tonite's NCAA final (I like North Carolina in a high single digit, low double digit win)--my themes were clearly sports--related.
 
Lessons from Jimmy V
 
 
 
More clear signs of Peak Autos, and here and here.
 
Winwood and Clapton play a Tesla tune.
 
 
I will be dining on the "dark side" on Thursday night at Mar-a-Lago. I will send pictures and maybe a new issue of The Palm Beach Chronicles.
 
CAT is still a DOG.
 
 
Who's the sucker? With retail investors committing billions of dollars into equity ETFs and insiders aggressively selling. Let me Tell You Something!

Another strong rally from the market's nadir in the morning -- which I used as an opportunity to expand my short book.

But, as it relates to my quote at the beginning of "Takeaways" -- look at the weakness in the Russell Index! A conspicuous one percent decline.

In other words there was less (in this market) than meets the eye.

 
* The US Dollar weakened.
* The price of crude oil dropped by 35 cents to $50.26 a barrel.
* Gold rallied by $3.60 an ounce.
* Ag commodities: wheat +1, corn +3, soybeans -7 and oats +1.
* Lumber down an outsized -7.50 today.
* Bond yields declined by 5-6 basis points -- largely a result of the weak auto data (that I have been warning about for months).
* Importantly (for financials), the 2s/10s spread flattened by four basis points and now stands at only 109 basis points.
* Municipals declined (but closed end muni bond funds advanced), as did junk. (The iShares iBoxx $ High Yid Corp Bond (ETF)  ( HYG - Get Report) fell 42 cents. Let's watch this ETF closely in the days ahead.)
* Banks, initially quite weak, rallied but ended lower on the day.
* Life insurance stocks were lower, as were brokerages. Hartford Financial Services Group  ( HIG - Get Report) performed relatively well.
* Auto stocks stunk up the joint.
* Retail was broadly lower after a few days of stabilization.
* Homebuilders down, but not meaningfully so.
* Big pharma was flatlined.
* Biotech was down by about one percent led by Allergan  ( AGN - Get Report) , Valeant Pharmaceuticals ( VRX) and Gilead ( GILD - Get Report) (both at new lows).
* Ag equipment lower, but off the bottom. Caterpillar  ( CAT - Get Report) another factory shuttered.
* Mixed media.
* Transports flat.
* Defensive consumer staples fared poorly.
* Little price change in autos.
* (T)FANG strong, led by Tesla ( TSLA - Get Report) , Amazon ( AMZN - Get Report) and Alphabet ( GOOGL - Get Report) .
* In indiviudal stocks, Incyte  ( INCY - Get Report) , CIGNA  ( CI - Get Report) and Chipotle Mexican Grill ( CMG - Get Report) were upside standouts. CarMax ( KMX - Get Report) and AutoNation ( AN - Get Report) (Peak Autos!), Robert Half International ( RHI - Get Report) , O'Reilly Automotive ( RLY - Get Report) and CBRE Group ( CBG) downside standouts.
Here are some value added contributions from our contributors:
1. Jim "El Capitan" Cramer wants to keep some cash handy.
2. Ben "Goldfinger" Cross on Trump and gold.
3. RevShark ruins my night!
4. Divine makes another great call on the Russell's vulnerability and gives me some promise tonight!
5. Paul Price on value cycles.
6. Bob Lang on being careful who you pay attention to.
Position: LONG HIG large; CPB large; TWTR large AGN large; Short CAT small .

Dear Mr. Fantasy, Play Us a Tesla Tune

Originally published April 3 at 10:52 a.m. EST

"Dear Mr. Fantasy play us a tune
Something to make us all happy
Do anything, take us out of this gloom
Sing a song, play guitar, make it snappy."
--Traffic, " Mr. Fantasy "

This morning Tesla's (TSLA - Get Report) share price is up nearly $15 after advancing smartly in recent weeks.

  • Telsa' valuation per auto is $600,000.
  • Ford's valuation per auto is $7,000.
  • Tesla is now worth more than Ford.

This is 1999-2000.

From my perch, Elon Musk is our present-day P.T. Barnum.

Tesla's annual earnings estimates keep going down, but its stock keeps going up, manhandled by momentum-based strategies that worship at the altar of price.

If Tesla can't make money selling $100,000 cars to subsidized rich people while it has no competition and advertising costs, how will Tesla make money selling $40,000 cars to middle-income people with massive competition coming and as subsidies disappear?

As suggested in an earlier piece this morning, our markets have lost their innocence and bear little relation to reality.

Tesla possesses a nearly $48 billion equity value with less than 4% upside to the biggest Wall Street bull's fantasized price target.

Tesla, owing to the large short interest, is un-shortable.

It is also un-longable, though I am not sure that is a word, either.

Position: None.