Good, the Bad and the Ugly; What Troubles Me: Doug Kass' Views

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


The Good, the Bad and the Ugly

Originally published April 25 at 3:17 p.m. EST

" It's not a joke, it's a rope, Tuco. Now I want you to get up there and put your head in that noose. -- Blondie, " The Good, the Bad and the Ugly"

The Good
 
* Mr. Market.
* Banks, insurance ( Hartford Financial Services ( HIG) , "Trade of the Week) and brokerages which are rate sensitive.
* Ag equipment after Caterpillar's  ( CAT) big beat. Deere  ( DE) gets pulled along.
* Biotech ( Allergan  ( AGN) , Celgene  ( CELG) and Gilead Sciences  ( GILD) )
* Speculative biotech ( ZIOPHARM Oncology ( ZIOP) , SAGE Therapeutics  ( SAGE) , Intrexon ( XON) , Valeant Pharmaceuticals ( VRX) , ACADIA Pharmaceuticals ( ACAD) , FibroGen ( FGEN) ).
* DuPont  ( DD) , Netflix ( NFLX) , Baidu  ( BIDU) , Radian  ( RDN) and Biogen ( BIIB) .
* New tech - (T)FANG ( TSLA) , ( FB) , ( AAPL) , ( NFLX) , ( GOOGL) .
* Chipotle Mexican Grill ( CMG) continues as a star.
 
The Bad
 
* Homebuilders--fears of rising costs and lower margins after the lumber move against Canada?
* Retail still can't get much of a bid (excluding Home Depot ( HD) and Lowe's ( LOW) Kohl's ( KSS) , J.C. Penney ( JCP) , Nike ( NKE) lower.
* Old tech.
* The "bobsy twins"-- Snap  ( SNAP) and Twitter ( TWTR) .
 
The Ugly
 
* Silver -$0.30. Gold -$13. But what is worse are the levered gold ETFs like  ( GDXJ) and ( JNUG) that I have been warning about.
* Bond prices are getting schmeissed as yields rise (by nearly seven basis points).
* Lumber -$10 (limit down) after Canadian tariffs were introduced.
* The U.S. Dollar getting whacked for the second consecutive day following the French elections.
* Ryder System ( R) , Express Scripts  ( ESRX) , Nielsen  ( NLSN) , T. Rowe Price Group  ( TROW) , Eli Lilly  ( LLY) and Laboratory Corp. of America  ( LH) .
* Sears Holdings (SHLD) breaking down, again - after a good run (short squeeze?)
 
Position: Long DD small RDN TWTR large HIG large Short TLT .

What Troubles Me and What Should Trouble You

Originally published April 24 at 12:31 p.m. EST

"The problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts."--Bertrand Russell
 
As Grandma Koufax taught me, I often live in constant fear that the "Cossacks are Coming."
 
This is not an innate condition of fear or a permanent state of investment paralysis. Nor is it, as some have claimed, the status of a Perma Bear--as I actually am long a number of stocks.

Rather, it is a reflection of the realities, concerns and uncertainties that investors face over the next 1-2 years.

Tuesday's opening missive will discuss the threat of central banks' normalizing interest rates in a world heavily laden with debt.


While the Perma Bulls will call my concerns a " Wall of Worry," I believe that is far too glib and a non rigorous response to serious issues.

In the past 12 months I have consistently and continuously written that never in my investment career have their been so many market and economic outcomes--many of which may be interpreted as market unfriendly. (This is something my pal and legendary brokerage executive and investor Ira Harris mentioned to me a few years ago).

 
I also wake up every morning with some nagging questions--now totaling eight!--" This Aint No Seder "--which makes this market different than other markets.

Yet, many are self-confident--and use as their baseline expectation that we will see a "hockey stick" of nominal GDP growth and U.S. corporate profit growth in the next two years coupled with some further expansion in price earnings multiples.

I am deeply skeptical of that outcome. The lack of political, geopolitical, economic and market certainty of outcome helps to explain, in part, why I have shorted my investment horizons ( "Shorten Your Investment Horizons and Hang Tight") and reduced the size of my trading and investment positions. I recognize this eight year global bull market will not die easily thanks, in part to a combination of animal spirits (they call them animal spirits because animals are dumber than humans!) and central bankers (who often act like animals)!

At the same time I also recognize these pearls of wisdom from another friend, Byron Wien: "Disasters have a way of not happening."
 
From my perch, the growing list of developing uncertainties is not market friendly and will weigh on valuations for, as the Oracle has taught us, the intermediate- to longer-term the market is not a voting machine but rather is a weighing machine.

I remain honest in view and uncertain and lacking of confidence of direction over the near term. At the same time I remain negative over the intermediate term -- in which downside risk is likely at least 3:1 versus upside reward.

 
Position: None .

Action Alerts PLUS, which Cramer manages as a charitable trust, is long AGN, FB, AAPL and GOOGL.

 

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