Market Top Bell Rings Twice; ADP Job Numbers Down: 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 'Market Top' Bell Rings Twice

Originally published May 3 at 10:13 a.m. EST

  • First Boca Biff Goes "All In"
  • Now the Approval and Introduction of 4x Leveraged ETFs
I recently questioned whether Boca Biff's all-in long market move was a signpost of a market top.

After all, history suggests so!
 
Late Tuesday, the Securities and Exchange Commission approved quadruple leveraged exchange-traded ETFs, which no doubt will result in more applications of permutations of the same in the months ahead.
 
The ETF, under the ticker of "UP," was filed by the NYSE Arca Exchange. UP has been structured to deliver 400% of the return of the S&P Index futures.
 
No doubt the approval of UP will lead to copycats and maybe even a 10x or 20x product in the months ahead!
 
But before you consider buying UP, remember that the decay, rebalancing effect and poor tracking history of leveraged ETFs, about which I consistently have warned you. Indeed, leveraged ETFs may be seen as another example of a financial weapon of mass destruction!
 
UP is being distributed by Exchange Traded Manager Group LLC.
 
I reviewed the S-1 Form for UP; ForceShares Trust discusses the following risks and red flags associated with this product:
  • The sponsor has limited capital.
  • The sponsor has zero experience in operating commodity pools.
  • The funds are not registered; there is no protection under the 1940 Act.
  • The sponsor is "leanly staffed" and the success of the product depends on their ability to implement its strategies.
  • The sponsor has numerous potential conflicts of interest, including (but not restricted to) trading in their own accounts.
 
Caveat emptor.
 
Position: Non e.

My Trading Week at a Glance

Originally published May 5 at 11:14 a.m. EST

"That was the week that was
America's expanding well
Jackie is going to have a child....
That was the week that was
Its over let it go..."
 
-- "That Was the Week That Was" (BBC program with David Frost)
 
This week's buys have been basically restricted to ProShares UltraShort S&P 500 ETF ( SDS) , ProShares UltraPro Short QQQ ETF  ( SQQQ) , Campbell Soup ( CPB) and Hartford Financial Services Group  ( HIG) .
 
Position: Long SDS large, SDS calls, SQQQ large, CPB large, HIG large, HIG calls.
 

ADP April Jobs Number Down From March

Originally published May 3 at 9:06 a.m. EST

ADP said 177,000 private-sector jobs were added in April, about in line with expectations of 175.000, while March was revised down by 8,000 to 255,000.

The main reason for the slowdown relative to March was in the goods-producing sector, which saw a spike all winter because of weather. In April, this area of the labor market added 12,000 jobs vs. 79,000 in March, with construction trimming 2,000 jobs after an increase of 153,000 in the mild winter from January thru March. Manufacturing added 11,000s after a rise of 31,000 in March. The natural resource sector, helped by the rising rig counts, added 3,000 jobs after a gain of 5,000 last month.

On the services side, job growth totaled 165,000 vs. 176,000 in March, and that's pretty much in line with the six-month average of 178,000. Professional/business services, education/health services and leisure and hospitality led the gains in this large portion of the U.S. labor force. Retail jobs continue to be shed in the new online/mobile phone world we live in.

Bottom line, mild weather helped to goose job creation in the first three months of the year in construction and manufacturing while services sector job creation was no different than the recent trend. Thus, the April slowdown was some giveback on the goods-producing side. That should continue. Also, after seeing just a 0.7% GDP print in the first quarter at the same time monthly job gains averaged 257,000 means that productivity was poor again and we'll see that official figure tomorrow.

Hopes are high for a second-quarter growth rebound, but it won't come from the consumer side with the purchase of new vehicles. The estimate for private-sector job gains on Friday is 190,000 after the big miss of 89,000 in March.

Position: None.

Action Alerts PLUS, which Cramer manages as a charitable trust, has no positions in the stocks mentioned.

 

 

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