Here are Doug Kass' top thoughts on some of the biggest stories of the week.


Goldman Weakness Could Be Another Negative Tell

A few weeks ago I wrote a column that compared Rev Shark's reactionary trading style to my anticipatory trading and investment strategy.
 
If action is a "tell" and price should be reacted to (according to RevShark's methodology), I want to call attention to action this week in the shares of bellwether Goldman Sachs ( GS) .
 
I placed the very popular Goldman Sachs shares on my Best Ideas List as a short at $242 a share eight months ago. At the time the consensus was very positive on the shares.
 
In the market's schmeissing on Tuesday GS shares fell by $8 and rallied only by $1 on Wednesday.
 
This morning, against a slightly better market backdrop, GS shares are down by another $3 to around $215.80. The shares, stated simply, are breaking down.
 
While the decline in GS is a bit more exaggerated relative to the also-weak action in bank stocks this week, this sort of deep underperformance in a pivotal stock that typically anticipates a change in capital market activity and prices is another potentially quite negative tell.
 
Just as the bond market's strength could be an indicator of a slowdown in business and economic conditions relative to consensus expectations, the weak absolute and relative performance of GS shares should not be ignored.
 
At least I am not ignoring this short's weak action.
 
For these reasons and others, I am now adding a trading layer (short indices) to my core investment short position.
Position: Short GS, BAC small, C small, JPM small, TLT .


Takeaways and Observations

"I satirize at all times, and my hyperboles are as nothing compared to the events to which they refer."
- Marshall McLuhan
 
We are stuck in a fantasy legislative land.
 
Goldman Sachs gets on board with my Hurricane Harvey/Budget view.
 
 
 
Speaking the truth to power. The news and commentary in the business media is getting ever more repetitive, with commentators who forget what the say days before. Don't believe the hype and I will continue to fight the power!
 
Not surprisingly to many, Mr. Market displayed a nice rally of about nine S&P handles.
 
Last program standing will determine the last sixty minutes of trading.
 
The proximate cause was the Trump Pelosi and Schumer agreement on the debt ceiling tied to Hurricane Harvey relief -- something I predicted ten days ago.
 
I both added to longs and shorts today.
 
* The US Dollar weakened.
* The price of oil gained +$0.47 to $49.13.
* Gold fell by -$7 to $1337. (After the big run I would rather be short than long now).
* Ag commodities: wheat +3, corn +2, soybean +3,and oats +3. (Potash Corp. of Saskatchewan ( POT) traded well today)
* Lumber -7.
* Bonds were lower, higher and ending lower. Looks to close the day at the low in price and high in yield. Yields rose by three basis points on the day - in the intermediate and long ends. As I wrote yesterday, I added to my bond short.
* The 2s/10s spread rose by one basis point.
* Municipals were lower in price while junk bond was slightly in the green.
* Banks rallied -- at 3PM at day's high -- after yesterday's shellacking. But Bank of America  ( BAC) , Citigroup ( C) and JPMorgan Chase ( JPM) up only fractionally. I add to Wells Fargo ( WFC) almost every day -- and I will continue at current prices.
* Insurance companies slightly higher. Lincoln National ( LNC) and Metropolitan  ( MET) (shorts) up modestly.
* Same for brokerages after Tuesday's schmeissing. Disappointing to bulls, I suspect.
* Autos have a better tone as replacement in Houston (and Florida) could eat up some of the outsized industry inventory.
* Consumer staples headed higher for the second day in a row. (Bruce Kamich on Campbell Soup ( CPB) technical and Credit Suisse on the fundies)
* Old tech was mixed, a bit disappointing again for the bulls.
* Retail caught a bid with Target ( TGT) , Dillard's ( DDS) , Nordstrom ( JWN) and Macy's ( M) stronger.
* Ag equipment stronger.
* Energy ( ( XLE) +$1.10) much better on higher energy prices.
* Biotech climbed higher though long Allergan ( AGN) lagged. Speculative biotech stabilized after Wednesday's hit to the downside.
* Railroads quite strong on an upgrade.
* Media mixed
* (T)FAANG lower in the morning and midday, rallied in the afternoon.
 
Here are some value added columns from our contributors today on our site:
1. Tim "Not Judy or Phil " Collins thinks it is time to be alarmed.
2. RevShark, like Chauncey Gardiner, is just being there.
3. Guy Ortmann on " crossovers."
 
Position: Long SQQQ AGN Short AMZN small BAC small C small JPM small GS MS MET LNC.
 
Originally published Sept. 6 at 3:16 p.m. EST

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

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

 

 

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