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DAILY DIARY

Doug Kass

Market on Close

  • How much to buy?

"One last thing."

-- Lt. Columbo

My mavens on the floor see about $490 million to buy market on close.

In terms of sectors, consumer staples have $155 million to buy, energy $110 million to buy and financials $90 million to buy.

Telecom has $5 million to sell.

The largest individual stock buys are in Anadarko (APC, $53 million), Altria (MO, $50 million) and Coca-Cola (KO, $40 million).

On the sell side, Apache (APA) has $15 million to sell and Pfizer (PFE) $12 million to sell.

Position: None

The Bulls Have the Day

  • Thanks for reading my diary and enjoy your evening.

Another win for the bulls today.

Thanks for reading my diary and enjoy your evening.

I have an appointment with the cold linoleum floor.

Position: None

Dell Rumor Lifts Nasdaq

  • Rumor has it that Silver Lake Partners is willing to pay as much as $15 a share for Dell.

Nasdaq lifts on rumor that Silver Lake Partners is willing to pay as much as $15 a share for Dell (DELL).

Position: None

Nu Skin and Avon Under the Microscope

  • Deutsche Bank is pressing the issue.

Break in: Nu Skin Enterprises (NUS) and Avon Products (AVP) are being pushed by Deustche Bank now.

Position: None

Jobs Now in Focus

  • Preliminary readings are not optimistic.

Focus will be shifting to Friday's jobs report.

It should be noted that in this morning's weak January Consumer Confidence Survey, jobs plentiful fell 2.2 points, to a four-month low, and those who said that jobs were hard to get rose 1.6 points, to 37.78, a three-month high.

Position: None

Let's Go to the Tapes!

From 'Futures Now.'

Let's go to this afternoon's "Futures Now" tapes:

Position: None

Breadth Check

  • Here's a whiff.

As of 2:00 p.m. EST:

  • S&P 500 -- 325 advancers to 172 decliners
  • NYSE -- 1,131 advancers to 711 decliners
  • Nasdaq -- 1,038 advancers to 1,100 decliners
  • Russell 2000 -- 973 advancers to 920 decliners

Volume on the S&P 500 is 21% higher than past 10-day average, 27% higher than past 30-day average, and 34% higher than Monday's volume for this time of day.

Position: Short SPY and IWM

Adding to a Short

Position: Short DHR

Recommended Reading

  • Run, don't walk, to read Ed Ponsi's latest.

Run, don't walk, to read Ed Ponsi "Scheme's" "The Currency War Is Real."

Well done.

Position: None

After-Hours Earnings

  • Here is a list.

Below are some of the more significant earnings reports after the close today (and with consensus expectations).

Position: None

Screwy Stocks

  • The S&P 500 forges higher while the Russell 2000 sputters.

Today's action is weird.

I can't put my finger on it.

We have numerous tech wrecks and a serious warning regarding the consumer, yet the S&P 500 forges higher while the Russell 2000 sputters (after a huge advance).

Position: Short SPY and IWM

Staples Lead the Market

  • Should we be concerned?

Consumer staples stocks continue to be market leaders today, which is typically a warning sign.

But there is nothing typical about this market.

Position: None

Ignorance Is Bliss

  • The market remains impervious to bad news.

Despite my protestations, the market is impervious to bad news.

The market = the World's Fair.

Position: None

Tune In

  • Run, don't walk, to watch me on CNBC's 'Futures Now' at 1:00 p.m. EST.

I will be on CNBC's "Futures Now" at 1:00 p.m. EST again today.

Position: None

Ford and Europe

  • Cortes chimes in with a chart.

"Fast Money's" Steve "Hernan" Cortes "De Monroy Y Pizarro" chimes in on Europe and Ford (F), backing up some of the points I mentioned earlier.

Position: Long F

Consumer Confidence

  • A longer-term perspective.

Today's consumer confidence report (at 58.6) was a big miss to expectations (consensus was at 64.0).

Below is a longer-term perspective on this series.

Consumer Confidence

Source: Bloomberg

View Chart »View in New Window »

Position: None

Case-Shiller (Part Deux)

  • The index is in for a long streak of lower sequential numbers that should turn negative year over year.

It is important to note that the November Case-Shiller (out this morning) is up to six months old!

That is because the index is a function of closed sales from September-November. The purchase and price decisions on closed sales come a month or two prior, however, so the real pricing metrics for today's release are from July-October.

In July-October 2011 (year over year), interest rates were above 5%. This year they were below 3.5%. This creates 15% more purchasing power for the 72% of buyers who use a mortgage even on flat incomes.

Thus, the year-over-year Case-Shiller change of 5.52% reported this morning is net deflationary when normalizing for rates.

Moreover, we know that prices softened up in the back half of 2012. This means the Case-Shiller is in for a long streak of lower sequential numbers that should turn negative year over year when December 2012, January 2013 and February 2013 are fully factored into the survey in the summer.

Position: None

Ludicrous Forecast

  • The market will experience its largest daily loss today.

We haven't had a ludicrous forecast this year, so here we go: The market will experience its largest daily loss today.

That is not much of a stretch as the largest daily drop in the S&P 500 in 2013 was only -0.35% on Jan. 8.

Position: Short SPY

Case-Shiller

  • Home prices remain 30% below the peak of April 2006 and are only back to summer 2003 levels today.

Yesterday's opening missive expressed a cautious view on housing this year.

This morning the Case-Shiller 20-city home price index rose by +0.63% (month over month) and by +5.52% (year over year), representing the eleventh month in a row of price gains and at the highest level since summer 2010.

Case-Shiller

Source: Bloomberg

View Chart »View in New Window »

But let's put the price rise into perspective -- home prices remain 30% below the peak of April 2006 and are only back to summer 2003 levels today.

Position: None

Danaher Hurt by European Weakness

  • Seems to be a trend.

In a previous column this morning, I citedFord's (F) warning on European automobile sales.

Danaher (DHR) just chimed in on continued weakness in Europe ("low-single-digit grind down"). The company now sees low-single-digit core growth in first-quarter 2013 and has cut its full-year 2013 EPS view to $3.32-$3.47 from $3.40-$3.55.

Danaher now sees first-quarter EPS at $0.72-$0.77 compared to consensus of $0.78.

So while EU sovereign debt yields are at new engineered lows, the economies speak another tale.

Position: Long F; short DHR

On the Contrary

  • The market is overpriced and ready for a fall.

Let's not lose sight of the fact that, to most investors, the trend is one's friend. Variant views are typically rare (particularly when the trend is as powerful as the last three weeks of market advances), as they can expose managers to not only investment risk but to business risk. At the same time, a variant view near inflection points can deliver alpha or excess returns -- seeApple (AAPL).

The crowd usually outsmarts the remnants, and the comfort of the herd provides most investors with a security blanket.

Over the past several days the business media has been filled with talking heads who are partying like it is 1999, appearing more bullish than ever and likely disregarding or downplaying the fact that the S&P 500 has risen from 666 to 1500.

Below are the most common epithets I have heard appropriated to justify the talking heads' bullishness (and my quick response in parentheses). These glittering generalities are appealing words closely associated with concepts and beliefs that carry conviction without supporting information or reason:

  • "There is no alternative to stocks; bond money will flee equities." (Many classes of investors may remain risk-averse, as there are numerous secular issues facing global economic growth. Moreover, rising interest rates might attract new fixed-income money from investors.)
  • "Stocks are cheap relative to bonds." (This has been the case for three years; it's not a new observation. But monetary policy in the U.S. is in its final innings.)
  • "Money markets yield near zero." (This has also been the case for over three years.)
  • "The data don't matter." (Until they do.)
  • "Washington's inertia in dealing with the budget deficit doesn't matter." (Really? If our leaders don't address the burgeoning deficit and kick the can down the road, a price will be paid. At the very least, this will prove to be valuation-deflating.)
  • "The market wants to go higher." (Until it doesn't. Those who worship at the altar of price momentum will retreat from the markets in any meaningful market decline.)
  • "Central banks are printing huge amounts of money; it has to go somewhere." (Monetary easing in the U.S. has still failed to create a self-sustaining recovery. Fourth-quarter 2012 real GDP will likely be only +1.5%. Secular issues continue to weigh on growth and will for some time. If printing money was the sine qua non, every recession would be patched up by monetary expansion. There is a price to pay for excessive monetary growth.)
  • "Despite a relatively sluggish corporate profit outlook, valuations -- P/E multiples -- will expand." (We are at about the average multiple over the past five decades. Considering the aforementioned secular issues, why should valuations be above the historic average?)

To be quite direct, most of these are old, worn, simplistic and non-rigorous arguments, many of which have been in place since the S&P 500 stood at 666 in March 2009. And, for now, they are working in investors' favor!

As I like to write, though, price is what you pay and value is what you get.

Since these glittering generalities have been accepted by many as a rationale for the market advance, let me submit my own glittering generality: The market is failing to distinguish between economic progress and reality, ignoring countless factors (an earnings cliff, a spent-up consumer, etc.), and it is overpriced and ready for a fall.

On a more serious note, I have countered most of these glittering generalities over the last few weeks with objectionsthroughanalysis.

Position: Short SPY

Shorting IWM on Weakness

  • At $89.75.

I am doing something that I haven't done this year.

I am shorting an index on weakness in premarket trading -- specifically, iShares Russell 2000 Index Fund (IWM, $89.75).

Position: Short IWM

Ford Is Mixed

  • EPS beat consensus, but the company cautioned that European sales will disappoint.

Ford (F) beats but warns that European automobile sales will be worse than expectations.

I suspect the shares will sell off despite the beat.

As mentioned recently, Ford's shares will likely build a base in the months ahead after its quick rise from the $10 level.

There is no rush to add to positions, in my humble opinion.

Position: Long F

Economic Calendar

  • Here it is.

Below is the economic calendar (and consensus expectation) for the next two days.

Position: None
Doug Kass - Watchlist (Longs)
ContributorSymbolInitial DateReturn
Doug KassVKTX4/2/24-31.13%
Doug KassOXY12/6/23-14.95%
Doug KassCVX12/6/23+12.40%
Doug KassXOM12/6/23+14.91%
Doug KassMSOS11/1/23-22.06%
Doug KassJOE9/19/23-14.08%
Doug KassOXY9/19/23-26.33%
Doug KassELAN3/22/23+28.94%
Doug KassVTV10/20/20+66.05%
Doug KassVBR10/20/20+77.71%