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DAILY DIARY

Doug Kass

Good Evening

  • Thanks for reading.

I am ending the day at a bit more than 10% net short, as some of my PowerShares QQQ (QQQ) scale was executed.

Thanks for reading my diary today. I hope it was helpful.

My ludicrous forecast two months ago stands: Nikki gets the final rose tonight in "The Bachelor."

Enjoy your evening.

Position: None

Blame It on the Bossa Nova?

  • Tim Collins examines leading Brazilian stocks.

Tim "Not Judy or Phil" Collins explores the outlook for some of the leading Brazilian shares, in "Say 'Bye Bye' to These Brazil Stocks."

Blame it on the Bossa Nova

Position: None

Market on Close Imbalances

  • How much to buy?

My mavens on the floor see $750 million to buy market on close.

Position: None

Yen Pinching

  • Japan's consumer spending should slow.

Watch out for a slowdown in spending by the Japanese consumer.

Position: None

Recommended Reading (Part Quatre)

  • Run, don't walk, to read Seth Klarman.

Every bull and bear should read Seth Klarman.

Position: None

Shorting SPY

  • At $187.88.

I am back shorting SPDR S&P 500 ETF (SPY) at $187.88.

Position: Short SPY

Adding to QQQ Short

  • Just replacing what I covered earlier.

I covered half of my PowerShares QQQ (QQQ) short earlier today, and I am back replacing that short at $90.50 (and on a scale higher) now.

Position: Short QQQ

Recommended Viewing

  • Lee Cooperman's CNBC appearance is worth watching.

Here are the videos of Lee Cooperman's appearance today on Fast Money: Halftime today: parts one, two, three.

In this interview, Lee discusses the overall stock market, eBay (EBAY) and some other of his favorite long holdings.

As comes through in his interview, Lee is a long-term investor and not a trader.

Lee is hard-working (I know firsthand), and he goes "belly to belly" with his portfolio companies. That is, he knows his holdings as well as, if not better than, any other institutional investor.

He is patient and analytical, and a strong big-picture thinker whose holding period is measured in years.

Position: None

An Ominous Sign

  • The Russell is noticeably weak.

The iShares Russell 2000 Index (IWM) is conspicuously weak relative to the other major indices.

Typically this is a negative "market tell."

Position: Long TZA

Slim Pickings Out There

  • Not much meets my standards at the moment.

I am really trying hard -- in addition to isolating my home run stock -- to find some new long merchandise.

But I simply find very few new ideas that meet my standards of investment.

Position: None

Recommended Reading (Part Trois)

  • Run, don't walk, to read Robert Weinstein's TZA option strategy.

Over on Columnist Conversation, Robert "Not Stan" Weinstein has an interesting option strategy on my favorite, Direxion Daily Small Cap Bear 3X Shares (TZA).

Position: Long TZA

Recommended Viewing

  • Run, don't walk, to watch my interview with Reuers' Bobbi Rebell Kaufman.

I had a great interview with Reuters' Bobbi Rebell Kaufman this morning.

Position: None

Cashin's Comments

  • Here are his musings at midday.

Midday musings from Sir Arthur Cashin:

This morning stocks appear to be on fusion diet ¿ part China, part Japan with a dash of Ukrainian spice.  Narrow movement in Treasury yields suggests a very limited Ukraine influence.

Japan data may have more impact than China since the latter may have been distorted by Lunar New Year (similar distortion last year).

Run rate at 12:15 projects to an NYSE final volume of 580/660.

Position: None

Buying GM

  • Again.

I am back buying General Motors (GM) now.

Position: Long GM

The Barron's Effect

  • A favorable feature on MetLife has the shares outperforming competitors.

What is the value of a Barron's positive mention?

I will show you.

MetLife (MET), featured favorably, in Barron's is up $0.40 a share on the day; direct competitior Lincoln National (LNC) is down $0.90 a share on the day.

I shorted both on Friday.

Position: Short MET and LNC

Interesting Emerging Market Data

  • Emerging markets sneeze, and we follow.

Emerging market equities have fallen every Monday in 2014.

The iShares MSCI Emerging Markets ETF (EEM) is down a cumulative 11% for 2014 on first day of the week and then recovers to be down 5.5% year-to-date.

Is that the impact of weekend Chinese news and press or some other emerging market issues?

So, emerging markets sneeze, and we followL S&P down 75% of Mondays in 2014 and cumulative return of -4.6%; Tuesdays have rallied 88% of days fora  6% gain in 2014 after we consider that perhaps it does not matter.

Position: None

Recommended Viewing

  • Run, don't walk, to watch Lee Cooperman on 'Fast Money: Halftime Report.'

Run, don't walk, to watch the hardest-working hedge-hogger extant (and my old boss!) Omega Advisors' Lee Cooperman with the Judge and the "Fast Money: Halftime Repoort" gang today.

Must-see TV!

Position: None

Recommended Reading (Part Deux)

  • Run, don't walk, to read Barron's' Randy Forsyth highlight my recent comments on biotech.

My comments regarding the implications of the weakening biotech sector were showcased by Randy Forsyth in Barron's this weekend:

In any case, biotechs have been among the market's leaders. And as Doug Kass of Seabreeze Partners relates, one of the deans of market analysis (now retired) thinks the stumble in the formerly highflying group is a significant tell for the overall market -- even as it celebrates the fifth anniversary of the rally that has put stock prices at a peak.

Position: None

Recommended Reading

  • On the Crimea crisis.

From the Irish Times: Russian troops reportedly opened fire with automatic rifles during the takeover of a Ukrainian naval post in Crimea today, Interfax news agency quoted a Ukrainian officer as saying.

Position: None

Covered Half of QQQ Short

  • I am back to 5% net short.

I just covered half of my PowerShares QQQ (QQQ) short for a $0.50-per-share gain and moved back to 5% net short.

Position: Short QQQ

Time to Short Homebuilders?

  • I expect he pause in housing to continue during the all-important spring selling season.

I am not yet short but I am looking at the homebuilders.

My expectations are for the pause in housing (chronicled frequently in my diary) to continue during the all-important spring selling season.

The absence of "new era" investors and a rise in mortgage rates should produce continued downside industry surprises despite the better jobs report on Friday.

Speaking of housing, I am left with tag ends of Radian (RDN), but I don't see as much risk in private mortgage insurers vis-à-vis the homewreckers.

Position: Long RDN

Whither Tesla Bulls?

  • With the shares now down $17 since Thursday's close, I don't hear a peep.

I got a big pushback from Tesla (TSLA) bulls after my focus on the company's fourth-quarter accounting.

With the shares now down $17 since Thursday's close, strange I don't hear a peep.

So goes life.

Position: Short TSLA

MetLife Flattens

  • Now flat on the day.

MetLife (MET) is now flat on the day after a feature story in Barron's.

Position: Short MET

Adding to QQQ Short

  • Aggressively at $90.64.

I am aggressively shorting more PowerShares QQQ (QQQ) a $90.64 and taking my net short exposure back to 10%.

Position: Short QQQ

Tesla Drops

  • Shares were down by $8 on Friday and are dropping a similar amount today.

Tesla (TSLA), the object of my accounting disaffection on Friday, was down $8 on Friday and is dropping a similar amount today.

Position: Short TSLA

Apple Gets Sweeter

  • The shares have continued to strengthen today.

I added to Apple (AAPL) on weakness on Friday.

Apple had a nice $3-a-share run in the last few minutes of the trading day on Friday.

The shares have continued to strengthen today.

Position: Long AAPL

MET Plan

  • I will be adding to my small short today on strength.

MetLife (MET), an on-again/off-again short of mine, was mentioned favorably in a column in Barron's over the weekend.

I will be adding to my small short today on strength.

Position: Short MET

How Short?

  • I start the day about 5% net short.
Position: None

An Open Letter to Sir Larry Kudlow

  • In the event that you didn't see my post on Larry Kudlow over the weekend, here is the column reprinted in its entirety.

"We believe that free market capitalism is the best path to prosperity!"

-- The Kudlow Creed

Dear Sir Larry,

I just read the CNBC announcement that you are retiring from the "Kudlow Report" at the end of March.

I wanted to write to you and say that you have been a beacon for me and many others throughout nearly a decade and a half (on "The Kudlow Report," "Kudlow & Company," "Kudlow & Cramer" and "America Now").

You are bigger than just a commentator and host of "The Kudlow Report"; you are a man who has faced headwinds and adversity and has conquered them all.

You are among the handful of beautiful people I have been associated with who have known trials, known struggles, have known loss and have found their way out of the depths to rise to new heights.

My Grandma Koufax used to say, "Dougie, it's not where you start that counts; it's where you end up. If the road was smooth, you have likely taken the wrong route. And, remember, never to suffer would never to have been blessed."

Hardship either makes or breaks people. It made you.

To me, you have ended your role as host of "The Kudlow Report" at your professional apex.

You have been a forerunner in the integration and analysis of politics, policy and markets in the media.

Your delivery has always been fluid, your point of view always substantive, not easy tasks.

You are by far the best dressed in the Fourth Estate.

You have had the rare ability to bring out the best in investment debate and from experts with markedly opposing viewpoints. Despite spirited debates, you managed to end every segment on high, courteous and respectful notes.

I will forever treasure my many appearances on "The Kudlow Report." Most were filled with exciting sparring against the bullish cabal. Some even ended up with a historic calculus, like my early-March 2009 "generational bottom" call I made on your show. 

You also brought me back together with old friends during that period, like with Uncle Vinnie Farrell, Joe Battipaglia, Mikey Holland and many others.

On a more personal note, your mentoring of my son Noah will never be forgotten by me, him or my family.

Now with Noah getting his Doctorate at The University of Pennsylvania, I am sure he is on the way to an even more exciting career than when he originally met you that first time over dinner at Nicolas Restaurant in New York City.  You, in part, are responsible for some of Noah's great successes in print (Huffington Post and TheStreet), on television (MSNBC) and in his important role in addiction treatment.

To myself, Noah and so many others that you have helped, you are a personal role model.

I am a former "Nader Raider"; you are a former member of the Reagan administration. Our politics are diametrically opposed, but our debates have always been lively and respectful of view.

You are my favorite Republican, ever.

I call you Sir Larry because of the esteem I hold for you.

Like members of my family, I like to think that you call me Dougie because of the fondness you have for me.

Wherever you are and whenever you call, Sir Larry, Dougie is there for you.

With Love and Fondness,

Dougie

Position: None

Weak Data From China

  • The Chinese know how to kick the can down the road just as well as the Americans.



In order to produce a coordinated self-sustaining global economic recovery (and maintain or improve market valuations), the world needs economic strength in the U.S., EU and China, but, based on recent data, China appears to be tripping up.

The equity markets, however, remain forgiving.

Weak China data over the weekend is having no meaningful impact on U.S. equity, currency or fixed-income markets. The only exception I can find is copper, where weakness in the futures is being blamed on the weak China data. Copper is down about 2%, to $302, from Friday's close of a little over $308.

Chinese February exports were down 18.1% vs. consensus of up 7.5% and January's up 10.6%. Imports were up 10.1% vs. consensus of 7.6% and January of 10.0%. This caused a trade deficit of $23 billion vs. consensus of a $14 billion surplus and vs. a January surplus of $31.9 billion.

The trade numbers were distorted by:

  1. the lunar holiday, which started on Feb. 9 last year, and Jan 31 this year;
  2. last year's inflated base due to fake export invoicing; and
  3. weakness in the U.S. due to the weather distortions.

We will need to wait for the March trade numbers for cleaner data.

The Chinese inflation data were weak as well, with CPI of 2% for February vs. consensus of 2.1% and January's 2.5%. The China February CPI of 2.0% marked a 13-month low. PPI declined for the twenty-fourth consecutive month to -2.0% vs. expectations of -1.9% and vs. January PPI of -1.6%. Core inflation (non-food) was just 1.6%.

The Chinese data are being met with a similar reaction to the "soft patch" data in the U.S. Just as in the U.S., so much has been explained away by weather and investors and policymakers are eager for clean data to gauge the true rate of underlying growth, so, too, in China investors will learn a lot more about the state of the Chinese economy once data for March are released.

Premier Li Keqiang released economic forecasts last week that were in line with consensus but nonetheless confusing for an economy so in need of slowing further in order to rebalance growth away from fixed-asset investment and toward household spending. The GDP growth target was 7.5%, the same as for last year, and the inflation target remained at 3.5%. Ongoing low inflation data give the Chinese scope to ease. Yet monetary and/or fiscal stimulus would complicate the government's attempt to rein in credit growth.  My own sense is that the priority will continue to be on growth, even if it's the wrong kind of growth and even if this risks credit growth, which is too fast and causes ongoing excesses and distortions, particularly in the property sector. The Chinese know how to kick the can down the road just as well as the Americans.

Peter Boockvar writes on the same subject:

The Shanghai index got hammered overnight by almost 3% bringing the year to date decline to 5.5%, a 6 week low, and helped dragged down the Hang Seng index by 1.8% in response to economic data out of China. Exports in February fell 18.1% y/o/y, well off the estimate of up 7.5%. But, we must take January and February together because of the lunar new year holiday which brings the Jan/Feb y/o/y drop to 1.6%. If we also take into account the fake and juiced invoices of last year, the y/o/y change was likely higher but at a slower pace than seen in the past few years. Imports did rise 10.1%, above the estimate of 7.6%. Also of note but after the Chinese stock market closed, loan growth slowed sharply to 938.7b yuan from 2.58t in January which is below the estimate of 1.3t and less than February '13 of 1.07t. The drop off is likely in response to two wealth management products that ran into trouble but got bailed out anyway. While a slowing in the growth rate off excessive credit levels is a long term positive, it obviously has short term economic implications. Yesterday, CPI rose 2% but PPI fell by 2% y/o/y, both about in line with expectations. Bottom line for the rest of us, growth concerns in China are real and the generic copper contract is falling to the lowest level since July following the data and a downward revision to Q4 GDP in Japan to just .7% annualized vs the original estimate of 2.8% last month. Australian stocks, a Chinese proxy, fell by .9% and every other Asian stock market except India traded down overnight. The pace of global growth is still a very mixed picture.

Over there, while Crimea looks more likely to permanently fall into the tight grip of Russia, markets in the region are mostly shrugging it off today but only after last week's weakness. The German DAX remains a clear laggard due to the strong euro and natural gas needs from Russia. The referendum in Crimea, if it happens, comes on March 16. Data-wise, after Germany reported a better-than-expected January IP number on Friday (including the December revision), France did the opposite today with a month-over-month drop of 0.2% vs. the estimate of a gain of 0.3%. But, the manufacturing component improved while the drop in electricity/gas was the culprit for the headline miss. Italy reported an upside to its IP figure for January.

Over here the important economic data of the week in the U.S. doesn't come until Thursday's retail sales and Friday's PPI, and with commodity prices at the highest level since October 2012, inflation numbers should now be a focus. We'll see if the Fed mentions it next week along with another round of taper to $55 billion per month.

Position: None

In a Meeting

  • Posts will be brief until the meeting is adjourned.

I am at an early breakfast meeting this morning with a company in which I am interested.

I will have some brief posts in the interim interval.

Position: None
Doug Kass - Watchlist (Longs)
ContributorSymbolInitial DateReturn
Doug KassVKTX4/2/24-32.96%
Doug KassOXY12/6/23-16.60%
Doug KassCVX12/6/23+9.52%
Doug KassXOM12/6/23+13.70%
Doug KassMSOS11/1/23-22.80%
Doug KassJOE9/19/23-15.13%
Doug KassOXY9/19/23-27.76%
Doug KassELAN3/22/23+32.98%
Doug KassVTV10/20/20+65.61%
Doug KassVBR10/20/20+77.63%