Skip to main content

DAILY DIARY

Doug Kass

Off to the Driving Range

  • I am outta here, to the driving range.

Thanks so much for reading my Diary this week and enjoy your long holiday weekend.

And a special God Bless to Uncle Vinnie.

Position: None

On Market Close

  • $860 million to buy market on close.
Position: None

Out of TBT

  • Housekeeping item.

I am now out of my ProShares UltraShort 20+ Treasury (TBT) day trade for a small profit.

Position: None

TLT Down on the Day

  •  IShares 20+ Treasury (TLT) is now down on the day.
Position: Long TBF

Monitise Panic Retreats

  • I hope to replace my sold stock in the weeks ahead.

As I mentioned in my Monitise (MONIF) update yesterday, the short-covering panic has subsided and the shares are starting to retreat from Thursday's high of $0.87.

I hope to replace my sold stock between $0.70 to $0.75 in the weeks ahead.

Position: Long MONIF

I Can See a Big Bond Short

  • Maybe in the next few months.

Sometime in the next few months I can see taking a 25% weighting short bonds.

Position: Long TBF and TBT

Cashin's Midday Musings

  • Midday comments from Sir Arthur Cashin.

The post-Cameron/alert hike stroll to safety had a very short shelf life.  Ten year yield and gold revert to lowered risk profile.

Even with the alert flurry, we are on pace for slowest full session of the year.  Take that with a grain of salt since the close could see volume pop on MSCI reweighting and end of month window dressing.  Projection at 12:20 would be 470/550 million shares.

Have a great and safe ¿ weekend

Position: None

Recommended Reading

  • Hero stocks of today.

Jim "El Capitan" Cramer runs down today's Hero Stocks.

Which gets me to the question, is there anyone left to be squeezed on the short side?  

Position: None

Is The Inversion Jig Up?

  • Lew to speak Sept. 8.

The Wall Street Journal reports that Treasury Secretary Lew will deliver a speech on tax inversions on Monday, Sept. 8.

Position: None

Will Be out of TBT by Day's End

  • Decay is the issue.

I will be out of the ProShares UltraShort 20+ Treasury (TBT) long rental by day's end (issue with these is always decay).

Adding further to ProShares Short 20+ Treasury (TBF).

Position: Long TBT and TBF

Sold Half of TBT

  • Housekeeping item.

Sold half of my ProShares UltraShort 20+ Treasury (TBT) for a small gain.

Position: Long TBT

Got too Cute on Altisource

  • The stock is jumping.

I was too cute by half in trying to buy Altisource (ASPS) on weakness after the company got permission from Luxembourg authorities to buy back stock.

The stock is up by more than $3 a share today on top of recent gains.

Position: None

Tice off the Reservation

  • I agree with Ritholtz on this one.

I am a long-term acquaintance of David Tice, but this week on CNBC he went off the reservation with his call that the market will drop by as much 60%.

I agree 100% with with buddy/pal/friend Barry Ritholtz in his Big Picture blog

Respectfully, these sort of pronouncements cause me to question the validity of the forecasters' investment methodology. 

As Warren Buffett said, "'Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future ..."

As I say, "Perma Bulls and Perma Bears are headline grabbers, not money makers."

Position: None

Short Bond Position Update

  • I am back up to a 5% weighting in my short bond position.

I took a ProShares UltraShort 20+ Treasury (TBT) position for a very-short-term trade at $54.05 just now.

Position: Long TBT and TBF

Conditions for a Markup?

  • If so, I may re-establish my SPY short.

With animal spirits heightened since early August and volume slowing to a crawl this afternoon, the setting for a possible markup bears some consideration at month end near today's close.

Not sure which way the PM goes, but anything can happen.

If there is a markup, I will re-establish my SPY short that I just covered.

Err on the side of conservatism.

Position: None

Goldman on Consumer Confidence

  • Golmdan Sachs on consumer confidence.
Position: None

Covered My SPY Short

  • Housekeeping item

I have covered my SPDR S&P (SPY) short for breakeven and have reduced my net short exposure somewhat.

Long weekend and I want to sleep.

Position: None

Here Come the GDP Downgrades

  • As i mentioned earlier, here come the 3Q real GDP downgrades.
Position: None

Chicago PMI Bounces Back

  • Back to close to a four-year high.

After disappointing a month ago (52.6), the August Chicago PMI bounced back (64.3).

Last month's reading appeared initially to be a one-off as ISM and Markit PMI all indicated much stronger manufacturing growth than the Chicago PMI implied for July

The reading puts us back in the April-June reading range at close to a four-year high.

Position: None

Adding to TBF

  • I am addingProShares Short 20+ Treasury (TBF) at $27.20 now.
Position: Long TBF

Threat Levels

  • Interesting that the British are raising threat levels and we are not.

Our politicians on both sides are inept, which is very discouraging. 

The president's news conference yesterday was disturbing. The Republicans are even more disjointed. (Note: James Carville is saying this morning that Romney will run in 2016).

Prime Minister David Cameron sounds presidential. 

Yet investors just buy stocks, thinking (in part) that they are a good investment because there is nowhere else to invest cash.

What is wrong with this picture?

Everything, I believe. 

Err on the side of conservatism.

Position: None

Weaker PCE

  • That will hit real GDP expectations.

Today's weaker-than-expected July personal consumption expenditures should take down 3Q 2014 consensus expectations for real GDP by as much as 0.5%.

In all likelihood, tracking estimates will now fall below 3% and approach only 2.5%.

Position: None

Best Ideas Update on TBF

  • Here's my logic and outlook on TBF.

As I mentioned yesterday, over the next few days I intend  to describe my specific price expectations (for the balance of the year) of each of my long positions on my Best Ideas list.

Yesterday I updated my view of Monitise. Monitise has a downside of $0.70-$0.75 per share and an upside of $0.95 to $1.00 over the next four months. That's a neutral outlook. It's a show-me stock. Intermediate term, and subject to subscriber addition success, I can see the shares moving much higher.

The forecasts that I make in the coming days are within the context of a cautious/negative market view and are based on the expectation that stocks will move lower over the remainder of the year.

I would warn that these price expectations are guesstimates and are not meant to be precise. That is the reason I will not give a price target, but rather upside/downside for each equity. 

Today's update is on my short bond position, the ProShares Short 20+ Treasury (TBF). I am adding the shares to my Best Ideas list this morning at yesterday's purchase price of $27.21.

Sir Mark Grant takes another bow on his bond call this morning (see below).

By contrast, for reasons mentioned this week, I am slowly expanding my short bond position now (bought TBF at $27.21 yesterday).

Given the better domestic economic data, one of the only things depressing U.S. note and bond yields is European economic weakness and the levitation in EU bond prices (facilitated by the jawboning of the ECB). 

The latter could reverse at any minute as gestalt (or the Ponzi Scheme) of European banks buying up all the EU sovereign debt to ridiculously high prices and low yields could change in a heartbeat. (This poses the potential for some systemic and certainly market risk).

I started the year expecting the 10-year to range in yield between 2.5% and 3%, way out of a consensus that saw rates rising.

We have breached the low end of my forecast in recent weeks.

At a yield of 2.33% on the 10-year, I believe I have something of a margin of safety in light of +2.5% or better real GDP growth and 4% of nominal GDP forecast by the consensus for the second half of the year.

The U.S. is moving out of QE and is likely embarking on a normalization of monetary policy.

Ultimately, I see the federal funds rate moving towards 2% in the next few years.

The 10-year typically tracks at about 90% to 100% of nominal GDP (which should run about 4% in the second half. So, absent the weight of non-U.S. yields, the 10 year note should be closer to 4% than 2%.

I view my downside for TBF at about $26.75 to $27.00 and my upside at about $29.50 over the balance of 2014. That represents a favorable reward vs. risk.

Here is Mark Grant's bow!

The top headline in MarketWatch, owned by the Wall Street Journal, this morning was:

"With Bond Boom Ending, Switch to these Instead"

The article states, "Consider the iShares Barclays 20+ Year Treasury Bond ETF TLT, +0.52% which has soared 15% this year, double that of the S&P 500 Index of the largest U.S. stocks. The thing is, though, bonds aren't going to be a great investment for long."

From January until now it has been the same, yields are going higher, prepare your portfolios before it is too late, buy this that or the other thing as a replacement and sell your fixed income securities immediately. This would be not tomorrow or after some consideration but during the next fifteen minutes before you have anymore coffee or go to the bathroom.

The advice has been wrong, very wrong, really wrong but it keep being handed out to the Public like free bottled water.

"There will be a rain dance on Friday night, weather permitting."

                        -George Carlin

All year it has been the same. From every lead bank, from virtually every large money manager, from almost all of the economists it has poured out in the media like Morton's Salt when it rains, "Yields are going higher." I wonder sometimes if there isn't some kind of conspiracy to fleece people and institutions alike that has been orchestrated by Wall Street or Switzerland or the Russian government that has continued this diatribe of devilish deceit. It has to either be that or some of the dumbest thinking in years that has infected the financial community like "Ebola of the Stupid" prepared by idiots, made by idiots and imbibed by idiots.

Market value well over 10 billion I am sure.

"Are you an idiot, or an idiot," Gargarin hissed.

"The first one. I really resent being called the second."

                   -Melina Marchetta, "Froi of the Exiles"

In the article that I have referenced the author suggests three alternative investments. These are Master Limited Partnerships, REITS and Preferred Stocks. What, if yields increase then REITS and Preferred stocks won't head in the same direction? You might be able to make a case for some of the Master Limited Partnerships, REITS would fall in price as a corollary to higher yields but Preferred stocks would move virtually penny for penny with bonds and this is the suggested alternative?

"The common mistake that investors make when trying to invest money rationally is to underestimate the ingenuity of the complete fools who are ranting and raving about how you should invest it."

                    -The Wizard

I learned long ago that if some prescription for investing makes no sense then it does not matter who says it. I have also learned that the decibel level of the proffered advice does not change the quality of what is being said. Finally I have learned that if the investment advice is given while the guy is waving his hands that my pocket is the place where those hands are trying to get into.

Managing money today is a race. It is between Wall Street marketing idiot-proof programs that try to assure you that you will "make a fortune" while the Street gets paid as each person lines up to play, of course, and the markets that prove that these programs were designed by idiots. So far, I would say, the markets are making the point.

Of course the worst strategy on the planet is, "Buy and Hold." No one on Wall Street can make any money with this strategy so it is continuously derided. It is also the world's worst strategy for money managers. No one's brilliance can be demonstrated nor can additional fees be charged when someone just "Buys and Holds." Anyone, everyone, will tell you just how bad this strategy is these days. Forget the VIX, it is the velocity of transactions that are important.

Those who never quit are winners.

Those who never win are quitters.

However, those who never win or quit are idiots.

Don't be an idiot!

Position: Long TBF, MONIF

From The Street of Dreams

  • Samsung cut.

Credit Suisse cuts earnings (smartphone pricing risk) and target price for Samsung Electronics this morning.

Position: None

DAX Holds Hands with S&P

  • The German DAX and S&P futures are moving in lock step this morning.

DAX just turned slightly lower.

Position: Short SPY

Recommended Reading

  • Weekend reading. 

In America, Labor Is Friendless, from Harvard Business Review, is a worthwhile weekend read

Position: None

Second Quarter Big Picture

  • Earnings rise, but there's less than meets the eye.

Most of the second-quarter earnings reports are now in and it appears that S&P earnings rose by about 9.4% (year over year). This gain is about 300 basis points above consensus expectations and was achieved with about +4% top line expansion. Energy, healthcare and technology were the only sectors achieving better than 4% sales growth in the quarter. 

In terms of quality, there was less than meets the eye, with buybacks, lower interest expenses and lower effective tax rates contributing to more than 2% of the 9.4% growth. Productivity gains contributed to a surprising margin expansion of about 3% of the 9.4% EPS gain.

In 2Q 2014, 69% of the companies beat expectations on the bottom line and a bit more than 50% beat on the top line, about in line with history.

Full-year S&P earnings look like they will fall between $118 and $119/share (+7% year over year), higher than I expected at year end 2013. (The current top-down consensus is $117 a share and bottom-up consensus now stands at $119.40/share.)

Sales looks likely to grow at about 4.5% for the full year   

Looking into next year, consensus sees about $125 a share in earnings achieved by some margin expansion and near-5% revenue growth.

Though 2014 results seem destined to beat my expectations, a lot of the gains were through financial engineering (which seemingly should be accorded a lower price earnings multiple vis-a-vis organic growth).

Position: Short SPY

This Morning's Market Setup

  • Where it began.

The rundown:

  • U.S. futures continue to build off the month's gains . (S&P futures are up by 5 handles and Nasdaq futures are 11 handles higher.)
  • European stocks are mixed to higher, despite continued deflation and economic fears.
  • Nikkei is 35 points lower.
  • China is +0.10%. Looks like, as expected, profit taking will take the FXI back below $40 as I suggested LINK. I am a $39 to $40 buyer.
  • Little  foreign-exchange volatility this morning. .
  • Gold is down $4 an ounce and crude is up $0.39 a barrel.
  • The yield on the 10-year U.S. note is up a basis point to to 2.345%. I have begun to take a stand on short bonds late this week. 

A lot of U.S. economic data this AM: Personal Income 0.3%, Spending 0.2%, PCE Deflator 0.1%, PCE Core 0.1%; Chicago PMI 56.5; UM Confidence 80

Yesterday I reviewed my Monitise (MONIF) position in light of the 25% advance this week.

Position: Long FXI, QID, MONIF and short QQQ and SPY
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%