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DAILY DIARY

Doug Kass

Day is Done

I am going to call it a day, a bit early.
Thanks so much for reading my Diary.
I hope it was helpful.
Most importantly, enjoy your weekends with your families.

Position: None

Pushing It!

Salt and Pepa's here, and we're in effect
Want you to push it, babe
Coolin' by day then at night working up a sweat
C'mon girls, let's go show the guys that we know
How to become number one in a hot party show
Now push it

-- Salt N Pepa, Push It

I might be crazy (well I am crazy at times) but I have to write that my Procter & Gamble (PG) position is uber sized long.
Unless I have completely lost my analytical and investment management capabilities, the reward versus risk is this conservative consumer packaged goods company is superior to most other alternative equities that i look at.
Here is my thesis.
So I am going old school with Salt N Pepa... push it and working up some sweat!

Position: long PG large

Subscriber Comment of the Day

I moved to my (DWDP) position yesterday  and again today.

Canadjuneh13 minutes ago

DWDP. biggest % gain on the DJIA today..nice.

Position: long DWDP large

Trade of the Week Update

Citigroup  (C) was my "Trade of the Week."
Mentioned on Tuesday at $66.25, it is trading at $67.45 now -- for a modest gain on the week.
That's fine considering that it was a holiday-shortened week and given the inconsistent action and wild volatility.

Position: long C large

Back to Small Net Short

With additional SPDR S&P 500 ETF (SPY) shorts, sales/add ons of some longs and establishing a GM (GM) short -- I am back into a small net short exposure.

Position: Short SPY large GM

Sold Most of Dillard's

I just sold most of my Dillard's (DDS) at over $83.15 -- moving to tagends -- based on the dynamic of a deteriorating reward vs risk as the stock has just risen by +$9 in a few days.

DDS was placed on my Best Ideas List on June 2017 at $50.75.

Like Twitter (TWTR) , I have made over five meaningful trade/investments in the retailer over the last year or so. My cumulative profit, on a per share basis, is over $75/share, for a cumulative gain of about 150% in this investment.

Position: Long DDS tagends

Tweet, Tweet No More

I just sold the balance of my Twitter (TWTR) long at $35.75 based on the dynamic of a changing upside reward (+$4) compared to downside risk (-$5).

Twitter, by virtue of its strong price performance (in large measure based on better execution and tangible evidence that its advertising base is expanding) has become one of the momentum players' and talking heads' favorite stocks. It has gotten "overbought" and trader optimism has climbed meaningfully (from when it was hated months ago).

I prefer to fade rather than join momentum traders (on the downside and upside) in making my investments -- assessing reward vs risk clinically. And I don't carried away with such a wide swing in sentiment from bearish to bullish.

Twitter could obviously go higher from here(much will depend on a continued collateral move in FANG higher), but it will go there without me now.

Twitter was placed on my Best Ideas List at $15.75 in March, 2017.

Throughout the interim interval I have probably made six or so trades in the shares -- buying as we moved into the teens and selling, on average in the $30s. In sum total we have made in excess of $35/share on an investment in the high teens, on average, in price -- for a return of almost 200% (on a cumulative basis).

I wish every stock was Twitter.

Position: None

Back In My GM Short

I am back in my (GM) short at $43.05 - after having covered my short at under $36 in early May.

I believe Soft Bank overpaid for their interest in Cruise.

As well, burgeoning car inventories, increased incentives, and lower used car prices are suggestive of "Peak Autos."

Position: Short GM (small)

Average Cost of My SPY Short Today

The average cost of my (SPY) short today is about $272.70 as I have made a considerable portion of my sales at the higher end of the day's range.

Position: Short SPY (large)

Covering Part of My (Investment) Bond Short

Given my expectations of a year-end ten year US note yield of between 2.65% an 3.00% (now at 2.90%) I have covered a portion of my (investment) bond short - and I am now medium sized.
(TLT) was placed on my Best Ideas List on June, 2016 at $139.55.
TLT is currently trading at $119.97.

Position: Short TLT

Moving back to DWDP Large

Moved back to large in (DWDP) .

Position: Long DWDP (large)

Market Neutral Mode

I feel comfortable being in a market neutral mode right now and going into the weekend.

Position: None

Added to Banks, Other Stocks

Added to banks, (CPB) , (PG) , (KHC) this morning at the get-go.

Position: Long C (large), BAC (large), CPB (large), PG (large), KHC (large)

Expanding My SPY Short

I have been expanding my (SPY) short on a scale in premarket trading.

Position: Short SPY (large)

Don't Give Up On Bank Stocks

Repeating for emphasis.
I believe it is a mistake if one "gives up" on the bank stocks

Position: Long C (large), BAC (large), JPM (large) WFC (large)

Tweet of the Day

Position: None

Mama Mia (Part Deux)!

"It took Gibbon six volumes to describe the decline and fall of the Roman Empire, so I shan't embark on that. But thinking about this almost incredible episode does tell one something about the nature of civilization. It shows that however complex and solid it seems, it is actually quite fragile. It can be destroyed."
-Kenneth Clark, Civilization

The yield on the ten year US note is up by eight basis points to 2.90% as investors seem to be relieved about the recent developments in Italy.

Mark Grant seems to be at odds with the new found Italian optimism:

"In my opinion, the newest EU show is just beginning. There will be theatrics aplenty and enough fireworks to appease anyone who is the fan of those sorts of things. Brussels will bark, and the new Italian government will say "Stuff it" and then Rome will rage, and the bureaucrats in Brussels will be lit up in frenzy. When the new Parliament forms, the nationalist groups will control 69% of the legislature and then there will be no going back. The proposed social programs will lift Italy's debt to GDP ratio from 133% all the way up to 155% to 160%, in my calculations, and stand right behind Greece.

Some may think that the ECB will rush in to bail them out, but the new government would have to sign certain pledges and agreements for the ECB to do anything at all, and I do not think that will happen. The Financial Times states, "One tool for the ECB would be its ability to buy bonds in unlimited quantities under what is known as its Outright Monetary Transactions program, to stem a run on deposits. But it would only do so if Rome were willing to enter into a fiscal adjustment program sanctioned by Brussels. Such a move would be anathema to a Five Star-League government...

The bottom line, in my estimation, is that Italy is going to be at loggerheads with the European Union quickly and for quite some time. While no one can foresee exactly how that will turn out, it is quite rational to assume that a major amount of "Risk" will be present, as they go at each other's throats, which I think will happen. Spain has also come into focus, as Prime Minister Rajoy has now been ousted. Counterparty Risk may become a factor, once again, with banks in other countries, as the Italian banks become even more troubled with their non-performing loans possibly increasing. No investments in Europe, unless you have a mandate, is the way to play it now for investors, in my estimation. Speculators, well, you can take your shots."

Position: None

Recommended Reading (Part Deux)

Investors Business Dailyquoted me recently.

Position: None

Recommended Reading

Knowledge@Wharton's Will Italy's Divided Politics Cripple Europe's Economy - or Worse?.

Position: None

The Book of Boockvar

There is a lot going on over there, says Peter Boockvar:

Now that we actually have the 65th Italian government since WWII, Italian bonds and banks are rallying. The 2 yr yield is down 27 bps and below 1% at .80%. The 10 yr is lower by 23 bps to 2.56%. What a wild ride but take note that these yields are still well above where they were just two weeks ago. The MIB index is higher by 2.6% with Intesa and UniCredit up about 6% and the smaller banks up 7.5-10%. I'm not worried at all about Italy leaving the euro as most citizens don't want to. Italy's challenge remains the lack of stronger growth, a huge sovereign debt pile, and the end of ECB QE

ITALIAN 2 yr YIELD


In Spain we now have a socialist as the new PM. Talk amongst yourselves.

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But following Italy, the Spanish IBEX is rallying as are Spanish bonds. The flight to safety bonds of the UK, Germany, France and the US are all selling off as to be expected. At some point, the 'safe' European sovereign bonds will start to digest the May inflation data and the soon to be end to QE. 

Ahead of the US ISM report today we saw a bunch of PMI's overseas that were mixed. Japan's index fell 1 pt m/o/m to 52.8, matching the lowest since August. Taiwan and India also saw m/o/m declines. There were gains for South Korea (though is still below 50), Vietnam, Thailand (back above 50) and the Philippines. Markets in Asia were mixed as well as who knows where the US trade tactics are going. If you do, please let me know.

The eurozone manufacturing PMI for May was left unrevised at 55.5 but that's down from 56.2 in April and is at the lowest level since February 2017. Markit said "Some of the weakness may have been related to higher than usual number of holidays during the month, but risks appear tilted towards growth remaining subdued or even cooling further in coming months." I'm not sure if trade tariff worries are the reason but "slowing export sales have been a key drag on both production and order book growth."

On inflation in the eurozone in light of yesterday's data, "May saw the rate of input price inflation faced by eurozone manufacturers remain strong and quicken for the 1st time since January. In contrast, output price inflation eased to a 5 month low but nonetheless remained well above its historical average. Germany registered the sharpest increase in both input costs and output prices during the latest survey month." 

The UK PMI rose .5 pt to 54.4, better than the estimate of 53.5. It follows 5 straight months of m/o/m declines. Markit was not impressed with the rebound. "A slowdown in new order inflows meant the expansion in production was achieved only by firms working thru their backlogs of work. Weaker than expected sales meanwhile led to the largest rise in unsold stock in the survey's 26 yr history." Cost pressures rose and "average vendor lead times, a bellwether of supply side constraints, deteriorated to the greatest extent during 2018...May saw output charges rise for the 25th successive month, with solid increases across the consumer, intermediate and investment goods sectors. That said, the rate of selling price inflation eased to its weakest since last August."

While the BoJ has been in a subtle taper ever since they shifted to yield curve control, I don't think that we should take any signs just yet that they are increasing the taper after cutting the amount of 5-10 yr paper they bought overnight. JGB yields are only up slightly and the yen is down. But, we'll keep a watch out. 

Position: None

Shorting More SPY

I ended the day small net long in exposure.
Futures are higher (it's the first day of the new month so there are likely inflows)
I am now shorting more (SPY) , moving to large sized at $272.
My net exposure brings me back to market neutral.

Position: Short SPY (large)

Deutsche Bank Credit Rating Cut

Deutsche Bank (DB) , the object of my scorn for some time, had its credit rating reduced by a notch overnight.

Position: None
Doug Kass - Watchlist (Longs)
ContributorSymbolInitial DateReturn
Doug KassVKTX4/2/24-31.72%
Doug KassOXY12/6/23-14.53%
Doug KassCVX12/6/23+10.81%
Doug KassXOM12/6/23+13.02%
Doug KassMSOS11/1/23-22.80%
Doug KassJOE9/19/23-14.64%
Doug KassOXY9/19/23-25.97%
Doug KassELAN3/22/23+37.02%
Doug KassVTV10/20/20+64.63%
Doug KassVBR10/20/20+77.10%