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DAILY DIARY

Doug Kass

Time to Scoot

Thanks for reading my Diary today -- I hope it was value added.
Scooting onto a research call at 4 p.m.
Enjoy the evening.
Be safe.

Position: None

Adding to Short Book

Break in!

In a WSJ interview, St. Louis Fed President James Bullard is saying that he believes there are likely to be four rate hikes this year.

A week ago, he expected three rate hikes

Adding to shorts.

Position: None

Cannabis Tweet of the Day (Part Deux)

As I mentioned in our Comments Section -

"Unusual" call activity in (MSOS) :

Position: Long MSOS

Chart of the Day (Part Deux)

Sic transit Gloria?

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Position: None

More Moves

Pressing my (VXX) long and Index shorts.

Position: Long VXX, Short SPY, QQQ

First Time Long Time

* We are in a heightened regime of volatility.

I bought some (VXX) just now at $17.71.

Position: Long VXX

Living With the Folks

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Roughly half of 18- to 29-year-olds in America still live with their parents.

· These are levels we haven't seen since the Great Depression.

· In 1960, less than a third of young adults lived with their parents.

· That number has risen every decade since then, hitting 46% in 2020.

Position: None

Short Cues

I am taking my shorting cues today from: 

* The weakness in (TROW) , (GS) , and (GM) .

* The inability of some tech stocks (read: Amazon (AMZN) ) to hold early gains and totally reverse.

* The profound reverse in market breadth.

* The uber confidence expressed in the business media, and elsewhere, that inflation will come down markedly - in the face of some real and reasonable objections.

Position: Long AMZN

No HeeHaws In GewGaws (Part Deux)

No bounce in the gewgaws. 

Jan 05, 2022 ' 02:25 PM EST DOUG KASS

Avoid 'Em

Meme and gewgaws taken to the woodshed today.

Avoid 'em:

Jan 04, 2022 ' 12:20 PM EST DOUG KASS

Stay Away

This morning's opening missive dealt with the concept of conviction, or, in my case, the lack of!

On the other hand, the one thing I am a bit more convicted about is that - in what appears to be a maturing Bull Market - it might be advisable to stay away from illiquid positions and speculative gewgaws.

Position: None

Trades

Just now:

* Reloading on my Index shorts (SPY)  ($471.10) and  (QQQ) ( $387.51).

* Added to (MSOS) and (GTBIF) longs.

Position: Long MSOS, GTBIF, Short SPY, QQQ

Breadth

You can see from the following, a marked reversal in breadth this morning at 11:21 am:

Breadth

View Chart »View in New Window »



Heat Map

View Chart »View in New Window »

Position: None

Coinless

I sold out the balance of my (COIN) on today's gap.

Will buy back on weakness.

Position: None

Back in the Saddle

Umm... not so ludicris.

Position: None

Boockvar on the CPI

Here's Peter's analysis:

The CPI in December rose .5% headline and .6% core m/o/m and both were one tenth more than expected. Versus last year, the headline print was 7% and the core rate was 5.5%. The headline print came in spite of a .4% m/o/m drop in energy prices even though they are still up 29% y/o/y. Food prices grew by .5% m/o/m and 6.3% y/o/y.

Services inflation ex energy was up .3% m/o/m and 3.7% y/o/y and rents are still badly lagging reality. The BLS said owners' equivalent rent was up .4% m/o/m and 3.8% y/o/y. Rent of Primary Residence was higher by .4% m/o/m and 3.3% y/o/y. Apartment List on Monday in contrast said rent prices in 2021 were up by 17.8% and makes a mockery of the BLS rent calculation. If you plug that 17.8% into the calculation instead of 3.8%, you'd have inflation above 10%. Medical care costs were up by .3% m/o/m and 2.2%. Car insurance fell for a 2nd month but are still up 4.1% y/o/y and car repair prices are up by 4.8% y/o/y. Impacted by omicron, airline fares rose 2.7% m/o/m and up just 1.4% y/o/y. Going out for dinner is more expensive, by .8% m/o/m and 6.6% y/o/y.

On the goods side, core goods prices jumped 1.2% m/o/m and by 10.7% y/o/y. The increase was driven by a 1% m/o/m and 11.8% y/o/y increase in new cars and a 3.5% m/o/m and 37.3% y/o/y gain in used cars. The used car number remains astonishing and while price will recede in the back half of this year, there are structural reasons why they will stay high for years. That is because there has been a well below trend in new 3 yr car leases signed over the past 2 years and fleet sales are down dramatically, both because of a lack of new cars. These were two major sources of used car supply. Apparel prices were up a sharp 1.7% m/o/m and 5.8% y/o/y. Major appliance prices were up by .5% m/o/m and 8.4% y/o/y. The prices for household furniture are in the double digits with furniture and bedding prices up 2% m/o/m and 13.8% y/o/y.

Bottom line, if rents were accurately calculated, inflation would be double digits but because the markets are taking the data today at face value and about in line with expectations, Treasuries are rallying as are stocks as can be seen. That said, the yield curve is flattening because the Fed will tighten as we know this year in response to data like today. Inflation breakevens are unchanged after a big jump yesterday. The euro/yen heavy dollar index is quietly at the lowest level in 2 months and gold has gotten back what it lost over the past week and a half. I still love gold and silver.

Stating the obvious, the Fed has its work cut out for it as monetary policy is on another planet relative to where it should. I'll say again though, the inflation stats should top out next month, thus leaving the question as to where it settles out at. I remain of the belief that we will NOT be going back to 1-2% any time soon and 3-4% is more likely. While that is half the current pace, it's still a problem because the world's debt levels, valuations, growth and monetary policy sits on a foundation of 1-2% inflation.

Headline CPI y/o/y

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Core CPI y/o/y

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Core Goods Prices y/o/y

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DXY

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Position: None

Getting Ludciris!

It is time, yes -- for a Ludcris Forecast.

With S&P cash now +25 handles, I would not be surprised to see a reversal to the downside!

Position: Short SPY

My Index Shorts

Before I leave - I have gotten more aggressive on my index shorts.

Position: Short SPY, QQQ

Some Good Morning Reads

* China will likely cause sustained supply chain problems

* The three biggest market risks

* What is ahead for the U.S. economy (Wharton)?

Position: None

From The Street of Dreams (Part Trois)

Bank of America's research department delivered new indications that Omicron impacted the cruise line recovery in December - with core cruise spending -39% after being down -29% in November, 2021. 

December credit card spending on cruises were -46% v. -33% in November. 

I am short small positions in (RCL) and (CCL) .

Position: Short RCL, CCL

Not Selling Amazon

Amazon (AMZN) is trading + 21 in premarket (to $3328).

Though my purchase price was about $3240 yesterday, I am not selling any of my position, in response to some emails.

Position: Long AMZN

More SPY, QQQ

I have added to my SPY and QQQ shorts on the post inflation rip at $472.05 and $388.88, respectively.

Still small-sized.

Position: Short SPY QQQ

Programming Note

I am back to the doctor between 10:15 am and 11:15 am for some minor foot surgery - no biggie - but it did cause me to withdraw last weekend from the Flight A golf championship at my golf club! 

Radio silence during that period.

Position: None

From The Street of Dreams (Part Deux)

I recently passed on PayPal (PYPL)

Jan 07, 2022 ' 12:05 PM EST DOUG KASS

Pass on PayPal

After listening/watching nearly every commentator on FIN TV buying PayPal (PYPL) over the last two months - it piqued my interest and I spent a few hours on the name.

It's a pass for me after doing that research.

The same applies to (SOFI) .

A pass there, too.

Today Jeffries downgraded the name.

Position: None

The Book of Boockvar

With a flood of earnings reports upon us, for many, it will come down to execution in terms of who will be rewarded and who will be punished (stating the obvious I know) because it is the level of execution that needs to excel in the current challenging supply situation. A few days ago Abercrombie said "We did not have enough inventory to keep pace with customer demand resulting in lost sales during the peak holiday selling period." Lululemon said "We started the holiday season in a strong position but have since experienced several consequences of the omicron variant, including increased capacity constraints, more limited staff availability, and reduced operating hours in certain locations." LULU has fallen steadily over the past week while ANF rallied yesterday to a one week high.

Shake Shack said its preliminary Q4 was better than expected in spite of "a sharp increase in Covid cases" which "had an impact on our ability to staff and keep all of our restaurants fully open." Its stock was richly rewarded yesterday. In contrast today, Koninklijke Philips, the large health tech company, has its stock down 14% after they missed numbers and the CEO said "It was expected to be a big quarter for us, but the shortage and supply chain bottlenecks meant we couldn't get our products to customers in time. The chip shortage meant there were spot buys and prices going through the roof...It's a difficult situation. We had shortages of several components and saw port congestion, sometimes up to 2 or 3 weeks. All of this meant our manufactured goods couldn't reach customers in time."

So back to my point, all of these supply and labor issues are well known but who best maneuvers, aka execution, will be differentiated.

According to the MBA, the average 30 yr mortgage rate jumped by almost 20 bps for the week ended January 7th to 3.52%, the highest since March 2020 coincident with the rise in Treasury yields. As it was such a quick one week jump, I don't think people really had a chance to respond either way. Refi's were flat as a pancake w/o/w while still down 50% y/o/y. Purchases rose 2.2% w/o/w but after a sharp holiday fall in the week before. They are still down 17% y/o/y. Combine historically high home prices, up almost 20% y/o/y with now a jump in mortgage rates and you have the recipe for a further slowdown in the pace of transactions and more demand for rentals.

Average 30 yr Mortgage Rate


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China said its producer price index for December rose 10.3% y/o/y, pretty robust but below the estimate of up 11.3% and follows a 12.9% gain in November. With the data it is tough to know how much was related to coal, steel and iron ore prices which have been all over the place. Also, Chinese authorities intervene too with respect to the pricing of some raw materials. As seen in the chart below, the CRB raw industrials index closed yesterday at less than 1% from a record high. Consumer prices were up by 1.5% y/o/y, less than the estimate of up 1.7% with a sharp drop in pork prices. Core prices grew by 1.2% y/o/y, the same pace as the month prior, services prices rose by 1.5% and you can drive a truck thru the difference between PPI and CPI and part of that are benign housing costs for consumers and low medical care prices. Also, the tough stance with covid also likely keeps a lid on consumer prices.

Like Pavlov's dog, when an economist sees a lower than expected inflation stat in the context of slower economic growth, the first reaction is 'they need to cut rates.' Maybe the PBOC will but only modestly as they are still trying to balance the aftermath of excessive credit growth. Bond yields in China are little changed notwithstanding the inflation misses.

CRB Raw Industrials Index

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With respect to lending in China, aggregate financing in December totaled 2.37T yuan, almost as expected with bank loans making up 1.13T of this. Money supply growth as measured by M2 was higher by 9%, above the estimate of 8.6%. Specifically with residential real estate, we know Chinese authorities have tapped the shoulder of the banks to ease lending standards to home buyers so as to cut into the inventory and provide cash to the distressed developers. With the People's conference this year and Xi looking to lock in another term, assume that the Chinese government will do all it can to keep growth going and in the face of the stress in residential real estate. A lot will depend too on local governments who rely on land sales for money that they then spend but those land sales are now falling.

Chinese stocks were higher, especially the H shares which after a tough year in 2021, are up by 4.6% year to date. At just 10x earnings, they are cheap and I expect them to outperform the S&P 500 this year. Blasphemy I know.

Out of Europe was some dated November data. Wholesale prices in Germany rose 16.1% y/o/y and .2% m/o/m after a 1.3% gain in November. While the Fed has a lot of catching up to do, the ECB is far worse. Industrial production for the Eurozone was higher by 2.3% m/o/m which was well better than expected but completely offset by a sharp revision lower to October. Net, net, none of this is market moving today but with European markets filled with non tech stocks, they also are likely to outperform the S&P 500 this year.

Position: None

New Buy (and Short) 'Levels'

* My revised levels

I don't want there to be any ambiguity about the size of my positions, or about my buy and short levels, as I strive for as much transparency as possible.

This column is a continued commitment towards that sort of disclosure.

"When the time comes to buy, you won't want to."
(March 2019)

- Walter Deemer

"When the time comes to sell/short, you won't want to." (August 2021)

- Doug Kass

I promised to update my "levels" at least once a month.

My last update was on December 10th.

My "official coverage list" now includes 109 names (64 longs and 45 shorts).

Given my ursine market view I have lowered a number of "levels" to buy and to short in this month's column.

Here are some of my new individual buy/short levels of stocks that I want to add to or reestablish on weakness, and in the case of shorts, to sell on strength:

BUYS

-- Facebook (FB) $305

-- Amazon (AMZN) $3,250

-- Alphabet (GOOGL) $2,725

-- Papa John's (PZZA) $120

-- FedEx (FDX) $240

-- Hartford Financial Services (HIG) $62

-- Goldman Sachs (GS) $365

-- Twitter (TWTR) $42

-- Macy's (M) $22

-- Dillard's (DDS) $185

-- Kohl's (KSS) $46

-- Comcast (CMCSA) $48

-- Bank of America (BAC) $45.50

-- Citigroup (C) $67

-- JPMorgan Chase (JPM) $155

-- PNC (PNC) $185

-- Wells Fargo (WFC) $52

-- Procter & Gamble (PG) $147

-- SPDR Gold Shares (GLD) $168

-- Silver Trust (SLV) $21.50

-- Kraft Heinz (KHC) $37

-- Walt Disney (DIS) $147

-- Morgan Stanley (MS) $94

-- Verizon (VZ) $51

-- Micron (MU) $72

-- Penn National Gaming (PENN) $45

-- Draft Kings (DKNG) $26

-- Vornado Realty Trust (VNO) $42

-- TreeHouse Foods (THS) $34

-- J.M. Smucker (SJM) $118

-- General Motors (GM) $55

-- Ford (F) $16.50

-- Boeing (BA) $212

-- Walmart (WMT) $136

-- Vanguard Value (VTV) $136

-- Vanguard Small Cap Value (VBR) $176

-- Financial Select (XLF) $36.50

-- ViacomCBS (VIAC) $33

-- ViacomCBS Convert Sub. Debt (VIAC) $55

-- Discovery (DISCA) $26

-- Discovery (DISCK) $25.50

-- Coinbase (COIN) $230

-- GDS Holdings (GDS) $44

-- AdvisorShares Pure US Cannabis ETF (MSOS) $27

-- ETFMG Alternative Harvest ETF (MJ) $9

-- Tilray (TLRY) $5

-- Ayr Wellness (AYRWF) $15.50

-- Terrescend (TRSSF) $6.15

-- Curaleaf (CURLF) $9

-- Cresco (CRLBF) $8.50

-- Trulieve (TCNNF) $26.50

-- Verano (VRNOF) $13

-- Green Thumb (GTBIF) $22

-- Fibrogen (FGEN) $13

-- A T&T (T) $24

-- Invesco (IVZ) $23

-- Wynn Resorts (WYNN) $77

-- Alibaba (BABA) $125

-- GDS Holdings (GDS) $45

-- Johnson and Johnson (JNJ) ($161)

-- Green Brick (GRBK) $27

-- Elanco (ELAN) $29

-- Sonos (SONO) $29


SHORTS

-- Netflix (NFLX) $550

-- ARK (ARKK) $100

-- Carvana (CVNA) $210

-- Zoom (ZM) $220

-- Tesla (TSLA) $950

-- Rivian (RIVN) $100

-- KKR & Co. (KKR) $74

-- Blackstone Group (BX) $135

-- Caterpillar (CAT) $210

-- Fastenal (FAST) $63

-- Beyond Meat (BYND) $100

-- T Rowe Price (TROW) $200

-- Franklin Resources (BEN) $32

-- Peloton (PTON) $50

-- Hilton (HLT) $150

-- Live Nation (LYV) $118

-- Plug Power (PLUG) $33

-- Delta Air Lines (DAL) $41

-- United Air Lines (UAL) $48

-- Marathon Digital (MARA) $38

-- MicroStrategy (MSTR) $620

-- GameStop (GME) $150

-- AMC Entertainment (AMC) $30

-- Gingo Bioworks (DNA) $11

-- Digital World Acquisition (DWAC) $60

-- Robinhood (HOOD) $23

-- Krispy Kreme (DNUT) $17

-- F45 Training (FXLV) $13

-- Wayfair (W) $205

-- Mastercard (MA) $360

-- Visa (V) $225

-- American Express (AXP) $165

-- Starbucks (SBUX) $111

-- JOYY (YY) $50

-- Lightspeed Commerce (LSPD) $77

-- Sleep Number (SNBR) $87.50

-- Berkeley Lights (BLI) $20

-- Match Group (MTCH) $145

-- Home Depot (HD) $410

-- Royal Caribbean (RCL) $80

-- Carnival Cruise (CCL) $20

-- SPDR S&P 500 ETF (SPY) $464

-- Invesco (QQQ) $380

-- Russell Index (IWM) $225

-- Bonds (TLT) $145
__________

Long COIN, MSOS, VIAC, AMZN, AYRWF, TRSSF, GTBIF, CURLF, CRBLF, TCNNF, VRNOF, GDS, BABA, C.

Short SPY, QQQ, RCL, CCL, JPM.

Position: See above

Chart of the Day

About S&P futures liquidity:

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Position: None

Tweet of the Day (Part Deux)

I continue to be of the view that we are in an interconnected global economy and continued lockdowns outside of the U.S. will exacerbate supply chain issues and serve to contribute to higher inflation than is generally expected: 

Position: None

There Is No End in Sight For Evergrande

Evergrande's (EGRNF) bond prices continue to melt: 

-EVERRE--

YIELD PRICE AXE AXE
TKR CPN MTY CCY BID OFFER MID COD BID SZ ASK SZ

EVERRE 8.25 Mar-22 USD 12.00 14.00 3736.21 0.00 0.000 0.000

EVERRE 9.5 Apr-22 USD 11.00 13.00 3223.54 0.00 0.000 0.000

EVERRE 11.5 Jan-23 USD 11.00 13.00 668.30 0.00 0.000 0.000

EVERRE 10 Apr-23 USD 11.00 13.00 368.38 0.00 0.000 0.000

EVERRE 7.5 Jun-23 USD 11.00 13.00 256.39 0.00 0.000 0.000

EVERRE 12 Jan-24 USD 11.00 13.00 302.84 0.00 0.000 0.000

EVERRE 9.5 Mar-24 USD 11.00 13.00 195.41 0.00 0.000 0.000

EVERRE 10.5 Apr-24 USD 11.00 13.00 197.67 0.00 0.000 0.000

EVERRE 8.75 Jun-25 USD 11.00 13.00 114.95 0.00 0.000 0.000

Source: Mark Grant

Position: None

From The Street of Dreams

Barclays maintains (BABA) as a buy and reduces its price target to $247.

Position: Long BABA

Two Charts of the Day

Could you imagine?

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Spending in consumer goods grew by approximately the same amount in the two years post Covid as it had in the prior 10 years. Won't there be a hangover from this? Pull forward?

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Position: None

A Brief Review of Overnight Trading

Most don't look at overnight trading, but it gives me a needed perspective.

Futures again experienced some volatility last night.

S&P futures (-11 at low and now +4) and Nasdaq futures (-65 at low and now +33).

Position: Short SPY, QQQ

Cannabis Tweet of the Day

Position: None

Inquiring Minds What to Know...

What was Jamie Dimon talking about yesterday?

Position: None
Doug Kass - Watchlist (Longs)
ContributorSymbolInitial DateReturn
Doug KassVKTX4/2/24-33.86%
Doug KassOXY12/6/23-15.46%
Doug KassCVX12/6/23+9.14%
Doug KassXOM12/6/23+11.94%
Doug KassMSOS11/1/23-32.71%
Doug KassJOE9/19/23-17.22%
Doug KassOXY9/19/23-26.77%
Doug KassELAN3/22/23+33.94%
Doug KassVTV10/20/20+62.27%
Doug KassVBR10/20/20+75.46%