Skip to main content

DAILY DIARY

Doug Kass

Signing Off

I have a lot of administrative things to address on the expiration, so I am going to sign off.

Nice move off the lows and the middle of the bottom end of my trading range.

It could have been worse:




Net-net and on weakness I added to my long exposure today.

Thanks for reading my Diary today and all week.

Enjoy the weekend.

Be safe.

View Chart »View in New Window »

Position: None.

Expiring Option Paper Up Ahead

I have a lot of option paper that expires today so I will be burying my head in my portfolio over the next hour.

You probably wont hear from me until after the close.

Position: None

No Mercy/No Malice

Scott Galloway's "no mercy/no malice" Attentive.

Position: None

Afternoon Trades

* Added to (SPY) at $382.33.

* Added to (DIS) $107.25.

* Added to (FDX) at $157.45.

Position: Long SPY, DIS, FDX, Short SPY calls and puts

Disney Buy

I still hate streaming but Disney's shares are approaching my entry level. 

I just bought small at $108.32 and have a buy scale lower.

Position: Long DIS

FedEx Market Cap

FYI:

The market cap of FedEx (FDX) is approaching $40 billion.

Position: Long FDX (still small)

My Tweet of the Day

Position: None

Boockvar on the Confidence Print

From my pal Peter: 

The preliminary September UoM consumer confidence index rose to 59.5 from 58.2 and just below the estimate of 60. Expectations rose by 1.9 pts and the Current Conditions component was up by .3 pts. One yr inflation expectations moderated to 4.6% from 4.8% which is back to where it was last August. It got as high as 5.4% in March and was at 2.50% in January 2020. Gasoline prices have a big influence on this stat as we know it's a price many see each and every day.

Inflation expectations 5-10 yrs out fell one tenth to 2.8%. That's also back to the level seen last summer. It peaked at 3.10% in January and was at 2.50% in January 2020. Further on inflation, there is a huge amount of uncertainty here as to the future direction according to respondents. The UoM said, "Uncertainty over short-run inflation reached levels last seen in 1982, and uncertainty over long run inflation rose from 3.9 to 4.5 this month, well above the 3.4 level seen last September."

Employment expectations did improve by 5 pts to 91 and off the July low of 77 but it was 109 six months ago. The income component fell 7 pts but after rising by 6 last month. I think that wages, while growing nicely, are still not keeping up with inflation is a drag on this piece of the data. To this, the 'Mean % of Expecting Family Income Will Beat Inflation Over Next 5 Years' was 34% vs 35.1% in August, 33.6% in July and the recent low of 31.5% in June which was a 9 yr low.

Interestingly, and in the face of evidence growing otherwise, business expectations improved.

Spending intentions were unchanged m/o/m across the board for vehicles, homes and major household items.

The bottom line from the UoM, "All told, the tentative slowdown in inflation last month has not, as of yet, translated to meaningful improvements in how consumers feel about their financial situations. About 42% of consumers continue to cite high prices eroding their living standards, down from a peak of 49% in July but more than double the 18% from a year ago."

My bottom line, at 59.5 consumer confidence compares with the Covid bottom of 71.8 and the 101 it stood at in February 2020 and this reflects just how profound the cost of living challenge is for so many.

UoM

Image placeholder title

One yr Inflation Expectations

Image placeholder title
Position: None

From The Street of Dreams

AGP on cannabis:

View Chart »View in New Window »

Position: Long MSOS, Et al.

SPY Add

S&P cash is now at 3850 (-50), at the top end of the lower end of my projected trading range (3800-3850).

I have added to (SPY) at $383.61.

Position: Long SPY, Short SPY calls and puts

For a Trade?

On a short term trading basis it often pays to buy what is up in a down tape.

This morning homebuilders are green in a sea of red.

Position: None

The Banks

Big banks act terrific.

Position: Long BAC, C, WFC, JPM, PNC, Short BAC calls, C calls, WFC calls, JPM calls, PNC calls

S&P Cash

S&P cash at the lows of the day slipped into the low end of my expected range (3800-3850).

Position: Long SPY, Short SPY puts and calls

Premarket Movers

Upside

- (AAOI) +32% (agrees to sell its Chinese manufacturing facilities and certain transceiver assets for $150M)
- (TYME) +14% (Syros and Tyme Technologies announce stockholder approval of merger)
- (NTLA) +7.0% (plans to initiate NTLA-2002 Phase 2 dose-expansion portion of study in 1H23 for treatment of Hereditary Angioedema (HAE))
- (BOWL) +3.4% (earnings)

Downside

- (FDX) -21% (issues weak Q1, Q2 guidance; withdraws FY outlook)
- (NCR) -16% (to separate into two independent companies)
- (CCNE) -9.9% (prices ~3.70M share offering at $23.50/shr for gross proceeds ~$87M)
- (CNM) -9.0% (prices up-sized 11M share offering (from 10M prior) at $23.75/shr)
- (HUN) -7.5% (cuts Q3 guidance)
- (XPO) -6.1% (lower in sympathy with FDX)
- (UPS) -6.0% (lower in sympathy with FDX)
- (GE) -4.8% (guidance, commentary from CFO at Morgan Stanley conference presentation)
- (UBER) -4.2% (investigating computer system breach; employees instructed to not use internal messaging service and other internal systems)
- (AVT) -3.5% (Wells Fargo Cuts AVT to Underweight from Equal Weight, price target: $35 from $45)
- (ARW) -3.3% (Wells Fargo Cuts ARW to Underweight from Equal Weight, price target: $87 from $125)
- (ADBE) -2.6% (multiple broker downgrades following announcement of Figma acquisition)
- (AMZN) -2.6% (lower in sympathy with FDX)
- (BA) -2.1% (CFO comments from Morgan Stanley Laguna conference)

Position: None

Will Buffett Buy FedEx?

* It is a perfect fit...

"Wishin' and hopin' and thinkin' and prayin'
Plannin' and dreamin' each night of his charms
That won't get you into his arms
So if you're lookin' to find love you can share
All you gotta do is hold him, and kiss him and love him
And show him that you care"

- Dusty SpringfieldJust Wishin' and Hopin'

I invested in FedEX (FDX) in early March, 2022 but I grew more pessimistic on the stock in late March, 2022 and sold it for a profit: 

Mar 07, 2022 ' 01:16 PM EST DOUG KASS

First Time, Long Time!

I have taken an initial and small investment position in FedEx (FDX) ($206.54).

But I turned negative on the shares soon after, and sold the stock for a profit: 

Mar 21, 2022 ' 10:05 AM EDT DOUG KASS

FedEx Move

After reviewing last week's FedEx (FDX) EPS release, I have sold my position at $222.21 

And... 

Apr 25, 2022 ' 10:55 AM EDT DOUG KASS

FedEx and Amazon Prime

I always am interested in buying (FDX) on weakness - historically a dominant franchise and I view ultimately it's a great fit with Berkshire Hathaway (BRK.B) - but this news item regarding Amazon Prime (AMZN) puts a dagger into FedEx, in my view.

Back two years ago this was one of my Surprises: 

Surprise #7 Berkshire Hathaway and Warren Buffett Surprise the Markets - On Several Fronts

Berkshire Hathaway, with over $130 billion of cash, acquires FedEx (for $55 billion) in a spirited bidding contest against Walmart (WMT) . There are several important catalysts to the transaction - Buffett understands FDX's business and the deal would expand his scale in transportation - where he already enjoys a stronghold in rails with subsidiary Burlington Northern. Moreover, despite the recent Amazon issue, FedEx has a wide business moat with a vast distribution presence and a large fleet of vehicles. Finally, FedEx' shares have been pummeled (-20%) because of a difficulty in adopting to digital commerce and the company could be purchased on the cheap at under 20x earnings. (Warren Buffett is a close friend of Fred Smith, Federal Express' former Chairman)

This surprise is not too farfetched. 

I have taken a small position in FDX.

Position: Long FDX

The Book of Boockvar

So, as we add FedEx to the list of company preannouncements, they won't be the last. "Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US" said the new CEO Raj Subramaniam in the press release.

On CNBC last night he said "we're seeing volume declines in every segment of the world...the weekly numbers are not looking so good, so we just assume at this point that the economic conditions are not going to be good." Cost management mode is what follows. To the question, "are we going into a worldwide recession?," the answer from the CEO was "I think so."

Noteworthy today, and again, long end bonds are no flight to safety with the clear economic global downturn as all the rate hikes are raising the bar across the yield curve, notwithstanding the inversions.

Part of the weakness in FedEx's business is definitely the China slowdown as they have a huge Asia-Pac presence. China reported its August retail sales, IP and fixed asset investment data that all exceeded subdued expectations. The closures and reopenings, along with trouble in residential real estate, are creating huge disruptions on the ground but also with these monthly data points bouncing up and down month to month.

Singapore said its August non-oil domestic exports fell by 3.9% m/o/m, more than the forecast of down 3%. Shipments to China fell as they did for pharma and electronic products. Asian stock markets were red across the board.

Weighed down by falling real wages, UK retail sales ex fuel oil in August fell by 1.6% m/o/m, worse than the estimate of down .7%. They are down 5% y/o/y. The ONS said "All main sectors (food stores, non-food stores, non-store retailing and fuel) fell over the month."

In response, along with broader dollar strength, the pound is now at around $1.14. We are now seeing shockingly the weakest level since 1985. Gilt yields are little changed and the FTSE 100 is up because of that weak pound. This comes before next week's BoE meeting where they will debate a hike of 50 or 75 bps.

British Pound

Image placeholder title
Position: None

FedEx

I have added to a small (FDX) long this morning in premarket trading. 

My average cost today is about $162.55.

Position: Long FDX

Subscriber Comment of the Day (and My Response)

Miraan hour ago

Good morning Dougie. Are you adding SPY here or waiting closer to 3800?

dougie kass Miraan hour ago • edited

yes see next post Minding Mr Market
I paid $384.71 for more SPY this morning.
Remember I am only 20% net long.
Dougie

Position: Long SPY; short SPY puts and calls

Themes and Sectors

This is a good resource for short-term traders:

Themes and Sectors

View Chart »View in New Window »

Position: None

Minding Mr. Market (Part Deux)

I have been working with a baseline expectation that, for the balance of the year, the S&P 500 Index will trade in a range of 3,800-3,850 to 4,200-4,250.

With this morning's futures decline we have moved close to the bottom of the expected trading range (S&P cash of about 3,860).

This potentially has produced a very positive reward versus risk looking out to the intermediate term.

I plan to unemotionally add to my relatively low net long position if the averages stay at these levels or decline toward 3,800 on the S&P Index.

Mr. Market discounts in advance. He knew about company-specific (FedEx (FDX) , General Electric (GE) ) problems and the economic challenges that lie ahead.

There is nothing that has occurred in the last two weeks that altars my "mild and brief" recession, that Ukraine is gaining strength in its battle with Russia, declining inflation rates and a steady improvement in supply chain bottleneck forecasts.

The biggest headwind to stocks today is the risk-free rate of return. (See Goodbye TINA, Hello TATA)

Look at the windshield and not the rear view mirror.

Investment vision (and knowledge) is 20/20 when viewed in the rear view mirror.

The hardest trade is to buy now.

Value resides at current levels according to my calculus

Having avoided much of 2022's pain, I plan to buy -- not aggressively, but slowly and incrementally (I possess a time frame longer than the next few weeks or month).

I especially like the large-cap banking sector.

I have avoided technology all year but values are now emerging in this space as well.

Position: Long SPY; short SPY calls and puts

Chart of the Day

Image placeholder title
Position: None

Tweet of the Day (Part Six)

Another one from Charlie:

Position: None

Tweet of the Day (Part Five)

Position: None

Tweet of the Day (Part Four)

From FY from SOFI:

Position: None

Minding Mr. Market

This year has been a year in which a money manager has earned his stripes and has been value-added. It is not during the "salad days," when delivering positive investment performance is easy.

As I mentioned on Thursday, the investment mosaic is complex. It is not solely looking at a moving average on a price chart (as was confidently suggested yesterday by a prominent member of the business media).

From my perch, it is about evaluating reward versus risk, logic, common sense, hard-hitting analysis and risk management.

It is about being unemotional and willing to be a contrarian.

Currently, my hedge fund, Seabreeze Capital Partners LP, is about 20% net long and 80% in cash and equivalents (with loads of short-dated Treasuries).

We have delivered modestly positive investment returns this year.

As also noted, I (no one) will get it right all the time. I am filled with doubt and I am often wrong. My columns are qualified and filled with words like might, could and may.

When I am wrong I will admit to it.

That is what I have tried to deliver in my Diary over the last 24 years.

It will be what you will (hopefully) continue to see today and tomorrow.

Position: None

Tweet of the Day (Part Trois)

From Wally:

Position: None

Tweet of the Day (Part Deux)

From the Divine Ms. M:

Position: None

More Night Moves: A Quick Look at Overnight Futures

* The market (and money) never sleeps -- and neither do I, it appears!

* Stock futures were broadly lower all evening as a guide downward at FedEx (FDX) and a General Electric (GE) warning contributed to an extension of Thursday's market weakness. The weakness has intensified in the last 60y minutes.

* The pound slid below $1.14, the first time since 1985.

* Brent crude is showing little movement, down $0.14 to $90.66.

* Gold, which collapsed on Thursday, is down again, -$12.90; I still can't work it up to buy.

* Soft commodities are broadly lower.

* Bond yields are again slightly higher. The yield on the 10-Year is +1.1 basis points to 3.471%. I added to Treasuries on yield strength all last month.

* With the monumental drop two days ago, the S&P oscillator remains oversold but still fairly low, at -2.38% (a level it has been since Sept. 12) . The oscillator has been a good short-term trading tool over the last few months!

"Workin' on our night moves
Trying to lose the awkward teenage blues

Workin' on our night moves
In the summertime
And oh the wonder
Felt the lightning
And we waited on the thunder
Waited on the thunder."

- Bob Seger, "Night Moves"

I described the importance that overnight futures trading holds for me here. It is a guidepost to my strategy in the regular trading session.

Moreover, the overnight/early morning futures hold opportunities as they are (1) inefficient, though liquid, and (2) it seems fear and greed is often exaggerated outside the regular trading session.

Stock futures were lower all evening.

Brent is -$0.14.

Soft commodities are getting hit.

The 10-Year U.S. Note yield is +1 basis point at 3.47% (Goodbye TINA, Hello TATA). I continue to buy Treasuries.

S&P futures peaked a -14 and bottomed at -39. At 4:47 a.m. ET futures were -38 handles.

Nasdaq futures peaked at -56 and bottomed at -149. At 4:48 a.m. ET futures were -146 handles.

Here is a synopsis to some of my columns I believe were important. The intent is to review the logic of my market moves and other factors:

The Queen Was on Kitchen Duty

Reward vs. Risk

Repeating My Bullish Bank Thesis

The Expression of Confidence

The Great Rotation From Growth to Value (I own no tech stocks)

Here were Thursday's trades:

* Bought SPDR S&P 500 ETF (SPY) in the hole ($389-$393) and sold on yesterday's rally ($394.22) RealMoney (thestreet.com).

* I started to buy back SPY again at $389, but held back after an initial purchase.

* Added to Citigroup (C) , Wells Fargo (WFC) and Bank of America (BAC) .

* Started to accumulate FedEx (FDX) after the miss and added at $165 early this morning.

Position: Long SPY BAC C WFC FDX; short SPY calls and puts BAC calls C calls WFC calls

Tweet of the Day

From Bramo:

Position: None

The Fed and QT

Wolf Street on quantitative tightening.

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%