August 6, 2019

This Past Week and Weekend Uncovers and Underscores Old Risks and New Concerns

"The decade long transition from active to passive investment management holds some important risks - as the most popular products and strategies worship at the altar of price momentum means that too many live on the same side of the bullish boat. This means that when the primary market trend turns there will be an inordinate amount of selling and few potential buyers."

-via twitter

July 11, 2019

The Jeffrey Epstein Situation

Doug Kass lays out his views on the Jeffrey Epstein case on twitter...

Everyone 'knows' Jeff Epstein - but do they really know him?
As an example, not one person seems to understand how Jeff Epstein made all his money. From a teacher at The Dalton School, to a limited role at Bear Stearns, to a benefactor at Harvard....

It is my view that the Epstein affair has the potential of roiling American industry and politics as well as Wall Street. Palm Beach, Florida is actually a very small town and word gets around quickly.

As a resident of Palm Beach - where Epstein resided - I believe I have some understanding of the depth of his relationships and his financial modus operandi.

I had a similar familiarity of investors (and other details) of the Bernie Madoff scheme - for some of the same reasons (locale and my social relationships).

The nature of Epstein's deeds (that he was jailed for) is heinous and I don't plan to discuss this any further. But there will likely be broad and unpleasant reverberations.

Some stocks and certainly some reputations may take large hits in the time ahead.

June 27, 2019

US economic growth is slowing while stock market valuations are high

Doug Kass thinks the US economic growth is slowing while stock market valuations dont seem reasonable based on fundamentals. Below is an excerpt from his twitter post.

Regardless of my interpretation this morning, during the day we received more confirmation of slowing domestic economic growth and the message of the continued drop in yields (-3 basis points, the yield on the 10-Year Treasury closed at 1.99%) was also loud and clear.

The rate of U.S. economic growth is decelerating markedly, valuations are extended, and a number of fundamental headwinds and concerns are pressing against a market that is very close to an all-time high.

Over the last few days, the business media has seemed to have echoed the notion that we are in a small pause that refreshes. For this to be accurate, we probably need a trade deal with China and my notion of The Fed Pushing on A String must be incorrect.

I don't think we will see a trade deal "with teeth" nor do I think taking down the federal funds rate from 2.40% to about 2% (or lower) will have much of a positive economic impact. 
That said, it sure looks like the market has again been repelled at similar levels achieved

June 4, 2019

Danger signs in the stock market

Doug Kass in twitter writes his reasons on why the bull market could be in danger.

The conditions that led to a market being able to recoup most of its late 2018 losses are no longer in place:

* We are closer to an earnings recession than in 4Q2018.

* At year end the domestic economy was prepping for a +3% Real GDP in Q1 2019 - now Real GDP is expected to slide to below +1.5%.

* The Cass Freight Index is showing profound weakness - and other high frequency economic data is weakening. 

* Markets have already priced in multiple interest rate cuts.

* With rates so low now (10 year yield down nearly 100 bps), there are few tools left in the monetary shed. 

* The prospects for any meaningful fiscal stimulation is gone (e.g., an infrastructure build) as the animus between the parties has intensified and will continue to erode as we move to a November, 2020 election.

* As mentioned in my opening missive, global coordination and cooperation is at an all-time low.

* A relatively smooth and non disruptive BREXIT is no longer likely.

* The trade backdrop is a mess - with disputes with Mexico and China (in particular) probably going to continue for quite a while.

* The geopolitical backdrop has deteriorated - particularly with Iran and North Korea.

* Commodities are falling (especially of a Jun 1 crude-kind).

* China's economic growth is no longer stable - it's moving lower (see last night's manufacturing data).

* Technical's have just begun to erode.