Doug Kass is the president of Seabreeze Partners Management Inc. Until 1996, he was senior portfolio manager at Omega Advisors, a $6 billion investment partnership. Before that he was executive senior vice president and director of institutional equities of First Albany Corporation and JW Charles/CSG. He also was a General Partner of Glickenhaus & Co., and held various positions with Putnam Management and Kidder, Peabody.Expand

Kass received his bachelor's from Alfred University, and received a master's of business administration in finance from the University of Pennsylvania's Wharton School in 1972. He co-authored "Citibank: The Ralph Nader Report" with Nader and the Center for the Study of Responsive Law and currently serves as a guest host on CNBC's "Squawk Box."Collapse

How Politics Works Real Money Pro($)

From Sir Mark J. Grant:   I told my son, "You will marry the girl I choose." He said "no." I told him, "She is Bill Gates' daughte…
Peter Boockvar on today's economic data:
Quant funds are gaining market dominance. Most, at least related to specific quant strategies, are often on the same side of the trade. Dealers, market makers and specialists are dying breeds. That's in part because of regulatory changes, in part because of structural market changes and reduced profitability of their functions. As a result, you better be very sure when you go into a new asset class because, at times, either everyone wants to get out at the same time or there is simply limited market depth.That helps to explain why I like to average into positions!   It is no wonder that ETFs are taking over the investment landscape (more on those risks later in the week!)   A good example of lost liquidity can be seen in closed-end municipal bond funds.   If you recall we made a successful entry into this asset class in December 2013 when volume escalated and prices plummeted as many individual investors took year-end tax losses in that poor performing asset class.   But this could

Walk Away From This Market Real Money Pro($)

Overvaluation, with 25x GAAP and 19x non-GAAP Political uncertainties The likelihood of more fiscal gridlock (2017-2020) with a Democratic presidency and Senate and a Republican House Geopolitical risks Nascent inflationary pressures A mean regression of corporate profit margins An undercapitalized and derivative top-heavy Deutsche Bank (DB) The dominance of risk parity and volatility trending strategies that exaggerate short-term market moves and run the risk of more dangerous flash crashes The general lack of fear and Bull Market of Complacency, and A peak in central banks' liquidity I followed that column up with two other posts on the same theme: Part Two Part T
Vanity Fair's "Is Bill Ackman Toast?" confirms "Peak Ackman" thesis and more troubles for hedge funds.

Caterpillar's CEO to Exit Real Money Pro($)

Caterpillar's CAT chairman and CEO, Doug Oberhelman, has just announced his retirement.

Analyst Actions Real Money Pro($)

BMO downgrades JPMorgan Chase (JPM) to neutral.

The Book of Boockvar Real Money Pro($)

The morning commentary by my pal Peter Boockvar of The Lindsey Group surrounds interest rates, pension safety and some other items:
The 10-year U.S. note yield started 2016 at 2.27%.
Lower Bond Yields Ahead: The yield on the 10-year U.S. note has risen from about 1.35% in early June, when I called for a Generational Bottom in bond yields, to 1.805% on Friday. I believe that with the rate of domestic economic growth now slowing, as will be discussed more exhaustively in my next post, the yield will likely come down back into the previous trading range of 1.55% to 1.70%.  A Flattening Yield Curve: The 2s/10s spread is up to 96 basis points; it bottomed several months ago at approximately 78 basis points Though high-frequency data economic statistics have been eroding, the odds of a December rate rise have been mounting (now at about 68%) and our central bank seems determined to deliver an increase in the fed funds rate. I believe the Fed's worst nightmare is about to come true -- a fed funds rise could trigger lower longer-term bond yields as the domestic data weaken even further. With higher short-term interest rates and lower intermediate- and long-term bond yields, a further flattening in the yield curve is expected. Rate Sensitivity: Banks are asset sensitive, meaning the institutions have an imbalance of rate-sensitive assets over rate-sensitive liabilities. Lower intermediate- and longer-term yields coupled with a flattening yield curve will be an anathema to bank share prices and earnings. Less Value of Deposits: Given the above, a dollar's worth of deposits will be less valuable and produce less profits in the future compared to today. Slowing Loan Demand May Lie Ahead; With the domestic economy weakening (Peak Housing, Peak Autos, etc.) coupled with Peak Liquidity in the U.S. as many anticipate a December Fed rate hike, credit demand may abate. Recently the Atlanta Fed reduced its second-quarter real GDP growth estimate to 1.9%; it initially projected a better-than-3% growth rate a month ago. If correct, this would mark the fifth consecutive quarter of sub-2% growth since the Great Decession ended. That would make the first time since 2009 that the U.S. economy grew by less than 2% in five consecutive three-month periods. Stricter Enforcement of Dodd-Frank in a Clinton Administration: The Wells Fargo fiasco now enforces the case for Dodd-Frank, and the notion that banks are too big to manage got much stronger in September-October. At the very least, a likely Clinton administration and an emboldened Elizabeth Warren could result in continued regulatory pressures, acting as an expensive and burdensome albatross around the neck of the banking sector's shares and profitability. In its extreme, the re-emergence of the populists' too big to manage objections could bring on a new directive and initiative to break up the banks. Lower Equity Returns: More regulatory compliance means that a dollar's worth of equity will be less valuable and also produce less profits three to six months from today. Deutsche Bank Is the Canary in the International Banking Coal Mine: The health of Deutsche Bank (DB) is not improving. Any further deterioration in the bank's financial/operating condition and/or emergence of European economic weakness could strengthen concerns regarding the bank's opaque derivatives business, and the associated counterparty and systemic risks could develop into collateral risks in our country and elsewhere. Bank Stocks Are Not Inexpensive: The prevailing meme in the business media and analytical community is that bank stocks are cheap. They are neither inexpensive relative to their regulatory restraints on return on equity (going forward) nor relative to non-U.S. bank valuations. On the later point, after the recent bank stock rally, U.S. bank stocks trade at about 1.2x book value. This compares to European Union banks at 0.6x and Japanese banks at 0.35x (Source: Larry McDonald's The Bear Traps Report)  Bottom Line  Lower bond yields, a flattening yield curve, challenged credit demand in a slowing domestic economy and continued burdensome and expensive regulatory threats mean that forward-looking bank profits have little upside, and some downside.  Priced at book premiums and far in excess of non-U.S. banks, domestic bank stocks, after a 17% run higher, seem vulnerable absolutely and relative to the broader market indices.  On Friday I shorted Financial Select Sector SPDR ETF (XLF) and on the early-morning earnings-influenced gap higher I initiated shorts in Citigroup (C) and JPMorgan Chase (JPM) . This week's Trade of the Week is to short XLF (at $19.42).


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