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

Here's What Up From Overnight Real Money Pro($)

Here is a good summary of the price action in many asset classes overnight and in the early morning. (Hat Tip Zero Hedge) 

Recommended Reading Real Money Pro($)

Bloomberg View columnist Cass Sunstein delivers a warning to President-Elect Trump from Friedrich Hayek.  
Bonds and bond-equivalent stocks (REITs, utilities and consumer staples) act well -- as concerns about the possible timing of fiscal stimulation (not surprisingly) surface. Notes and bond yields are about 3 basis points lower in today's session -- at the low this morning they were down 6 basis points. iShares Barclays 20+ Yr Treas.Bond ETF (TLT) up a little less than a beaner. Retail better on a more defined probability (lower) of a border tariff tax. J.C. Penney (JCP) , Target (TGT) , Walmart (WMT) , Kohl's (KSS) and Norstrom's (JWN) leading the way. Energy stocks stronger (on a higher crude oil price) -- Schlumberger (SLB) Exxon Mobil (XOM) are up. Hartford Financial (HIG) a standout in the insurance space. Added to this name. Campbell Soup (CPB) continues to exhibit good absolute and relative price action. I Love Gold! And I have added to SPDR Gold Trust ETF (GLD) . Oaktree Capital (OAK) up for the fifth day in a row (but modestly so). I have added to The Mighty Oak. Oil up $0.60. Gold up $17.60! The Bad Brokerage, banks and insurance are stinking up the joint. A good thing, as I am short Goldman Sachs (GS) (a recent Best Ideas List short), Bank of America (BAC) , Citigroup (C) , JP Morgan Chase (JPM) ,
I put Goldman Sachs (GS) (short) on my Best Idea List a week ago at $242. Today the shares are trading $6 lower. Morgan Stanley's …
Judge Wapner, on "Fast Money Halftime," mentions the disclosure by David Einhorn (Greenlight Capital) in his investor letter that he is short C…

Today's Trade Real Money Pro($)

I have added to my ProShares UltraShort S&P500 ETF  (SDS) , Oaktree Capital  (OAK) , Allergan  (AGN) and Hartford F…
J.C. Penney (JCP) is trading a bit better based on (1) Trump's comments on the border tariff tax and (2) the inclusion of a Nike (NKE) de…
I now have a relatively large short position in financials when one includes my life insurance shorts MetLife (MET) and Lincoln National(LNC) , which recently were added to my Best Ideas List as shorts.

Retail Rallies This Morning Real Money Pro($)

If Sears Holdings (SHLD) files for Chapter 11 bankruptcy, expect tens of thousands of the company's workers to be let go. And as SHLD is a major tenant in many U.S. malls, a bankruptcy would further exacerbate the sales indigestion we're seeing in malls large and small, creating havoc for mall REITs.
I Remain Negative on the Overall Market. I have thought (see 15 Surprises for 2017) that the S&P could make a yearly high in the first half of January 2017. If I am correct, bank stocks will suffer as, over time, bank stock price action is highly correlated to the broad markets. Bank Stocks Are Substantially Overbought. Like other market leadership groups, at the minimum I expect some mean reversion lower in price. The reaction to last week's earnings reports and this morning's Morgan Stanley (MS) release already seems to be petering out. Economic Forecasts Remain Too Optimistic. Despite protestations from the bulls, the domestic and global economies are not that strong and a better-than-expected economic trajectory is at the core of a better bank stock sector. Structural headwinds persist; they include aging demographics, globalization, excessive debt and technological innovation, the latter of which displaces traditional jobs. It is unlikely that many of these issues will be addressed by our old or new political leaders. Some, like an aging population, cannot be reversed by policy. Moreover, the banking sector faces the fundamental challenge of two important peaks -- peak housing and peak autos -- over the very near term and into 2018. I don't expect any material upside change in earnings expectations for the next two years. Bond Yields May Remain Stubbornly Low and the Yield Curve May Not Steepen From Here. The current consensus is that monetary policy has lost its potency and that more aggressive fiscal initiatives will goose growth. While Trump's fiscal policy plans may be more aggressive than the previous administration, pessimism is warranted based on history on the hopes currently assumed by investors that an infrastructure program will produce the needed timeliness and overall impact. Moreover, border taxes and outright tariffs could negate all the good produced by fiscal policy. A muddle-through global economy continues to be my baseline economic expectation. The reflationtrade may be premature and the sights of investors may return back to disinflation in the months ahead. Optimism on a Quick Repudiation of Dodd-Frank Seems Premature. The animus between parties has had a recent hiatus, but it might be too optimistic to see the peace continuing. There is much regarding legislative changes between cup and lip as the opposition will be vocal and we do not yet have a sense of how strong, stable and effective the new administration will be. Remember, there remain deep-rooted populist concerns from both Republicans and Democrats about big banks and with regard to easing regulatory authority that have lingered since the Great Recession. At best, Dodd-Frank changes may be two to three years away; by then, the 2020 election will loom. Low Bond Yields. The 10-year U.S. note yield hit nearly 2.6% recently; I believe this was an exhaustion move. This morning the yield is now at a multi-week low of 2.33%. With lower economic expectations, I expect bond yields to decline further. I see a yield of 2.1% before 2.6% again, contrary to the growing consensus that rates will continue to ramp higher. If correct, the expected improvement in net interest margins and industry profits likely will be delayed relative to expectations. Lower Statutory Corporate Tax Rates May Hurt Bank Capital Bases. By my calculation, companies with large deferred tax assets on their balance sheets face large potential hits to capital. Citigroup, for example, could have a $7 billion or more non-cash write-down because of its deferred tax asset line. The U.S. Is Over-Banked and Over-Branched. Just as disruptive influences have shifted channels of the retail industry's distribution chain, the banking industry has too much brick and mortar and is being forced to eliminate branches. The industry, more than ever, has been commoditized, and with these factors comes lower returns on invested capital. Bank Valuations Have Returned to 2007 Levels. It took the Chicago Cubs 108 years to regain the World Series, but it only took a decade for bank stocks to regain the highs in share price to book value. Both a Cubs repeat and banks revaluations higher may have a formidable task ahead to make continued headway! Banks are still not returning their cost of capital. Barring a radical change in regulations that would allow the industry to return to proprietary activities and would permit more leverage through higher capital ratios, profitability levels and returns on invested capital will remain low and may not justify an expansion in valuations. With Near Universal Optimism in Bank Stocks, Who Is Left to Buy?


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