Among his posts this past week, Kass discussed what the latest GDP report means for the markets, the growing disconnect between Treasuries and the stock market and why Apple remains a trading stock, not a buy-and-hold investment.
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Real GDP Disappoints
Originally published on Friday, April 26 at 9:26 a.m. EDT.
One of the more important reasons for my bearish market outlook was underscored in today's weak first-quarter 2013 real GDP release.
First-quarter real GDP rose by only +2.5% (compared to consensus of +3%-plus).
Federal government expenditures and the inventory build came in weaker than consensus forecasts.
While consumption rose (+3.2%) ahead of projections (+2.8%), it was achieved as the consumer drew down his/her savings rate (to 2.5%).
As I have opined, the trend-line growth of the U.S. economy is probably +1.5% to +2.0% in real terms. With pricing pressures (and limited pricing power/flexibility ahead), U.S. corporate sales growth is only about +2%.
This is the principle reason why I expect S&P 500 profits to be under pressure and come in well below consensus forecasts.
This challenging earnings backdrop (clearly seen already in first-quarter 2013 results) represents the most important risk to the U.S. stock market.
This challenging EPS landscape is in a tug of war with liquidity (provided by the world's central bankers).
In the months ahead, I continue to see the weight of poor profits trumping the printing of money.
At the time of publication, Kass was short SPDR S&P 500 ETF .
The Great Disconnect
Originally published on Friday, April 26 at 1:04 p.m. EDT.
The differential in the chart below (S&P 500 vs. 10-year U.S. note) is getting extreme -- again.
Apple Loses Its Appeal
Originally published on Wednesday, April 24 at 7:27 a.m. EDT.
As I suggested late yesterday, Apple's shares have lost all of the $27 gain in after-hours trading.
Holders are fortunate that the company announced a more aggressive capital-allocation strategy ($50 billion-plus buyback) as forward guidance was horrible and product introduction news was disappointing.
Apple remains a trading sardine, not an eating sardine.
As long as Apple is losing the battle for the high-end customer and facing other fundamental challenges (including but not exclusively margin deterioriation), I see little more than a 3% dividend yield that will appeal to long-term investors in this name.
At the time of publication, Kass had no positions in stocks mentioned.