The Best of Kass
Among his posts this past week, Kass wrote about some encouraging economic data, the possibility of a last-minute fiscal deal and why shares of Ford likely will make a pit stop at current levels.
Please click here for information about subscribing to RealMoney Pro .
Originally published on Friday, Dec. 28 at 11:01 a.m. EST.
The December Chicago Manufacturing Index came in above expectations, at 51.6 vs. consensus of 51 and 50.3 in November.
This is the best reading since mid-2008 and represents the second consecutive reading above 50.
Notwithstanding the ubiquitous fiscal cliff debate (and its impact on growth), this print is encouraging and reverses the weakness of the September-October period. Importantly, the spread between orders and inventories widened, which means production should accelerate in the time ahead.
In terms of components, the orders lifted measurably by 9 points, to 54, and the employment component dropped considerably, so we have to watch this.
If we look at the manufacturing results from the Richmond, Chicago and Milwaukee surveys, we can expect December's national ISM (to be reported on Jan. 2) to climb above 50. (It was 49.5 in November.)
We are seeing a slow improvement in manufacturing and business fixed investment, but the latter still remains very low relative to balance sheet liquidity and profits. If we get some fiscal cliff resolution, a lot of catch-up should be expected.
Finally pending home sales, which foreshadow existing-home sales, rose by nearly 2% (or double expectations).
This is the third consecutive monthly increase, and the series is up 8% year-to-date. This index is now at the best level since 2007.
I continue to expect a durable and extended recovery in the U.S. residential real estate market in the years ahead.
At the time of publication, Kass had no positions in securities mentioned.
Common Sense and the Cliff
Originally published on Thursday, Dec. 27 at 5:10 p.m. EST.
It's always reasonable to expect a last-minute deal.
Today was but another reason to treat Mr. Market as a "trading sardine" market, not an "investing sardine" market.
It was also another reason to recognize why common sense is an important part of the process for an opportunistic trader.
While the media had all but given up on the chance of a fiscal cliff compromise, it has always been reasonable to expect (and the market responded to) a likely 24th-hour agreement on Sunday or Monday.
That said, the devil is in the details, and my best guess is that a patchwork deal that will result in a $300 billion fiscal drag seems the best guesstimate.