The Best of Kass
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
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.