Buying Carvana Puts

Avatar photo Doug Kass on August 25, 2026

I’m buying Carvana ($CVNA) puts for September and October.

Position: Short SPY common (VS), puts (S) 

Things I Did Today

Avatar photo Doug Kass on August 25, 2026

Here are today’s things:

* I added to my $SPY short at $767.18.

* I added to ETF shorts $GRNY at $27.89 and $JOET at $46.10.

* I shorted $JPM at $353.71.

* I shorted more $CRWV at $89.06 and $NVDA at $212.04. 

Position: Short SPY (VS), GRNY (M), JOET (S), JPM (VS), CRWV (VS), NVDA (S)

Debunking the Core Bullish Argument That Strong EPS Equates to Strong Price Gains         

Avatar photo Doug Kass on August 25, 2026

The investment mosaic is far more complicated than suggested by hosts, investment strategists, panelists and guests in the business media.

First-Level Thinking Vs Second-Level Thinking

Specifically, many distill the bullish argument to this: Since 2026 S&P EPS is expected to be about +20% (well above consensus expectations at the beginning of the year), the S&P price gains in 2026 should be about in line with that profit growth (or better). Candidly, that sort of distillation is the essence of “first-level thinking.”

First-level thinking is lazy, simplistic and superficial — it looks for simple formulas and easy answers.  To paraphrase Howard Marks:

  • First-level thinking says, “S&P EPS growth will be strong, let’s buy the market.”  
  • Second-level thinking says, “S&P EPS growth will be strong, but everyone knows it. Stocks are fairly or overpriced, let’s sell the market.” 

Most recent examples of when S&P EPS was better than expected and strong were in 2018 (+20.5% EPS growth, -6.6% decline in the S&P), 2006 (+16.7% EPS growth, +11.3% rise in the S&P), 2005 (+19.3% EPS growth, +8.8% rise in the S&P) and 2004 (+20.1% EPS growth, +4.2% rise in the S&P).

Going back, during the last 50 years — other 12-month periods with robust EPS growth and less-than-stellar to down S&P price include the years 1993, 1992, 1987, 1984, 1979 and others.

S&P 500 Index

Source: Seabreeze Partners

Furthermore, I would argue that the backdrop of 2026-2027 offers unique market challenges relative to prior periods since 1975 (“it’s different this time”):

 *  High and rising inflation and interest rates.

*   A burgeoning deficit and U.S. debtload may be a permanent condition giving the general lack of discipline from both parties in Washington DC.

*   Improvisational geopolitical and fiscal policies that present threats to political and economic stability. 

*  Both parties are moving to extremes — the Republican party more to the right and the Democratic party to the left. With a possible Democratic congressional majority win in November, anti-corporate policy (higher corporate taxes, etc.) may be in the offing. 

*  Traditional valuation metrics in the 98%-tile and two standard deviations above the average.

* The AI capital spending spree and gains from investments have inflated S&P profit reports — as noted in my “More Tales From Nvidia” series an earnings reckoning may lie in the not too distant future. 

Bottom Line

Looking at any one variable (e.g. S&P EPS growth) to forecast S&P price is fatuous, simplistic, lazy and is contradicted by past investment returns data.

Stated simply, the correlation between S&P EPS growth and S&P price gains is a crutch and is not a reliable indicator.

The investment mosaic is far more complex than many present in the business media.

Position: Short SPY (VS)