• Superficial knowledge is not enough.

"One last thing"

 - Lt. Columbo

Instant analysis of companies that one only has a casual knowledge of -- such as Netflix (NFLX) -- can be harmful to your financial well being.

In this world, everyone is an authority, especially in the business media (those who want to convey instant "news" and opinion).

However, it is the smart investor and trader who knows his limitations. 

• Thanks for reading my diary and enjoy your evening.

Here is a special treat, especially for baseball and music fans.

It was an epic evening at Wrigley Field with Ernie Banks and Eddie Vedder serenading the crowd.

Let's go to the tapes!

Thanks for reading my diary and enjoy your evening.

• How much to buy?

My mavens on the floor of the exchange see $225 million to buy on the close.

Energy leads buys with $75 million followed by health care at $60 million.

Johnson & Johnson (JNJ) has $100 million to buy, ExxonMobil (XOM) has $85 million to buy, and Bank of America (BAC) has $65 million to buy. Oracle (ORCL) and UnitedHealth (UNH) each have $22.5 million to sell.

• I have done little since my incremental shorts earlier today.

Mr. Market looks a little tired, and I am, too, despite it only being Monday!

I have done little since my incremental shorts earlier today.

• The theme is getting some play on CNBC.

Steve Liesman is doing an excellent segment on the widening gap between the haves and havenots on CNBC.

Here is what I wrote in a Barron's editorial about two years ago on this subject.

• GMO might have the answer.

To find out readGMO's second-quarter letter.

• I cut back my Chimera long and shorted more IWM.

I further expanded my net short exposure by cutting back on my Chimera (CIM) long and shorting more iShares Russell 2000 Index Fund (IWM).

• Namely, Schwab and McDonald's.

I have added to my Schwab (SCHW) and McDonald's (MCD) shorts.

• Here's his view of today's up-and-down action.

Midday musings from Sir Arthur Cashin:

Early dip on home sales quickly reversed in assumption that weak housing data might stay the Fed's hand on tapering. Rally pared a bit as housing analysts say the dip is just a blip.

Gold soars as NYT story on metal warehouses fans flames of conspiracy theorists that gold warehouse stores have been "lent" out. That theory also aided by backwardation (spot price far above near future).

At 12:30, run rate projects to an NYSE final volume of 560/640.

• The stock is also in the red now.

Two of the five horsemen of the Nasdaq are now in the red: Amazon (AMZN) and Netflix (NFLX).

• The real estate maven analyzes today's housing data.

Below is an update from Mark Hanson on today's housing data:

This is a rare opportunity to arbitrage two different key economic data reporting methodologies, a mortgage rate shock that occurred over 1.5 months and is only captured in New Sales release, and a general misunderstanding over any of this.

1)  June Existing Sales are "closings" and a reflection of escrows opened in April and May, when rates were at record lows (and they were still down MoM for the first time in more years than I care to review). Today's release will be revised lower by 3% next month.

2)  June Builder New Home Salesare "contracts" to buy written in June, when rates were surging.

Both these reports are called "June sales BUT Existing April and May sales and New are really June sales.

Bottom Line:  Today's June Existing Sales report stems from record low rates and Wed's June New Sales report stems from surging rates.  They are both called "June" but fewer understand the reporting differences that will lead to a much larger miss when Wed's New Home Sales data are released (unless consensus is adjusted downward sharply over the next two days).

On today's Existing Sales report, I will have the break down and charts out shortly. On a cursory review I already see compelling evidence that the existing and new home sales were weakening before the "surge".  This tells me that there were fewer fence sitters that jumped in as rates surged than those who got blown out or decided to wait.  This will be more pronounced in the builder segment due to the lack of "investors".

• It's the only one of the Five Horsemen of the Nasdaq that is down today.

In contrast to the middle of last week, only one of the Five Horsemen of the Nasdaq down today, Amazon (AMZN).

• At $169.40.

Herds of bulls come at me,

the raging bulls stampede,

Horns lowered, nostrils flaring,

like a herd of buffalo on the move.

-- The Holy Bible, Psalms 22:12 (The Message Translation)

I added to my short exposure by shorting more SPDR S&P 500 ETF Trust (SPY) at $169.40.

• The June reading of the Chicago Fed National Activity Index shows a U.S. economy growing well below trend.

The Chicago Fed National Activity Index for June came in at -0.13 compared to expectations of zero and to +0.29 in May.

This index is broad based, with 85 different factors, a good indicator of national economic activity.  

While the series is typically not market-moving, the June reading of the Chicago Fed National Activity Index shows a U.S. economy growing well below trend, as the long-term average is 0.02 vs. current reading of -0.29 (based on the three-month moving average).

The series is also consistent with other reports that real domestic growth is expanding at a below-2% pace. As such, it calls into question whether growth is self-sustaining in the U.S. -- even in the face of ZIRP and QE and five-years post-recession.

After today's home disapppointment, Goldman Sachs has reduced its second-quarter 2013 real GDP forecast to +0.7%.

As I have repeatedly pointed out, the market's P/E has expanded from 13.6x at year-end 2012 to over 16x now, surprising given that second-quarter 2013 earnings (excluding financials) are basically unchanged and that forward guidance has been uninspiring to poor.

Maybe this explains the Fed chairman's unwillingness to say or do anything to upset the markets.

The fragile nature of the domestic expansion explains my bearishness.

So far, I am wrong.

• A pause in the housing recovery may lie ahead.

Existing-home sales in June totaled 5.08 million annualized, 180,000 less than expected, and May was revised lower by 40,000, to 5.14 million (still the highest since November 2009).

Both single-family and condo/co-op sales fell month over month, and with a rise in the total amount of homes for sale, the inventory-to-sales ratio rose to 5.2 from 5.0 and compares with the low in this cycle of 4.3 in January. Single-family sales, while near a multiyear high, are still just back to where they were in 1998. The median price rose 13.5% year over year, to $214,200. Part of this increase is due to the continued shrinkage in the amount of distressed sales, which totaled just 15% vs. 18% in May and 25% one year ago.

First-time home buyers remained little changed at 29% of the total, still well below the historical level of 40%, and the NAR blames "the frictions of tight credit and very limited inventory in the lower price ranges in most of the U.S." We can thank investors for that limited inventory, of course, as many entry-level buyers are now going to have no choice but to rent.

Bottom line: this measure of closings likely saw contracts signed in March and April before the sharp rise in mortgage rates, therefore making it somewhat old news in terms of the new world of financing we are now in. There are anecdotal stories already that the bidding frenzy for many homes seen in the spring has cooled because of higher rates in the past two months. The housing market will continue to improve but with higher rates likely having an impact, it will be in fits and starts from here.

A pause in the housing recovery may lie ahead.

• A technical take.

Below is an interesting chart from "Fast Money's" Steve Cortes on retail/McDonald's (MCD).

• I doubled my short exposure this morning.

• Real estate maven Mark Hanson presents his bearish housing thesis.

Below is a substantive heads up for housing bulls from real estate maven Mark Hanson.

I have rarely been more bearish housing and mortgage.  Not necessarily on an absolute basis yet (we still have to see how the "surge" plays out over the next quarter before we start modeling the "triple-dip" in volume and prices); rather relative to short-to-mid term Main Street, media, and Wall Street lofty expectations and linearly extrapolated consensus estimates.   The structural inadequacies of this solely stimulus-driven and drunk housing market are about to present themselves in dramatic fashion.

- Rate Surge "Catalyst" will cause much confusion, uncertainty, 'consternation', and volatility presented in this weeks' key housing data.  And the Surge "catalyst" is only slightly in the "June" data (i.e., this is only a taster of the "reset").

- This is a very rare opportunity to arbitrage varied sector reporting methodologies, the calendar, a recent suspect Homebuilder Sentiment surge, and a sector specific credit event.

- This is the first week of a multi-month "discovery process" from which everybody will learn that they have been "fooled by stimulus" yet again.

- "This" housing market was already brain-fried from massive stimulus that did a great job filling pent-up demand and even better job pulling it forward.  The "surge" catalyst reset the market overnight. Now we just wait for data to fully catch up to what's happening on Main Street.

- The "Surge" was the largest, "overnight" removal of direct housing market stimulus, ever.  This weeks' housing reports will begin to confirm that the "surge" did slam an already fragile and thin market;  that a 45% surge in rates in 1.5 months was the greatest removal of housing market stimulus ever; and that a "durable" housing market recovery may have been just a pipe dream given the lack of de-leveraging allowed to occur over the past 5 years in this sector.

-  There is no "shortage" of houses in "which to live". There is a shortage to buy due to malinvestment and speculation (which will correct itself over the next few quarters).  Fundamentally speaking, Phoenix (for example) cannot have a housing shortage when the large PE firms are sitting on thousands of vacant rentals -- a ~50% vacancy rate -- and similar numbers in all the hot speculative buy-to-rent markets.

1)  I now have a large amount of back-up that "builder sales" contracts got clobbered in June, most likely on the "surge".  New Home Sales looks to be setting up for a consensus miss TWICE that of the Existing Sales 5% miss two days prior. But they are so small in number, rounded-up when counted, always revised, and counted by the gov't that the miss could range from 5% to 10%.

It's so important to remember going into TUESDAYS' "Existing Home Sales" report that they are "closings" frompurchase/pricing decisions and contracts made in April and May (due to 30 to 45 days escrow closing cycle) when rates were still mostly at record lows.  However, June "New Home Sales" on THURSDAYwerecounted at contract meaning the "surge" was having an effect despite rates still being relatively low in the front half of the month.

Taking it one step further, weak "June" New Home Sales tells me that in the builder segment there were no fence sitters, rather buyers who decided to wait as the surge was happening to see how it shakes out mostly likely due to the lack of already "built supply" and inability to inexpensively lock in a rate for as long as it takes to complete a house under construction or not started yet.

Bottom line:"Existing Sales" reported on Tuesday will miss the 5.25mm consensus estimates by ~4% to 5%.  People will blame "rates" due to a lack of knowledge over how housing data are reported.  The decline in June and sharp consensus miss is most amazing because "June Existing Sales" were contracted in April and May (due to 30 day escrow cycle) when rates were at record lows.  This report will put 'some' uncertainty around the "New Home" sales number on Thursday but "investors" will probably give the segment the benefit of the doubt.

Then on Thursday I think the bomb drops.  New Home Sales,arguably the most important of the housing reports out next week -- even though they are multi-decade lows as a percentage of total monthly home sales (~7%) and don't add to GDP like they did 7, 17, 27 and 77 years ago (in fact, when "distressed" were surging and the rehab cycle was in full force they added to GDP much more than builders) -- will miss consensus estimates much more severely.  Note, June "New Home Sales" actually lead Existing Sales because they are "counted at contract" not closing.  This miss will usher in the real fear, greed, uncertainty, and volatility.  Note...from the "June" New Home Sales report released on Thursday we actually get a ton of visibility into the "July" Existing Sales reported a month from now.

This weeks' disappointing housing reports will begin to confirm that the "surge" did slam an already fragile and thin market;  that a 45% surge in rates in 1.5 months was the greatest removal of housing market stimulus ever; and that a "durable" housing market recovery may have been just a pipe dream given the lack of de-leveraging allowed to occur over the past 5 years in this sector.

2)  Important sidebar on Existing Sales:  don't let "economists" tell you that Existing Sales don't matter to housing or the economy. In fact, they were never more important in 2011 and 2012.  That's because New Sales are only 7% of total US house sales, a record low;  "distressed" rehabs for rent or flip -- that required a ton of same labor and materials homebuilders use -- made up so much of the market over the past 2 years;  and 65% of Americans own an "existing" house and most don't plan on buying from a builder.  Heck, New Sales are so small relative to Existing that JUST THE BROKER COMMISSIONS GDP component on Existing Sales alone adds up to 60% of TOTAL monthly builder residential investment.

3)Below are June data points from CA state and Contra Costa -- an "A" SF Bay Area county of a million residents -- respectively. This fits so well with my sharp consensus estimate miss for next weeks' new home sales report.

CA State:    "DataQuick reported there were 1,459 houses sold last month compared to 1,704 in June 2012, a 14 percent decrease."

Contra Costa Co:   "The number of new homes sold in Contra Costa County plummeted from 98 a year ago to 15 last month."

4)  On houseprices, the back half of the year is going to be very heavy. June Existing Sales "should" not reflect much of the weakness because, once again, they are from purchase and pricing decisions made in April and May when rates were at record lows.

However beginning in July house prices, as reported by the more real-time reporting firms, will weaken monthly.  The most widely-followed Case Shiller -- due to it's massively delayed reporting methodology of using the a 3 month average of existing sales -- will not reflect the "surge" until the October data are released in December.

Moreover, Case-Shiller will be hit especially hard. That's because in the past year it was pushed much higher than it should have been due to distressed flip resales.  In short, if I buy a beater for $200k, put in $50k in rehab and resell for $300k, Case Shiller treats it as a 50% price gain when in fact, HALF of that gain was in materials and labor. As distressed and flips have plunged so will this artificial boost in Case-Shiller. In fact, when the Case-Shiller distressed boost closes it will put incredible pressure on the indices.

5)  Largest removal of direct housing market ever:It's imperative to put the "surge" into the proper perspective.  This wasn't a run of the mill "rise" in mortgage rates we just underwent.  In fact, this was the "overnight" removal of the greatest monetary accommodation aimed directly at housing, ever. Perhaps in the past when "rates rose" over much longer periods of time -- and amidst wage inflation or other powerful and/or strengthening economic activity -- one can't find a direct correlation to house prices. But when I look back only a few years at the last stimulus aimed right at housing -- the Homebuyer Tax Credit -- and what occurred when that ended, the correction is as plain as day. And the sudden loss of mostly all of the Twist/QE3 benefit to interest rates over the past 18 months was greater than the loss of the $8k Homebuyer Tax Credit to the power of 10.

• With stocks elevated well above my perception of fair value, you will be seeing an increased number of short rentals in the week ahead.

• I am shorting shares at $28.40.

I am reshorting Yahoo! (YHOO) at $28.40 now on the Third Pointliquidation of 40 million shares.

• If the company can't experience better July comps, bulls could throw in the towel.

I have shorted McDonald's (MCD) in premarket trading on the earnings miss.

If the company can't experience better July comps (compares are easy), I suspect the bulls are gonna throw in the towel on this name.

• Hyaaaaaaaahhhhh!!!!!

Break in: After a 1000-point S&P 500 advance, former Governor Howard Dean turns bullish.

Phew!

Green light.

• Let's take a peek at overnight and early action in some of the more important asset classes.

The rundown:

• S&P futures +1;
• Nikkei +;
• European markets +;
• euro +;
• crude +$0.50;
• gold +$24; and
• the 10-year U.S. note yields 2.48%.

Worth mentioning:

• Friday was another frustrating day for the bears, who likely anticipated a market schmeissing after the close of Microsoft (MSFT) and Google (GOOG), which rallied most of the day after a sharp gap lower.
• I continue to be slightly net short -- and frustrated!
• Why am I frustrated? Economic growth is anemic, with second-quarter 2013 nominal GDP likely to come in at only +2%. Revenue growth is turning slightly negative in the current quarter, even worse than my expectations at year's beginning. My focus on slowing top- and bottom-line growth and tepid economic growth has been wrong-footed thus far, as investors levitate valuations and see equities as cheap relative to artificially low interest rates. (P/Es have risen from 13.6x to over 16x in 2013.) Though there are no signs of a self-sustaining domestic economic recovery, market participants seem to want to believe (in fairies!).
• I did little on Friday.
• Weekend news was sparse. As expected, Shinzo Abe had strong results -- his party controls both chambers.
• The G-20 emphasized growth over austerity in its meetings late in the week and into the weekend and outlined debt goals by country. Here are some of their goals and challenges.
• More importantly, G-20 seeks policies that "won't spook markets," similar to Bernanke, who is reluctant to confront and make uneasy our markets -- an ever larger Bernanke "put," the G-20 is promising not to upend the markets. These monetary policy "puts" have proven to be dangerous, as they bring about more leverage and speculative/bubble-like pricing. This must be watched, as there is, for sure, a developing bubble (e.g., pricing in fixed-income securities such as high-yield debt).
• European markets are higher after good results at UBS (UBS) and Julius Baer and after Portugal avoided elections.
• The height of the earnings season is this week.
• A bunch of flash PMIs hit Tuesday night July 23 (China) and Wednesday morning July 24 (U.S. and Europe) and will provide investors with the first major look at July economic trends. For China, the key will be stability (the Street is modeling a small increase from 48.2 in June to 48.5 in July), while Europe has been exhibiting small signs of progress (consensus eurozone manufacturing PMI at 49, up small from 48.8 in June). For the U.S., the projections stand at 52.5.
• Phil Mickelson was exciting to watch as he captured the British Open Championship.
• New York Yankees -- R.I.P.! 

In the press:

• We have a lot morenewsonDetroit'sbankruptcy.
• The Wall Street Journal: U.S. growth stuck in neutral; fraud in Miami's bond offerings; higher interest rates won't stall housing.
• The New York Times -- A brilliant investigative reporting of shenanigns by Goldman Sachs (GS) and others in the aluminum market, not exactly "God's work!"; the coming food crisis.
• Seeking Alpha: The stock market's blissful case of cognitive dissonance.

Here are the important market catalysts today:

• U.S. existing-home sales for June (10:00 a.m. EDT, 5.25 million estimated).
• Chicago National Activity Index.
• Earnings before the open: Gannett (GCI), Halliburton (HAL), Hasbro (HAS), Kimberly-Clark (KMB), Lennox International (LII), McDonald's (MCD), NVR (NVR), Philips (PHG), RPM International (RPM) and STMicroelectronics (STM).
• Earnings after the close: BancorpSouth (BXS), Crane (CR), Hexcel (HXL), Idex (IEX), Netflix (NFLX), Texas Instruments (TXN), Volterra Semiconductor (VLTR), Werner Enterprises (WERN) and Zions Bancorp (ZION).