• "One last thing," -- Lt. Columbo.

Carl Icahn Tweets: "DISCLOSED APPROX 61 MLN SHARE POSITION IN TALISMAN ENERGY. MAY HAVE CONVERSATIONS WITH MGMT RE STRATEGIC ALTERNATIVES,BOARD SEATS"



"MAY HAVE CONVERSATIONS WITH MGMT RE STRATEGIC

ALTERNATIVES, BOARD SEATS, ETC."

• Just don't eat them.

Frankly, I have too much respect for money to be deeply committed or to fake and pretend conviction (as I see many bulls and bears do) at today's market levels, given the overall uncertainties expressed in this morning's missive. --Kass Daily Diary, "Complacency Rules the Market" 

Today was a disappointing day for the Bulls, but Friday was a promising day for the Bulls. In other words, as I highlighted in today's opener, the market is "newsy" -- basically, dependent upon announcements out of Washington D.C., not fundamentals or technicals.

For now, trade the sardines, don't (invest) eat the sardines -- unless you (and your investors) have a "forever" time frame, like The Oracle of Omaha.

Thanks for reading my Diary. Enjoy your evening.

• Run, don't walk, to read Jim Cramer's 'Circling Back to Bernanke.'

Run, don't walk, to read Jim "El Capitan" Cramer's "Circling Back to Bernanke."

It is an important read.

• Citigroup at $48.34 and TBT at $75.19.

I just added to my Citigroup (C) long at $48.34 and to my ProShares UltraShort 20+ Year Treasury (TBT) long at $75.19.

• My price is $13.20.

I am back biddiing $13.20 for more Northwest Bancshares (NWBI) now.

• Here are his musings at midday.

Midday musings from Sir Arthur Cashin:

Lack of renewed artillery fire (verbal) in Washington has allowed for levitation off the lows.  Even in first half hour volume was light, hinting not much trading from offshore.

Run rate at 12:30 projects to an NYSE final volume of 520/600 million shares.

• Check out this amusing email.

This (funny) email has been circulated throughout the day on trading desks:

October 7, 2013

To: The Freemasons, the Illuminati, Scientology, FEMA, the new world order, the Federal Reserve, Citigroup, Goldman Sachs, Halliburton, Google, The Vatican, Bilderberg, Walmart, the Rothschilds, the Knights Templar, HAARP, the U.N. Skull & Bones, Bohemian Grove, the Koch Brothers, George Soros, the Trilateral Commission, the Knights of Malta, The CFR, Exxon Mobile, the Zionists, the VRIL Society, the Lizard People, Gandalf, Merlin, and everyone else who secretly controls the United States government.

"CAN YOU PLEASE GET YOUR STUFF TOGETHER? THIS IS EMBARRASSING!!!"

Sincerely,

A Concerned Citizen

I am getting close to its completing my research and analysis for my next hopeful home run stock.

So you know, I am still working on my next home run stock (hopefully!), and I am getting close to its completion.

But the sort of work I do is a process, and I try to be comprehensive in my analysis, although I only typically summarize my views on my diary.

Stay tuned.

• This should give bulls continued pause.

The continued weakness in banks and financials should give market bulls continued pause.

As it is written in the "Investment Bible," as financials go, so goes Mr. Market.

• Again, this is an ideal enivronment for trading sardines compared to eating sardines.

I still have some cobwebs from my 22-hour drive (Friday to Saturday morning) from East Hampton, N.Y., to Palm Beach, Fla., but I am still increasingly active compared to the last week or so.

Again, this is an ideal enivronment for trading sardines compared to eating sardines.

While I am a market-agnostic at this point, I see limited upside that would support anything above a modest long position -- from my perch!

• Here is what I am seeing around institutional desks on the Street.

Though the tape is down, I am seeing better to-buy at a ratio of about 3:2.

Buy flows in specialty retail are especially strong and particularly high in sell orders on financials.

Other buying is in real estate, household products, defense and telecom.

I am seeing selling in banks, insurers, asset managers, energy, software, biotech and in selected industrials.

• I am now slightly net short.

I sold out my SPDR S&P 500 ETF Trust (SPY) long rental from this morning just now at $168.18.

I am now slightly net short.

• I am now slightly net long.

With today's buys, including an increase to my Apple (AAPL) long rental, I am now slightly net long.

Prior to this morning's long rental of SPDR &P 500 ETF Trust (SPY), I had effectively (more than 95% of the time) been net short since early August.

• Hopefully, this will result in ringing the cash register.

Repeating for emphasis: I will be trading opportunistically/aggressively over the next few weeks in keeping with my trading mantra.

Hopefully, this will result in ringing the cash register.

This staccato approach is not for everyone, but I will be passing on my trades transparently and often.

• I purchased more shares at $48.33.

I added to my Citigroup (C) long, a recent Kass Katch, this morning at $48.33.

• I have added to my ProShares Ultrashort 20+ Year Treasury (TBT) long.

At $75.24 in premarket trading.

• From The Street of Dreams.

Apple (AAPL) (a recent long rental), receives upgrades from Jefferies and others this morning.

• The market is underestimating the odds of a technical default.

"We are not going to pass a clean debt limit.... The votes are not in the House to pass a clean debt limit."

-- Speaker John Boehner, ABC's "This Week With George Stephanopoulos"

"The U.S. is on the verge of going somewhere we've never been if Congress fails to raise debt ceiling."

-- Treasury Secretary Jack Lew, NBC's "Meet the Press"

The markets are complacent and are ascribing a near-zero possibility of a technical default -- that is, missing part or all of the mandatory spending (Medicare, Social Security, etc.) but paying interest on the government's debt while maturing debt is rolled over.

By contrast, I don't see the possibility of an adverse outcome as trivial.

On Sunday, Boehner reported that the House will not pass a clean debt-ceiling bill.

At the same time, Obama has stated he will only sign a clean bill.

That is what we call a standoff.

While I continue to view the baseline case as an Oct.16-Oct. 17 compromise, the odds of a technical default are at least one in three. (Note: It is increasingly clear that prioritizing payments is difficult after the Oct. 17 deadline, as Treasury payments are programmed day by day and not by recipient.)

This is an uncomfortably high possibility relative to what the markets appear to be pricing in.

Here are my four basic concerns:

1. The Republican Party remains polarized and dysfunctional.
2. The Democratic Party remains uncompromising of view.
3. My contacts in Washington, D.C., continually tell me that there are little signs of movement (even under the surface) in dealing with the shutdown and debt-ceiling issue. (As I wrote, the two issues have merged as one.) In canvassing some of these contacts over the weekend, they used words like "immovable," "chaotic," "challenging" and "hostile." If you talk to the participants in the process, as opposed to the bookies betting on them in the marketplace, they are surprised that the capital markets have been as calm as they have. The dynamics of a compromise remain complex, and the pathway to that compromise, according to the central players (who understand the forces at work), is still not clear or under control.
4. Both the Democrats and Republicans appear incapable of dealing with each other. If anything, their hostility is growing stronger.

As I have continually opined, now is not the time to be over one's skis, either long or short. It is a period to have above-average cash reserves, and, similar to Being There's Chauncey Gardiner, it is an excellent time to watch how things sort themselves out, particularly considering how far the market has advanced.

In the meantime, and before Oct. 17 comes to pass, volatility will likely be on the ascent in a market with limited memory from day to day. Even if we don't go into technical default, the next few days will be high theater.

A Fragile Domestic Economy Appears Vulnerable to the Exogenous Shock of Political Dysfunction

Given that the U.S. recovery is barely at escape velocity and that it can be argued that the weak trajectory of growth is still not self-sustaining, it remains uncertain how vulnerable the domestic economy is to the high drama in Washington.

In all likelihood, the longer the stalemate continues the more significant the dent to business and consumer confidence. The two previous budget impasses had a more adverse impact on the U.S. stock market and on economic growth than what we have seen this time (further confirming my view about the current level of complacency).

The bottom line is that we must question whether the risk is that three strikes of budget impasses (over the past several years) and the (fragile) economy is out.

Ten days from now, in all likelihood, there will be a resolution in Washington.

And, at that time, we can again refocus on the challenges to sales and corporate profits in the upcoming quarters, which could pose an even larger threat than the debates on budget and debt-ceiling issues.

No Taper Until March 2014

Meanwhile, it is important to recognize that the current shutdown will bring a continued halt to the release of government economic data.

If I am correct that the decision comes close to Oct. 17, the economic data vacuum will make it difficult for the Fed to properly assess the economic condition on a timely basis. But even after a possible budget resolution (after Oct. 17) the economic data will grow more ambiguous, further complicating its interpretation by the Fed.

This probably means that a tapering is unquestionably off the table this month and, in all likelihood, off the table in December. The first opportunity after December is January 2014, but I wouldn't rule out March 2014 as the month that a tapering is finally initiated.

This backdrop of more liquidity could be viewed as a positive for the markets upon an eventual political resolution.

What Should Our Tactical Trading/Investment Response Be?

With the market likely influenced heavily by the machinations in Washington (and neither fundamentals nor technicals holding the key to investment success), I remain an opportunistic trader, not a member of the buy-and-hold crowd.

Looking beyond the current impasse, our trading and investment focus will soon be back on a lackluster top-/bottom-line and profit margin (70% above five-decade averages) outlook for large U.S. corporations (which has likely deteriorated as a result of the Washington follies), an already-seen 2013 expansion in P/E multiples (from less than 14x to more than 16x) and a still-scary and unresolved global geopolitical backdrop.

Frankly, I have too much respect for money to be deeply committed or to fake and pretend conviction (as I see many bulls and bears do) at today's market levels, given the overall uncertainties expressed in this morning's missive.

Reward (upside) is simply not particularly attractive relative to the risks (downside).

• My regular Early Look column will restart tomorrow.

In premarket trading, I have repurchased a long rental in SPY at $167.38 to neutralize my portfolio.

I am currently in a market neutral position.