There was $975 million to sell market on close.

Thanks for reading my Diary today. I hope it was value-added.

Enjoy the evening.

There is $975 million to sell market on close.

Thanks for reading my diary today. I hope it was value added.

Enjoy the evening.

He likes it, hey Mikey!

Mikey Paulenoff, that is -- he likes Bank of America's (BAC) technical position.

I agree on fundamental grounds. 

"I still can't price gold. I have no idea of what gold's intrinsic value is as it has no store of value.

I am maintaining my position in SPDR Gold (GLD) as a hedge against QE forever and  the central bankers (AKA 'The Committees to Destroy the World '), who have gone totally insane."

 - Kass Diary, "QE Forever"

I had a "protection policy" through a holding in gold that I discussed in February.

Today gold is +$22/oz.

At a breakfast meeting this morning with an investor, the investor asked me why I have a long position in gold.

I couldn't answer his question in an intelligent manner .

I just sold the position at around $116.50, up $2 on the day (to break-even).

My "protection" in the future is to be short SPY!

From Knowledge@Wharton, "Back to the Future: GE's Retooling Into an Industrial Powerhouse." A must-read if you are long GE (GE). 

"Sometimes I'm right and I can be wrong, my own beliefs are in my song."

-- Sly and the Family Stone, Everyday People

Here's an example how a bull (like Jim "El Capitan" Cramer) views the same set of variables relative to a bear's vision (like myself).

In "Rails, Retailers Capping the Market," Jim looks at "headwinds of facts versus ephemeral tailwinds" and concludes that "it's anybody's guess who prevails on what otherwise would be a very big up day." He examines the incremental impact of a lower U.S. dollar (a positive), benign interest rates (a positive) and tame oil (a positive). Against this, the economy is struggling (a negative).

I agree with Jim that a declining dollar is a tailwind for U.S. profits (that is one reason I am building my Ford (F) and GM (GM) exposure) and that sluggish domestic economic growth is a market headwind.

But, with all respect, the price of crude is not tame, in my view, having risen by almost $20 per barrel in the last few months. And the yield on the 10-year U.S. note is 60 basis points higher than the February/March lows, near its recent yield high (and price low) of 2.36%.

To (very loosely) paraphrase Meatloaf, three out of four is bad.

• Midday musings from Sir Arthur Cashin:

Stocks continue to trade thin and a bit nervous. Yield creeping up from morning softness, making traders edgy lest bond brushfire resumes.

Run rate at noon projects to an NYSE final volume of 740/820 million shares.

A moribund consumer and weak personal consumption expenditure acitivity have shifted the automobile stocks into low gear over the last few months.

But, to me, the reversal lower in the U.S. dollar continues to be an important positive catalyst for the sector.

I have added small today to my holdings in Ford (F) and General Motors (GM) and will be more aggressive on a market correction -- which I expect.

Earlier this morning I commented on Danaher's (DHR) proposed acquisition of Pall Corp. (PLL).

Today, I wanted to weigh in on the worst trade of my life as it, too, relates to Danaher.

Like most subscribers I am on a constant search for the next "home run" stock.

This is truly an amazing and true story -- it is a story of buying a stock at $1/share, selling it at $3.50 (on the basis of a market capitalization of about $50 million) -- and watching (over the last 33 years) the shares rise to reach a market cap of $62 billion, a more than 1200x rise in the value of the company!

Move over Berkshire Hathaway (BRK.A, BRK.B) and Warren Buffett -- I am not aware of any more successful public enterprise in history.

I purchased a large and filing position (for about $1/share) in DMG Inc., the predecessor firm to Danaher, back in the early 1980s when I was a general partner at Glickenhaus & Co. I bought in for several of our clients and for our general partners' account.

At that time, DMG was an almost fatally wounded REIT, with an equity capitalization of only about $15 million. It owed about $40 million to First Continental and First Chicago banks. The situation was so bad that the bank had already written off the loan!

The company's assets were a hodgepodge of junk, from an underground refrigeration facility under Kansas City to a motor home park in Albany, N.Y. Its largest asset was a strategically positioned (!) second-home community about six hours outside of Houston.

The company did have, however, a $125 million tax-loss carry-forward that I valued at about $40 million, or several dollars a share. (The tax laws had not yet become so restrictive about usage of these credits.) That was nearly three times the equity capitalization at that time. I thought that if the company could clean itself up by selling most of its assets, it could merge some profitable businesses into it and utilize that tax-loss carry-forward.

DMG was based in Palm Beach, Fla., having moved from Boston -- a good move! My association with DMG ultimately formed the basis for my interest in moving there in 1999.

DMG's two principals were living the good life and earning close to $1 million each for running a REIT that was essentially in liquidation. the problem was that they wanted more and attempted to grant themselves (as outlined in the 1981 proxy material) a large commission on all ongoing asset sales.

After I purchased a position of nearly 10% in the stock, two other investors followed us in and filed form 13-Ds (indicating an economic interest of more than 5%). I felt that the idea of the two senior executives at DMG earning that much was appalling, given the company's position. The other investors agreed. We showed up at the annual meeting and took control of the company.

I became a member of the executive committee and the board of directors of DMG -- which was a NYSE-listed company. We threw the two managers out of the company. We then started to liquidate the company's assets over the next few months, in an attempt to pay the banks off.

I decided to leave Glickenhaus in 1982 (and undertake my own gig). I told the two other groups that since I was no longer going to have an economic interest in DMG, and my partners at Glickenhaus had no one to continue my efforts, we were going to sell the shares. The stock had risen from our purchase price of $1.50 to about $3. The two other groups said they too wanted to sell, since the team that was going to spearhead the effort of managing DMG's turnaround was no longer intact.

My recollection is that we all ultimately sold to Steven and Mitchell Rales within a few months for a price of about $3.50 per share. That put a capitalization on the company of around $50 million.

The Rales brothers ultimately hired investment bankers (I believe First Boston was the company's lead) to undertake a series of large capital raises. That enabled the Rales brothers to grow the company aggressively and externally.

After they gained control, DMG's name was changed to Danaher by the controlling shareholders. The origin of Danaher goes back to the root "Dana," a Celtic word meaning "swift flowing." The story goes that Danaher's principals were on a fishing trip on the Danaher River, a tributary in Western Montana, and conceived the name change.

In the beginning, Danaher acquired Mohawk Rubber and an automotive conglomerate, Fayette Tubular Products. Further smaller acquisitions in the specialty automotive component areas followed. By the early 1990s Danaher consisted of 10 diverse but cyclical companies with a strong emphasis on automotive parts. That mix was accompanied by a very low P/E ratio. By 1996, Danaher sold Fayette Tubular Products, which marked the beginning of a move away from cyclical businesses.

The company became more acquisitive as the bull market roared and accommodated its financing needs. In 1998, Danaher purchased Pacific Scientific (motion control), Fluke Corporation (electronic test tools) and Dr. Bruno Lange (water quality instruments). In 1999, it acquired Hach Co. (water quality instruments), Atlas Copco Controls (electronic motors) and Buhler Montec Group (water quality instruments). In 2000, the company added WWG (electrical testing and calibration), API (motion control), Kollmorgen (electronic motors) and Warner Electric (motion control). The acquisition spree went on and on.

The company has stayed acquisitive. Today it owns world class properties in five different business sectors: environmental (Hach, Chemtreat and Gilbarco Veeder-Root), testing and measurement (Fluke), dental (Kerr, Dexis), life sciences and diagnostic (Beckman Coulter, Leica) and industrial technology (Pacific Scientific, Kollmorgen).

From the humble beginning of DMG (with a market capitalization of around $15 million-$20 million), Danaher sports a market cap today of more than $62.0 billion -- by any calculation a remarkable feat. Consider that Danaher's sales stood at almost $20 billion in 2014. DMG had no sales in 1982. DHR's employees total 71,000. DMG had 36 people 33 years ago. DHR's earned $2.6 billion last year. DMG had a huge loss in 1982.

All in all, the Rales team has done a truly remarkable job in transforming DMG into Danaher and managing its asset base.

Steven Rales and Mitchell Rales are still on the board of directors of the company.

Finally, here is the long term chart of Danaher (previously DMG):

It makes me sick that I sold a 10% position in Danaher.

Selling the shares was the worst investment mistake of my life. 

•  Mid-morning musings from Sir Arthur Cashin:

Stock market a bit thin, adding to volatility. First, was the post-opening spike then the quick fade after oil inventory surprise. They key influence this morning has been fluctuations in the ten year yield.

I have moved to a larger net short exposure -- to medium-sized now.

I have raised my net short exposure from small to somewhere between small to medium on this morning's ramp, with the addition of a PowerShares QQQ (QQQ) short at $108.75 and more SPDR S&P 500 (SPY) at $211.05.

This morning's release of weak monthly retail sales supports my interest rate view expressed earlier, as well as supporting my growing (and very large) investment in closed-end municipal bond funds.

Retail sales in April were again disappointing relative to expectations. Sales excluding autos and gas rose just 0.2% month over month vs. the estimate of 0.6% and only partially offset by a two-tenths revision upward in March. The control group, which also takes out building materials, was unchanged at five-tenths less than expected while March was revised up by two-tenths. On a year-over-year basis, the core rate of sales is only up 1.6%. Sales fell in autos, furniture, electronics, food/beverages, and department stores. Sales gains were seen for online retailers, restaurant/bars (which seem to have been the only beneficiary of lower gasoline prices as sales are up 8.6% year over year), clothing, sporting goods, health/personal care and building materials. Second quarter GDP estimates should be trimmed by a few tenths. The Atlanta Fed prior to this already had a less than 1% second-quarter estimated gain.

Bottom line, the control group measure of core sales that is plugged into GDP is basically flat over the past six months. On an absolute basis in April they totaled $239.2 billion vs. $239.7 billion in November. We can blame weather and the port strikes all we want (today's data is from April so no longer an excuse) but it's also obvious that saving an extra $50 per month at the gasoline pump hasn't moved the needle for overall sales. I have long expressed that the reduction in oil prices would be a net liability to aggregate growth.

Consumers are saving more money, taking on less credit card debt than seen historically, but many Millennials have too much student-loan debt, and the cost of living in the real world (not measured by the PCE or CPI) is accelerating faster than wages (especially for the 36.3% of households that rent). Higher health care spending (higher deductibles and premiums post Obamacare) has also diverted a lot of consumer discretionary money.

Finally, in response, U.S. Treasuries have risen on the day and yields have dropped. The U.S. dollar is getting hit. Will the stock market continue to celebrate economic mediocrity?

I answered that question in yesterday's opening and in "There Is No Margin of Safety Left."

• From The Lindsey Group's Peter Boockvar:

While it will take some time to gauge the effectiveness of the recent policy easing by the Chinese, all of the April economic data released overnight came in less than expected. Money supply growth as measured by M2 rose 10.1% y/o/y, well below the estimate of 11.9% and it's the slowest rate of gain since records of this stat began in 1996. Aggregate loan growth totaled 1.05T yuan, down from 1.18T in March, compares with 1.5T in April 2014 and was below the forecast of 1.2T. A 200b yuan drop in bank loans was the main driver. I guess the old saying of 'you can lead a horse to water but you can't make it drink' applies here as it has in many other countries whose central bank keeps trying to encourage more borrowing and lending even though the horse is already filled up with water. Retail sales rose 10% y/o/y, the slowest pace of gain since February '06. IP was up by 5.9%, a slight improvement from 5.6% in the month prior but one tenth less than expected. Lastly, fixed asset investment ytd y/o/y was up by 12%, the weakest read since December '00 and below the forecast of 13.5%. The Shanghai index was down by .6% and the H share index in Hong Kong was lower by .8% in response. The other China proxies are mixed with copper little changed, brent crude higher and the Aussie$ higher as well vs the US$ to a 4 month high which I believe correlates to the continued tick up in overall commodity prices. The Canadian$ is also at a 4 month high and I remain bullish on both as part of my continued positive view on commodities.

GDP growth in Q1 in the EU rose .4% q/o/q and 1% y/o/y, in line with the consensus. Of note, on a y/o/y basis the Italian economy stopped contracting for the 1st time since Q3 2011 as it was flat y/o/y. The German economy was up by 1%, the slowest rate of gain since Q3 2013. The estimate was 1.2%. The French economy was up by .7% y/o/y, the best gain since the same quarter last year but in line with the estimate. Spain saw solid growth while Greece fell back into a recession but their economy is tiny and irrelevant anyway relative to the region. Separately, industrial production in the region in March fell .3% m/o/m. The estimate was for no change. Bottom line, there was no real surprise in the overall data but European sovereigns are getting some relief today with yields lower after the rough beginning to the week. Germany and Italy sold debt today without a hitch as buyers were likely very attracted to the higher yields after the microscopic ones they were looking at just a few weeks ago. That said, the internals of the auctions were mixed as German bid to cover for the 10 yr auction was just 1.3, the weakest since November. The yield of .65% compares with just .13% at the auction in April. The bid to cover for Italy's 3 yr was just 1.49, the lowest since July and the yield of .32% is vs .23% in April.

In the UK, the unemployment rate for the 3 months ended March fell to 5.5% from 5.6%. That's the lowest since July '08 and compares with the 30 year average of 7.4%. Notwithstanding this, the BoE still can't find any will to start raising rates as they are deathly afraid of pound strength vs the euro as the EU region is their largest trading partner. Mark Carney alluded today that it won't be 2016 until we see a rate hike. Wage growth continued to improve with earnings ex bonus up 2.2% y/o/y, the best gain since June '11. For April, jobless claims fell by 12.6k, not as much as the 20k forecasted but has fallen for 30 straight months. The pound is little changed in response but gilts are rallying along with other European sovereigns and the FTSE is up as a result.

With the average 30 yr mortgage rate in the US ticking up to 4%, a 9 week high, refi applications were lower by 5.9% w/o/w, the 3rd week in a row of declines and the y/o/y gain has slowed to 15.2% vs 35% one month ago. Purchase applications were little changed for a 3rd straight week but remain up 12.3% y/o/y vs 7.2% last month. Retail sales will be the other area of economic focus with sales within the control group expected to rise at the best pace since November on a q/o/q basis.

Late last year I speculated that Danaher (DHR) would split the company apart into different securities and businesses.

This morning Danaher announced the $14 billion acquisition of Pall Corp (PLL) and that it is splitting into two publicly traded entities! 

I continue to believe that the three-decade bull market in bonds will be over this year.

However, I don't expect much movement higher in yield (and lower in bond prices) over the remainder of 2015.

The recent rate rise took the 10-year U.S. note's yield back to above 2.35% at one point this week. The current 10-year yield is 2.22%.

Over the balance of the year, in light of the tepid economic backdrop, my view is that the 10-year U.S. note yield ceiling will likely be in the range of 2.35% to 2.50% -- not far from the current level. I expect the yield to move towards 2.00% during the summer period and then to slowly rise into year end.

It is for this reason that I have substantially raised my exposure in closed-end municipal bond funds, which now yield 6% and sell at approximately 6% discount to Net Asset Value.

"One of the greatest moments in auction history."

 -- Jussi Pylkkanen, Christie's President

Sometimes the bell of speculation just rings out loudly and conspicuously.

Liquidity and zero interest rates are the mothers of speculation.

Six years of it have certainly raised the animal spirits of investors in a number of asset classes -- in the high-end residential and commercial housing markets, in the global fixed income markets, in covenant lite lending and in many others.

The art world, it seems, is the newest member of the speculative club.

But let me digress...

My exposure to the art world is basically limited to being the proud brother of famous and celebrated artist, Debbie Kass. Debbie recently had a retrospective at The Warhol Museum(she was recently named a Board member of the Warhol Foundation), is represented by the Paul Kasmin Gallery in NYC and   has taught at Yale for the last decade. Here are two videos that describe her body of work. Here is the first and here's the second video. Over the past weekend she shared her thoughts on Athenian Vases for the Museum of Metropolitan Art's "Artist Project."

Oy (Art) Vey!

"We sometimes take Picasso for granted, but in this picture we see how modern, how fresh he really was."

-- Loic Gouzer, Art Consultant

Last night, the "Looking Forward to the Past" sale in New York City at Christie's raised $705 million in a 90-minute auction of only 34 lots of Impressionist classics and contemporary pieces.

Picasso's "Les Femmes d'Alger (version O)" sold for $179,365,000 -- the most expensive work of art ever sold at auction, beating the previous record of $142.4 million paid for Francis Bacon'sThree Studies of Lucian Freud at Christie's in November, 2013. 

The sale of the Picasso took all of eleven minutes!

A Giacometti bronze sculpture, "L'Homme au Doigt," sold for over $141 million last night -- the most expensive sculpture ever sold at auction.

Steve Wynn and Steve Cohen were among the sellers in the auction.

"It was great to see the top end of the market tested in this way... but the danger is that you can't keep pulling rabbits out of hats, because then it doesn't look like magic. In all cases, you want to leave the market wanting a little."

 -- Amy Cappellazzo, Art Agency Partners

Caveat emptor.

Or, as my Grandma Koufax used to say, "Dougie, meshuganah is trump." ("Craziness is three-fold," in Yiddish).

Finally, if you are looking at a way to capitalize on a speculative blow-off in high-end art prices, here is the chart of Sotheby's (BID) shares ¿ which might be viewed as a potential candidate for sale/shorting:

Sotheby's (BID)

Source: Bloomberg

View Chart »View in New Window »