"It's not a joke, it's a rope, Tuco. Now I want you to get up there and put your head in that noose."

-- Blondie, " The Good, the Bad and the Ugly"

No "Takeaways" today as its vacation time at the Kass household and I want to take a swim with my family right after the close.

So let's move to the abbreviated Monarch Notes form of "Takeaways," with "The Good, The Bad and The Ugly."

The Good

* Gold continues its rally (+$3).

* Big Pharma better -- especially of a Johnson & Johnson (JNJ) kind.

* Speculative biotech improving - especially of a Sage Therapeutics (SAGE) kind (a Bobby Lang pick!). ZIOPHARM Oncology (ZIOP) +10%.

*Chipotle Mexican Grill (CMG) continues its impressive advance.

* Incyte (INCY) +!

* Campbell Soup (CPB) in face of a strong consumer staples look.

The Bad

* Ag equipment lower despite an easy compare for March retail sales at Deere (DE) . Caterpillar CAT -$1.70 and DE -$1.10

* Perrigo  (PRGO) new lows.

* Transports -- especially of a railroad kind (CSX (CSX) and Union Pacific (UNP) lower).

* Insurance mauled.

* Banks broadly lower - but losses reduced during the day's trading session.

* The stock market has a different complexion -- I am seeing some pimples.

* At 245PM S&P near its daily lows. ( (SPY) down a beaner) I added to ProShares UltraShort S&P500 (ETF) (SDS) and ProShares Trust UltraPro Short QQQ ETF (SQQQ) longs.

* Lumber -$10.

* For the second day in a row the optical space is lower on China and Apple (AAPL) fears.

* GE (GE) fizzling and might be rolling over.

* An uncommon losing day for Elon Musk's baby, Tesla (TSLA) . (-$9)

The Ugly

* Brockerages cant rally, breaking down. Morgan Stanley (MS) and Goldman Sachs (GS) are on my Best Ideas List (short).

* Tractor Supply (TSCO) -7%.

* Fastenal (FAST) a mess after a gross margin miss.

* FMC (FMC) , Nucor (NUE) and United Rentals (URI) leading cyclicals lower -- as Trump initiatives may be pushed back in time .

In his news conference, Tillerson calls for improvement in US-Russian relations -- "which are now at a low point."

My guess is that we go off the "flight to safety" trade for a bit now -- allowing the 10-year U.S. note yield to successfully test and bounce off of the 2.30% level.

As for stocks, the Tillerson conference call may be irrelevant.

Stay tuned.

I just pressed my ProShares UltraShort S&P500 (ETF) (SDS) and ProShares Trust UltraPro Short QQQ ETF (SQQQ) longs at $13.62 and $38.14, respectively.

Moving up to between small and medium sized in my net short in exposure.

Capping the last auction of the week and after a soft 10-year auction yesterday, the long bond today was weak too. As I mentioned, the yield was about one basis point above the when issued and the bid to cover of 2.23 was below the twelve month average of 2.31. Direct and indirect bidders took about 70% of the auction which is about in line with the one-year average. As this area of the curve is mostly driven by pension funds and insurance companies, it's always tough to read too much into it. That said, the yield of about 2.94% remains well above its level of 2.62% on the day of the election and the plunge low last July at 2.10%. It is below the March high of 3.22%. The 10-year yield is holding at 2.28% where it was just before the results.

Clearly the debate over where longer term rates go from here is about more than just a growth and inflation. One must acknowledge the changing influence of the big central banks and their altered QE programs. U.S. yields will be somewhat correlated to where German bund yields go for example -- no matter what inflation print comes our way here. Also, as I have documented the 10-year U.S. yield was around (give or take) the nominal GDP rate for 5-6 decades -- which was 3.5% in 4Q2016 and might only be 3% in 1Q2017.

Who knows when, if ever, we get back to that, but just maybe the path towards it begins when central bank balance sheets start shrinking. Whenever that might be.

For the purposes of my own calculus, I am presuming that the 10-year U.S. note yield will approximate 0.75x nominal GDP down from the 1960-2015 average of 1x.

I remain of the belief that the July 2016 lows in global yields represented a Generational Bottom in Yields which will never be seen again in our lifetimes.

Lastly, this is a chart overlaying the nominal GDP growth year over year growth rate from 1981 to Q1 2000 (thus before all the central bank easing that took the fed funds rate to 1% in 2004 and of course well ahead of what went on after 2007) with the ten yearUS yield.

You can see the relationship:

(Source: Bloomberg)

The popular semiconductor index is another space that appears to be rolling over.

I suppose people have forgotten that a large portion of the sector's business serves automobile manufacturers - and, with "Peak Autos," that may not be a good thing.

As mentioned in my opener, we live in an interconnected world.

Like the poor 10-year auction yesterday, today's 30-year long bond auction was weak, with the pricing at a 2.938% yield compared to a when issued market of 2.929%.

That is helping my iShares Barclays 20+ Yr Treas.Bond (ETF) (TLT) short somewhat -- which has moved down by about -- 30 cents from its highs of the day.

In a Fox interview early this morning President Trump said that he plans to move back healthcare reform to the front burner. 

This is consistent with a likely pushback of the Administration's fiscal agenda, which I discussed in today's opening missive (Again, this has been a rising probability and not a political statement by me).

It also helps to explain today's weakness in equities and strength in bond prices -- it's reduced economic and profit growth expectations.

Real estate maven Mark Hanson discusses Millennials and housing:

In the background of all long-term, bullish housing market research reports is the narrative that the Millennials, the biggest generation, will be out buying houses left and right for years to come.

While Millennials may want to buy, eventually, as an ultimate goal, given their negative savings rate, it won't be anytime soon.

That's unless, new ZERO DOWN, OR NEGATIVELY AMORTORTIZING loans come out to "MAKE HOUSING AFFORDABLE AGAIN!"

The new renters survey below by Zillow is great and tells us what we already know...

• 68% "Can't Afford the Down Payment" to buy;
• 53% don't make enough, have too much debt, or too poor of credit to "Qualify for a Mortgage";
• 50% have "Too Much Other Debt" - student, card, auto et al -- to buy;

The SAD PART is, FHA and the GSE's do loans all day long at <5% down. In fact, the average down payment in the US is less than 7% for all purchases.

Bottom line: For the intermediate future at least, Millennials are not a driving factor to housing demand, or incremental house price gains.

News Release Issued: Apr 12, 2017 (8:00am EDT)

To view this release online and get more information about Zillow visit [here]: 

Down Payment Holding Back Renters from Buying a Home

Almost 70 percent of renters in 20 U.S. metros say coming up with the down payment is holding them back from homeownership, according to the first Zillow Housing Aspirations Report

- Saving for a down payment was a barrier for more than two-thirds of renters surveyed in a new Zillow survey, topping other hurdles such as job security and qualifying for a mortgage.

- About half of renters surveyed said debt and qualifying for a mortgage were barriers to homeownership.

- Saving for a down payment was a barrier to the greatest share of renters in San Jose, San Diego and Los Angeles -- a few of the most expensive rental markets in the country.

- A 20-percent down payment on a typical U.S. home costs more than two-thirds of the national median annual household income. In pricier markets, it can cost more than 180 percent of the average annual income.

SEATTLE, April 12, 2017 /PRNewswire/ -- Even though a mortgage payment is more affordable than a rent payment on a monthly basisi, renters say they can't buy a home due to the pricey down payment, according to the first Zillow® Housing Aspirations Report™ (ZHAR)ii.

Almost 70 percent of renters surveyed cite the down payment as a greater barrier to homeownership than debt, job security and qualifying for a mortgageiii. Just over half of renters cite qualifying for a mortgage as a barrier to homeownership, and half say debt is holding them back. Almost 40 percent of renters say job security is keeping them from buying a home.

The U.S. homeownership rate is near an all-time low and has been falling since 2004, although members of the largest generation of Americans -- millennials -- are coming of age and starting to think about buying a home and settling down. Rents are also at record highs, costing almost 50 percent of the median income in some cities. Making a monthly mortgage payment is cheaper than a monthly rent payment in all but two of the 35 largest U.S. metrosiv, but first renters need to save enough money for a down payment.

The Zillow Housing Aspirations Report, a semi-annual survey sponsored by Zillow and conducted by IPSOS, asks 10,000 renters and homeowners in 20 metros across the country about their views on homeownership and their personal housing expectations going forward.

Here are some highlights from the report:

• Over half (63 percent) of renters are confident that they will be able to afford a home someday, with 25 percent planning on buying in the next three to five years.
• Millennial renters are more confident than any other generation that they will be able to afford a home someday, with 34 percent planning on buying in three to five years. Almost a quarter (22 percent) said they plan to buy in one to two years and 2 percent of millennial renters said they never plan on buying a home.
• The majority of respondents (66 percent) believe owning a home is necessary to live The American Dream, and 72 percent believe owning a home increases your standing in the local community -- millennials believe these two statements more than any other generation.

With home values across the country at their highest point since June 2007, cobbling together a 20-percent down payment on a home costs more than two-thirds of the U.S. median household annual incomev. In pricier markets like San Jose and Los Angeles, buyers must come up with more than 180 percent of the median annual income, making a home purchase out of reach for many aspiring homeowners.

"With home values close to record highs, it's no surprise renters are concerned about coming up with enough money to buy a home," said Zillow Chief Economist Dr. Svenja Gudell. "Rising rents are also a factor -- it's extremely difficult to save when you're paying record-high rents. While it is possible to put down as little as 3 percent on a home, the trade-off is a higher interest rate and costly private mortgage insurance, a financial tradeoff that may make sense for some buyers. But with interest rates rising in 2017, it's important to remember that a lower interest rate can save buyers thousands of dollars over the life of their loan. For those trying to save for a down payment, it's important to set realistic goals and realize it may take a few years. Also, consider working with a reputable financial advisor to help set a budget that works for you."

San Jose, San Diego and Los Angeles had the greatest share of renters say affording the down payment is the number one barrier to owning, at over 72 percent. Women (72 percent) were more likely than men (62 percent) to select the down payment as the top barrier to homeownership.

One-third of buyers used more than one source of funds for their down payment, including gifts and loans from family, according to the Zillow Group Report on Consumer Housing Trendsvi. Over half of buyers saved by setting aside a little money at a time.

Mortgage rates on Zillow ended the month of March at 3.94 percent, down from a high of 4.13 percent in the middle of the monthvii. Home shoppers can use the Zillow Affordability Calculator to see how varying loan amounts and down payments will impact monthly payments and the lifetime balance of their mortgage.

A classic tweet from the legendary Divine Ms M (our own Helene Meisler) :

And from South Park! 

Back in late March I wrote a contrary column, "The Long Course on Why to Short or Sell Financials" 

I got the Bronx Cheer from many corners.

So be it.

There is no group that was as widely touted in the business media as the banking stocks. The bullishness was palpable as was the self confidence of support.

Banks are now down on the year, suffering about a 8% decline since my post.

I would continue to avoid the group.

As to the bulls, crickets as usual.

Another lesson learned.

I should have mentioned in the prior post that I adjusted my net exposure to small short through the purchase of trading rentals ProShares UltraPro Short QQQ ETF (SQQQ)  and ProShares UltraShort S&P 500 (SDS) -- again!

With everyone convinced that the market routinely will rally from a morning drop, now is probably the time when the market just keeps heading lower.

I continue to see a rollover and the possibility that a 2017 top in the S&P 500 Index has been recorded.

I moved from market neutral to slightly net short this morning.

Over in Columnist Conversation, Paul Price endorses the idea of selling (naked) long-dated puts in Fastenal (FAST) .

I continue to feel that this is a poor idea, both in structure and in company target.

Here's why:

• While the options market for FAST is nominally deep -- that is, plenty of options bid and offered -- the spread is ridiculously large between the bid and the ask prices. In the case of January 2019 $42 puts, the bid is $3.50 and the offering is at $4.70; that's big enough to run a truck through! Moreover, if you decide to change course -- even without any price change in Fastenal's shares -- you are paying a hefty price, buying at close to $4.70 and selling at close to $3.50. In the case of the January 2019 $45 puts, the spread is $4.90 bid and $6.00 offered. I don't like these odds.
• Generally, I don't favor selling naked puts; it's a potentially dangerous strategy that limits your upside against a possible large downside . I have seen too many floor traders going broke with the strategy of selling options naked. As an example, I was critical (but respectful) when Paul sold naked puts in Perrigo (PRGO) last year when the shares were trading at $110 to $120. The shares are at $67 this morning. This is the sort of trade that can put professionals and novices out of business.
• Given that only 31 of the $42 puts and 14 of the $45 puts traded today, that is not a clear indication of conviction. My guess is that most of the trading in these options, as mentioned in a previous bullet point, will result in buys near the offering price and sales near the bid price.
• I also am of the view that the outlook for Fastenal is for a secular decline in the least squared profit growth relative to consensus expectations, chiefly reflecting a changing competitive business landscape. That is why I am short and why the shares remain on my Best Ideas List.

Fastenal at this writing is trading down $3.75 to $46.60 -- its low of the day.

A few odds and ends of note:

• Longtime fave Radian Group (RDN) looks like it is making a move toward its old highs.
• Twitter (TWTR) is up about $0.40 in the early going. I add almost every day to this large holding. I appear to be in a minority of one!
• Bonds continue to benefit from geopolitical tensions. I am using the strength to continue to short iShares 20+ Year Treasury Bond ETF (TLT) .
• Banks continue to underperform, in some measure because of the low level of rates, the continued flattening in the 2s/10s curve and disappointing commercial and industrial loan demand. I would avoid all things financial for now, as you all know. 
• Retail, after a few good days, looks like it is meeting some resistance.
• Consumer staples are picking up a bid today on a weaker U.S. dollar. I have been adding to Campbell Soup (CPB) recently.
• Caterpillar (CAT) headed back lower after Deere's (DE) reasonably good retail sales data.
• Overall, I continue to see individual stocks and many sectors as rolling over.
• Ludacris Forecast: Steve Bannon doesn't last the week.

Fastenal FAST has been an investment short of mine for several years.

In late January I put the stock back on my Best Ideas List at around $51.25.

This morning the shares are down by nearly $3 to around $47.50 on an in-line sales report. 

The problem with the report was that earnings per share fell a penny or two shy of most estimates as gross margins dropped by 40 basis points (unseasonably lower than the previous quarter despite higher volumes) and the daily rise in sales growth in March lagged the consensus expectations and was below normal seasonality.

The report raises questions about whether the company will achieve the margin expansion presumed by the Street in the back half of the year. With moderating domestic economic growth, steel price inflation, rising compensation expenses and some negative mix changes, I am skeptical.

At nearly 28x 2017 estimates there could be more downside.

I attended Wharton for my MBA but was also accepted at Harvard Business School. I couldn't go to the later because they provided no financial aid.

It worked out fine!

So, this morning I give one read from Wharton, knowledge@wharton: "What the Future Holds for U.S.-Cuba Relations." 

And one from Harvard Business Review: "The Stage Where Most Innovation Projects Fail."

A week ago Monday, my Trade of the Week was to buy ProShares UltraPro Short QQQ ETF (SQQQ) and short PowerShares QQQ Trust (QQQ) .

Since then, the Nasdaq has fallen eight days in a row.

Yesterday morning, with S&P futures down by nearly 20 handles and the Nasdaq getting schmeissed, I reduced my QQQ short from medium in size to small.

The morning commentary by my pal Peter Boockvar, chief market analyst with The Lindsey Group; notice the rise in bullish sentiment, the Fear/Greed Index and the possible turn downward in hard economic data in the European Union: 

At least according to newsletter writers, sentiment on US stocks remains very bullish. Investors Intelligence said Bulls rose to 56.3, a 3 week high from 55.8 last week. Bears fell by .8 pts to 17.5, a 3 week low. The peak in Bulls in the post election time frame was back on March 1st when it touched 63.1 which was a 30 yr high. That day was also the peak close in the S&P 500. II refers to any read above 55 as the "danger zone" and that was first reached on November 23rd. As of yesterday's close, the Russell 2000 is back to where it was on December 8th, the Transportation index closed at a level first seen on December 6th, the S&P Midcap index is 1% above its December 8th close, the industrial stocks (XLI) are 2% above its December 7th close and the financials (XLF) are back to its early December close, to name a few. Tech is really the only standout with XLK up 9.5% since December 7th and in turn has helped the market cap weighted S&P 500 and NASDAQ. We are of course well above the November 8th close for all markets but the point I'm trying to make is when bullishness gets stretched, stocks usually are closer to the end of its short term move rather than the beginning. This could certainly be just a rest for another move higher but a cooling of bullishness would be a better backdrop for that. Fundamentally, I still believe that this is the time when valuations begin to matter because of the tightening of monetary policy.

In contrast to the attitude of newsletter writers, the CNN fear & greed index closed yesterday at 31 which is in the 'Fear' category. This figure is calculated by looking at 7 indicators, momentum (market relative to its moving average), junk bond demand (spread b/w high yield and IG), stock price strength (52 week highs minus 52 week lows), put/call ratio, stock price breadth (McClellan Volume Summation Index), safe haven demand (difference b/w 20 day stock and bond returns), and the VIX. What to make of the discrepancies in market attitudes? I'm not exactly sure.

We start the trading day with the US 10 yr yield exactly at the lower band of its 5 month trading range as we all debate the mixed messages that all these markets are sending on growth. I want to emphasize my belief though that underlying the behavior on bonds is also the shifting behavior of QE programs which creates its own dynamic that can't be analyzed by looking at just growth and inflation stats. Over the next year, Fed, ECB, BoE and subtle BoJ tapers are upon us and the end of negative interest rates will coincide or soon follow. That alone puts a floor on global rates I believe. As for the US 10 yr, even after a 1.6% growth performance in 2016 and a possible under 1% print in Q1, its yield is still almost 100 bps above the July 2016 lows and a lot has to do with the change in central bank action in addition to the rise in inflation expectations and hopes for Trumponomics.

In the midst of the spring selling season, the MBA said mortgage applications to buy a home rose 2.9% w/o/w and 2.8% y/o/y. That y/o/y move is the slowest since February but on an absolute basis is the best since June. Sellers are enjoying high prices. Buyers though are dealing with modest inventory, a persistent rise in prices that are running double the rate of inflation and mortgage rates that are about 50 bps above last year. Refi's saw no change w/o/w and remain down 40% y/o/y even though the average 30 yr mortgage rate fell 6 bps to 4.28%, the lowest since mid January. I'm sure bank earnings reports will reflect the collapse in this area of their business.

The relationship between the yen and the Nikkei still remains pretty tight as the 1.2% rally in the yen yesterday drove a 1% decline in the Nikkei overnight and it closed at the lowest level since December 7th. See the first paragraph with the mention of that date. Machinery orders in February disappointed with a 1.5% m/o/m rise vs the estimate of up 3.6% but due to the quirkiness of the calculations, the y/o/y rise was 5.6% vs the estimate of up 2.5%. As this number is hugely jumpy both up and down month to month, I'll accept the volatility in it. Importantly, the BoJ reported that bank loan growth grew 3% in March vs 2.8% in February and it hasn't grown that fast since May 2009. Net interest margins are still shrinking thanks to BoJ policy so loan growth is trying to grow faster than the decline in margins. This news didn't stop the 1% decline in Japanese bank stocks overnight as they still remain yield curve and profit challenged.

One more thing on the BoJ, Governor Kuroda knows that the stronger yen is making his job that much harder in achieving his made up 2% inflation target and he did his part to try to talk it down. "It's true a further weakening of the yen might make it easier to achieve the BoJ's inflation target." Again, if wage growth doesn't match the rise in hoped for inflation, the Japanese are worse off and even if all it does is match it, they are still running to stand still. It was the mid 1990's the last time Japanese wage growth was persistently above 2%.

The only thing of note in Europe was the February UK jobs data which was mixed but there was particular weakness in March jobless claims. For the 3 months ended February, 39k jobs were added vs the estimate of 70k. It still was enough though to keep the unemployment rate steady at 4.7%, which matches the lowest since 1975. Yes, 1975 at the same time the BoE benchmark rate is at .25% and QE is ongoing. Wage growth did improve slightly but is rising no higher than CPI. It was up 2.2% y/o/y ex bonus for 3 months ended February vs 2.4% in the prior period. March CPI printed 2.3% this week. The BoE is afraid to raise rates as long as wage growth is slow but they should be raising rates because inflation is rising. Lastly, the March jobless claims figure rose by 25.5k, the biggest one month increase since August 2011. This is quite a spike and bears watching. The pound is little changed in response as are gilt yields and stocks.

"Ivanka is by his side in Washington. She is not involved in everything. I think she comes and goes with issues she deeply cares about, but when you get to a certain level of power a lot of times -- and you see this in business, too -- a lot of times people will say yes just because you happen to be the boss ...

... I think it gives you a sounding board who is a little bit more unconventional than the 37 people that might happen to be standing round a table at that one time who just want to appease."

--Eric Trump, Daily Telegraph interview

The administration's policies and agenda directly impact our capital markets, plain and simple. That is why I frequently write my morning missives about my perception of the administration's ability or inability to catalyze U.S. economic growth and to develop a coherent domestic and foreign policy. (Though some ardent Trump supporters may disagree, my observations are not intended to be ad hominem).

While I am acutely aware that our president won his election on being an anti-establishment disrupter and by being different, I and others are growing more concerned with the Trump administration, both in its decision-making process and in delivery of its policy messages.

The now-established precedent of our president having unelected, young and inexperienced relatives providing a more influential impact on the administration's policy agenda than experienced government and military professionals seems an unsound and potentially unsafe course.

By Eric Trump's own admission -- here and here -- his sister Ivanka, as well as his brother-in-law Jared Kushner, who recently headed off to Iraq, already have been seen as influencing some of Trump's most important decisions. This includes having Ivanka take partial credit for the bombing of the Syrian airport last week (see quote at the beginning of today's missive).

Even more important is the shifting and bewildering contradictory stances in policy regarding Syria  -- where thousands of American lives are at stake -- coupled with the failure of a number of other important legislative and executive orders, including health care and the travel ban that was declared unconstitutional.

Policy delivered by tweets -- for example, on Tuesday morning (below) -- is an unsound and potentially dangerous method of communication. Policy delivered by tweets represents a measure of inconsistency and lack of coherent thought regarding complex issues.

Government by fiat and impulse and a policy agenda that does not defer to the traditional input of one's own appointed officials and other deeply informed individuals -- including national security representatives, Cabinet members and valued congressional leaders -- and instead relies on certain relatives with absolutely no perspective whatsoever on foreign matters yet who have an ability to weigh in on major foreign and domestic decisions is not what our forefathers expected from the president of the United States.

Serious policy that impacts our economic state, influences and establishes a legislative agenda and even may affect lives requires more sober, coherent and thoughtful decision-making. It requires working with the opposition, both among one's party and across the aisle. As I have stated previously, running our country is not as elementary and as focused as running a real estate empire with one's sons, daughter and son-in-law at one's side.

Today we live in a flat and interconnected world in which decisions are interrelated and complex and must be extremely thought out in consequence and influence. Otherwise, the dominos simply will fall, and fall quickly.

It means, as Jim "El Capitan" Cramer justifiably noted late yesterday, that his more traditional fiscal initiatives -- repatriation, regulatory reform and infrastructure and tax policy -- will face higher hurdles and could be delayed, if they are enacted at all.

Yesterday and Tomorrow

Strength in bonds and gold yesterday are a probable manifestation of a growing recognition and fear among market participants of Trump's process of governing on gut (and the growing input from his family) as well as the perception of his ability, or lack thereof, to develop a complicated and coherent agenda.

Meanwhile the ETFs, algos and machines were up to their old tricks, abetting another "bigly" (Trump-speak for big league) market recovery from early morning weakness. As I noted previously: 

"Are late-day ETF buy/rebalancing programs and the proliferation of price momentum (quant) strategies the 2017 equivalent of 1987's portfolio insurance?

And does it end badly?

Yes, it probably does!

"I have learned through four decades of experience that once most market participants are conditioned to one way of action, the other way quickly may surprise them as rising markets brings rising expectations, and vice versa.

Those expectations can be argued to be at their highest level at any time in this bull market that started in the first week of March 2009.

Optimism in and of itself is not dangerous, but it is tautological that risk and disappointment expand as optimism multiplies.

That optimism is readily apparent as retail investors massively embrace passive investing in their accumulation of exchange-traded funds -- a shift in behavior showing a willingness to commit to the long term in our markets.

This could explain the late-in-the-day market ramps. To digress, I would note that, year to date, 37% of exchange value has occurred in the last 30 minutes of trading. This can be explained in large part by the enormous popularity of ETFs that are forced to rebalance during the late minutes of the trading day."

--Kass Diary, "Everything's Awesome ... But For How Long?"

For now, markets that increasingly are committed to ETFs and run by risk parity, volatility trending and other strategies that worship at the altar of price momentum have suppressed volatility and are, as Rev Shark suggests this morning, immune to bad news, whether it be in the real economy or in the corridors of the White House.

But a trend change in price is almost inevitable as the schism between financial asset prices and the real economy widens and the animal spirits take over the human spirits. As I noted last month:

"That said, regulators seem to be using bicycles to try and catch Ferraris and it might be only a matter of time before there is another market incident, as occurred in October 1987, when the primary direction of stock prices starts moving from the upper left to the lower right (thanks for that phrase, Dennis Gartman!).

At that point in time the computers no longer will be buying; they will be selling.

It is at that point in time when the movie will be seen in reverse and end-of-day selling will replace the persistent end-of-day buying that has characterized the last few years of trading.

Remember, as we learned 30 years ago, the unexpected often moves markets, for as I wrote above:

"I have learned through four decades of experience that once most market participants are conditioned to one way of action, the other way quickly may surprise them as rising markets brings rising expectations, and vice versa.""

--Kass Diary, "Don't Think the Machines Could Turn to Seling? You've Forgotten 1987" 

However, just as buyers buy higher,sellers sell lower. And just as market participants ignore, arguably, the chaos and lack of progress to date in Washington, D.C., and ignore the likely pushback of the administration's agenda, I am convinced that markets ultimately will be weighing machines and not voting machines. 

As I wrote yesterday, "It's Always Been a Matter of Trust, and I Don't Have It." So, now more than ever, I believe that Trump will make volatility and uncertainty great again. 

Whether one is a Republican or Democrat, the aforementioned observations in today's opening missive and in those over the last few months are simply not market-friendly, especially starting from today's elevated valuation levels and with the consensus expectation of hockey stick growth in earnings in 2017-2018 that, in large measure, is an anticipated byproduct of the administration's presumed success in delivering impactful fiscal policy.

As Grandma Koufax used to say, "Dougie, the plot is thickening."

Most investors should consider the benefit of maintaining above-average levels of cash as reward versus risk is unattractive, perhaps dramatically so.

P.S. I encourage and welcome a broader discussion of my concerns of how the White House might hurt our economy and markets in our Comments Section today. I recognize that many think my comments are politically based. I accept your views, but they are not. Rather, they are based on my observations. Let's make the conversation respectful and value-added.

Here is a good summary of the price action in a broad list of asset classes from last night to this morning. (Hat tip Zero Hedge)