Expectedly, an uneventful and illiquid afternoon session
Still at lunch, so big thanks for reading
Everyone have a great holiday weekend.

"Tough times don't last, but tough people do."

- Unknown

Here are three inspiring stories from Houston as delivered by my (email) pal Reid in Dallas:Big Rig RescuesDerrick Lewis rescues confederate flag carrying victim of HarveyMattress Max

I added further to two large longs this morning: Wells Fargo (WFC) and Twitter (TWTR) .

Also of note: Nordstrom (JWN) gets jiggy this morning (up 3%).

Investors must be hoping for a going-private deal in the short term!

"Jazzy" Jeff Hirsch of the Stock Trader's Almanac (and participant in the Real Money Pro Investment and Golf Conference) has come out with the following: "September Outlook: Worst Month Primed for Long Overdue 10% Correction."

Please pay attention to his interpretation of Three Peaks and a Domed House:

Psychological: Confused. According to the most recent Investors Intelligence Advisors Sentiment survey bulls are at 49.5%, bears are at 19.1% and correction is at 31.4%. Although there are substantially less bulls now than there were in July, they are slightly outnumbered by bears and those expecting a correction. This nearly even split suggests now is not a good buying opportunity.

Fundamental: Stalled. Little has changed over the last five weeks. Q2 GDP has been revised up to 3%, but the longer-term trajectory still remains murky. The unemployment rate remains in the low 4% range and existing home sales fell to their lowest level in a year in July. The Trump Administration has put the brakes on new regulation and rolled back some, but major policy initiatives have still not become law. At some point stock market valuations could matter again.

Technical: Bouncing. At mid-August, Stochastic, relative strength and MACD indicators applied to DJIA, S&P 500 and NASDAQ were all negative and at or near oversold levels. This set the stage for the rebound occurring now. Previous all-time closing highs loom large and are likely to provide significant resistance. If all three indexes can breakout to new highs together, then the rally has a fair chance of continuing otherwise the rally will likely stall.

Monetary: 1.00-1.25%. Fed Chair Yellen's highly anticipated speech at Jackson Hole focused less on monetary policy and more on financial regulation reform. Her view that any changes should be "modest" likely means she will be replaced when her term ends in February as the Trump Administration would prefer a more aggressive roll back. The uncertainty created by who will replace her could ultimately have a negative impact on the market.

Seasonal: Bearish. Since 1950, September is the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1971), Russell 1000, and Russell 2000 (since 1979). September's rankings improve modestly in post-election years, but average performance is still negative across the board.

As the unofficial close of summer nears this market that has been unwilling to go down since last fall may be running into a host of obstacles that could lead to a typical September/October correction of at least 10% and potentially more. It has now been 567 calendar days since the last 10% correction, which is nearly two months past the average 515 days between corrections. While the topping process has been elusive up until now, several factors are lining up that could force the market lower.

First off, it's September, the most tumultuous month of the year highly prone to corrections and market declines, especially at month end and the week after Triple Witching. With the market seemingly refusing to correct since the election, it is set up for the typical late-Q3/early-Q4 swoon.

Sentiment remains complacent with bulls running near 50%. There are bears and skeptics out there, but "buying the dip" continues to be the norm. Technicals and internals are less than robust with the indices leaking higher on a dwindling Advance-Decline line, decreasing new highs and expanding new lows. Reports of late cycle employment, productivity and housing data plateauing and beginning to roll over are also concerning.

News from the geopolitical front is anything but encouraging. The White House has not been able to deal with anything on its agenda from healthcare reform to tax reform to infrastructure spending or much else for that matter. The standoff with North Korea is not encouraging and now the Hurricane Harvey disaster will require a lot of attention and money out of the feds.

Meanwhile our Three Peaks and a Domed House Top Pattern (3PDH) scenario continues to play out. We may not see a full completion of the pattern back to the February 2016 point 14 low, but a 10% correction back to turn-of-the-year levels is quite likely and a full blown bear is not out of the realm of possibilities, but that make not happen until next year. Not on the 3PDH chart below we have moved point 23 to the August 7 high.

Pulse of the Market

As August comes to a close, DJIA (S&P 500, NASDAQ and Russell 2000) have all recovered from mid-month lows (1) and with the exception of S&P 500 and Russell 2000 are poised to finish with modest full-month gains. Strength over the past two weeks is on the verge of turning DJIA's faster and slower moving MACD indicators (2) positive. Earlier in the month, DJIA traded above 22,000 for the first time ever and that old high could prove a challenge for the current rally.

DJIA (3) and has recorded a weekly gain in ten of the last fourteen weeks, S&P 500 (5) has logged nine weekly gains over the same time period and both are on course for another gain this week. During this streak of weekly strength, traders and investors have not shied away from buying on Fridays. DJIA has been up ten of the last fourteen (4). But, follow through on subsequent Mondays has been spotty with DJIA down seven and up seven. NASDAQ has not fared as well recently with four weekly losses out of the last five (6).

NYSE Weekly Advancers and Decliners (7) continue to be mostly a mixed bag. One exception to this observation occurred during the week ending August 11 when Decliners heavily outnumbered Advancers, 2527 to 561. This was the greatest number of Weekly Decliners since January 15, 2016. At that time, the market did not hit bottom until February 11.

After increasing throughout most of July, NYSE Weekly New Highs (8) quickly dried up in August while NYSE Weekly New Lows quickly expanded. Last week (and most likely this week) that trend reversed. As is often the case in later stages of a bull market, the number of Weekly New Highs tends to fade with each new fractionally higher, high. This fading participation generally warrants caution.

The spread between the 90-day Treasury Rate and the 30-Year Treasury Rate (9) appears to be bottoming out. Mid-month weakness triggered a retreat in short-term rates that outpaced the decline in long-term rates. Continued flattening of the yield could be an issue for banks and potentially even the Fed.

I will be leaving for a late (1:30 p.m. ET) holiday lunch with some friends today and I likely won't be returning until after the close.

Byron Wien muses about our political, economic and market futures.

Today Dow Chemical and DuPont have merged. The new symbol for what is now DowDuPont Inc. is DWDP.

The shares of DuPont met my long-held price target of $85 and I have removed the stock from my Best Ideas List.

A much better ISM Manufacturing Index than expected is taking a toll on the fixed-income markets.

The yield on the 10-year U.S. note is 3 1/2 basis points higher, to 2.155%, and the 2s/10s spread has expanded by two basis points.

I added to my already large SPDR S&P 500 (SPY) short at $248.03 and to my large ProShares UltraPro Short QQQ (SQQQ) long at $26.50.

I took off a small amount of my Allergan (AGN) long at $231.55, trading aggressively around this core investment. I have moved down in medium in size.

I am also offering more Unilever (UN) , Procter & Gamble (PG) and Mondelez (MDLZ) on the short side.

As I wrote in my opening missive below, consumer packaged goods stocks are likely overpriced.

Stated simply, brand loyalty is for oldsters.

As an example, consumers are buying Amazon (AMZN) basics and other private-label batteries rather than the Coppertop or Bunny brands. The same applies to packaged food products.

As a result, prices, margins, cash flows and profits are dropping for many consumer packaged goods companies that previously were seen as possessing deep, broad and impenetrable competitive moats.

Meanwhile, valuations for consumer staples at over 20 times trailing earnings seem unsustainable and could fall over the next 12 months.

I am placing Unilever (UN) ($59.76), Procter & Gamble (PG) ($92.56) and Mondelez (MDLZ) ($40.88) on my Best Ideas List as shorts.

Check this out on the S&P 500:

"In economics, a monopsony (from Ancient Greek µ¿¿¿¿ (mónos) "single" + ¿¿¿¿¿a (opsonía) "purchase") is a market structure in which only one buyer interacts with many would-be sellers of a particular product. In microeconomic theory of monopsony, a single entity is assumed to have market power over terms of offer to its sellers, as the only purchaser of a good or service, much in the same manner that a monopolist can influence the price for its buyers in a monopoly, in which only one seller faces many buyers."

--Definition of Monopsony, Wikipedia

Yesterday's opening missive, "The 'Ketchup Stand' Loses Value in an Epic Retail Battle,"  on Warren Buffett's evolving view of consumer packaged companies, drew quite a lot of attention.

Consumer packaged (CPG) companies are those that manufacture, market and sell goods to other companies called retailers.

Things change in industry and in the markets, and of his many characteristics, Warren Buffett is not stupid.

The Oracle has incredible street smarts and an enormous helping of common sense that, I suspect, comes from his Midwestern background.

As Buffett expressed in an important interview with CNBC's Becky Quick this week, what has changed is the emergence of the monopsony -- that is, a monopoly of the buyer.

Today, buyers of consumer packaged goods are as strong as sellers as retail has consolidated.

Now more than ever, many consumer packaged goods are sold under private labels. Walmart Stores Inc. (WMT) is big at this, as is Costco Wholesale Corp. (COST) . Two fast-growing German-based discount supermarkets are Aldi (more than 10,000 stores in 18 countries with sales of 50 billion euro) and Lidl Stiftung (also more than 10,000 stores across Europe and that this year expanded into the U.S). Both sell almost exclusively private label products at significant discounts and in packaging that looks like U.S. consumer packaged goods brands. As a result, there is less than zero market sales growth as the population grows slowly and the Trump administration does all it can to limit immigration.

It is not a great stew pot.

The multiples of consumer packaged goods companies are, in three words, now unreasonably elevated. There is negative unit growth. Sure, there is free cash flow, but there is the need to be more "organic" and then to tell consumers about it. This squeezes margins. (A recent BusinessWeek article on Oscar Mayer tells the tale.) 

From my perch and given these headwinds, consumer packaged goods companies should sell at about seven to nine times 12-EBITD. And if interest rates go up, which seems inevitable, that number goes down. Why would you want more of them?

Warren Buffett sees this as clearly as the sunrise. Back when I was an analyst at Putnam Management in Boston, I remember a well-respected money manager, Ron Clark, telling me that once in the "good old days" General Foods sold at 20 times earnings (12 times EBITD). We are seeing the end of Version II of the "good old days."

It will not be pretty for consumer staples stocks that no longer should be seen as defensive, as they may be quite offensive to shareholders in the time ahead.

I am short Procter & Gamble Co. (PG) , Mondelez International Inc. (MDLZ) and Unilever plc (UN) .

Here is yesterday's column, "Warren Buffett Evolves as 'Ketchup Stand' Loses Value in Epic Retail Struggle," which "bears" repeating:

"In business, I look for economic castles protected by unbreachable 'moats'."

-- Warren Buffett

According to Warren Buffett, the wider a business' moat, the more likely it is to stand the test of time.

In days of old, a castle was protected by a moat that circled it. The wider the moat, the more easily a castle could be defended, as its width and depth made it very difficult for enemies to approach. A narrow and shallow moat did not offer much protection and allowed enemies easy access to the castle. To Buffett, the castle is a company's business and the moat is its competitive advantage. He wants his managers to continually increase the size of the moats around their castles.

Over history, when looking to purchase a business, Buffett has paid careful attention to a business he understands -- not just in terms of what the business does but also of "what the economics of the industry will be 10 years down the road, and who will be making the money at that point." He also looks for "enduring competitive advantages." This, in a nutshell, is what makes a company great: the width and depth of the moat around the company's core business.

In an important interview, skillfully conducted by CNBC's Becky Quick yesterday morning, Warren Buffett demonstrated the remarkable ability for the 87 year old to be flexible and non-dogmatic -- and, importantly, to identify that the definition of a moat has changed, in time, for the American retail industry.

This flexibility is yet another example of why The Oracle is the greatest modern day investor: he is adaptable.

For years Berkshire Hathaway /Buffett has acquired and extolled the merits of packaged-goods firms with multiple brands. After all, Kraft Heinz (KHC) , Berkshire Hathaway's (BRK.A) (BRK.B) second largest investment, was the merger of cheese and ketchup.

In the past Buffett used to say there is always money in the ketchup stand as Heinz ketchup will be prominently positioned on the dining room table for years to come.

But, as reflected in the CNBC interview, Buffett's views on the value of moats in consumer packaged-goods companies are undergoing a radical change in an epic retail struggle.

Let's go to the tape of yesterday's Buffett interview!

To Buffett, packaged goods have begun to struggle in the marketplace under the weight of other retailers' growing influence, reflecting growing size (Walmart (WMT) and Costco (COST) ) and the adoption of new technology in retail (Amazon (AMZN) ).

Buffett explained that today the possession of a wide number of brands is less significant (than it has been historically) and non-additive compared to having one dominant brand that is strong and appeals to the consumer. The greater the number of brands will no longer necessarily, The Oracle related, translate into a better negotiating position for shelf space nor will it preserve pricing advantages (that protect margins and profitability):

"If you have five items that might be served at dinner, that doesn't (and no longer) make you a lot stronger than having one."

To Buffett, the dominance of Costco and Walmart -- and now Amazon -- reflect a profound change to the competitive landscape for packaged-goods companies and have shifted the weight of power away from packaged goods towards mega-sized and innovative retailers.

As a result, Buffett suggested, in Becky's interview, that Kraft Heinz would not likely purchase Mondelez (MDLZ) in the future.

This seeming about face is similar to his seeming change in view of investing in technology. For years Buffett has avoided technology that he was uncomfortable analyzing as the space too often was faced with technological obsolescence. But, recently, with the purchase of interests in IBM (IBM) and Apple (AAPL) , Buffett has appeared to change his strategy and tune.

To me, the specific investment take is that the relatively highly prized and highly priced (read: valuations) consumer packaged-goods companies (like Mondelez, Unilever (UN) (UL) , Procter & Gamble (PG) and Campbell Soup (CPB) (which badly missed EPS expectations this morning) are quickly losing some of their relevance (and earnings power) and that their value to potential acquirors has been diminished.

Bottom Line

I would now avoid all of the publicly traded packaged-goods companies as the brand manufacturer is now disadvantaged (in its bargaining power) relative to the emergence of enormous and powerful retailers and because of the innovations at Amazon. (Reflecting diminished product pricing power, I would consider selling Kraft Heinz and P&G if I was long - as their "muscle" in the current epic retail battle has been lessened).

The influences discussed in this morning's opening missive and the Buffett interview will no longer cushion consumer packaged goods as models of safety or produce an assured and steady stream of profits and cash flows.

Stated simply, the consumer packaged-goods moats have been permanently damaged.