NBC and other news agencies report that North Korea has fired a missile over Japan.
S&P futures are only down by five handles, indicating even the algos don't care any more!

CalPers is slashing pension payment to retirees in two more California towns by 70% to 92%.

Former Fed Chairman Ben Bernanke likely didn't think about this when he lowered rates to zero -- and current Fed Chairman Janet Yellen is probably also not putting much weight into this factor as she guides monetary policy in the U.S.

So far we've only seen the upside of low interest rates. It's like living in the Florida Keys -- it's all sunshine until the storm hits and then it's indescribable devastation.

Thanks for reading my diary today -- I hope you enjoyed the show.

Have a great evening.

From Neil "The Real Deal":

From M* supporting Doug's focus on WFC. I disagree and think there are good values but I do respect their work.

Many of the U.S. banks we cover presented at the Barclays Global Financial Services Conference over the past three days, giving updated takes on guidance and views on the industry and the U.S. economy. Overall, not much changed, with only slight adjustments to guidance levels. Despite many positive industry trends, we don't see many compelling valuations within the U.S. banking sector. Best idea Wells Fargo is the main standout, trading at a 23% discount to our fair value estimate, while many of our regionals, despite our assumption that a tax cut will take place, still trade at or even above our fair value estimates.

Several key themes emerged during the conference, including the consistency of low deposit betas, continued efforts to improve operating efficiency, increasing capital returns to shareholders, and marginally slower loan growth for the third quarter. The universal U.S. banks also mentioned a likely reduction in third-quarter trading revenue. We believe investors should not overreact to these short declines in loan growth or trading revenue. As for trading, volatility may have remained low over the summer, but we don't expect markets to remain calm forever. At the same time, a tight rein on expenses across the industry in recent years should pay off once volatility returns. For loan growth, once uncertainty abates surrounding key proposals in Washington, such as those related to tax reform, we believe commercial investment and mergers and acquisitions should pick up more.

Ss (S&P) over Ns (Nasdaq) -- as clear as day.

Great for ProShares Trust UltraPro Short QQQ ETF  (SQQQ) long, not so much for ProShares UltraShort S&P500 ETF (SDS) long.

The iShares 20+ Year Treasury Bond ETF (TLT)   is back to day's highs -- equities not watching (or following) in that direction, though.

Again, another day of ridiculous non volatility -- in the extreme!

Adding to my already large position in Nordstrom (JWN) at $46.60.

More disruption announced this week -- this time in the exchange traded funds industry.

Goldman Sachs (GS) (Asset Management) has announced a new ETF -- a smart-beta product that tracks an equal weight index of roughly 500 large cap entities.

Traded under the ticker GSWE, the product will have only a 0.09% expense ratio -- far less than most smart-beta products whose expense ratio is typically between 0.24% and 0.39%.

This can be viewed as a negative to Blackrock (BLK) .

This is yet another day of remarkably narrow range bound price action.

My only trade, which I have added to, is to short the SPDR S&P 500 ETF  (SPY) -- my cost basis today is $250.02.

Otherwise, like Chance the Gardner in "Being There" ... "I like to watch." 

Nice $11 break in Amazon (AMZN)  from the opening -- good for the shorties.

File today's IPO of the special purpose acquisition company Social Capital Hedosophia (IPOA) as another top-of-the-market signpost.

At hospital so I don't have much access.
My stock screen seems locked -- with little price movement.
Bonds appear to be rallying a bit (to day's high) -- my negative market 'tell' which has not been telling much!

For those keeping score at home:

As I postulated yesterday, the three-day trading range for the S&P 500 is the smallest (0.3 percentage) on record.

Mr. Market seems to have reverted back to nonexistent volatility around a narrow trading range .
The only rotation I see is from the NFL to the NHL!

Everybody loves debt!

I don't have a dog in the Equifax (EFX) fight, but if you do read this!

iShares 20+ Year Treasury Bond ETF (TLT) turns up in the premarket (about 40 cents) after the latest economic data and yields turn lower.

Ten-year yield now under 2.19%.

Good sale of Trade of the Week ProShares UltraShort 20+ Year treasury (TBT) yesterday!

The Lindsey Group's Peter Boockvar comments on inflation and jobless claims (S&P futures slipped a bit on the news):

Initial jobless claims totaled 284k, 16k less than the forecast which was of course boosted to take into account the hurricane stricken regions (wasn't just Houston as claims were estimated for Florida, South Caroline and Georgia in anticipation of the storm.

Bottom line, outside of the influence of the hurricane damaged areas in Houston, the story remains the same in that the pace of employees getting let go is modest in light of a labor market where good help is tougher to come by as supply dries up. Yes, there are plenty of people still on the sidelines for whatever reason but it's obvious it's going to take more incentives to bring them back.

August CPI rose .4% headline, one tenth more than expected and the core rate was up by .2% as expected. This brings the y/o/y gains to 1.9% and 1.7% respectively vs 1.7% for both in July. Leading the core rise was a pickup in services inflation ex energy which was higher by .4% m/o/m and 2.5% y/o/y (although down from the 3% pace seen over the past few years). Notwithstanding more supply in some of the big cities, rent growth overall remains a big problem for many as Rent of Primary Residence rose .4% m/o/m and 3.9% y/o/y. The other major cost of living, medical care, did moderate with just a .1% m/o/m gain and 1.8% y/o/y rise but with high deductibles eating into discretionary income, don't take too much comfort in that.

Goods prices is where the deflation remains as prices here fell by .1% m/o/m and .9% y/o/y. New car prices were flat m/o/m and down .7% y/o/y. Used car prices were down again m/o/m and lower by 3.8% y/o/y. Houston will definitely help relieve some of the inventory problems in the industry. Apparel prices rose m/o/m but are still down y/o/y. Wireless prices that the Fed seems obsessed with wanting to go higher were instead lower by 13.2% y/o/y and .1% compared with July.

Bottom line, again we have services inflation (although off the faster pace last year) led by rent growth and goods deflation (as is typical depending in part on where commodity prices mostly are). Keep an eye though on the goods deflation as the recent rise in commodity prices works its way into the supply chain. Either way, this data doesn't impact what the Fed will do next week (start QT) and I believe they will be raising interest rates again in December if the S&P 500 reacts fine to QT.

After having covered my Amazon (AMZN) short at around $950 I suggested I would re-establish a medium-size short at $975 to $980.

With the market's strength I decided to give the stock a wider berth.

I just began to re-establish a more significant AMZN short in premarket at $999.

My thesis remains the same -- that political and antitrust forces represent an existential threat to the company's horizontal and vertical expansion plans.

I am still small in size, however.

Bitcoin is down by another 6% to about $3,645 this morning after suffering a similar decline yesterday.

Yesterday I cautioned about investing or trading in this "asset class."

I don't give two bits for bitcoin, and two bits (25 cents) may be where it is headed!

Anecdottally:

* Bombastic John McAfee was interviewed on CNBC yesterday in support of bitcoin. He is not an authoritative source to say the least and his rationale was vague and non-rigorous. Let's go to the tape so you can decide! 

* Reminding me of the day-trading community in the late 1990s, I have six separate friends whose children are trading and investing in bitcoin on a full-time basis. Res ipsa loquitor.

I continue to build my sizable SPDR S&P 500 (SPY) short in premarket trading.

$250.05 is the cost this morning on the incremental shorts.

In the early-morning bond session, the yield on the 10-year U.S. note touched 2.20%.

That was my short-term objective in my Trade of the Week, long ProShares UltraShort 20+ Year Treasury (TBT) . (Remember, the yield closed at 2.06% last Friday). 

Yesterday I sold out of TBT for a profit

My expectation is for the yield to be range-bound over the balance of the year -- 2.1% to 2.4%.

As it relates to my equity portfolio, I don't think that relatively low range will be market-friendly for financials.

I remain short Bank of America (BAC) , Citigroup (C) , JPMorgan Chase (JPM) , Goldman Sachs (GS) , Morgan Stanley (MS) , MetLife (MET) and Lincoln National (LNC) .

My only long in the financial space is Wells Fargo (WFC) .

My pal Peter Boockvar, chief market analyst with The Lindsey Group, writes about a Bank of England decision and a softening China:

While they just couldn't find the gumption to do it today, the Bank of England is finally laying the groundwork for a rate hike. After all, the lowest unemployment rate in 42 years and inflation relative to wages becoming a real problem makes the case for doing nothing pretty flimsy. The vote was 7-2 as expected. They said "Recent development suggest that remaining spare capacity in the economy is being absorbed a little more rapidly than expected at the time of the August Report, and that inflation remains likely to overshoot the 2% target over the next 3 years." Three years they estimate and they still couldn't hike rates today! But, they are telling the market that they are way too modest with their rate hike expectations: "if the economy follows a path broadly consistent with the August Inflation Report central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than current market expectations." On when that first rate hike will take place and assuming things carry on as is, "some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target." It's about time in light of the real wage squeeze on the UK citizenry. Wages rising in line with inflation is tolerable. Inflation rising without a commensurate gain in wages and no interest income on their savings is making people poorer. I say that last point to all central bankers at the ECB, Fed and BoJ too among others.

The pound ripped higher in response to the groundwork being laid for a rate hike and the 2 yr yield is up by 4 bps to .34%, the highest since early July. See chart of the move in just the past week.

2 YEAR GILT YIELD

The economic data out of China overnight missed expectations across the board for August. Retail sales were up by 10.1% y/o/y vs the estimate of 10.5% growth and a modestly slower pace from the 10.4% seen in July. It also is the weakest print since May 2016. Industrial production grew by 6% y/o/y, down from 6.4% growth in July and lower than the estimate of 6.6%. That pace matches the slowest since October 2015. Keep in mind though that part of this slowdown within IP is purposeful in that old and out of date commodity capacity in steel, aluminum, etc... are being shut down. With fixed asset investment, it was up by 7.8% ytd y/o/y, also below the forecast and down from August. It's also at a level last seen in 1999. Also of note, while property development rose a still robust 8% y/o/y, home sales were up at the slowest rate in about 3 years at 3.8% in response to buying restrictions. Bottom line, whether it's due to attempts at capping inefficient and excess supply in industrial metals or due to the impact from greater government focus on slowing the rate of huge credit growth, aka deleveraging, by reining the non bank credit side, China's economic growth will continue to slow in coming years and is now likely moderating again after the first half stabilization.

One other data point from China of interest. In response to the Chinese government's disgust with movie theater companies buying soccer teams (to use as an example), China company investment outside its shores fell 42% ytd y/o/y in August. Foreign investment in China though was up 9.1% y/o/y but higher by just .2% ytd y/o/y.

The economic news is sending the yuan down for a 5th straight day and is at a 2 week low vs the US dollar. The Shanghai comp was lower by .4%, the H share index was down by .8% and the Hang Seng was weaker by .4%. Also, copper is down by 1.4% and lower for a 3rd straight day. It's now down 7% from last Wednesday's 3 yr high.

The China proxy that is Australia saw the ASX down by .1% but the Aussie$ is higher and bond yields are jumping after they reported a much better than expected jobs number for August. Employment rose by 54.2k, well more than the estimate of 20k and the participation rate rose to a 5 yr high while the unemployment rate held at 5.6%. The RBA for now is sitting tight with rates but more numbers like this and they will be going higher. The RBA doesn't believe in negative real yields.

JPMorgan downgrades Opko Health (OPK) to neutral and initiates Berkshire Hathaway (BRK.B) with a buy.

Overnight markets are quiet and little changed.
I am in a bus to New York City this morning to attend to a family health issue.
My posts will be delivered frequently today but they will be less lengthy.