Let's close the week with a prayer for those who have suffered mightily this week. Not only the deceased named above (in this week's New Yorker) who were lost in the horrific tragedy in Las Vegas -- but also for their friends and families.

I beat prostate cancer a few years ago. I was interviewed over the years by this reporter, Mark Mooney -- who was less fortunate. I can't think of a better way to end the week by reading his "My Last Byline." 

Thanks for reading my Diary and enjoy the weekend with your families!

I just added to my SPDR S&P 500 ETF  (SPY) short at $254.30 -- in a quiet trading day.

And I have begun reestablishing an Amazon (AMZN) short at $992.

I thought Jim "El Capitan" Cramer's Costco post Why Costco Goes Down on Fabulous Numbers was brilliant and succinct.

Meanwhile, Amazon  (AMZN) is back to my shorting levels and on any further strength I will take up my very small short to medium sized.

Sentiment ebbs and flows for FANG stocks, including Amazon and the recent market strength has led me to give a wider berth of my short entry points

I have treated Amazon as a trading sardine -- making four successful trades in the stock. All the while I have kept a small short core position

I placed the stock on my Best Ideas List because of the existential threat of politics and anti trust -- which is likely to weigh down the shares...perhaps materially, if and when it develops.

It will be at that point when the stock becomes an investment short.

Regular readers of my diary know I sometimes post things that replicate the theme of the "Tell Me Something I Don't Know" segment on MSNBC's "Hardball With Chris Matthews."

So... "Tell me something I don't know, Dougie."

OK, here it goes:

Though the market is euphoric about the soft data and the economic growth prospects for the domestic economy, the New York Federal Reserve's Nowcast for 3Q2017 and 4Q2017 Real GDP Growth is only +1.5% and +2.5% respectively. 

"Be fearful when others are greedy and greedy when others are fearful."

-- Warren Buffett

I am going to write something that might seem hyperbolic but simply represents the reality of what I am seeing in my email.

There are two times in the twenty years that I have written for TheStreet that I have received extreme and overwhelming emotion in my email box.

The first time was in February 2009 - on the way to a Generational Low in Equities made soon thereafter in the first week of March, 2017. The universal fear expressed was nothing remotely close to anything that I have ever observed. The S&P bottomed in March, 2009 at 666 and now stands above 2545.

This week, specifically last night and this morning, was the second time. But in this case it was an expression of universal and unbridled investment euphoria that I too have never seen. A new paradigm of uninterrupted global economic growth, ever higher valuations, a cooperative Federal Reserve and a permanently low level of interest rates were some of the many reasons I was given in those emails for their projections of a continued and spectacular bull market. The sheer volume of optimistic e-mails has dwarfed the large amount of e-mails received around the generational bottom eight years ago.

Yes, we are buying high (many suggested) but we can sell higher. Extended valuation metrics, the historic role of global central bankers, unsustainably low interest rates, a mature economic expansion, political dysfunction be damned -- as it's different this time in the markets.

I am of the belief that history doesn't repeat itself but it sure does rhyme.

Clearly fundamentals are much more sound today that during the dot.com era, but other influences are even more extreme than in 1999-2000 -- including the central bankers' role, the dominance of passive investing (ETFs and machines) and its impact on the markets, generationally low interest rates (which have nowhere to go but up) and..... of course, elevated investor sentiment (the CNN Fear and Greed Indicator just hit 97/100 this morning).

Think about how some of the remarkable optimistic views embraced eighteen years ago (at an historic height in the Nasdaq) now exist today -- most importantly, like in 1999, when there emerged the untimely notion of The Long Boom(Wired Magazine). It was the thought, then as well, of a new paradigm of a likely extended period of uninterrupted economic prosperity and became an accepted investment feature and concept in support of higher stock prices!

To wit:

"We're facing 25 years of prosperity, freedom and a better environment for the whole world. You got a problem with that?

"A bad meme -- a contagious idea - began spreading through the United States in the 1980s: America is in decline, the world is going to hell, and our children's lives will be worse than our own. The particulars are now familiar: Good jobs are disappearing, working people are falling into poverty, the underclass is swelling, crime is out of control. The post-Cold War world is fragmenting, and conflicts are erupting all over the planet. The environment is imploding - with global warming and ozone depletion, we'll all either die of cancer or live in Waterworld. As for our kids, the collapsing educational system is producing either gun-toting gangsters or burger-flipping dopes who can't read."

-- Peter Schwarz and Peter Leyden, Wired Magazine (1997) " The Long Boom: A History of the Future, 1980-2020."

Pigs Get Slaughtered

"Bulls make money; bears make money; pigs get slaughtered."

-- Old Wall Street axiom

The dot.com boom ended badly with an 80% decline in the Nasdaq and two economic recessions in the next nine years (the later being the worst since The Great Depression). 

Pay attention to my emails this week.

A quiet opening with a slight bias lower after a hard rush to the upside yesterday.

Key features are:

* Continuing strength in the auto sector, led by General Motors (GM) ; I prematurely aborted a great trading rental earlier in the week.

* Mixed FANG, with Amazon (AMZN) an upside feature (but beginning to weaken from early strength) and Netflix (NFLX) continuing its run higher.

* Financials stronger on the bond market weakness, led by the life insurance sector.

* Retail and biotech are mixed.

With the CNN Fear & Greed Index now at 97, I have added to my large SPDR S&P 500 (SPY) short.

For me, it is time to be fearful when others are greedy.

I am staying the short course after reducing my gross exposure earlier in the week.

The Lindsey Group's Peter Boockvar chimes in on the jobs report:

The hurricanes distorted payroll figure in September was a decline of 33k, well worse than the estimate of +80k. Private payrolls fell by 40k vs the forecast of +75k. Stating the obvious, the BLS specifically said "a sharp employment decline in food services and drinking places (down by 111k) and below trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey." To quantify, there were 1.47mm people that didn't show up for work due to the 'bad weather.' Remember, "employees who are not paid for the pay period that includes the 12th of the month are NOT COUNTED as employed." There was a dramatic increase however in the household employment survey of 906k jobs (663k came from the important 25-54 yr olds) which combined with the increase of 575k in the labor force sent the U3 unemployment rate down to just 4.2%. In this survey, "persons with a job are COUNTED as employed even if they miss work for the entire reference week, regardless of whether or not they are paid." Thus, importantly on the household survey with respect to the storms, the BLS said "There was no discernible effect on the national unemployment rate." The U6 fell 3 tenths and is down to 8.3%. The pre-recession low was 7.9%.

Reflecting the large rise in the size of the labor force, the participation rate rose 2 tenths to 63.1%, matching the highest since September 2013. The employment to population ratio rose to 60.4%, the most since January 2009. And finally we saw a sharp rise in wage costs as average hourly earnings rose .5% m/o/m and 2.9% y/o/y which matches the quickest pace since May 2009. As hours worked remained unchanged, average weekly earnings also rose by 2.9%.

Also of note, there was another drop in those working part time 'for economic reasons' (lower slack work offset rise in 'can't find full time'). There was also a fall in those 'not in the labor force' who 'currently want a job' but still is above its level of a few months ago.

Bottom line, we can of course put aside the establishment survey. It was the household survey that really made the news with the sharp increase in those working, the drop in the unemployment rate and jump in wage growth. The implications for Fed policy is all over this rise in wages as the market starts to not just fully price in a rate hike in December but at least another one next year. We know the Fed has plans to hike 3 times but we have no idea who is going to be running the institution next year. If its Powell, he'll go along with 3 more. If its Warsh, expect more than 3. Certainly QT will continue apace.

The 2 yr note yield is at a fresh 9 yr high at 1.52% and the 10 yr yield is at 2.40%. Also, European sovereign bonds are at the lows of the day in response with the German 10 yr bund yield kissing .50% again.

AVERAGE HOURLY EARNINGS

The hot wage print pretty much insures a Fed rate rise in December.
The yield on the 10-year U.S. note has increased by more than three basis points.

My pal Peter Boockvar, chief market analyst with The Lindsey Group, says "we are almost there" and discusses other indicators:

Only 5 more points to go in the CNN Fear & Greed Index. I want to make clear though that this is just one survey and should only be used as another short term trading tool even though I don't really know its usefulness in timing markets.

And, we're almost there. The price to sales ratio in the S&P 500 is just 4% from the peak in March 2000 and 32% above the last cycle top in 2007. We all know valuations mean nothing in the short term until they do but they do mean a lot in trying to figure out what the longer term potential market returns are.

PRICE TO SALES RATIO S&P 500

Notwithstanding all the evidence of a shortage of labor in Japan, base pay continued its anemic growth rate in August with a .4% y/o/y rise vs .5% in the two prior months. Only with a 1.5% boost in overtime pay and a 6.1% jump in bonus' did the overall cash earnings number print up .9% y/o/y (which by the way is the most in a year). The issue of modest pay for full time workers and more generous pay for part time workers (because of Corporate Japan's reluctance to take on full time staff) remains. The 40 yr JGB yield did trade off modestly on the better headline number and closed the week with a yield of 1.10%, up by 1.4 bps and matching the highest in 20 months. The 10 yr Japanese inflation breakeven was up by 1.6 bps to just below a 3 month high. Modest yen weakness helped the Nikkei close up .3%.

Markit reported Hong Kong's September PMI index and it rose to 51.2 from 49.7 but the internals were mixed. Markit said "Hong Kong's private sector economy showed signs of recovery at the end of the third quarter but business sentiment remained downbeat. The latest PMI survey signaled renewed growth in output and order books although the labor market continued to struggle." In trying to glean what this means for China, the 2nd biggest economy in the world, "while demand for Hong Kong's products and services were reported to have strengthened, there was evidence that Chinese orders had faltered. Survey data indicated that sales to mainland China fell for the 1st time in 5 months. Anecdotal evidence suggested that yuan depreciation and policy restrictions had dampened Chinese demand." This confidence figure (along with many) is not market moving but the Hang Seng did close up by .3%.

After a soft July, German factory orders in August came back strong with a 3.6% m/o/m jump. That is well above the estimate of up .7% and the y/o/y gain was 7.8%. The strength was driven by non eurozone countries and also from within Germany. Orders from within the eurozone was negative for a 3rd straight month. The German Economic Ministry said "Order activity has increased once again from an already high level" and they expect this to continue. With growth outside of the eurozone, this also means that the recent strength in the euro has had no impact on business. The German 10 yr bund yield is up by 2.3 bps to match a 2 month high at .48%.

We also saw Spanish industrial production in August come in better than expected with a 1% m/o/m rise vs the estimate of up .2%. The European economy remains on track for a solid year for them with 2%+ growth.

The British pound continues to have a crappy week as now I'm hearing calls for Theresa May to resign over the early goings of Brexit negotiations. The pound is down 2.5% on the week vs the US dollar and is at the lowest level in a month.

On Wednesday I explained why I would avoid Teva Pharmaceutical Industries (TEVA) :

I know by the Comments Section that there has been a lot of bottom fishing in Teva (TEVA) .

I had done a few hours of research on the company over the last months and passed on the name.

I would continue to avoid the shares based, in part, on the following:

* Consensus estimates (which were close to $4.00/share) are still too high. The new CEO is likely to reset earning expectations towards the $2.50/share (this was a typo on my part - it should have read $3.50) level, reflecting continued generic competition and the impact on pricing and profitability.

* Teva's equity cap is only $16 billion, but its enterprise value is almost $52 billion. The company's debt load is large ($36 billion) and interest (on that debt) relative to EBITDA is stretched.

* Though price to sales and price to book value seem attractive -- it could be a value trap given the fundamental uncertainties and the financial risks associated with the above.

I will expand on my analysis later in the week.

Later that day, Bret Jensen delivered a thoughtful analysis of Teva. Bruce Kamich and Paul Price also contributed their views on Oct. 4.

While Teva's shares appear inexpensive relative to current earnings, price to book and price to sales, the earlier-than-expected approval of Mylan's (MYL) generic version of multiple sclerosis drug Copaxone increases the biggest challenge that Teva faces -- namely, its leveraged balance sheet, which remains compromised and potentially threatened by rising generics competition and lower drug price realizations.

Copaxone 2018 sales likely will fall from $3.8 billion to $2.35 billion (accounting for most of an expected decline in overall company sales from $22.7 billion to $21.1 billion) and decline by another $600 to $700 million in 2019 and a few hundred million dollars more in 2020.

Two years ago Teva earned $5.42 a share; it now is estimated that the company's EPS will decline through 2020. EPS for 2017 is estimated at $4.25. I can see Teva's 2018 EPS as low as $3.25 (in a range of $3.25 to $3.55) compared to the consensus of $3.92 (according to Bloomberg). EPS for 2019 will be lower and is forecast at $3.10 to $3.35.

Return on equity (ROE) peaked at close to 18% in 2015 and will be steadily dropping on a yearly basis, settling around 10% in 2019. Similarly, gross margins, at 62.2% in 2015, likely will decline to 53% in the next few years.

A realistic cash flow analysis using a 9.75% weighted cost of capital produces a 12- to 15-month value of about $19 a share, but high debt levels, still-deteriorating generics pricing, the possibility of incremental generics competition and disappointing traction in the company's attempt to rebuild its branded pipeline will create a degree of operating uncertainty that easily could take that target lower.

I continue to pass on Teva shares despite its large price decline over the last 12 months.

From Joe Weisenthal: