Over the last few weeks I have sold a number of my longs including (but not restricted to) all of my Dillard's (DDS) , Macy's (M) and Twitter (TWTR) holdings.
I have reduced the size of some others (e.g., Box (BOX) ).
At the same time I have added to some longs (Procter & Gamble (PG) , Comcast (CMCSA) , Campbell Soup (CPB) , etc.) and built up some shorts.
My methodology is not based on "feel" or one dimensional determinants. Nor is it based on the technical analysis of charts (though I respect the practioners ability to make money in that process).
Rather, I am fundamentally based in my investment process.
All of these actions have been determined by the relationship between what I have calculated to be fair/intrinsic value and the then share price -- and has had little if anything to do with my market views. (This exercise produces a risk/reward ratio).
My (SPY) (through puts now) and (QQQ) short hedges are a function of my market view -- we moved toward the higher end of my anticipated trading range -- which also takes into consideration my calculation of reward versus risk (determined again by the relationship of intrinsic value against share price).
This is why I do what I do.

* Goodbye T.I.N.A., Hello T.A.T.B.A
* "Treasuries Are The Best Alternative!"

At the start of the year the one-month Treasury bill yielded 1.24%.

Today the one-month Treasury bill yields 1.85% (+1 basis point on the day and +61 basis points from year-end), which is very close to the trailing 12-month dividend yield on the S&P Index of 1.89%.

If T.I.N.A. ("there is no alternative") drove the market higher, what does the market do when it has turns to T.A.T.B.A. ("Treasuries are the best alternative")?

My largest investment is in the asset class of short-term Treasuries.

Treasuries are the best alternative.

(GLD) turns green.
Adding.

Apple (AAPL) (my largest individual short) has reversed lower and is now -$3 from the day's highs.
Excluding FANG -- Facebook FB , Amazon (AMZN) , Netflix (NFLX) and Alphabet (GOOGL) -- where the jury is still out, the complexion of the market appears to be changing.
I am medium sized net short in exposure after more SPDR S&P 500 ETF (SPY) put purchases and the  (QQQ) short.

Goldman Sachs (GS) , General Motors (GM) and Starbucks (SBUX) -- these are stocks that should could concern the Bullish Cabal.
So too should the parabolic rise in FAANG -- Facebook FB , Amazon (AMZN) , Apple (AAPL) , Netflix (NFLX) and Alphabet (GOOGL) -- and the (extreme) relative performance of growth over value concern the Bullish Cabal.
Bond yields (low) and the yield curve (narrowing) are factors that should concern the Bullish Cabal.
The low probability attached to a large market drawdown should also concern the Bullish Cabal.
Among other things.

I have taken in some of my (SBUX) short just now at $51.08 - moving from large-sized to medium-sized.
I currently expect to keep my position at this size for the forseeable future.

As expressed recently, I continue to see a large accumulator of CPB stock in the market:

Just Wishin' and Hopin'

Jun 19, 2018 ' 11:08 AM EDT

Wishin' and hopin' and thinkin' and prayin'
Plannin' and dreamin' each night of his charms
That won't get you into his arms
So if you're lookin' to find love you can share
All you gotta do is hold him and kiss him and love him
And show him that you care

- Dusty Springfield, Wishin' and Hopin'

Over the last 5-8 trading sessions I have seen a large, consistent and persistent buyer in Campbell Soup (CPB) .

I am not a big "flow" guy (in stock or options) but this one is conspicuous.

Just wishin' and hopin' it can put a bow on a very good year!

The just released Supreme Court decision on the collection of internet taxes is helping my short (QQQ) cause now.

Big reversal in FAANG.

Bidding for more (SPY) puts.

FAANG reverses hard to the downside and I pressed my (SPY) puts and (QQQ) short.
Now medium sized short in net exposure.

In keeping with my opening missive Shades of 1999?, I am taking a small initial trading short rental in Invesco QQQ Trust  (QQQ) at $177.71.

I don't know if this is true but high above the Alps my Gnome is hearing more breakup rumors on (PG) .

"If everyone is going left, look right..."
--Sam Zell

Rupert Murdoch's Twenty-First Century Fox (FOX) is the object of a bidding war between Comcast (CMCSA) and Disney (DIS) .

Like Sam Zell, who in 2007 sold Equity Office Properties Trust -- the largest REIT in the U.S. -- for $39 billion, Murdoch is selling his lifelong and most significant asset, Fox, in a bidding war right at the top of the market.

Both are brilliant investors and businessmen; both know when to sell.

Sam called the top in real estate 11 years ago. Rupert Murdoch is calling the media top in 2018.

Reminiscing on Sam

Here are some things I have written about Sam in the past:

* An April 2017 review of his book, "Am I Being Too Subtle? Straight Talk From a Business Rebel":

Last night I received a gift from Sam Zell in the mail -- his new book, "Am I Being Too Subtle? Straight Talk From A Business Rebel"

I got up extra early (for me that is 4AM!) and I finished the book by noon today.

In his book, Sam explores his distinctly opportunistic professional and personal journeys.

My favorite chapter in the book is "A Godfather Offer" in which Sam describes the early 2007 sale of Equity Office, the largest REIT in the U.S, for $39 billion.

I particularly enjoyed the email reparte between Sam and another good pal of mine, Vornado's Steve Roth, in which Vornado made a counter bid against Blackstone for Equity Office.
The email exchange went like this:

Dear Stevie:

Roses are red

Violets are blue

I heard a rumor

Is it true?

Love and Kisses,

Sam

And Steve responded:

Sam, how are you?

The rumor is true

I do love you

And the price is $52.

To see if this poem will rhyme

We should talk at a set time

While to talk like this is nifty

We should really talk at three fifty.

Forever yours,
Steve

I am a big fan of Sam Zell.

Back in late 2006 I wrote a Barron's editorial entitled, "Look Who's Selling "; as you can see below, his sale made me think about the possibility of The Great Recession well before it was formed:

"THERE ARE SOME PEOPLE you just shouldn't trade against. Among them: George Soros, Stanley Druckenmiller, Steve Cohen, Ed Lampert and Sam Zell -- yes, the Sam Zell who recently agreed to sell his Equity Office Properties Trust to the private equity firm Blackstone Group. Shares of EOP, the largest real-estate investment trust specializing in commercial properties, have nearly doubled from the mid-20s in the fall of 2002 and now, at almost 50 a share, the value of one of Zell's jewels is relatively full. Zell accepted cash and the associated tax bill, which supports the view that he thought the price was rich...

SPECULATORS TOOK OVER and began to take a disproportionate role in the residential-real-estate market. Home prices kept on rising until they were elevated to levels that were out of reach for most buyers. Eighteen months after demand evaporated we still don't know where the bottom will be.

Today's boom in commercial real estate, like the bubbles that preceded it, has been fueled by the belief in a long, uninterrupted economic boom and a continued stream of equity and debt capital. Both could come to an end.

How? Let us count the ways:

(1) A more serious housing decline leads to a broader consumer-led global economic downturn than is generally expected.

(2) A continued fall in the U.S. dollar lowers purchasing power while the defense of the dollar raises interest rates.

(3) Foreign trade initiatives like protectionism and tariffs reduce confidence in the capital markets.

(4) A geopolitical event adversely affects confidence in the capital markets.

(5) A domestic event precipitates a loss of confidence and the figurative or literal closing of the capital markets.

(6) Failure of a deal or some other event precipitates a loss of confidence and the closing of the bridge-financing window.

We don't know what to expect, but that should be no comfort. The unexpected is what usually puts needles in bubbles."

At the end of the chapter on the Equity Office Sale, Sam contends that people incorrectly credit him with calling the top in the real estate market:

"The reality is I wasn't trying to. While I was certain the market was frothy, I wasn't selling to get out of the office market. I had simply received a Godfather offer."

To me and many others he did call the top -- nearly $40 billion says so -- despite his protestations

Regardless, "Am I Being Too Subtle" is a must read!

Run, don't walk to read it!

Bottom line

Too many ignored the statement underlying Sam Zell's sale of Office Equity in 2007.

The subsequent collapse in the real estate markets over the next few years after that sale was breathtaking.

Rupert Murdoch is making his own statement in the sale of Twenty-First Century Fox.

Be forewarned, as another top sign has emerged.

More ambiguous signs of economic growth are seen in the plunging Philly Fed data this morning.
This is one of the foundations of my negative market view.
I should be shorter but I will watch Mr. Market for signs of a price momentum change, with a particular focus on a potential FAANG blow-off.

My good buddy Peter Boockvar, chief investment officer with Bleakley Advisory Group, offers his thoughts on Europe and the European Central Bank:

The German auto maker Daimler's news last night where they cut earnings estimates due to the Chinese trade taxes is a sign that those impacted are not always who you think as supply chains crisscross everywhere. The taxes on Daimler are on the cars they make in the US (Alabama) that are then shipped to China. They said "Fewer than expected SUV sales and higher than expected costs, not completely passed on to the customers, must be assumed because of increased import tariffs for US vehicles into the Chinese market." A European company of course was not the target of a Chinese tariff. The same can be said of the US tariff on Chinese semiconductors where US companies will end up paying the tax.

Notwithstanding all the tariff noise, French business confidence in June held at 106 in May as expected as did the manufacturing component. Macron has really changed the entire attitude of the French economy for the better. The CAC is the best performing stock market of the major European countries. MFGA.

The Swiss National Bank remained dovish with its deposit rate at -.75% and showed no indication that it would start to raise rates. They remained obsessed with the strength in the Swiss Franc. "In light of political uncertainty in Italy, we have since seen counter movement, particularly against the euro. The situation on the FX market thus remains fragile, and the negative interest rate and our willingness to intervene in the FX market as necessary therefore remain essential." Because of this attitude, the SNB is trapped in not being able to raise rates until after the ECB does.

I've said this before but will again, whenever the downturn occurs in Europe in coming years, the region's central banks having not normalized anything will have no effective resources to deal with it.

The Bank of England again dragged their feet on raising rates as they kept policy unchanged BUT importantly the Chief Economist of the BoE voted to raise rates. The vote was thus 6-3. On the reality that they are finally getting closer to a rate hike, the pound immediately reversed itself and is now up on the day. UK gilts are also selling off with the 2 yr yield jumping by 6 bps to .77%. Their next meeting in August and odds are 70% they hike.

INTRADAY MOVE in the POUND after 6-3 vote

The one-day calm in China after the comments from the PBOC were short lived as the Shanghai comp sold off by 1.4% to the weakest level in two years. The H share index was lower by 1.2% and the Hang Seng was down by 1.4%. The yuan is also lower along with everyone else against the US dollar today.

The Philippines is another emerging market central bank that has had to raise rates to defend their currency and they did so again overnight by 25 bps. It's the 2nd hike in three months.

"Price action of the U.S. growth/value trade looks ominously similar to that of late 1999... Watch out for a growth bubble."
--Robert Buckland, Citigroup strategist

* Growth is outpacing value, to the degree last seen in late 1999
* FAANG may be in the blow-off phase
* According to my calculus, the market's downside risk dwarfs upside reward over the balance of 2018
* I am back to net short

Yesterday's opening missive outlined my strategy to deal with the new regime of volatility.
A recent 40-handle drop in futures caused me to cover my entire short SPDR S&P 500 ETF (SPY) position and to move to a net long exposure. The quick rally over the next two sessions resulted in a move back to net short through the purchase of defined-risk July $280 SPY puts, where I stand going into today's session:

Just Two More Things

Jun 20, 2018 ' 4:53 PM EDT

Stock quotes in this article:

FB, AMZN, AAPL, NFLX, GOOGL, SPY

"Just one more thing." (actually two things!)

-- Lt. Columbo

In looking at the possible blow-off in FAANG -- Facebook (FB) , Amazon (AMZN) , Apple (AAPL) , Netflix (NFLX) and Alphabet (GOOGL) -- coupled with the weakening close, I decided to add to my defined risk SPDR S&P 500 ETF (SPY) puts (for July at $280) and expand my net short exposure to between small and medium sized.
In addition, Growth's outperformance of Value (something I will try to address in my opener) is starting to resemble the early 2000 condition/extreme -- which marked an important top in the Nasdaq Index.
Secondly, German auto manufacturer Daimler just warned -- making yesterday's GM short cover really dumb.
"Peak autos."
Again, thanks for reading and enjoy the evening.

* The proximate cause for my tactical move is the possibility of a blow-off phase in the market-leading FANG stocks that is beginning to resemble late 1999. (I would note -- and what caught my eye -- was that most FANG stocks closed well off their highs yesterday in a weaker close.)
The relationship between a rapidly advancing growth sector relative to a moribund value sector (resembling the scene in late 1999) is seen in this chart:

* The optimism in tech has caught on with small traders -- another contrarian indicator to the downside:

* Looking toward the intermediate term, the downside risk relative to the upside reward is skewed dramatically negative over the balance of 2018 based on my calculus. Here are my risk parameters from yesterday:Market Downside: 2400 to 2450
'Fair Market Value': 2500
Trading Range: 2550-2750 to 2800
Current S&P Cash (adjusted for this morning's future rise): 2775
Here are the current reward-versus-risk parameters based upon the 5-handle rise in S&P futures, 2750 S&P equivalent:1. There are 350 points of downside risk against only 25 points of upside reward compared to the top of the expected trading range in my new pessimistic case (2400-2450). This is an overwhelmingly negative reward vs. risk ratio (14:1). 2. Compared to "fair market value" (2500), there are 275 points of downside risk versus only 25 points of upside reward. That's a negative 11:1 ratio. 3. Against the expected trading range, there are 225 handles of downside risk and only 25 points of upside reward (to the top end of the anticipated trading range). That's a 10:1 adverse ratio.
Bottom Line

Three factors concern me:
1. The relationship between growth and value is reminiscent of late 1999
2. Small traders are growing more optimistic and aggressive, a contrarian indicator
3. The downside risk dwarfs the upside reward according to my calculus