I continue to add to my long term investment in gold.
I am a scale buyer (lower) - and should  (GLD) fall to $118 I will have about a 5% weighting in the asset class.
Which, for me, is an outsized investment in a speculative asset.

Regarding my earlier post on "Timeframes and Expectations" I want to state that it is important to emphasize that this exercise is not meant to imply precision of forecast - its just an exercise I use to develop a guideline to trading and investing.

Nice pickup in (DWDP) earlier this week - I am a $65.50 buyer on any weakness.

Again for emphasis.
Strictly on a trading basis I believe that FAANG had a blowoff high about 10 days ago and could underperform in the period ahead - even if stocks continue to climb a bit more.

Here is a good summary of 2Q2018 sector and asset class performance by the very Rev Shark.

I have added to my large (CMCSA) long - based on the hope that CEO Roberts covets his stock price (and wealth) above the need to pay a silly price for Fox (FOXA) .
Stay tuned.

I will be out to lunch between 12-2 with some friends.

So radio silence then.

Hopefully it will be a liquid one.

This week's Trade of the Week, Northrup (NOC) , is on a nice move today.
I added in early trading.

"Too much of a good thing can be wonderful."

- Mae West

I added to (C) , (JPM) and (BAC) on the early morning dip off of the day's highs.

Wells Fargo (+$3.40) = "The World's Fair"

I have consistently had a contrarian and bullish view on this maligned bank.

I continue to do so - (WFC) remains my largest bank long.

Peter Boockvar on inflation and spending, oh my:

The Fed's fav inflation number is the PCE and not the CPI and the May PCE index was up .2% m/o/m both headline and core. The headline figure is now up 2.3% y/o/y, the most since March 2012 and the core rate was up 2% y/o/y, also the most since early 2012. High fivin' in the Eccles Building that they've achieved their target and given us higher inflation!

Consumer spending was up .2% m/o/m, half the estimate and April was revised down by one tenth. We will see a reduction in Q2 GDP estimates as a result. Real personal spending in May was zero as a decline in household utility spending (led to a decline in services spending) offset an increase in spending on goods (most nondurable ones).

The positive within the data was the 4.9% y/o/y increase in private sector wage and salary growth which is holding around the best level in this cycle. Overall income growth was up 4% y/o/y, the 2nd best print since 2015. As a result of the .4% m/o/m gain in income and .2% rise in spending, the savings rate rose two tenths to 3.2% after falling by two tenths in April and is still hovering near 10 yr lows.

Bottom line, with inflation now at the Fed's target and a fed funds rate that is still negative on a real basis, the Fed will keep on keeping on with rate hikes and balance sheet shrinkage. On the latter, it will pick up to $40b per month beginning Monday (and now will fully offset the 30b euros of ECB QE). The income number was good and reflects the tight labor market while spending estimates will get trimmed a bit for Q2. On the spending miss and inflation on target, the 2s/10s spread is now down to 32 bps.

SAVINGS RATE

Berkshire Hathaway (BRK.A) (BRK.B) is bursting at the seams with a record cash horde.
Although I don't know this to be true, high above the Alps my Gnome is hearing that the holding company is looking at several large acquisitions - one such deal, he hears, may be imminent.
Some obvious targets could include Colgate Palmolive (CL) or Deere (DE) .
But, my knowledge of Berkshire suggests the target company could be an unexpected one.

We have subscribers with differing risk profiles (from day traders to long term investors) and with differing timeframes.

So since our audience is diverse, let me briefly spell out my timeframes and investment expectations:

Short Term (in the next five trading days)

Higher, but not materially so. 2750-2775 seems a reasonable guesstimate.

I plan to scale into a net short position on strength, but I will give the market a wider berth today and into the first few days of the second half (inflows expected).

Short Term (in the next two months)

Lower, but not materially so.

I expect a series of tests of the S&P level 2675-2710.

Intermediate Term (in the next six months)

Lower, a break towards "fair market value" of about 2500 is my expectation.

Finally, here are my risk parameters for 2018:

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 drop): 2730

Surprise #4: The Cryptocurrency Bubble Pops

By means of background and as discussed previously in my Diary, bitcoin is a cryptocurrency released as open source in 2009. Bitcoin is a bearer instrument that provides a peer-to-peer exchange, allowing users to exchange bitcoin anonymously based on a trusted blockchain public ledger that does not rely on a trusted third party. I have recently written several columns about bitcoin:

*Woodstock or Bitcoin?

* Boca Biff Does Bitcoin

* Why Bitcoin Is En Fuego and Where It Might Go From Here

My Surprise is that though bitcoin becomes ever-more popular over the near term and rises to more than $21,000, the price plummets to under $2,000 during 2018.

The publication of this surprise -- that bitcoin will collapse in price in 2018 -- results in growing public criticism on Twitter and elsewhere from bitcoin devotees over the next few weeks toward me. I am called a "no coiner," a term given to bitcoin disbelievers such as myself. "No coiners" are defined as people who missed out on the rise in the price of bitcoin and have become skeptical and bitter, and who state that it's only a matter of time before the price collapses because it's a collective delusion.

In early 2018 the popularity of cryptocurrencies such as bitcoin crests. Bitcoin ATMs even become commonplace in Boca Raton, Florida, reminding us of the historic relationship between that town and past frauds and schemes. (Boca Raton has been the home of so many fraudulent schemes -- currency trading schemes, rare coin scams and the sale of timeshares for fictitious vacation homes. Former Securities and Exchange Commission Chairman Richard Breeden famously said that Boca Raton is "the only coastal town in Florida where there are more sharks on land than in the water.")

My surprise is that bitcoin trades above my target of $21,119 by early January but crashes in 2018 to under $2,000 and falls toward and eventually below the cost of mining the cryptocurrency, which today is about $1,000 to $1,500.

The initial pause and sizable break lower in bitcoin's price is when market participants begin to realize more fully that the supply of cryptocurrencies, in the aggregate, is unlimited with low entry barriers. The threat and realization of this risk is prompted by Apple Inc. (AAPL)  and Amazon.com Inc. (AMZN) , which introduce their own easy-to-use and faster cryptocurrency blockchains. (Note: Amazon already has received a patent for its own blockchain technology -- 8,719,131 -- see here and here.)

JPMorgan Chase & Co. (JPM)  causes a stir after CEO Jamie Dimon's previously negative comments on bitcoin by introducing "JPMorgan E-cash," its own cryptocurrency. Soon thereafter, other banks follow suit. As well, several governments (including the U.S.) introduce their own government-based cryptocurrencies based on their desire to continue to control policy levers such as money supply and fiscal policy.

The eventual demise for bitcoin commences in earnest when it is revealed in a New York Times expose that less than 10 entities, mostly residing in China and Japan, are found to have manipulated the price of bitcoins higher in Ponzi-scheme fashion over the last two years. The cryptocurrency bubble finally collapses in dramatic fashion and falls in value by 90% as a result of direct government intervention and a successful hacking where thieves penetrate the blockchain code and steal a large amount of coins.

Several large, well-known hedge funds desperate for "alpha" are caught with their pants and portfolios down and with a large weighting in bitcoins and other cryptocurrencies; they lose more than 30% of their funds' assets and value and are forced to liquidate their cryptocurrency holdings and close their funds.

Bitcoin will ultimately assume a permanent place in the Speculative Hall of Fame, along with tulips (1636-37), the dot.com bust (1999-2000), the housing bubble (2005-07) and the South Sea Bubble (1711-20), as traders and investors learn the lesson, once again, that an asset class founded on the notion that there is a greater fool who will be willing to buy that asset for more than the previous fool paid, almost always ends in disaster.

The year 2018 will be one in which investors come to understand that blockchain technology -- a distributed database of records of transactions that are executed and shared among participating parties and are validated by a network of users, called "miners," who contribute computing power in exchange for the chance to garner coins using a shared database and distributed processing -- is real (each transaction is encrypted and can't be replicated or altered), but that bitcoin is a mirage and becomes, like many past schemes, a byword for Ponzi-like nostalgia.

- 15 Surprises for 2018

Next week I will review how my 15 Surprises for 2018 are faring.

One of those Surprises, was that the price of bitcoin would fall to under $2,000.

Trading now at $5,865, I consider this... "Mission Accomplished."

The absence of regulatory oversight, the lack of tax authority (money laundering is commonplace), the unlimited supply of new crypto currencies and the lack of security (seen in the regularity of hacks) formed some of my rationale for a negative view on bitcoin and most crypto currencies.

Frankly, I am shocked how many reasonably intelligent venture capitalists, innovators and otherwise professional investors have been duped in the crypt currency space.

Bitcoin is a mirage and is on the way of becoming, like many past schemes, a byword for Ponzi-like nostalgia.

As Peter Boockvar says, you hit me and I hit you back:

While we will celebrate our birthday on Wednesday, Canada does on Sunday (151 years) and on that day they will also put tariffs on about $15b of US goods in response to our steel and aluminum tariffs on them. Some of the items hit are also steel and aluminum and orange juice, coffee, toilet paper, circuit breaker panels, washing machines, motorboats, whiskey mustard and beer kegs. The Canadian consumer and American business (and its workers) will get hurt. I'll state the obvious again, unless we get resolution soon, with better deals and lower tariffs everywhere, global growth will go down and inflation will go up.

In the more up to date inflation metric in Japan, that of just Tokyo in June (whole country data follows next month), was higher than expected. CPI ex food was up .7% y/o/y, up from .5% in May and one tenth more than expected. The rate ex both food and energy was higher by .4% y/o/y, twice the level of May and also one tenth more than forecasted. That doesn't sound like much but it is the 2nd highest print since June 2016. Because it wasn't data on the whole country, JGB yields aren't moving but Tokyo is usually a precursor for the national data.

Japan's labor market got even tighter in May. Their unemployment fell to a microscopic 2.2% from 2.5% and the estimate was for no change. Go back to the summer of 1992 to see something similar. The job openings to applicant ratio rose to 1.60 from 1.59. In January 1974 it was only higher. How can wages not accelerate higher in this environment? Japanese workers are still skeptical. In today's consumer confidence figure, the Income Growth component fell to the lowest level since August 2017. This said, regular base pay has been trending up.

Mario Draghi finally got to his 2% inflation target as June CPI was up 2% y/o/y as expected, up from 1.9% in May. This matches the fastest inflation since December 2012. Higher energy prices were the main factor as they jumped by 8% y/o/y. CPI ex food and energy was up by 1.2% which is steady with the trend. Their core CPI which also takes out alcohol and tobacco was up by 1%, also on trend. Services inflation was higher by 1.3% vs 1.6% in May and 1% in April. Bottom line, nothing here will change the ECB plans because the core rate is not accelerating but is still quite stable. The euro is rising but some of that is due to the German migration deal with other countries.

Germany and France both reported unexpected y/o/y declines in May retail sales. German sales were very weak in particular, falling by 1.6% y/o/y vs the estimate of up 1.9%. This is even with a pretty solid labor market but tariff worries are real. In June, unemployment fell by 15k, twice the estimate as the unemployment rate held at 5.2%, the lowest since Checkpoint Charlie fell.

South Korea, an important country to watch in the gauging global trade trends, reported industrial production higher by .9% y/o/y as expected for May. As it is pre tariff implementation, the June and July data will be more relevant.

The yuan broke a 6 day losing streak and that helped to lift Chinese stocks which did bounce back by about 2% to end the quarter. Almost every single market in Asia too rallied. For those with a time horizon longer than a year or two, I am bullish on the emerging markets of Asia. You want the most vibrant regional growth over the next 10 years, this is where you are going to get it.

* Looking in the past and looking forward -- politics has become more important than the central banks' actions in determining stock market behavior
* CCAR results set the stage for an extended period of higher banks stock performance"It was all night pouring, pouring rain, but not a drop on me."
- Grateful Dead, Bertha
As of 5:30 am, S&P futures (+13 handles) are nearly +40 handles above the premarket lows of Thursday (where we covered our (SPY) short position). This may be testimony to:
* Quite a bit of luck.
* The willingness to unemotionally trade within an expected trading range during non traditional market trading hours ("I am a pajama trader and proud of it").
* A positive market reception to good CCAR results - and an after market climb in bank stocks.
* A marked reversal from general market optimism to market skepticism seen in the investor sentiment studies highlighted by the Divine Ms M and Peter Boockvar.CCAR Results
Dont' let others' negativity take you down, stay positive - is the theme of the Grateful Dead quote I start today's missive with -- particularly as it relates to the substantive return of capital that large money centers will now undertake.
Traders (and business commentators), who likely never even analyzed bank balance sheets and income statements, were downtrodden and had begun to look unfavorably on the group into yesterday's CCAR results in large measure because of 12 consecutive daily down days for the group.
Banks remain my largest individual industry exposure. The industry is woefully over capitalized and will be returning capital back for years. With solid, expanding and almost monopoly like deposit bases (which grew through Fed friendly and assisted acquisitions as an outgrowth of The Great Recession of 2007-09), this asset sensitive industry will prosper, over the long term, as interest rates inevitably rise.
Should interest rates normalize (to above consensus levels), which I believe to be ultimately likely, the value of those low cost deposits will rise exponentially. And so will bank industry profits.
Though I am attracted more from the standpoint of a multi year opportunity, last week I opined that a short term price reversal/opportunity may have also developed over the near term. Donald Trump and the Markets

"Donald Trump Will Make Economic Uncertainty and Market Volatility Great Again. #MUVGA!"
- Kass Diary
The second quarter of 2018 was period in which politics, specifically the combative actions of our President, transcended (in importance) even the actions of central banks.
I expect this to be the case in the last half of this year.
The traditional view appears to be that Trump's hardline tactics with China is another example of "The Art of the Deal," where strategy can suddenly make a U-turn and the White House can declare a win.
I respectfully disagree and view the Administration's stance as an act of economic warfare based on spurious economic theory. (The relationship between imports and US GDP is not inverse as Navarro and Lighthizer apparently believe. Rather, over history, there is a direct relationship between deficits and US GDP).
Moreover, it appears that Trump is targeting a more combative strategy against China's upgrading of its economy in an attempt for the US to maintain global economic leadership. As such, Trump's China policy may be more than just tariffs.
I see the policy relationships between the US and China as well as with Mexico, Canada and others jeopardizing and souring previous bilateral relationships as a broader protectionist strategy that could "have a life of their own." This could have a meaningful impact on business and investor, global economic growth and on our markets.
That economic impact could even be more deleterious than the pivot of global monetary policy from ease to restraint. Bottom Line

"Watch each card you play and play it slow."
- Grateful Dead,Deal

In other words, make it a point to take risks, build bridges and, at times, be an investment contrarian. But always tread lightly!
Both the month of June and all of 2018 has seen little progress in the markets, overall. But there have been important opportunities to deliver excess returns in your portfolios in the new regime of volatility.
Stay independent in view (reject "Group Stink") and recognize that, from an intermediate term standpoint there are plenty of risks, but also may present plenty of rewards for the unimpassioned and opportunistic trader.
As I look towards the second half of 2018 I see market conditions increasingly influenced by (wrong headed) policy in Washington, D.C., growing political partisanship and a pivot from central bank ease to restraint (an important contributor to heightened - and no longer suppressed - market volatility).
I start the day with a small net long exposure - but that wont last long if the market continues to advance.
Fare thee well.

Buy American.. banks -- still.