I end the day with a larger net short exposure than I had the day before - which was my largest in several years.
Thanks for reading my Diary and I hope you found it informative.

Yesterday, with (DDS) trading at over $79, I moved from medium-sized to small-sized.

Today the shares are down by nearly -$3 to $76.25.

I would reload at $72-$73.

From my old Putnam associate, Wally:

My golfing buddy Roger Lipton provides his semi-monthly fiscal/monetary commentary, "VANGUARD 'RESTRUCTURES' PRECIOUS METALS FUND, SHADES OF 2001?":

The general equity market was up in August, gold bullion was down about 3%. The mining stocks fared worse, with the two largest mining ETFs, GDX and GDXJ, down 12.9%. Strange as it may seem, the apparent reason for the relatively poor performance of the miners may be a turning point. On July 31st, Vanguard announced it was "restructuring" its $2.3 billion Precious Metals and Mining Fund, and the newly named "Global Capital Cycles Fund" will start its new strategy in late September. Moves like this from a major institution are often a sign of "capitulation", evidence of extreme negative sentiment, and marking a bottom as positions are liquidated. In particular, back in 2001, Vanguard removed the world "gold" from what was then its "Gold and Precious Metals Fund", which coincided with a low in gold before a ten year rally. So, we'll see.

If the facts had changed, we would have changed our strategy, but the underlying reasons are intact. The rampant creation of currency, and monstrous increase in debt, around the world, can do nothing but cause inflation in the long run, because it's the only way out for the politicians who can't admit to spending their constituents into financial oblivion. The amount of gold held by major central banks, relative to their circulating currencies, is approximately the same level as it was in 1970, before gold went from $35/oz. to $850/oz. There will be a "catch-up" again.

We believe, also, that the relationship between the price of gold and the US debt is valid, and the debt obligation as shown on the chart below is understated, not including monstrous unfunded entitlements. The price of gold moved in lockstep with the growing US debt, from 2000 until 2009, and for decades before that. In 2009, after a steady 9 year rise, because markets anticipate, gold ran sharply ahead when it became clear that the Obama administration was going to sharply increase the annual deficit. The price of gold diverged on the downside from late 2011 until the bottom of 2016, likely, because the annual reported deficits were lower, even though the debt steadily increased from "non-budgeted" spending. For example, this fiscal year ending September, the reported deficit will be about $800B but the increase In debt is already over $1 trillion. We think another inflection point is at hand, as the annual deficit and cumulative debt are accelerating again.

The gold mining stocks have fared even worse than bullion recently, down more than 50% since gold was at the current level four or five years ago. That 100% catchup could be on top of the leveraged move that the mining companies, as operators, make when bullion changes price. Financial markets can make shockingly rapid moves at certain times, as illustrated by the recent volatility in Bitcoin, first up by over 20x and down by two thirds more recently. We believe this will again be the case with gold bullion, much more so with the mining stocks, this time on the upside.

I have said this before (and I have been wrong) - but I will observe again that the market's complexion seems to be changing.
FANG (ex-Amazon (AMZN) ), the market's leading space, is faltering.
Former market darlings like (MU) , (INTC) , (TSLA) , (BABA) (and many others) are falling from grace.
Laggards, like (GM) and (F) , cant find any footing despite being at/near 52 week lows.
Defense stocks remain lackluster and can't attract a bid.
Biotech (both majors and tertiary more speculative names) are breaking down.
All in all, the market's appearance is getting nasty and its skin is breaking out.

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."

According to a report from JP Morgan today, 90% of all trading volume is derived by activity of ETFs, options trading, Index players and Quants.
Think about this.
Think about what this means for natural price discovery, etc.

Its been a quiet day thus far - from a trading standpoint.
I shorted more (QQQ) at $185.17 and more (SPY) at $289.39.

Putting out some more (SPY) at $$289.45 now.

Bullard via slides ahead of a speech today and Kashkari was quoted speaking about EM spillover...both non-voting and uber-doves, but a pretty easy stance for others to start to take as well...

Today's Congressional hearing with Twitter's (TWTR) Jack Dorsey (and others) makes one thing apparent, and that is the public forum TWTR has become is singular in its uniqueness.

This uniqueness (and scarcity value) alone makes it tor me a value at current prices - specially at this valuation

Goldman Sachs on the growing probabilities of a market crash (h/t Zero Hedge).

Yesterday I mentioned the risks associated with high RSI readings at Apple (AAPL) and Amazon (AMZN) .
Today we see the risks associated with that excessive enthusiasm.

From "The Little Chief," the total returns of MSCI US vs MSCI World (ex-US):

For both short term traders and long term investors I believe that Twitter (TWTR) provides good value at $32.86 (-$2).
I am adding to my already large long position.

A laconic observation from my teammate Mikey on the South Team:

badgolfer22 dougie kass

drillers don't believe the oil price...the way the gold stocks never believed the gold rally to 130.

I have been pressing my (QQQ) short.

* In a nutshell!

In 2018 U.S. equities are higher primarily because of the tax cut and the money that has been released by share buybacks.

The domestic economy is importantly gaining in some measure because of a rise in the U.S. stock market.

If stocks drop, the whole thing unwinds, a la 2000.

Peter Boockvar runs down "a bunch of stuff": 

Firstly, I want to clarify a comment I made yesterday in discussing manufacturing and exports. I mentioned that US exports make up about 10% of the US economy. I should have been more specific in saying that the exports of GOODS are about 10%. Adding in the exports of services brings the combined total to about 14%.

Overseas markets are another mess again today. The Shanghai comp fell 1.7%, the H share index was lower by 2.3%, the Kospi weaker by 1%, the Australian ASX down by the same amount, while the Nikkei was lower by .8% and the Jakarta comp by almost 4%. As seen on the screens this has spilled over into further weakness in Europe with the German DAX in particular falling to the lowest level since May.

The only respite is Italy where bonds there are rallying again as the political leadership is trying to calm fears that the next budget they produce will have a deficit of less than 3% of GDP. The MIB stock index is up too and its helping to rally the EURO STOXX bank index. In spite of what is going on overseas and in a world that is so interconnected, the Bulls in the US see little risk according to Investors Intelligence. Bulls rose to 60% from 59.6%. That is the highest since late January and II said that when Bulls get to 60+ it "signals elevated risk and the need for defensive measures." Bears meanwhile slipped down to 18.1% from 18.3% last week. That is the least since April 4th. The balance that are looking for a Correction is at the lowest level since late January. The bull-bear spread is the widest since January 31st. Bottom line, while the Bulls can certainly be right for a period of time, the current extreme both absolute and relative to the bears can't be ignored. This year stocks have tended to top out and consolidate when getting to a Bull reading of 60+ and they've bottomed out and rallied after when they got into the 40's.

With mortgage rates holding steady near 7 year highs, mortgage applications were little changed w/o/w. Purchase applications to buy a home rose .6% after falling by .9% last week week. The y/o/y gain is a modest 2%. Refi's fell 1.4% w/o/w and are down by 37% y/o/y. Bottom line, the evidence seen this year is clear, home price inflation that has run more than 3x the pace of consumer price inflation along with the 7 year high in mortgage rates has combined to slow the pace of housing transactions as buyers have called a time out. The same can be said for vehicle sales where yesterday's SAAR for August totaled 16.6mm, 200k less than expected and that is the slowest pace of sales since August 2017. "Average transaction prices are up for the industry, as most manufacturers reported gains from the sales mix continuing to shift from cars to SUVs," Tim Fleming, analyst for Kelley Blue Book, said in a statement. We can add the end of zero percent financing, higher interest rates and less incentives as automakers try to preserve profits.

Higher inflation is a deterrent to higher REAL growth, not a driver of it.

A key factor in the weakness in Asian markets was the decline in the private sector weighted Caixin Chinese services PMI for August to 51.5 from 52.8. That's the weakest since October 2017. The Singapore PMI fell to 51.1 from 53, India's slowed to 51.5 from 54.2 and Australia's dropped to 51.8 from 52.3. Japan's was up slightly to 51.5 from 51.3. Hong Kong's was higher too but is still below 50 at 48.5 from 48.2 last month. Markit said worries about business relations with the US is why the business expectations component for the Hong Kong PMI fell to a 20 month low.

In Europe, the August services PMI for the eurozone was 54.4 as expected, in line with the preliminary figure and up a touch from the 54.2 print in July. For comparison, the average this year is 55.2. The domestic, service side of the European economy has held up much better than the manufacturing side. However, Markit said "Geo-political trade tensions ensured that business expectations in the service sector were at their lowest for 21 months in August." In the UK, their August services PMI did improve to 54.3 from 53.5 and that was better than the expected figure of 53.9. The business outlook though fell to the lowest since March, "which was attributed to political uncertainty and the unpredictable impact of Brexit on clients' business operations" according to Markit.

Bottom line to today's services data and yesterday's manufacturing figures, there is a clear level of trepidation in overseas economies as we await more news on trade, particularly tomorrow from our Administration and what they will announce about the possibilities of new tariffs. One last thing, I find it interesting that long bonds have not been a flight to safety in light of what's going on in overseas markets. The US 10 yr yield is at a 3 week high and Japanese and German yields have been trending higher. We are just 3 weeks away before the net liquidity injection from the Fed, ECB and BoJ goes to zero in Q4 vs $100b per month in Q4 2017.

Bitcoin crashes, again.
I suppose we will see my pal Tom Lee on a CNBC Crypto Crash special this evening.

* The investment mosaic is dynamic and complicated - value is subjective and its definition is liable to change.
* History undoubtedly teaches lessons about investment but it does not say which lesson to apply when.
* In searching for long term gains, be independent and disciplined of view and maintain your risk profile.
* Market reward versus risk is unfavorable.

'If you can keep your head when all about you

Are losing theirs and blaming it on you,

If you can trust yourself when all men doubt you,

But make allowance for their doubting too;

If you can wait and not be tired by waiting,

Or being lied about, don't deal in lies,

Or being hated, don't give way to hating,

And yet don't look too good, nor talk too wise:'

- Rudyard Kipling, Rewards and Fairies (1910)
The investment mosaic is complicated and, at least to this observer, cannot be solved easily through a simplistic and linear process like gazing at a chart or by a casual glance of "unusual activity" - or by utilizing any other one single independent determinant.
Chasing benchmarks and worshipping at the altar of price momentum may be a recipe for occasionally achieving some short term gains but is not, in my view, a recipe for long term (measured in years/decades) investment gains.
To me, a serious investor (not trader) who searches for the holy grail of alpha, must comb through a maze of fundamentals, technicals, valuations, sentiment and other (changing) factors in an objective and calculating way.
***
With the benefit of hindsight, the past 10 years has been skewed by several positive influences which have resulted in an uncommonly resilient Bull Market:
* The influence of passive investing - ETFs and quant strategies that are virtually agnostic to balance sheets and income statements. Rather, price momentum is their investing altar.
* The monetary largesse of the central bankers who have inhibited natural price discovery by inundating liquidity into the system and lower interest rates to generation lows.
* Fiscal policy that has widened the gap between "the haves (with large balance sheets of real estate and stocks) and the have-nots (with stagnating wages and rising costs of living)."
* Both monetary and fiscal policy which have resulted in aggressive corporate share buybacks which has reduced the float of the outstanding shares of publicly traded companies (by about one fifth) - thus improving and tipping over the demand v. supply equation. 'If you can dream-and not make dreams your master; If you can think-and not make thoughts your aim;If you can meet with Triumph and Disaster, And treat those two impostors just the same;If you can bear to hear the truth you've spoken Twisted by knaves to make a trap for fools,Or watch the things you gave your life to, broken, And stoop and build 'em up with worn-out tools:'

Each cycle brings new variables and challenges.
Value is subjective and its definition is liable to change. (see Valeant Pharmaceuticals and more recently the decline in the popularity of Micron (MU) and Intel (INTC) shares!)
History undoubtedly teaches lessons about investment but it does not say which lesson to apply when.If you can make a heap of all your winnings And risk it on one turn of pitch-and-toss,And lose, and start again at your beginnings And never breathe a word about your loss;If you can force your heart and nerve and sinew To serve your turn long after they are gone,And so hold on when there is nothing in you Except the Will which says to them: "Hold on!"

Investors are challenged by orthodoxy and consensus... or as I like to describe, as "group stink." Many of the business media are complicit in that it delivers predominantly bullish views (optimism "sells") - sometimes provided by rigorous participants, but most often by those that deliver a simplistic view of Mr. Market (and usually have their own service to sell).
Let's not forget that pride goeth before fall - also publicity handshakes and celebrity. Nor shall we forget Theranos and maybe even Tesla (TSLA) .
Many perma bullish "talking heads" possess a silly (and much quoted) view that bearish market analysis rationale always sounds superior to the bullish case. This is a common and much repeated argument that holds little weight.
Always stick to your process and do not deviate from your risk appetite and profile.
As Ben Hunt wrote in Epsilon Theory ( Death in the Afternoon):
"Where there's shame, for both investing and beekeeping, is not sticking with your process. And if your process is only for getting into an investment or starting a new colony ... sorry, but that's not a process. Investments and animals have a life cycle. Your JOB as an investor and a beekeeper is to be there for the entire life cycle, even for the really hard parts like culling a weak queen or getting out of a weak investment. Even if it's raining outside." 'If you can talk with crowds and keep your virtue, Or walk with Kings-nor lose the common touch,If neither foes nor loving friends can hurt you, If all men count with you, but none too much;If you can fill the unforgiving minute With sixty seconds' worth of distance run,Yours is the Earth and everything that's in it, And-which is more-you'll be a Man, my son!'
We live in an interconnected, networked and flat world - denying the risks of poorly thought out trade policy, the weakness in the Chinese and EU stock markets and the potential contagion from Turkey, Argentina or any emerging market are dangerous based on history and its consequences. Indeed, given global flatness, the odds favor that contagion is less ring fenced today than at any other time in history.
And so is ignoring hastily crafted policy (conflated with politics) by the White House a dangerous leap of faith - it shouldn't be ignored. Though the body of the Administration seems to have been diseased (in multiple ethical, moral lapses and in other ways), many of those same commentators who dismissed the mortgage derivative problem (a decade ago) suggest ignoring the indictments and guilty pleadings of multiple campaign members of the Trump team and the general culture of corruption that currently exists in Washington, D.C. -- that these considerations will have little impact on policy, the balance of power, the economy and our markets.
This may, too, be a dangerous investment route.
Bottom Line

I remain an investor with some modest success (and the author of my Diary for 20 years) because I have profited over numerous stock market cycles over the last four decades. I have consistently resisted (when appropriate) the notion of "Group Stink" and the commonly held view by many that superior investment performance can be achieved by a simplistic view or methodology.
I stick to my investment process.
The investment mosaic is dynamic and complicated. Value is subjective and its definition is liable to change.
Corrections and Bear Markets are typically born out of good news (and Bull Markets are born out of bad news). Based on my calculus (which is not meant to imply precision) it is time to avoid the crowds and it is time to keep our virtue and investment beliefs and conclusions as, according to my calculus, the market's upside reward is dwarfed by the market's downside risk.
History undoubtedly teaches lessons about investment but it does not say which lesson to apply when. While some successfully wait for the market to tell us his message and prefer to react to price momentum changes, others (like myself) prefer to weigh the dynamic of reward and risk. When Mr. Market sells off a stock based on an "event" and the discount to intrinsic value widens, I buy. And when Mr. Market takes a stock higher based on another "event" and the premium to intrinsic value widens, I short.
Given my risk appetite, the growing economic ambiguities, the pivot of global monetary policy (and other factors) and based on that calculation and my perception of the teetering odds of reward v risk - I am willing to approach the market in an anticipatory fashion and based on fundamentals and "intrinsic value" measurements.
As we say in the horse racing business... horses for courses.
But, for me, the horse (and the Bull Market) is leaving the barn and I have structured my portfolios accordingly.