"One last thing"
- Lt. Columbo
I wanted to apologize for not getting my Google posts out on a timely basis.
The stock was in a "fast market" and sometimes this happens.
Frankly my trades occur first before the post and things happened quite quickly.

I just covered my GOOGL short for a large gain.

I shorted more QQQs on the Google news.

I shorted Google at $1,158 in after hours as I believe the market is misinterpreting the results.

As a measure of my (lacking) conviction levels, I barely have traded in the last 2-4 days.

I used to do a poll in my Diary - maybe 15 years ago... Who's More Scared - The Bulls or The Bears?
I did the poll to determine investor sentiment.
So, who's more scared?
Please report your view in the Comments Section and Talk Among Yourselves.
(I say the shorts are more scared!)

(HYG) and (JNK) are all the way back from where they broke down.

I added to my (SPY) short at $270.45 and to (QQQ) at $168.88.

On Friday I mentioned paring back my JP Morgan JPM long investment:

I was a bit over my skiis long the banks (after buying all the way down) and I sold some (JPM) June $100 and $110 calls (yesterday and today) to reduce to a delta equivalent medium-sized position after the +$12 rally from Chirstmas. (This is the first sale I have made in the banks and is keeping with my "pause" view over the next few months. I WILL NOT be disturbing my (WFC) , (BAC) and (C) long investment positions but I might further reduce JPM which I view on a reward risk basis the least attractive bank )

I have decided to eliminate the position, based materially on the above coupled with an ursine market view. (As I wrote, I have no current plans to reduce or sell my other investments in the financials).

* Calling an audible after the stock rises by +$4.85/share this morning

I just sold my (PZZA) at $43.30.

I plan to repurchase the position under $41 if it falls back after the euphoria surrounding the Starboard investment dies down.

Remember, the company still has some "heavy lifting" ahead in order to stabilize comps and overall results.

Here is my recent update.

The stock remains on my Best Ideas List - placed in August, 2018 at under $39/share.

Clear messages overseas from Peter Boockvar:This is not a survey I had seen before but it adds to the mixed messages we are getting from the data. The WSJ survey of small businesses index fell to the lowest level since the presidential election. "Just 14% of firms expect the economy to improve this year, while 36% expect it to get worse." The lone caveat was that this survey was done right before the government reopened but I don't think businesses expected the closure to last that long anyway. Reflecting the conflicting signals, one CEO said "I'd rather play it safe at this point. I'm divided right down the middle. Half of me is very positive. Half of me is very nervous."

What confidence data leads to we'll of course have to see but at the minimum if CEO's are more cautious, it naturally leads to a hesitancy on hiring and investment until they become more confident again. Please view Friday's payroll data as lagging as those decisions to hire likely took place over the months prior. 

The slowdown in Europe was reflected in the Sentix investor confidence index in the Eurozone. It fell to -3.7 from -1.5 and that's the lowest since November 2014. Sentix said "Even in February, the bad news for the economy in Euroland is not abating."

SENTIX ECONOMIC CONFIDENCE INDEX

I'm going to highlight again the weakness in European bank stocks. The Euro STOXX bank index is down for the 6th straight day to a one month, lower by 1.4% today. This is a 30 year chart. I certainly attribute much of the weakness over the past few years to NIRP and what was done to the yield curves in the region. The ECB unfortunately has completely deflected criticism. How is Europe going to have any sustainable healthy growth when the lifeline of so many companies and households is having such challenges? 

EURO STOXX BANK INDEX

Aggregating the manufacturing PMI's from Singapore, Malaysia, Indonesia, Thailand, Myanmar, Vietnam and the Philippines, all very reliant on China, now looks like this: 

ASEAN MFR'G PMI

It's back below 50 and Markit said this, "Export demand was still a key factor weighing on the sector's performance, as trade tensions around the world caused export orders to fall for the 6th month running." For sure, a deal between us and China will go a long way to easing worries but China's growth is slowing regardless. 

The pace of the expansion of the Bank of Japan's balance sheet continues to slow on a y/o/y basis. Their monetary base was up 4.7% y/o/y in January vs 4.8% in December. That marks the lowest increase since early 2012, before Abenomics and the 3 arrows took hold. Bond yields, kept low now by yield curve control, has been mostly influence of late by worries about global growth. The 10 yr JGB yield is yielding (if you can call it that) -.009%. With the BoJ giving license to a +.20% yield, it is saying something about growth expectations. So is a German 10 yr yield at .16% or a US one at 2.70%, 45 bps below where it was at the end of October. 

I have added to my (QQQ) short rental at $168.11 this morning.

* I would reshort any move towards $115 for this much beloved entertainment company

Disney (DIS) was placed on my Best Ideas List (short) at $116.25/share. The stock has been on my List for the longest period of any other equity (either long or short) - having been put on in November, 2015, more than three years ago.

I have made 4-5 core investment shorts in this name (mostly in the mid $110s) - and have done quite well in doing so as I have covered materially lower than the current share price of about $112.

The entertainment giant will likely meet or slightly exceed 1Q2019 expectations when it reports after the close Tuesday - and I would short any move towards $115 (as I have done in the past). The Orlando theme park will likely beat, advertising should exceed consensus (football a +) and cord cutting might have stabilized.

However, looking beyond the extra week in the fiscal year, a potentially strong film slate, the Star Wars Galaxy Edge launch (this Summer at Disneyland and later at WDS-Hollywood Studios), for this year there are a number of continuing concerns:

* Rising digital losses, increased spending and execution risk in streaming could weigh against the market opportunity
* ESPN distribution renewals (Hulu investment could dwarf Disney+)
* Vulnerability (demand elasticity to sky-high admission prices) of theme parks to a general economic downturn
* Peak film content this year
* Likely years of margin pressures (due to new business costs/investments), growing cyclicality and slowing EPS growth relative to history and relative to expectations

Bottom Line

Disney's least squared earnings per share growth rate is falling precipitously -- to only +5% to +8% per year.

At 17x forward 12 month EPS, Disney appears overpriced relative to its projected (slowing and more cyclically sensitive) earnings growth rate.

* The Bull Market in complacency has reappeared as the markets (again) disassociate from the real economy"But February made me shiverWith every paper I'd deliverBad news on the doorstepI couldn't take one more step...It landed foul on the grassThe players tried for a forward passWith the jester on the sidelines in a cast."
- Don McLean, American Pie

As illustrated in my prior post (with Danielle), the core of my market concerns is the diminished outlook for economic and profit growth in 2019-2020.... and there was nothing in the recent high-frequency data or earnings reports that changes this outlook.
Indeed as noted last week, for every Facebook FB there is an Amazon (AMZN) or a DowDuPont (DWDP) with regard to fourth-quarter earnings
With political turmoil continuing and our thesis regarding private -- and public-sector debt loads unchanged, the market -- much like in previous periods such as January and September, 2018 -- has detached itself from the real economy.
One must look to the economic message of the bond market, and with a 10-year yield down to 2.63% here on Monday morning, that message is loud and clear. Meanwhile a negative Japanese ten year (-0.14%) and a near negative yield on the German 10 year bund (at only sixteen basis points).
As reported in Zero Hedge this morning, 1Q2019 earnings are peaking and are expected to post an annual decline -- the first such since 2016:

We have learned that this widening gap between economic and profit reality and fantasy can continue for a while, particularly with the Fed at the market's side, as the market over the short term is a voting machine.

But, as The Oracle teaches us, in the long run, the markets are a weighing machine.

Bottom Line

As I look into February and remember Don McLean passionate verse (above), we should remind ourselves that February may make us shiver...

And, like the first half of the Super Bowl last night between the Rams and Patriots, the players may fail to make a forward pass in the months ahead.

* Signposts of peak economic growth (and expectations) are springing everywhere
Happy days are not likely here again.
I continue to believe that the greatest market risk is a slowing global economy and weaker than expected corporate profits.
Here is some more support to my view from my friend Danielle DiMartino Booth:

The Holy Grail of Economic Indicators Cometh

4 February 2019

VIPs

• The markets are boycotting everything but the best of news on the economics and earnings fronts; every data point is extracted to be purely positive and thence extrapolated to approximately infinity
• The University of Michigan's confidence survey results on Higher Unemployment Expectations is QI's Holy Grail of economic indicators; households' signaling that they foresee rising joblessness in the next year is second to none in predicting recession
• Peak growth signals are coming from Higher Unemployment Expectations and ISM Customers' Inventories; a third of households surveyed said they see joblessness on the rise and fewer firms said they need to order more
• The January National Association of Credit Management report revealed new credit applications fell to 53.3 from 56.8, down from the 60s readings that had prevailed prior to July of 2018; credit applications are the most forward looking NACM indicators
• Inventories are on the rise, future demand is down, and firms are cutting costs to prepare for a potential downturn resulting in less demand for credit; while the slowdown signals are clear, the stock market is ignoring the writing on the wall the job market has penned

The Boycatt Bowl? It just doesn't have the same ring to it. But that's what New Orleans Saints fans would have attended yesterday in protest of the Super Bowl they would have attended if not for history's most controversial un-called penalty. You see, Captain Charles Cunningham Boycott's parents changed the spelling of their name from Boycatt to Boycott. "Captain"? Yes indeed. After retiring from the military, Boycott became a land agent in Ireland.

You may a recall dark chapter in 1880s Irish economic history that featured a rash of evictions. When Boycott's boss ordered him to begin evicting tenants, they demonstrated their displeasure by refusing to work. Local businesses refused to transact with Boycott and refused his money. The postman wouldn't even deliver his mail. So powerful was the collective campaign that by 1888, he and his family were forced to move away. News of the success of the movement spread. The name stuck.

As best we can tell, the markets are boycotting everything but the best news. It's easy enough to see why. Up until the moment of full Federal Reserve capitulation, the stock market needed the data to be bad to fend off the threat of Fed tightening. With that risk disarmed, the focus naturally shifts to the data needing to be good just in case the Fed is justified in hitting the sidelines. If the economy is slowing, which is the only plausible interpretation regardless of how delicately Powell couched the conclusion, bad news really is just that - bad.

In the QI tradition, we thought it best to have a Fed leader provide the takeaway from Friday's January jobs report. The best example we could find comes courtesy of a speech former NY Fed president Bill Dudley gave at the IMF in January 2016: "History shows it is very difficult to push the unemployment rate back up just a little bit in order to contain inflation pressures. Looking at the post-war period, whenever the unemployment rate has increased by more than 0.3 to 0.4 percentage points, the economy has always ended up in a full-blown recession with the unemployment rate rising by at least 1.9 percentage points. This is an outcome to avoid, especially given that in an economic downturn the last to be hired are often the first to be fired."

There is no precision with which to gauge our hunch, but we suspect that the droves of workers re-joining the labor force could be bumping into those being evicted from it. This is simply a last gasp which typifies cycle turns.

But wasn't the rise just a shutdown-induced fluke? Let us be the first to say that we will likely see noise in the unemployment rate in the months to come, as in a tick down before the rise is affirmed and surpassed. Straight lines in either direction are the stuff of fairy tales. That said, as pointed out by QI friend David Rosenberg, the fall-off in employment that pushed up the unemployment rate was the first registered in five months; over half the 251,000 decline was attributed to the private sector, as in cleansed of any shutdown effect.

In the event you require more validation yet on our conviction, our Holy Grail indicator as detailed in the Quill two weeks ago, came into the station. QI's single most reliable cycle signal - higher unemployment expectations 12 months out as gauged by the University of Michigan's confidence survey - crossed the 33% line in January. This threshold is significant. It marks a move into the yellow flag range of 33% to 46%; the top end is recession territory.

In addition, ISM customers' inventories have risen squarely off summer lows, signaling the January bounce in ISM new orders won't last. So we've got a third of those surveyed saying they see joblessness on the rise (future demand DOWN) and fewer firms saying they need to order more (future demand DOWN).

Is it any wonder the National Association of Credit Management (NACM) voiced concerns in its January 31strelease that "New credit applications declined considerably from 56.8 to 53.3-not a good sign. This category has been in the 60s since July of 2018 and keeps sliding."

In past conversations QI has had with NACM Economist Chris Kuehl, he's said that of the 10 survey components, new credit apps are the most forward looking. If firms are applying for credit at a reduced pace, the manufacturing sector is by definition transitioning to a cost-cutting mode in anticipation of a slowdown in capital expenditures and less need to hold inventory.

Isn't it swell when it all makes sense? Inventories up, future demand down, firms preparing for a slowdown by cutting costs further, which requires less credit to fund those tempered operations. Just don't tell the markets though we're certain that were Captain Boycott still with us, he'd be anything but long this stock market.

* PZZA is indicated +$4/share in early premarket trading
Late last week, we added to Papa John's International  (PZZA) .
The Wall Street Journal has reported, and the company has confirmed, that Starboard has invested $200 million in PZZA and that Jeffrey Smith has joined the company as Chairman.