Over the last few months my constant refrain is that VanEck Vectors Vietnam (VNM) represents my favorite ETF as I remain skeptical of the China/U.S. trade negotiations.

This column just in from Bloomberg: "The U.S.-China trade war has a clear winner: Vietnam".

I am bidding for more VNM -- slightly under the market.

"Mary...
What I meant was
Umm, what I meant was
I like you.
I like you a lot.
I want to ask you a question, straight and flat out.
I want to give me an honest answer.
What are the chances that a guy like you and a girl like me ending up together?
That's difficult to say...
Hit me with it. Give it to me straight...
At least you can level with me, what are my chances?
Not good.
Not good like one out of a hundred?
I would say more like one out of a million...
So, you are telling me there is a chance!"
Yeah!!"

-- Lloyd (Jim Carrey), Dumb and Dumber

Like Lloyd in Dumb and Dumber ,I am trying to figure out if there is a chance that the market will EVER go down.

Dip buyers remain very much on the playing field.

At times, like early this afternoon, the market has bent a bit -- but, despite my protestations, little real vulnerability is yet apparent.

Breadth remains stubbornly positive after dropping into negative ground in the morning.

"Maybe I should be going."
-- Mary, Dumb and Dumber

Nevertheless, I still like the odds of a playable correction as the Bull Market in Complacency marches on, investors are becoming more greedy and the risks to the downside seems to dwarf the upside reward potential.

But, I have Tiger Woods in my Masters bet -- so I have that going for me, which is nice.

I am holding on to my (SDS) a few days more than I expected (remember leveraged ETFs track badly over time!) - but this represents my rising conviction that the market is vulnerable.All investment views are not equal.
Moved to large-sized.

* The luminous path of marijuana legalization for both medical and recreational uses appears less clear these days

Pedro: Hey, man, am I driving okay?

Man Stoner: [looks around] I think we're parked, man.-Up In Smoke


As I wrote two days ago in "Not High On Pot"...

Pot stocks continue to go up in smoke.

Maybe it was the high school students I saw that came to my gym in February with Aurora Cannibis sweatshirts that called the top?

Or the plethora of college kids I speak to that have abandoned trading cryptocurrency and are now buying pot stocks with vigor.

It's always easier in the rear view mirror

Kids getting sick on weed.

Hospital visits up.

Until pot is better and more broadly regulated, and the consumer knows what he is smoking, eating, rubbing...it will likely get worse before it gets better.

In a recent investigative survey in South Florida-tested products from over 20 different stores and dispensaries - more than half did not have the ingredients that were labeled.

Moreover, there is a growing epidemic of young kids (in high school and even lower educational levels) who are smoking and vaping.

A recent investigative survey in South Florida tested products from over 20 different stores and dispensaries - more than HALF did not have ingredients that were labeled

As I wrote yesterday:

The action in pot stocks continues to be poor.

I have a very small position in (CGC) and even though the shares might be attractive over the long run, I won't be adding until I see some better price action. (I actually just sold my very small position out)

I have been cautious on the group for some time - after taking a large profit in most of my CGC (on Best Ideas List).

My analysis of the retail outlook for marijuana (e.g., MedMen) uncovered demand/supply concerns. This coupled with issues that have arisen with regard to potential health problems (psychosis, etc.) and questions regarding the legitimacy of health benefits from marijuana-based medical products have put a pale over the group - after such a large run in the share prices.

The verdict is not yet out whether the legalization of recreational and medical marijuana is such a good idea.

"Be fearful when others are greedy and greedy when others are fearful."
-- Warren Buffett

Investors are greedy now.

Q1/19 EPS estimates look to be down for the first time since Q3/16. Now that the unofficial start to Q1 earnings season is set to begin tomorrow with earnings reports from a couple of key money center banks, we thought it would be good to highlight current SPX operating earnings estimates (Source: I/B/E/S data from Refinitiv):

• Q1/19 EPS growth is estimated to be down 2.5%, but we believe the end result might be a small positive. Since 2009, every quarter has been revised higher from the first day of EPS reporting season to the end by a median 3.5% (Figure 1).
• 84% of companies beating estimates. Of the 5% of S&P 500 companies that have reported Q1 earnings so far, 84% have reported above-analyst estimates.
• The Q1/19 revenue growth estimate is 4.9%. The Energy and Technology sectors are the only two sectors expected to show slightly negative revenue growth.

All four intermediate-term indicators are moving back toward overbought levels.Our intermediate-term tactical indicators all reached an extreme oversold/pessimistic level in late December/ early January and have since climbed back near overbought levels, as the SPX has advanced 23% off the Christmas Eve low. The extreme levels these indicators hit suggest that a cyclical low was set in December, but the current overbought level could lead to a brief pause in the upside.

• The percentage of S&P 500 (SPX) index components above their 10- and 50-day moving averages. On 12/24/18, they were at 0.2% and 1.2%, respectively. The recent rally has the percentages at 71% & 80%, respectively (Figure 2), suggesting a solid breadth recovery.
• The VIX Index reversing from late December spike. There was a significant jump in the CBOE Volatility Index (VIX), which surged to over 36 on 12/24/18. The VIX has since been trending lower and is back down to 13 (Figure 3). Ultimately, we expect it could drop back toward single digits.
• The 14-week stochastic indicator in extreme overbought. Our trusty intermediate-term oversold indicator for the S&P 500 (SPX) hit 4 the week of 12/21/18. It is currently in overbought territory at 97 (Figure 4).
• Bullish newsletter writer sentiment reversing extreme pessimism. The week of 1/4/19, Investors Intelligence reported only 29.9%, of newsletter writers were bullish. Sentiment has since turned more bullish and is currently at 53.9% (Figure 5).

Housekeeping item.
I am out of CBS (CBS) .
The move from the low $42 in late December to the low $50s has materially altered the reward v. risk.

I have purchased a small long position in Lyft (LYFT) at $61.00.
My friend (and golfing buddy - thanks again for the great day at Riviera!) Citron Research's Andrew Left recently wrote a brief analysis of the company. Here it is.
My 12 month price target is $71.50 - slightly less than the IPO price of $72/share.

Breadth even.

This morning I have further increased my large net short exposure based principally by the "price action."

Larry Kudlow just said that interest rates may never rise in his lifetime.
Larry is 71 years old.

Shorted (TROW) and (BEN) .
Added to my (SDS) long.

Two days ago I delivered an impassioned analysis on why bank stocks represent unusual value.
The shares of many bank stocks are moving strongly this morning.

* A toxic cocktail is brewing in this space
* I will be shorting BEN and TROW today and will be adding both to my Best Ideas List (short)

Last week I participated in a Bull/Bear debate hosted by Citigroup's Tobias Levkovich.

One of the questions Tobias asked was:

"Technology is seen as generating growth but often at the expense of some others, such as online sales versus brick/mortar stores - is there a new area that you envision as being prone to major disruption?"

That was a great question from Tobias - though it is hard to predict areas that may be the next sector subject to disruption (because almost every area is subject disruptive change these days)!

However, Tobias' query renewed a project I was working on late last year -- shorting the investment managers (e.g., T. Rowe Price and Franklin Resources).

More and more money is going to passive products and strategies and away from active managers. Those products are by definition not as energetic compared to active managers. This is occurring at a time in which transaction costs and investment management fees are being disrupted.

A toxic cocktail may loom ahead:

* Lower stock market prices
* Less volume and activity
* Lower transaction pricing (commissions)
* Reduced investment management fees reflecting the continued share gains of passive products and strategies

So investment managers may be the next group to feel the disruption... and may be headed for share price falls.

I plan to short (BEN) and (TROW) today.

I am putting TROW ($104.33) and BEN ($35.14) on my Best Ideas List (short).

My pal Vitaliy on the Why Investors Shouldn't Watch Business TV.

These S&P EPS estimates are way too high, imho:

The Cass Freight Index has now fallen for the fourth consecutive month:

Last month I cited the Cass Freight Index in highlighting signs of a moderating US economy in February (h/t JB). Late yesterday they reported its March data. March shipments fell 1% y/o/y, the 4th month in a row that is negative. While Cass Freight is acknowledging the comps are tough, they did say "at a minimum, business plans and economic outlooks should be moderated or have contingency plans included or expanded."

Now Cass Freight doesn't over react to one month of information but this is what they said:

"When the December 2018 Shipments Index was negative for the first time in 24 months, we dismissed the .8% y/o/y decline as reflective of a tough comparison 'because December 2017 was an all time high for the month' and 'also because of the stabilizing patterns we see in almost all of the underlying freight flow'. When January 2019 was also negative (down a mere .3%), we again made rationalizations, 'January 2018 was...an all time high for the month.' Then February was down 2.1% and we said, 'While we are still not ready to turn completely negative in our outlook, we do think it is prudent to become more alert to each additional incoming data point on freight flow volume, and are more cautious today than we have been since we began predicting the recovery of the US industrial economy and the rebirth of the US consumer economy in the 3rd quarter of 2016'. With March down 1%, the 4th y/o/y negative month in a row, we are preparing to 'change tack' in our economic outlook."

Now you may ask again, what the heck is the Cass Freight Index. They say "As we try to navigate the ebb and flow of the economy, we don't pretend to have any 'secret sauce' or incredibly complex models that have exhaustively analyzed every data point available. Instead, we place our trust in the simple notion that the movement of tangible goods is the heartbeat of the economy, and that tracking the volume and velocity of those goods has proven to be one of the most reliable methods of predicting change because of the adequate amount of forewarning that exists."

I will finish their comments with this:

"Beyond our concern that the Cass Freight Shipments Index has been negative on a y/o/y basis for the 4th month in a row, 1)We are concerned about the severe declines in international airfreight volumes (especially in Asia) and the recent swoon in railroad volumes in auto and building materials; 2)We are reassured by the sequential increase in the Cass Freight Shipments Index (up 2%) and the volumes in US domestic trucking; 3)We are closely watching the volumes of chemicals and other shipments via railroad, as they have lost momentum in recent weeks and may give us the first evidence of the global slowdown spreading to the US."

I mentioned yesterday the weekly II data that saw the Bull/Bear spread at the widest since October 10th. Today, the AAII individual investor index Bull/Bear spread rose to just shy of the highest since October 4th. Bulls rose 5.3 pts to 40.3, the 2nd highest print since early November. Bears fell 7.9 pts to 20.4, the 2nd least since March 2018. As I've said before, I only care about sentiment figures when they get a extreme and at least for this week, it's getting there.

After commenting on what MSC Industrial said yesterday, Fastenal just reported a one penny eps beat and in line revenue number. There wasn't much guidance in the press release on the state of the economy but with the quarter they said cited "continued strength in underlying market demand and contribution from our growth drivers." They talked about "higher product pricing as a result of increases implemented over the course of 2018 to mitigate the impacts of general and tariff related inflation in the marketplace." The headwinds were "adverse weather across many of our northern regions...that created temporary disruptions in activity and reduced sales." There was no mention of any broader macro trends. I'll be listening to the conference call at 9am.

China reported its inflation data and they were exactly as expected for March. PPI (which correlates with industrial profits) rose .4% y/o/y and CPI jumped to a 2.3% y/o/y gain from 1.5% in the prior month. That was all due to a spike in food prices as prices ex food and energy grew by 1.8% y/o/y, pretty much on trend. These are not typically market moving data points but Chinese stocks took a definite breather overnight. The Shanghai comp fell 1.6%, the Shenzhen by 2.2% and the H share index fell by 1.2%. Copper is down too as is the Aussie $ and ASX index. All part of the algo's correlation models.

The British pound and FTSE 100 are both unchanged in response to the 6 month Brexit delay but as it relieves short term pressure, the 10 yr Gilt yield is higher by 2 bps. Now we have another 6 months to talk about this and UK businesses have 6 months more of cloudy visibility. Yeah.

After falling by .7% after Mario Draghi still seems to not grip the full negative impact of negative interest rate policy after 5 yrs of it, the Euro STOXX bank index is up by .3% on hopes of some relief with a tiering of reserves that would be penalized. It truly amazes me that the ECB still doesn't get the error of their ways. Either that or they are deathly afraid of blowing the NIRP bubble they created in bonds.

* Be skeptical of Wall Street products for the sake of your investment well being!
* Stay away from those "talking heads" who are miles long but inches deep in their analysis
* Do your homework and avoid the "next shiny object."

Wall Street exists primarily to sell merchandise to investors - it too often ignores the financial well being of its clients.

This helps to explain how much trouble Wall Street companies gets into (from a compliance standpoint) - in almost every cycle.

Poor controls and aggressive behavior nearly always results in large fines and more supervision.

The Lyft (LYFT) IPO is another case in point.

The shares, were down by another -$7 or almost -11%, in Wednesday's trading session

I described the bad actors recently in a column, "Who Is To Blame For the Failure of the Lyft IPO?":

* The lead investment bankers - JP Morgan, Credit Suisse and Jeffries - who placed the shares in bad hands, priced the deal too aggressively and failed to commit seriously to a syndicate bid.
* The business media spent much of the days leading up to the Lyft (LYFT) IPO on discussing the transaction. Though the coverage was repetitive and constant, from my perch, there was little there there in those discussions. Serious analysis in the business media was limited (or non existent) as glittering generalities were generously offered. Profoundly important issues facing LYFT and UBER were rarely discussed. The hoopla (and time devoted to the IPO) goosed the interest on the part of retail investors who got caught up with last week's shiny object - LYFT common shares. (And following the IPO many of those talking heads have sanctioned buying Lyft on weakness based on no apparent or real analysis)
* Retail investors who acted (avariciously) without forethought or analysis. Nothing new there - as individuals too often act first and think later (sometimes when it is too late).

As to the ramifications of the poor deal - unlike many - I view LYFT as a one-off and not having a terribly profound impact on the demand for future high tech IPOs.

Nor do I agree with those that say JP Morgan (a talking head just said Jamie Dimon really "needs this one" to work), in particular, will now come to the support of the deal in order to create a better reception for future initial public offerings.

Investment bankers do nothing more than provide merchandise to potential buyers. Too often it ends up in the hands of analytically-lite investors who give less thought to buying an IPO than they do in buying a refrigerator.

History rhymes and the tune is little changed from IPO to IPO and from cycle to cycle.

Caveat emptor.

Note: For what it is worth on March 27th I warned that I would avoid LYFT's shares after the initial lift and opening trade.

Danielle emphasizes some themes (including the negative impact of NIRP on European banks) that I have been discussing in my Diary over the last year:

Sentenced to the Clink

VIPs

• Analyzing Mario Draghi's prepared remarks reveals an overt admission that there are possible negative side effects to the European banking sector from the ECB's negative interest rate policy (NIRP)
• According to the NBER, financial intermediation is at the nucleus of the savings/investment process in capitalist economies rendering them a central cog of economic growth
• Cost-ridden European banks are stifling Europe's economic recovery; Draghi's calls for the need to consolidate the banking sector emanate from the weight of overproduction of credit
• A higher unemployment rate in the financial sector will be the upshot of bank mergers; Draghi appears to be on board with layoffs in the sector, despite the obvious consequences
• Since the ECB imposed its negative interest rate policy, European banks' loan book exposure to households has risen more relative to that of nonfinancial corporates; additional layoffs may filter through to higher non-performing loans

Skirt on your obligations in 1144 and you'd likely land in the Clink, that is, if you were in the vicinity of Southwark, just northwest of London Bridge. These days, you could meander through the museum on the sight of the oldest men's prison in London, handling torture devices and imagining what it would be like to be shackled, guilty of having reneged on an obligation. You might find yourself in the unsavory company of heretics, but it was more likely you'd simply be among other debtors in arrears. Though the stigma crossed the pond, debtors' prisons were banned under federal law in 1933. The Supreme Court affirmed in 1983 the unconstitutionality of incarcerating indigent debtors with reference to the Fourteenth Amendment's Equal Protection Clause.

Inspired by central banks that put debt on the map, modern-day protections are no doubt welcome in the United States and abroad. We've become a debtor nation and a debtor world. Nowhere is the former stigma more pronounced than the European Union where the European Central Bank's balance sheet has swelled to 41% of GDP.

It's customary that the outcome of central bank meetings elicits yawns. We form a consensus and the perma-dovish central bankers deliver on our expectations. On the surface, yesterday's ECB shindig followed that script. But if you know QI, we don't just scratch the surface.

In Mario Draghi's prepared remarks about the new series of target longer-term refinancing operations (TLTROs), this caught our eye: "In the context of our regular assessment, we will also consider whether the preservation of the favourable implications of negative interest rates for the economy requires the mitigation of their possible side effects, if any, on bank intermediation." ("...if any...REALLY?)

There's an admission here. And it's couched in a pros versus cons construct.The admission - in black and white - is that there are negative side effects on the European banking sector from the ECB's negative interest rate policy (NIRP). Of course, Your Honor, we would like to enter the words "possible" and "if any" into evidence.

But take a step back. Consider the importance of a central bank head admitting to its policy having a negative impact on financial intermediation. It should be applauded - and yes, we said that out loud. Why? Because there is acceptance that the monetary experiment we've come to know and abhor as negative interest rate policy, also known as NIRP, is not a panacea for all the economy's ills.

We tagged the National Bureau of Economic Research to help define financial intermediation (bolding ours): "The savings/investment process in capitalist economies is organized around financial intermediation, making them a central institution of economic growth. Financial intermediaries are firms that borrow from consumer/savers and lend to companies that need resources for investment." Based on that description, the banking system is the engine of economic growth; it takes in the fuel and determines the speed an economy travels.

If the engine in a vehicle is too heavy, its performance will be suboptimal. We're talking about cost-heavy European banks holding back the pace of Europe's expansion. These next comments, paraphrased from Draghi's Q&A session yesterday, clearly elucidate the ECB head's view on the financial sector in his neck of the woods:

"...What is pretty clear is that the banking system in Europe is overcrowded. The need for consolidation is very, very significant. And part of the structural weakness of the banking system in Europe is caused by this overcapacity in banking which is not the overproduction of credit, it is overcapacity in the number of people, the number of branches. Costs. Some banks have a cost-to-income ratio that is over 80%, 90%..."

Draghi also found it hard to believe some of these banks were complaining about negative deposit rates with such a cost structure. One of his solutions? More digitalization is required. Long fintech, short credulity?

Don't shoot the messenger. Draghi basically condoned higher unemployment in the European financial sector in the wake of the bloodletting underway in the German auto sector. While that might get some Euro-bank bulls all juiced up, it exposes the economy to the risk of more layoffs...above and beyond the bandied about 30,000-plus tied to a possible Deutschebank-Commerzbank merger.

The risk of higher unemployment would put additional stresses on European bank loan books that have seen exposure grow more to households than to nonfinancial corporates since the initial foray into NIRP in June 2014 (illustrated above). Euro Area households' debt burden also hasn't budged much since 2014, going from 106% to 104% of disposable income. So the vulnerability is there.

Savvy investors should be pricing in the unvirtuous feedback loop from banks to households and back as rising unemployment feeds into higher non-performing loans. With all due credit to its chief engineer, "Grazie, Signor Draghi."

The price of oil is now at a five-month high and up 53% from the December 2018 low: