* Where's the spirit?
* Where's the guts?

"The war is over, Wormer dropped the big one... What, did you say over? Nothing is over until we decide it is. Was it over when the Germans bombed Pearl Harbor? Hell no!"
-- Animal House, Bluto's Speech

Key Takeaways:

* Breadth bad -- 1,209 advancers, 1,730 decliners on the NYSE.
* Oil, gold and bonds moved little in price in today's session.
* Banks were the "world's fair." Goldman Sachs  (GS) bounces $6 after yesterday's $9 decline.
* Lyft  (LYFT) rose by 6% on no news.
* Pot stocks were "eh" despite a big push by Merrill/BankAmerica.
* New high in the Nasdaq on the heels of a big move in Apple (AAPL) - though Amazon (AMZN) looked a bit "tired" after a good op in the morning. Google (GOOGL) (+$8) taking over the mantle of leadership in FANG?

Bottom Line

I expanded my net short exposure late in the day because this situation absolutely requires a really futile and stupid gesture to be done on somebody's part -- and I am just the one to do it.

What happened to the Delta House I used to know?

Cause when the going gets tough, the tough get going.

Who's with me? (Not too many!)

Thanks for reading and enjoy your evening.

Throughout the day I have had a series of rich exchanges with Rev Shark and Tim "Not Judy or Phil" Collins as well as with some Twitter followers about calling market moves, the value of different types of input (technical, momentum, fundamental, etc.).

It made me think...

In the market "genius" is an ethereal state. Most of us mortals try to manage to find a reasonably high percentage of good ideas (vs. bad ideas) and, with a dash of price discipline (especially when we are wrong), we can succeed and even thrive.

For myself (and though many others operate and think differently), the only way to measure success is over the long term.

From my perch I am never as smart as it seems when things are going well and never as dumb as it seems when things are going poorly.

These credos are a rich source of ongoing sanity that has kept me balanced (and in the game) over the last four decades.

The strong rotation into financials (particularly of a bank-kind) continues apace today.

Our patience has paid off and banks remain my single most attractive sector and my largest long exposure.

My investment thesis on this sector.

"Labor's bargaining power fell, corporate taxes fell, tariffs fell, globalization increased, technology allowed for greater scale and lower marginal costs, anti-trust enforcement fell, and interest rates fell. These factors have produced the most pro corporate environment in history. Many of these drivers of high profit margins are now under threat."
- Bridgewater

Bridgewater/Dalio warn.

At the same time, global nominal GDP growth is slowing - which equates to moderating revenue growth.

From my friends at Miller Tabak:

U.S. and European Growth Outlooks are Still Weak

Chicago Fed President Charles Evans made some interesting comments this week, announcing that low inflation could cause him to support keeping interest rates steady until at least the fall of 2020. In addition, he expressed confidence that the recent mixed economic data are simply indicative of growth slowing to its trend and not a sign of impending recession. Like many FOMC members, Evans remains an optimist, stating that "I think anytime the economy decelerates from 3.1% down to 2%, it takes a really sharp-minded focus to kind of go, all right, it's less than what we had but it's still pretty good."

Several of the major economic data releases so far in April have been decent (e.g. the April jobs report and inflation data). But these have not been enough to boost estimates of 1Q2019 GDP growth, which remain mediocre and between 1.4% and 2.3%. Furthermore, these variables tell us relatively little about upcoming economic conditions beyond the first half of 2019. This week's subpar industrial production figure, which declined 0.1% from February to March, and capacity utilization data, which fell from 79.1% to 78.9%, are more evidence that growth will probably come in under 2%.

We are more interested in a pair of leading economic indicators that have a better record of moving well before it is already clear that the economy is headed into recession. We are thus encouraged that the yield curve is no longer fully inverted with the 10-1 year spread now at 17 bps. On the other hand, the excess bond premium (a measure of risk aversion from the corporate bond market with an excellent track record of predicting financial and economic conditions) rose 12 bps in March suggesting a declining taste for risk. It is now slightly above its historical average (the creators of this variable put the risk of a recession within a year at 25.8%). These factors partly cancel each other out and our model now puts put the chances of a recession starting within one year at 30.2%, and the odds of one beginning within two years at 45.3% (down from 34.5% and 50.1% in late March).

We also remind readers that new residential investment is another top leading economic indicator. Housing starts and building permits have increasingly been showing signs of decline over the past several months. We thus will be watching this Friday's housing starts report very closely.

Other Developments in Macroeconomics:

The Chicago Fed's National Financial Conditions Index (NFCI) continues to fall, suggesting good financial conditions, and is now at its lowest levels since late 2014. This contrasts with the excess bond premium, which is trending upward. The NFCI is a better indicator of current financial conditions, however, than upcoming ones. Figure 1 shows that the NFCI did not rise prior to the Great Recession until summer 2007, never rose in response to the 2001 recession, and only rose after the 1990 recession had already begun.

Figure 1: The National Financial Conditions Index Continues to Improve

Although 1Q2019 growth is likely to be weak, it is good news that the first quarter forecast for business investment has steadily improved. The Atlanta Fed's forecast for business equipment investment growth was just 0.2% as of March 27, but it has since risen to 4.8%, partly due to better manufacturing data. This bodes well for improved growth in the second quarter, although the New York Fed still projects only 2.04% 2Q2019 GDP growth (up from its pessimistic 1.4% first quarter forecast). It is clear that 3% growth is unlikely to return anytime soon

The economic news from Europe continues to be concerning with 5-year inflationary expectations declining to 1.4% alongside news that several ECB members think its growth projections are too optimistic. Europe's sovereign debt issues remain just below the surface and a European recession, or even very weak growth, could cause them to again become predominant. It is encouraging that sovereign debt spreads have been stable over the past month. But the Spanish spread against 10 year German debt has risen 31 bps in the past year, Italy's has risen 125 bps, and France's has risen 13 bps (Portugal's has essentially been unchanged). An additional widespread rise in these spreads would amplify Europe's growth concerns.

For the U.S., we view the later stages of quantitative easing as having impacted the economy mostly by delaying the liftoff of interest rates. But Europe's debt concerns makes us believe that the ECB's QE program was more significant than the Fed's, and that additional ECB monetary stimulus is more important for Europe's economy.

Market breadth is conspicuously weak - 1250 advancers/1650 decliners on the NYSE.

From my pal Thomas:

Officially jumping the shark, Carl's Jr will be debuting a cannabis infused burger on April 20.  

Would you eat cannabis in a burger with no clue what is in it? Strain? Strength?

Insanity - but the state of the world these days!

Speaking of marijuana, pot stocks are up only marginally on a big rollout of a buy recommendation by Mother Merrill/Brother Bankamcerica this morning. This might portend some more weakness ahead if Mr. Market ever takes a southerly route.

"It's never fun being late to a party. Everyone has been having a good time, and you've missed out. However, trying to jam all the fun into the party's last hour is never a sensible idea. It's probably better to simply admit you were late and be the designated driver for all your party-hardy friends.
The bull market started in March 2009 and is now more than 10 years old. Trying to recoup 10 years of missed excess returns into one's portfolio at this late date probably isn't sensible, but the data are suggesting that's exactly what investors are starting to do.
Investors are always the most bullish in the final stages of a bull market, and then subsequently regret their aggressive imprudence. At RBA, the combination of decelerating corporate profits, liquidity that's starting to dry up, and investors' incremental bullishness is starting to signal to us that we should consider being the designated driver at this party. No one knows when the party is going to end, but we feel confident that our budding conservatism will ultimately prove beneficial."
- RBA Advisors (April, 2019)

Continuing the theme of The Last One In Is a Rotten Egg, my pal Rich Bernstein's April commentary adds to and enrich my observations.
As Rich explains, liquidity is drying up and the profit picture is decelerating markedly just as investors grow more Bullish. (sorry Larry Fink, many disagree with your interpretation of the retail investors' pessimism).

The question I ask after hearing Larry Fink, and being involved in trading and investing in markets over four decades is, how many times does greed end in laughter rather than tears?

Greed kills is something I have made a career preaching to myself.

* "FOMO" is not necessarily a legitimate and thoughtful reason to be Bullish
* 'Cause when life looks like easy street, there is danger at your door.
* "FOMO" is a strategy and argument (mentioned by Larry Fink yesterday on CNBC) for mindless momentum chasing without regard or mention of fundamentals - in it's highest or lowest form (depending on your view of it)
* The investment process seems to nearly always deteriorate in the later stages of a Bull Market and after optimism expands valuations
* As Grandma Koufax might have said, "Just because Larry Fink says its so, doesn't make it so!"

"We have a risk of a melt-up, not a meltdown here. Despite where the markets are in equities, we have not seen money being put to work... We have record amounts of money in cash. We still see outflows in retail in equities and in institutions."
- Larry Fink, BlackRock (appearing on CNBC)

The CEO of the largest money manager in the world, BlackRock (BLK) , told Squawk Box that the large retail cash positions coupled with a "shortage of good assets" and the likely continued level of low interest rates could contribute to the fear of missing out and a "melt-up."

Fink's comments, to this observer, were non-rigorous "first level thinking" and failed to detail the very important reasons why interest rates are low and why retail investors (who appear to be surrounded by the comfort of ever popular ETFs (hawked by BlackRock) may have some very good reasons to be wary of equities at this point in time.

To this observer, the world is clearly upside down - sure a "melt-up" is always possible. But to listen to Fink's "melt-up" thesis would you think that all is well with the investment world and "the sky is the limit"?

Importantly, global interest rates (with $11 trillion of sovereign debt at negative returns) are delivering a message of disappointing aggregate economic growth. So, low rates, in and of themselves is not, as Fink suggests, a reason to run to equities.

With growing political turmoil, the risks of a policy mistake, the lack of coordination between G-8 powers, untenable levels of debt (in both the private and public sectors), evidence that high frequency global economic statistics and the corporate profit outlook are eroding, and with central banks believing in a smooth monetization of debt - the outlook is not necessarily getting better as the price of financial assets continue to climb.

Indeed, despite Fink's protestations, investor optimism has actually materially risen - I base this statement on a near three multiple (year to date) expansion in the S&P's price earnings ratio. Coincident with this has been a reversal, from net short to a near 12 month high in speculative long S&P exposure - as well as an explosion in IPO offerings (many of them experiencing a "profitless prosperity.")

And, oh yes, investors (both institutional and retail) are now greedy as measured by the CNN Fear and Greed Index! 

"Last One in is a Rotten Egg"

"Well the first days are the hardest days, don't you worry any more,
Cause when life looks like easy street, there is danger at your door.
Think this through with me, let me know your mind,
Wo, oh, what I want to know, is are you kind?"
- Grateful Dead,Uncle John's Band

Tony Dwyer¿ @dwyerstrategy 

More

Does anyone else find it ironic I posted about a pause in the upside yesterday, and today all the headlines are about a possible melt up in stocks? we are not looking for a major correction, just an consolidation period after Tech has ALREADY melted up.

Yesterday, BlackRock's Larry Fink basically made the argument for more mindless momentum chasing (and passive investing) without regard to fundamentals and in the face of a monumental leap in valuation over the last four months (price earnings multiples, on a trailing basis, have expanded from 16.5x at 2018 year-end to over 19.0x today).
Fink has become consensus-like and non-vigorous with his view and sentiment which appears to be changing with higher stock prices (as he has been quite negative at times of market duress over the last few years).
He also may be late in his view - reflecting the aforementioned valuation gains since Christmas Eve.
Fink's warning of a "melt-up" may be correct but, at a near height in equity prices (and though I sanction listening to "everybody" in order to become a better investor), the BlackRock CEO's comments are a primer of what not to pay attention to.
But, to be direct, what should we expect from the largest purveyor of exchange traded funds in the world?
My advice? Be fearful when others are greedy and do your own homework - and don't listen to the merchants of finance on Wall Street who have deep seated and vested interests in a particular investment outcome.

Capital spending failed to have an enduring upside after the January, 2018 corporate tax rate cut. (Business spending peaked in July). Manufacturing technology orders are disappointing now.

Two confirming tweets of a slowdown from my old friend, Fed Hickey: 

Over there (in Germany) economies are weakening, too.

Danielle DiMartino Booth covers these developments that will have impact on a likely domestic economic slowdown:

Hat Tip to Thomas Edison

VIPs

• Manufacturing technology orders are a leading guide for industrial capacity as well as broader capex trends; the current cycle's gains emerged from the 2015-16 industrial recession
• Manufacturing technology orders peaked in 2018 and have entered a down cycle; the 12.2% year-over-year decline in 2019's first quarter is the largest in three years
• Industrial capacity and capex are leaning the same way as orders with the March Industrial Production report signaling manufacturing peaked in December; core capex orders crested last July and have suffered back-to-back quarterly declines for the first time in three years
• While the factory slowdown does not directly feed the Fed's core PCE inflation target, these developments flag a further easing in the supply chain; for manufacturing to bleed into services, the weakness would have to manifest in rising jobless claims
• Manufacturing declines large enough to displace workers in the most cyclical durable goods industries push up recession odds; the risk of Fed rate cuts kicks in at that juncture