It is official!
No trades today - an uncommon occurrence!
Thanks for reading my Diary today and enjoy the evening.

* Non-stop trading is a mugs' game
* So, don't catch the "Stock Trading Jones"

Speaking of my trading inactivity today, let's get back to too much trading.

Here is another repost from seven years ago on this subject: 

This morning I want to explain why I was so active (in a trading sense) - what were the conditions that moved me towards this strategy - and why it should not be a permanent condition.

I have long tried to take what Mr. Market gives me - whether its during a clearly defined trend or if we are in a trading range.

I buy stocks I like with a funnel approach (and short them the same way) - as prices go lower and become discounted to "intrinsic value" I buy more, not less as the opportunity set is improved. I care little if I am catching a falling knife (rather, I embrace the opportunity) or if the price momentum is weak.

And, I increase my trading activity when the opportunity set expands - when stocks and markets enter a volatile period (much like we have seen in the last couple of weeks).

My Basic Trading Tenets

Let's say in normal times the daily range of the S&P Index (in percentage terms) is about one half of one percent or approximately 13 handles (I am guessing on this as I can't find reliable data). As a rule of thumb I do not trade actively in "normal times" like these.

I become more active when volatility picks up. The greater the prospects for volatility the more active I become.

And, with ETFs risk parity and other products and strategies becoming more dominant influences -- and with everyone on the same side of the boat -- I suspect we will see many more periods of heightened volatility and ever more opportunities for unemotional trading.

As we know, one-two percent daily price changes became commonplace in the last few weeks - but the intraday swings were much greater (as in one case, two days ago, it approached a four percent swing).

I expected this, embraced the rising volatility and I became far more active in the last week.

But... Beware the Stock Market Trading Jones

During the last two weeks, in particular, I have chronicled much of my frenetic trading activity.

Though the volume of trading decisions were likely confusing to many I purposely wanted to illustrate how active I get when volatility rises - and, at the same time, I have tried to demonstrate the rationale of my individual trading decisions, so you can better understand the trading process.

Nevertheless:

(1) This sort of active trading is not for everyone (in fact, it is for the few).

(2) I want to remind everyone that the more trading decisions one makes, the more likely trading boners will surface.

(3) Longer term investing will still be the principal fountain of returns for most investors.

My 2012 article "The Stock Market Trading Jones" details my views on the risks associated with too active trading:

"Yes, I am the victim of a basketball jones
Ever since I was a little baby, I always be dribblin'
In fac', I was de baddest dribbler in the whole neighborhood
Then one day, my mama bought me a basketball
And I loved that basketball
I took that basketball with me everywhere I went
That basketball was like a basketball to me

I even put that basketball underneath my pillow
Maybe that's why I can't sleep at night
I need help, ladies and gentlemens
I need someone to stand beside me
I need, I need someone to set a pick for me"

-- Cheech and Chong, "Basketball Jones"

Growing up on the South Shore of Long Island, my friends and I had one passion that we shared -- watching and playing basketball.

We played basketball at least five times a week at the Rockville Centre Recreation Center, at Hickey Field on Sunrise Highway, at St. Agnes High School or at nights at my friend Mark Merson's court, which was connected to his garage (because his court was the only one in the neighborhood with a floodlight). We even traveled to Midwood High School's outdoor courts in Flatbush, Brooklyn, for the really good competition.

When we weren't playing basketball we were watching basketball. Mostly, we would go to the old Madison Square Garden and watch the New York Knicks. In those days, the best of the New York City high schools played games before the NBA Game. I saw Lew Alcindor from Power Memorial and many of the other high school greats there.

We had what was called in those days the basketball jones, an obsession with basketball.

Today I see many traders and investors with a similar affliction, which I call it the stock market trading jones. Market participants feel compelled to overtrade. It comes in the form of a near-obsession in overtrading both on news-based dislocations (to the upside and downside) and on non-dislocations in the normal course of business, typically through chart gazing. The need to play too many earnings reports and the desire to trade macroeconomic events reside among numerous other catalysts.

There are several obvious influences that contribute to the addiction of too-frequent trading:

• Brokers. Brokerage companies have made trading at home easy and inexpensive. Sophisticated Internet-based trading platforms allow individual investors to trade actively at markedly reduced commission rates relative to any other time in history.

• Societal pressures that favor short term over long term. As a society, we have grown increasingly impatient. The media (and for that matter our society) increasingly emphasizes short term over long term and instant gratification over building value through intermediate/long-term value. Today, we even communicate more briefly than ever in staccato-like form via tweets of under 140 characters on Twitter and the acronym soup of instant messaging. How-to-profit books, teaching us how to gain money and fame quickly, outsell more thoughtful investing books such as Benjamin Graham's The Intelligent Investor. All of these pressures (in the pursuit of instant riches) contribute to excessive trading by individuals.

• Quick solutions and foolish acceptance of a special sauce to investment success. We too often seek quick solutions to complex problems/issues. Increasingly, traders seek a special sauce, an algorithm or stock chart that evokes the promise of immediate success, often shunning the heavy lifting and time-consuming analysis. In its simplicity, this also leads to excessive trading, as if the appearance of a chart is an almost mystical and certain way to produce the Benjamins. Technical analysis has a broad definition and when utilized intelligently can be a very helpful adjunct in making (and timing) trades and investments. But too often the decision to make so many of these trades is seen purely through the narrow interpretation of a stock chart, a view that historical price action will provide us with a guide into the future. I see this often on Real Money Pro - particularly in front of an earnings release. Does anyone really think that prior to, say, Nike (NKE) , or any other company) reporting its most recent earnings, a trader can outsmart the legions of other traders by virtue of looking at a chart? Does that really make sense to any of you?

• Shortening cycles. In our fast-moving world, economic, corporate and investment cycles are ever more truncated. Performance definitions grow ever briefer, whether it is the duration of a CEO's or baseball manager's career, measuring a company's profit performance, investors' patience with their investments (manifested in heavy turnover and reduced holding periods compared to any time in history) or with defining investment performance.

All of the above factors contribute to the impatience and heavy trading manifested in the stock market trading jones.

I have believed that by developing a variant view through hard-hitting and investigative research (e.g., contacting company managements, their competition, suppliers or through other means), you will have a much better chance of succeeding with an occasional trade. But, even that fundamental approach (which is time-consuming and doesn't fit in with some who believe that trading gains can be as easy as gazing at a chart) represents a difficult journey toward trading success, especially when it, too, is done with too much frequency.

Regardless of the rationale for action, however, a large portion of traders simply seem to have a trading jones - a need to play, a need for action. (Just look at the lion's share of the remarks in our Comments section every day; they are dominated by intraday or multiday trading plays.)

In my investment experience, I have seen many more professional traders armed with every trading system that money can buy (who have been inflicted by the jones of constant trading) blow up rather than succeed over time. Then, why should you, as an individual investor, be more successful?

The answer is that, in all likelihood, you will not be.

Nonstop Trading Is a Mug's Game

So, let me be direct and straightforward on this subject - nonstop, excessive trading is a mug's game.

Any market mathematician will tell you that the more trades you make the less successful you will be.

I have written for years that waiting for the right pitch in trading and investing is the way to succeed over the long run in this game.

I believe this now as strongly as ever.

Constant Trading Has Always Been the Media's Selling Point

Constant craving
Has always been
-- k.d. lang, "Constant Craving"

The business media are well-intentioned and inhabited by a lot of my friends. I am respectful of their contributions, but they too often encourage the stock market jones.

By and large, the media have an agenda that is different from yours. It doesn't make them bad guys - their objectives of a growing audience and higher ratings are inherently dissimilar to your objective of making money.

Moreover, as I have recently chronicled, the media's reaction to events of the day (e.g., the sovereign debt crisis, the Presidential election, the fiscal cliff, etc.) is often hyperbolic and simply wrong-footed (from an investment standpoint).

Always remember that they are in the press box, and you are on the playing field.

Not surprisingly and understandably (it's in their basic interest), the media too often advance the idea of constant craving of trading and even, at times, (by inference) the dream of instant investor gratification. For every long-term investor queried, it seems as if there are at least 10 traders (maybe more) questioned in the business media.

Maybe it wouldn't sell as well, but I wish there were more forums and time spent on long-term investing in the media.

Unfortunately, many investors watching and listening can't help from being influenced by the media's barrage and sometimes short-term emphasis of time frame. By contrast, long-term price targets (defined in years) are deemphasized, as these are not subject matter seen as capturing ratings and audiences, and typically take a backseat in discussions.

We are often inundated with ways to make fast money. By inference, the pundits and talking heads tell us that this is best accomplished by trading almost every market or individual stock wiggle, often based on technical levels and/or in the knowledge of how to react to certain triggers or events.

In the ultimate level of the absurd, the media conduct contests to guess where the S&P 500 and DJIA will close at month's end, what will be the exact jobs number and so on, as if these guesses will provide some sort of magic market elixir to delivering outsized trading gains. The thrust of many of the conversations on CNBC and Bloomberg are too often based on mindless guessing of short-term forecasts of which few really have any edge whatsoever.

How often does a business show start with the moderator saying something like this: "The S&P is up by half a percent today, so where is it going to end the day?"

Or the dialogue goes something like this:

• "What is the next move in Apple (AAPL) ?"
• "How do we play IBM's (IBM)  earnings report tonight?"
• "Whither Research In Motion (BB) ?"
• "If Friday's jobs report is 150,000 or more, how will the market react?"
• "How will the fiscal cliff debate impact the market today?"
• "Sovereign debt yields are lower today - how will our markets react?"

You get my point by now - continually going one on one against the trading world by guessing on near-term market and individual stock moves is a difficult (if not impossible) pathway to investment success.

Trade in Moderation

Importantly, I want to emphasize that there is a place for trading, as I believe intelligent trading can be a profitable adjunct to investing.

I am very much an advocate of opportunistic trading, especially when one concludes that the market is range-bound without a clear bias in either direction or, for example, when one can get in front of an earnings report with an informed and variant view or by responding quickly to an earnings quality in an earnings report (among other means).

Done effectively, trading can result in a cash-register effect, contributing to the aggregate returns in your investment account.

But only in moderation and only when the right pitch (read: enhanced reward vs. risk) is offered up.

In Summary

"Millions of people die every year of something they could cure themselves: lack of wisdom and lack of ability to control their impulses."
- Irving Kahn, Chairman Kahn Brothers Group

The essence of today's opening dispatch is that my definition of a good trading setup is far narrower and more selective than most on Real Money Pro and elsewhere.

My advice is to stop dribbling your way into multiple and numerous trades that one justifies by reacting to the media, based on technical analysis or based on any number of other reasons - unless you are very lucky, it will not pay off in the long run.

More likely, you will trade (and churn) your way into investment oblivion!

Oh, it feels so good, gimme the ball
I'll go one on one against the world, left-handed
I could stuff it from center court with my toes
I could jump on top of the backboard
Take off a quarter, leave fifteen cents change
I could, I could dribble behind my back
I got more moves than Ex-Lax I'm bad

-- "Basketball Jones"

Position: None

It looks like today will be one of those few days when I make no trades at all.

There is no need to overtrade in this market -- let Mr. Market come to you.

Back in the Spring of 2018 I talked about the reduced market liquidity and an anticipated new regime of volatility.
Here is a repost during the midday lull:

* A little discussed issue is the loss of market liquidity since the end of January
* This is one of the reasons I see a new regime of volatility and a widening trading range
* The swings of a market without memory from day to day could become the norm
* Recognize that the dominant market actors/influences are producing exaggerated, artificial and limited price discovery over the near term - don't over analyze the randomness!
* Take advantage of the volatility

"Out, out, brief candle! Life's but a walking shadow, a poor player that struts and frets his hour upon the stage and is heard no more. It is a tale told by an idiot, full of sound and fury, signifying nothing."
- William Shakespeare

There has been far too little discussion of the issue of the recent loss of liquidity and rising volatility in market commentary.

Here is something that I wrote earlier this year on the subject:

In large measure, reduced liquidity is the reason I see more volatility and a wider trading range (vis a vis prior years) in 2018.

As I initially discussed three months ago, Deutsche Bank (DB) embodies the policy decisions and other contributing factors that have led to the recent market drubbing in this diagram:


In, "Beware, There Is No Liquidity" Zero Hedge highlights the markedly reduced liquidity that now exists. Here is a summary:

* With reduced size available and widening spreads (in equity futures and cash market) since early February -- liquidity today is as poor as that existed in the center of the financial crisis.



* The February drop in liquidity is greater than is typically seen when volatility spikes. "Available size" in e mini futures are three standard deviations too low relative to VIX.


* There are four principal causes of markedly lower liquidity -- Market makers losses have caused dealers to step back, less supply ("volatility moves higher faster as spot declines), a volume shift to closing auctions, tighter financial conditions (I recently highlighted the widening of FRA-OIS) principally due to a tightening in monetary policy.

Here are some charts to support these observations:

To summarize a recent Morgan Stanley report:

"... to some extent this selloff is following the usual playbook - when market participants feel enough pain from the initial shock, markets retest the lows and volatility stays higher for longer. The path forward in spot will be driven by:

• How fundamental investors weather this storm - no signs of panic yet, but as they give up more and more performance their resilience will be tested
• Financial conditions and whether market makers can get some relief

... given the instabilities and lack of liquidity in the market, investors should be wary to catch a falling knife and wait for some stability before aggressively buying. "

Most of this data has not changed since I initially presented it in my Diary.

Less Listed Companies, Reduced Shares Outstanding/Available and the Quants

"Moreover, as recently written - with so much stock locked up in Central Banks and Sovereign Wealth Funds, and with fewer companies listed and a marked reduction of outstanding shares (due to buybacks) of the existing listed companies -- the market is structurally inflated to higher values."
- Kass Diary, Welcome to the Hotel Europa

Liquidity has also been meaningfully dulled by the dramatic reduction (halving) in listed companies on the exchanges and a further near 20% drop in the outstanding shares of the remaining listed companies (buybacks)

With liquidity light, the dominant investors today (ETFs and quant strategies) are in control - something I have emphasized for almost seven years.

These players tend to exaggerate short term moves - as we witnessed over the last two trading days.

This helps to explain the adoption of my opportunistic trading stance this year.

My Real Money Pro Diary

For two decades my Diary has been committed to contributing hard-hitting, logically reasoned, analytically thorough and, at times, unpopular and outside of consensus analysis and commentary. My primary objective is to make the column value-added, informative and fun to read. Importantly, I try to deliver my messages and views in a style and format that is combined with pop culture and humor -- and, hopefully, in an honest, transparent and self-deprecating way.

My columns, especially my opening missives, are often integrated with references from comedians, philosophers, poets, lyricists, etc., and include parodies and metaphors to slam home my views. I do this in an attempt to differentiate my output from the typically dry and commonplace commentary on the economy, individual companies and investment themes.

Having been the son of an extremely hip and complex jazz musician -- secondarily, he was a doctor! -- and having produced some rock and roll concerts, I have been especially drawn to music and their lyrics, and I often integrate the message of a song's lyrics with an investment theme.

Here was my March song: "The Day the Liquidity Died" (to be sung to the tune of Don McLean's "American Pie".) Have some fun with it!

The Day The Liquidity Died

A long, long time ago
I can still remember
How liquidity and an orderly market used to make me smile.

And I now know what investors do at any chance
Is to get themselves a margin loan in advance
And maybe add some more RIOT to the pile

But systemic strategies made me shiver
With every basis point the bond market delivered
A short volatility bubble and risk parity on the doorstep
Still the traders couldn't keep from taking one more step

I can't remember if I cried
When I read about last month's CPI
But you could lose your capital and your bride
The day the liquidity died

So bye-bye, to your piece of the pie
Investors poured their money into leveraged ETFs
Now their equity account's dry

It's just five weeks from an all-time high
Singin', Could we go back where we were last July?
Could we go back where we were last July?

Did you buy stocks you never heard of
Like Longfin at $55 or above
If the Twitter trolls told you so?

Now do you still believe in Bitcoin Investment Trust?
Were you in the last ICO IPO?
And will you continue to ignore the lack of free cash flow?

Well, I know that you were margined, too
'Cause you always take an intermediate-term view
Even your Stratton Oakmont broker shut you down
No more buying power could be found

The traders never worried on the whole way up
Buying leveraged ETFs from the back of a pickup truck
But I knew some week they will all run out of luck
The day the liquidity died

I started singin',
Bye-bye to your piece of the pie
Investors poured their money into ETFs
Now their equity account's dry

It's just five weeks from an all-time high
And singin', Could we go back where we were last July?

Could we go back where we were last July? Now for ten years we've been on our own

And moss grows fat on a rollin' stone
But that's not how its always gonna' be

Last year when the company executives sang for the king and queen
In suits they borrowed made of green
And with voices that didn't come from you and me

Oh, and just as things were turning 'round
The President slapped free trade down
The courtroom was adjourned
A guilty verdict was returned

And when Jay Clayton's SEC was falling asleep
Warren Buffett's cash pile kept on rising in his Omaha park
While Peter Schiff sang dirges and gold came out of the dark
The day the liquidity died

(Refrain)

Helter-skelter in the upcoming summer swelter
The bulls flew off into their fallout shelter
The Dow was at 22,000 but falling fast

And in the business media the "talking heads" landed foul on the grass
Though Belski, Golub and Jeff Saut were still trying for a forward pass
With Ken Fisher on the sidelines in a cast

Fox Business News' air was filled with sweet Palm Beach perfume
But Mr. Market wasn't playing their marching tune
The bulls all got up to dance
Oh, but they never got the chance!

'Cause the risk parity traders dominated the field
As the long bond climbed more than 150 basis points in yield
Was price discovery ever really repealed?
The day the liquidity died?

(Refrain)

Oh, with investment strategies and products all in one place
Bill Ackman still lost in space
Too old and with no time to start again

So come on; Fed be nimble, Fed ease again!
Is Chairman Powell still chanting amen?
'Cause more cowbell and QE is the market's only friend

Oh, as we watched the Dow Jones fall
Too many will receive a margin call
No broker born in hell
Could break that bear market's spell

And as the futures dropped into the night
To douse the sacrificial light
I saw Boockvar laughing with delight
The day the liquidity died.

(Refrain)

Well I met an analyst covering Facebook, Google and Amazon
And I asked her to interpret the antitrust news
But she just frowned and turned away

The traders marched towards Morgan Stanley's store
Where they made their fortune years before
But the brokerage demanded to see the cash before they could play

And on my Bloomberg, the ticker streamed - Bill Miller weeped and David Einhorn dreamed.
But not a bullish word was spoken
The market transmission mechanism was broken

And the three stocks the traders acquired last
Disney, Caterpillar and Comcast
Couldn't catch a bid and faded fast
The day the liquidity died

And they were singing (sing it for me now!),
So bye-bye to your piece of the pie
Investors poured their money into a broken market
Now their equity account's dry (everybody!)

It's just five weeks from an all-time high
Singin', Could we go back where we were last July?
Could we go back where we were last July?

Bye-bye to your piece of the pie
Investors poured their money into a broken market
Now their equity account's dry

It's just five weeks from an all-time high
And singin', Could we go back where we were last July?
Could we go back where we were last July?

Bottom Line

"It don't mean a thing
If it ain't got that swing
(doo wah, doo wah, doo wah, doo wah
Doo wah, doo wah, doo wah, doo wah)
It don't mean a thing"
-- Duke Ellington, It Dont Mean a Thing

With liquidity thin and volatility on the ascent, trade opportunistically and unemotionally.

The role of the dominant investors (mainly passive ETFs, volatility trending and risk parity) has distorted our markets and stock charts - so making confident market observations and forecasts in a regime of heightened volatility (and limited price discovery) might be a mistake.

The swings of a market without memory from day to day could become the norm.

Use the new regime of volatility to your advantage.

From my pal Tony:

Time to react:

Sometimes it is better to react to market conditions rather than try to anticipate the next move. We believe the market has been in tactical no-man's land following the early August 6% swoon because the market was no longer overbought but had yet to reach oversold enough levels to generate the next intermediate-term leg higher toward our 2020 S&P 500 (SPX) target of 3350. Friday's action and the likely decline into this week should go a long way in helping the market reach a pessimistic enough level that would warrant a more offensive position. That said, in order to adopt a tactically offensive position in a declining market environment driven by fear, we must be convinced the current global growth slowdown isn't going to end in an imminent recession.

No reason to change plan. We have no reason to believe our positive core fundamental thesis for 2019 has changed because it wasn't about strong growth. Our 1H/2019 positive thesis centered on a global economic slowdown resulting from the lagged effect of higher interest rates in 2018 and a developing trade war that would move the Fed and other global central banks to much easier monetary policy. Now with very poor global growth, a historic drop in sovereign debt market rates, and a very accommodative global monetary policy, the bull story turns to a global stabilization followed by reacceleration as we enter 2020. We believe that has already begun.

The third near-recession of the current cycle. There is no question the trade war with China has dampened capital spending and business investment, but similar to the past two industrial recessions this cycle - the drop in market rates and subsequent monetary accommodation should offer a counter balance in a consumption-based economy driven by leverage. We are currently in the third global industrial slowdown this cycle as evidenced by the percentage of global OECD countries with Composite Leading Indices above average (Figure 1). First, we had the European Debt Crisis in 2011-12, then the Emerging Economy Commodity Crisis in 2015-16, and now we have the Trade War Crisis in 2018-19. In both of the prior slowdowns in CLIs over the past ten years, the month-to-month reading led the year-to-year turn, which ultimately ended with a sharp turn higher in the widely followed global activity measure.

Global backdrop bad enough to be good. To be clear, we are not making the case the global economy is good; it is quite the opposite. We are making the case that the global economy and expectations got weak enough to cause a drop in market rates and a rise in global monetary accommodation that produced an important inflection like the past two periods of slowing over the past ten years. It is important to note all three were accompanied by a bear market in the early stages of the global slowdown, especially in the economically sensitive areas like Energy, Materials, Industrials, and Financials. Of course, according to the "official" transcript there needs to be 20% drop in the S&P 500 (SPX) to be considered a bear market, but the 19.6% drop in 2011 and 19.8% drop in 2018 are close enough in our book, and the incredible decline in the deep cyclicals by early 2016 also had every appearance of a bear. Either way, the low in the market led the low in economic activity and the 10-year U.S. Treasury Yield (Figure 2).

Here is the consensus as I see it (and where I stand):
* Buy/long stocks on any dip. (I am market neutral and plan to re-short strength based on the expectation of lower stock prices in 2019-2020.)
* Buy/long bonds as rates will continue to decline (principally owing to non U.S. interest rates in negative territory). (I am large short bonds, which I believe to be in a bubble.)
* Inflation and inflationary expectations will continue to subside. (I expect inflation to rear its ugly head in 2020.)
* Oil should be avoided. (I have no opinion on the commodity.)
* Banks are unattractive in a low-interest rate environment. (I expect rates to rise and feel the consensus is shortsighted.)
* The U.S. economy will increase by 2% to 2.5% (in real terms). (I see sub-2% real growth.)
* The global economy will increase by over 3% in 2019-2020. (I see sub-3% growth in real terms.)
* The current president will win the 2020 election and serve a second term. (I believe Donald Trump/Mike Pence will lose to Joe Biden/Kamala Harris by a relatively -- but surprisingly -- large margin.)

Unlike many, my livelihood is not based on writing about investing (in my Diary). It is based on the results of my investing.

Moreover, my Diary is not intended to be a list of recommended stocks and Index trades. As seen in the qualifier below all of my writings, I am not making recommendations.

Many on our site and elsewhere recommend stocks and options. I am not as that is not the service that I want to perform particularly since we have a subscriber base with dramatically different risk profiles and objectives.

I don't do a model portfolio for a number of reasons. First, it implies the list is a group of recommended stocks and it is not. Second, I decided years ago not to include very speculative stocks (especially of a short-kind) because some subscribers have miscalculated the risk factors and often tend to overweight these stocks in the hope of hitting a home run. (My portfolio is often the house for very speculative longs and shorts -- and I weigh the stocks appropriately given the higher risks).

Rather my Diary is intended to provide a discussion of what I am trading and investing in. I try to be transparent in what price I pay/sell/short, when I transact, the size of my positions and, most importantly, the analytical logic behind each transaction.

My views are intended to be hard-hitting analytically, contrarian (and anti-price momentum).

You see most of my investment blemishes. When I am wrong, I admit it -- I am not a "carpet sweeper."

I hope my views are different than mainstream consensus (you all get quite enough of that "group stink"!) and encourage you to develop investment thoughts you otherwise would not necessarily think about.
Subscribers should take it from there. Neither I nor anyone else has a concession on the investment "truth." There is no special investment sauce! So, evaluate my ideas (and the ideas of others) within the context of your risk appetite and profile and time frames.
Do your own homework because you alone are responsible for your trading and investment decisions. You pull the trigger, not I.
Towards that end, here is a response to a very intelligent question from my South teammate Mikey on market positioning and exposure.
If my answer is not adequate please respond in our Comments Section.
Thanks.

badgolfer22 • 2 hours ago

I know before asking this question I'm gonna get a very defensive response, but since I'm the only one here willing to ask it, I can't help myself...because I frankly don't get it.

Dougie, you've covered all your index shorts.. Yet you're long Banks large/huge/massive...pick an adjective, you're long CGC large since 41, you're long Amzn and google large and been adding for a week, you're short bonds massively. I'm sure I've left off some other longs here as well.

So tell me, with all of this long exposure, how can you characterize your stance in your trading as 'market neutral'?

To me it looks like you're long up the ass from where I sit.

just curious.

dougie badgolfer22 • a few seconds ago

"One last thing"

- Lt Columbo

90% of my longs have been discussed in my Diary and are on my Best Ideas List (10% are very speculative) and as a matter of policy I don't discuss.

Shorts are not appropriate for most investors as I have posted - so I am far less reluctant to detail all of my shorts, especially the very speculative ones.

I hope you understand this as I have made it very clear in the past.

Dougie

dougie kassbadgolfer22 • 8 minutes ago

Most importantly Mikey I have a very very very large cash position (six month treasuries or less maturity).

Dougie

dougie kassbadgolfer22 • 10 minutes ago

I have several large sized individual shorts.

In addition, I have several large shorts that are speculative and I have chosen not to discuss (as policy) because of the risks associated with them. Very volatile, high beta which give me bang for my bucks in a downturn in market.

I am market neutral.

Dougie

dougie kassdougie kass • 6 minutes ago

Finally, when I calculate my exposure I do so on a risk adjusted basis. In other words, I beta adjust.

So when my shorts have higher beta (vol) than my longs - it impacts my risk adjusted position.

Dougie

No trades today... yet.

* #MUVGA
* Uncertainty rules the day

"We have had calls (with China) at the highest level."
-- President Trump

In a brief period the administration, in response to answers in a press conference),has said conflicting things:

* That the president didn't hear the correct question regarding the China tariff negotiations properly, and
* The president meant to say that he wanted even larger tariffs on China.

The allocation of one's capital in investing as well as capital spending of a business fixed-investment kind are now suffering from hastily crafted policy conflated with politics, written on the back of a napkin and delivered by tweet.

The uncertainty is occurring at the worst of possible times, after a decade-long market and economic recovery that appear to be growing long in the tooth.

* Trading with a calculator and a contrarian view

"Yes I'm stuck in the middle with you,
And I'm wondering what it is I should do,
It's so hard to keep this smile from my face,
Losing control, yeah, I'm all over the place,
Clowns to the left of me, jokers to the right,
Here I am, stuck in the middle with you"

--Stealers Wheel, "Stuck in the Middle With You"

Spyders are trading at about $286, more or less in the middle of my expected trading range over the balance of the year, which is projected to be between 2700-2750 and 2900-2950.

I remain market neutral in exposure 'cause we seem to be stuck in the middle with stocks.

Here's more evidence of weakening domestic economic growth.

A miss to expectations on core durable goods orders...

... and the largest drop in shipments in three years.

Source: Zero Hedge

Canopy Growth (CGC) is upgraded to buy at Seaport Global Securities.

* The new regime of volatility continues -- don't be dazed, but rather use it to your advantage
* More night moves Sunday night as the pajama traders were active, demonstrating the need to be unemotional and to buy panic in your trading these days
* Overnight S&P futures fell by 40 handles
* But by 6:30 Monday morning futures had reversed and were +15 handles -- a reversal of 55 S&P points!
* Trump is "Making Economic Uncertainty and Market Volatility Great Again" (#MUVGA) -- his actions/tweets will continue to weigh on the markets

"Workin' on our night moves
Trying to lose the awkward teenage blues
Workin' on out night moves
In the summertime
And oh the wonder
Felt the lightning
And we waited on the thunder
Waited on the thunder."
--Bob Seger, "Night Moves"

For most of last week I was short in exposure but took down my short Index positions in Friday's market schmeissing. And, in after-hours trading Friday afternoon, I concluded a dramatic reversal in my portfolio positioning and moved back down to market neutral.

Here is what I wrote at about 5:30 on Friday afternoon in "I Have Covered the Balance of My Index Shorts in After-Hours Trading": 

With the after-hours announcement that Trump is retaliating further against China we now likely have certainty.

For those that anticipated (and shorted the market) in the belief that this cold/trade war would intensify we were paid off today.

First-level thinking is that this is bad, which it is -- and that the market will crater (which it may not).

To some degree, at least in reference to trade negotiations, the market seems to have now discounted the series of moves that broke today.

To me (and perhaps to second-level thinkers) the news is now out and from here I would not expect a material escalation in trade tension.

Given this, I have covered the balance of my SPY ($284.75) and QQQ ($182.40) shorts in after-market trading. (Fortunately, this is the second time in a few weeks that I have profited considerably from shorting strength and buying weakness. These sorts of trades add up).

I am now flat the indices and back to market neutral in exposure.

For those that believe this is the tip of the iceberg of more trade rifts, they might be right but I am not going to bet on it.

I continue to be focused on other, even more important issues (which serve as market headwinds) that I have highlighted in recent months.

I plan to re-short strength if a market rally develops.

I and my portfolio will sleep well in a market neutral state this weekend after today's schmeissing.

Bottom Line

Don't be dazed -- be involved.

The market's gyrations and the president's tweets will likely continue and provide an opportunity for traders to take advantage of the uncertainties that are reflected in wide market swings.
But the increased wildness of the moves are only for those traders who are quick of foot and unemotional.
Investors with longer-term time frames can also benefit by the new regime of volatility, waiting for the right pitch and swinging for longs when panic sets in and for shorts when optimism is elevated.
As for the market's intermediate term, I continue to believe the markets made an important top back in late January 2018, and nothing about the action of the last several weeks changes my mind.
The president's inconsistent behavior and his hastily crafted policy that is conflated in politics, established on the back of a napkin and delivered by tweet are exacerbating an already-weakening global and domestic economic picture that Danielle, Peter and I have been writing about.
Trump is Making Economic Uncertainty and Market Volatility Great Again -- #MUVGA -- because his inconsistent, poorly thought-out policy actions and seat-of-the-pants messages are likely weighing on business fixed-investment decisions.
I start the week in a market neutral position, having covered all my Index shorts.
Growth will be rare in the year ahead, so some of the FANG stocks, specifically Amazon (AMZN) , Alphabet (GOOGL) and Facebook FB , look especially attractive (and I added more aggressively on Friday).
As stated above, I plan to re-short the markets on strength based on my negative view relative to consensus of global economic and U.S. corporate profit growth.

This isn't child's play, though it sure seems that way:

Here is my reaction to Jim "El Capitan" Cramer's opening missive here on Monday: 

From the Supreme Tweeter:

A twitter exchange I had last night when S&P futures were -38 handles. (They are now +19.)

The economic slowdown is here, according to Danielle DiMartino Booth:

• Kansas City Fed President Esther George's insouciance about the U.S. economy suggested an unawareness of her own manufacturing survey, which had just posted its steepest decline in three years; New Orders, Backlogs and Finished Goods Inventories hit four-year lows
• Before the announcement that China would impose new tariffs on U.S. imports, more than half the respondents to the KC Fed District survey indicated the trade war was hurting business; 37% believed trade tensions will stretch for one or two more years
• With the exception the Dallas Fed's Kaplan, Fed District Presidents interviewed in Jackson Hole waxed optimistically even after China announced it would impose fresh tariffs on U.S. imports to China
• While Markit's Manufacturing input and output prices hit record lows last week, it was the services data that was the most concerning; Services exports matched a record low and the employment index hit a nine-year low signaling the factory recession had spread to services

There's nothing like the trappings of wealth -- unless, that is, you're finding your own riches by trapping. In the early 1800s, beaver was all the rage. Fur felt made from beaver pelts was fashioned into the finest top hats "best described as soft and slightly shaggy looking." Today a good beaver hat is smooth and all about the Xs, the more the better. No surprise, the vast riches on offer in the early 19th century lured the "mountain men" fur trappers to the valley beneath the Grand Tetons where the beaver population was enormous (though not for long). David Edward "Davey" Jackson so famously enjoyed first-mover advantage, they named the town after him in 1829 "Davey Jackson's Hole."

QI gets the sense the cell signal was jammed across the 1,065-mile distance separating the Kansas City Federal Reserve from that Tetonic mountain range providing the perfect backdrop for the Jackson Hole Economic Policy Symposium it hosted this past Friday and Saturday. The 10th Fed District's President, Esther George, appeared to be unaware of her lost signal. Even as her District's manufacturing survey was hitting the wires with the steepest decline in three years, she assured CNBC viewers that the yield curve inversion was not reflective of recessionary risk: "I'll keep watching that carefully for sure but I don't yet see the signal -- that suggests it's time to get worried about a downturn."

It's feasible that George is inured to the swings in her District. As you can see, four-year lows in New Orders, Backlogs and Finished Goods Inventories have been seen twice in the current expansion. Surely her hearty territory will power through, as it's done for more than a decade. On the other hand, right up on her website, there was this to behold, "All of the year-over-year indexes tracked by the bank fell in August." Add to that the disconcerting short-run demand-supply signal. The -10 reading for the New Orders-Finished Goods Inventories spread featured both parts contracting in August, something not seen simultaneously and to this extent since the lows of the 2016 energy bust.

With the exception of Dallas Fed President Robert Kaplan, her thinking was echoed by George's District Bank President peers, who said much of the same in their respective TV interviews. Perhaps Kaplan, who presciently warned that the economy was just one weak employment report away from the consumer buckling, has a better vista from which to appreciate the scope and damage being wrought by the trade war.

The most bizarre aspect of the Fed presidents' media blitz? They maintained their optimism even after China announced it would impose tariffs on a wider array of U.S. imports to China, including autos and energy.

That brings us back to Kaplan. As we've recently written, it's hard to dismiss Texas' initial jobless claims stubbornly holding among the nation's weakest. Not only is Texas the second-most-populous state, it's the largest exporting state and a bellwether for the energy industry. In other words, Kaplan's circumspection is not without merit.

But Texas is not alone in its plight. There's this place called Oklahoma just north of the Red River on Texas' border, where jobless claims have consistently and conspicuously been the weakest in the nation and are up by a blistering third over the past 12 months. The Sooner State is also part of George's District, along with portions of western Missouri, northern New Mexico, Colorado, Kansas, Nebraska -- and yes, Wyoming, home to the celebrity symposium.

Suffice it to say, oil cruising towards $50 a barrel would push both Texas and Oklahoma into full-blown recessions. But what of the offset of services, which dominate the U.S. economy?

We would also point out to George, who surely had no cell service on Thursday either, that the Markit data was jarring -- and we're not referring to new domestic and export orders in the factory sector hitting crisis-era lows. No, it was the Markit services data that unsettled:

Input and output prices hit record respective lows of 49.4 and 48.3. Can you say deflation? Service exports matched a record low of 48.1. Backlogs abruptly contracted to 47.8. And here's the opposite of icing on the Grand Teton cap: Service employment hit 50.2, a nine-year low. In the words of QI's Dr. Gates, "these Markit services data have contagion written all over them."

As for George's District's prospects, not only did 55% believe the trade war would hurt their businesses, "more than 37% of firms believe trade tensions will last for one to two years." And this was before the latest ratcheting up in the escalating war.

Far be it from us to say, but George could have filled in all the blanks of her Jackson Hole conference's theme "Challenges for Monetary Policy" by keeping her focus closer to home.