My friend Brian Wesbury just emailed me his commentary.
I thought it was interesting enough to repeat, "S&P 3100, Dow 25750": In December 2018 with the S&P 500 at 2,500, we forecast it would hit 3,100 by the end of 2019 and then pushed our forecast to 3,250 as stocks soared. The S&P 500 rose 28.9% in 2019 and hit that revised target on the first day of trading in 2020. We then raised the target to 3,650 for the end 2020, and the way stocks were moving higher in January and February made that forecast look reasonable. But then the world took a detour into the Coronavirus Contraction. As a result, we are adjusting our year-end 2020 target down to 3,100, with the Dow Jones Industrials average finishing at 25,750. That would be a moderate gain of 5.8% from the Friday close. The range of plausible outcomes for the rest of 2020 is very wide right now. Key variables include factors that are normally irrelevant to forecasting markets such as the spread of the Coronavirus, how quickly the economy opens, the development of therapies or a vaccine to fight the disease, and how quickly people are willing to go back to normal. With the economy getting crushed, some analysts are wondering how equities could have bounced so hard from the March lows. We understand their confusion. With unemployment likely above 15% and real GDP falling roughly 30% in Q2, how can equities be doing so well? One key to understanding this is that investors don't buy shares of GDP, they buy ownership stakes in a distinct set of companies, many of which are doing quite well despite the general economic carnage. Imagine a company that has a major competitor nearby. One day, completely out of the blue, the competitor's facilities are all destroyed by a meteor. Obviously, no one would celebrate this catastrophe. However, when competitors go away the enterprise value of the surviving company rises, and you don't have to be an astrophysicist to figure that out. In many ways, the spread of the Coronavirus has given larger well-capitalized companies, particularly technology companies and big box stores that were allowed to stay open, an advantage over Main Street competitors. And unlike Main Street businesses, a larger share of these companies are publicly traded. Meanwhile, our capitalized profits model for equities, based on profits and interest rates, suggests a 3,100 level for the S&P 500 would not be overvalued. To put this in context, a 3,100 level assumes that profits fall by 60% AND the yield on the 10-year Treasury Note climbs to 1.25%. We forecast profits will fall about 25% this year and the 10-year Treasury will rise to just 0.9% by year-end. In other words, even at 3,100 we believe the S&P 500 will still be undervalued. And with profits rising in 2021, we think the S&P 500 can then rise to 3,650, a year later than we originally forecast. One reason to be bullish on equities is that these days Quantitative Easing by the Federal Reserve is going straight into the M2 money supply and not into excess reserves. In the past three months, M2 has climbed at a 66% annualized rate, the fastest rate we know of in history. Meanwhile, the federal government has ramped up deficit spending (with unemployment insurance and loans/grants to small businesses) to try to offset private-sector losses in income. Regardless of what we think of these policies, the effect will be to support equity prices in the year ahead.

This afternoon I elected to move to a medium-sized net short exposure.
I recognize the risk of a market structure that favors "buyers buy higher (and sellers sell lower)," but the bad breadth to me may be seen as a short-term "tell," as could the narrowness of the leadership become more worrisome.
We are getting more deeply overbought (especially the Nasdaq) and look at the McClellan Oscillator (see Mark B's comment).
We have moved definitively toward the higher end of my expected trading range (2550-2950).
With spot S&P at about 2930 and though we are only about 4% above my "fair market value" of 2800 -- I am practicing what I preach and what I write!
Thanks for reading my Diary today and enjoy the evening.
None

I believe the NY Fed Survey , below, is an actual survey of individual expectations as opposed to institutional expectations. Of course, individuals are the ones that put money to work in the market, either individually (including the Robinhood traders, the new E*Trade), or through institutional intermediaries. 

From, here:   

"It is not a surprise that according to the latest New York Fed survey of consumer expectations, virtually every metric having to do with one's financial well being - income, wealth, debt sustainability and earnings expectations - is cratering with expected earnings, income, and spending growth each hit survey lows which is what one would expect in a depression...For example the expected probability of losing one's job jumped to an all-time high of 20.9% from 18.5% in April; the probability of missing a minimum debt payment over the next three months surged to 16.2% - a 7 year high - from 15.1%, while expected earnings growth tumbled to the lowest on record at 1.87%, down from 2.05% in April... while at the same timewhat is shocking is what the central bank reported was the average consumer expectation for stock prices in the future: according to the NY Fed, the mean probability that US stock prices will be higher one year from now surged to 51.8% up from 47.7%, above 50% for the first time ever and the highest print on record."

I suspect the following chart is probably reasonably highly correlated with stock prices, especially the retail favorites.  Just another example, people chase price (as do computers):


Source: Zero Hedge

I should be adding to my short book - if for no other reason that while the S&P Index is +10 handles and the Nasdaq is +105 handles, the market breadth is nearly 2-1 negative on the NYSE.

But I have decided to give the upturn a bit wider berth as we move towards the top end of my projected 3-6 month trading range of 2550-2950.
I am between small/medium net short in exposure.

With the exception of selling the balance of my small (PZZA) position, I conducted no other trades today.

A rare day.

"I don't think I'm exaggerating when I say that our 16th Annual Strategic Investment Conference will be the most important one I have ever hosted."
-John Mauldin

Today John Mauldin's Strategic Investment Conference begins.

As some of you know, John is the author of Thoughts From The Frontline - one of the very best sites extant.
Originally scheduled for Dallas, Texas - the conference will be held virtually.

Here is a description of this great event.

The conference will attempt to answer three core questions:

• * How deep a shock is the current recession going to be, and what does the recovery look like in the near term?
• * What is the longer-term fallout on the economy, the markets, and society?
• * What profit opportunities will emerge from the rubble, and how do we seize them?

There will be a number of panelists and presenters including Neil Howe, Niall Ferguson, Jeff Saut, Catherine Wood, James Bianco, David McWilliams, Matt Ridley, Peter Diamandis, David Rosenberg, Barry Ritholtz, Lacy Hunt, Ivy Zelman, Barry Habib, Mark Yusko, Lee Cooperman, and myself!

Lee and I are appearing on May 21st - the last day of the event.

See this video on fractional share buying. 

It's not just Robinhood either, other day trading platforms offer this now. 

All of this is clearly a big part of why we are is a bifurcated market, in addition to being, arguably, a nonsensical market. 

There is a small group of stocks that the CTA's and day traders are drawn to, and probably a vicious cycle between both (a lot of these huge moves are on such little volume -  clearly the Robinhood buyer is not very discreet).  Then some institutional money is drawn into the fray - either piling on or in a lot of cases just dragged along and some of them have to chase. Then the rest of stocks (most) where CTAs and day traders are not engaged trade absent any pulse and valuation. 

It is all discordant. 

Peloton's (PTON) and Tesla's (TSLA) business will not go to the moon with the financial sector out of business, for example.  This is all like a whacky version of 1999, except in 1999 revenue was moving up and to the right at warp speed as opposed to down and to the right at warp speed. 

Not sure there is anything more to it than price is being chased, and in a new and different fashion. It just happens much faster now and with much less discretion. 

I don't think other vectors like earnings, growth, multiples, rates, the Fed -- all this stuff have mattered as much as all this other stuff. 

Jerome Powell has nothing on Robinhood!  But like anything, this garbage all eventually runs its course.

Papa John's (PZZA) is up by another +$3 today.
I have sold the balance of my PZZA at $84 as the shares have met my longer term objective.
Its been a tasty ride.
And for those that still own Papa John's...
The company reported a solid first quarter last week:
* EBITDA was $27.8 million ($38.4 million excluding franchisee support)
* North America comps +5.3%
* International comps +2.3%
* In the first month of 2Q, North America comps +26.9% (split between traffic and average check) - the highest in history (lapped heavy discounting a year ago)
* Stimulus checks could propel the growth even faster in the weeks ahead
* Turnaround story continues to improve as recent menu, marketing and digital initiatives paying off
* EBITDA estimates from analytical community should rise by +5% to +7% for each of the next two years (+$10 million and +$12 million, respectively).
My price target of $84-$85 has been met this morning (represents 19x forward 12 month EBITDA) - and I have sold the balance of my shares held.

On Friday, we looked to resistance at S&P 2950 and Dow 24250. S&P stalled at 2932, while Dow inched to 24350 on what looked like late inserting of investment funds rather than any news related buying.

Payroll numbers were horrid as expected. Many saw their unemployment as temporary and that seemed to help the psychology.

Virus attention may shift to Korea and Taiwan where openings were more vigorous. We will check to see how these numbers come in and they will begin to effect the market.

Look to be testing some of these levels as reopenings of the economy are monitored as to how things are proceeding. We will carefully monitor the follow-through. Caution flags remain flying.

Stay safe.

Arthur

What's next according to Peter:

To the question I got a lot last week, "what's next?", for the coming weeks it really is just monitoring the pace of the reopenings, the level of foot traffic and whether there is any notable increase in virus spread that is not only the result of more testing capabilities. It should be the tri state area that will be a focus this week as they unveil its reopening plans for the coming month. Past this, when most things are reopen and hiring resumes, the economic data will be back in focus because we won't be able to blame the forced shutdowns anymore.

At least in Shanghai Disney, the new reality as mask wearing, among other things, is a crucial new part of the wardrobe. But it is one that will make this reopening much safer. South Korea is learning that forgetting this will result in more spread as they are seeing a flare up from people going to night clubs with as many as 7000 possibly exposed over the past few weeks. They've since been closed. Thanks to the strict contact tracing in South Korea hopefully this will be quickly contained.

While China has not blatantly turned on the liquidity spigot to the extent that many other central banks have because they want to limit the debt build up as they still absorb the post 2009 accumulation, loan growth in April exceeded expectations. Aggregate financing in April totaled 3.1 Trillion yuan, above the estimate of 2.78 Trillion with bank loans making up 1.7 Trillion of this vs the estimate of 1.3 Trillion. This large number of aggregate financing follows an even bigger one of 5.15 Trillion in March. Along with strength in new loan growth, corporate bond issuance was also robust.Money supply growth as measured by M2 rose 11.1% y/o/y, above the estimate of 10.3%. Bottom line, the monetary goal of the PBOC is to have M2 rise in line or just above the pace of nominal GDP growth. This data point came after the Chinese stock market closed where the Shanghai comp was flat but the H share index in Hong Kong was higher by 1.2%.

I unintentionally neglected to post that in a managed account I have a very small position in Alphabet (GOOGL) .
Mea culpa.
Google resides in a taxable account and I have no current plans of selling this small position.

badgolfer22

08:41VIAC ViacomCBS upgrade details -- to Outperform at Barrington Research; tgt $30 (18.08)

Barrington
Research upgrades VIAC to Outperform from Mkt Perform and sets target
price at $30. Analyst James Goss added, "Upgrade partly reflects even
better-than-expected progress in DTC subscriber gains and signs that
integration efforts are achieving early success: We had earlier
expressed caution regarding the time frame over which the newly
established ViacomCBS combined entity would be able to work through the
process of integrating assets from the merger partners in the midst of
the COVID-19 challenges compounded by some noncomparability issues.
While key revenue and profitability metrics fell in the quarter,
reported and prospective subscriber gains for paid subscription services
and MAU progress for the Pluto TV AVOD service fuel optimism that the
seeds of growth for the merged entity are taking root more quickly than
we were envisioning. Our valuation model suggests significant upside
exists. However, we felt the ability to realize those values would be
constrained as the integration process worked through its challenges.
While many challenges remain, progress in key subscriber/usage areas,
plus other initiatives including the expected rollout of an expanded
streaming service combining CBS All Access programming and technology
with key Viacom networks and some Paramount films, along with continued
dominance at the CBS Television Network and O&O group, count among
the reasons to favor VIAC at current depressed levels."

* With volumes declining and institutional positioning light, a new buyer, Robinhood, has emerged as an important market buyer and influence
* In early April I anticipated a rip your face rally and the mother of all short squeezes
* But, all good things come to an end as I expressed in the beginning of May in "A Time to Plant and A Time To Pluck Up Which Has Been Planted"
* I added to my short exposure after the close on Friday - shorting SPY at $293.40 - as futures carried through the trading session's sharp gains (and were within 1% of the top end of the anticipated trading S&P range (2550-2950)
Look who has been buying stocks over the last two months in what I described in early April as "the mother of all short squeezes!"
It's retail investors at Robinhood - who in this case are not robbing from the rich to pay the poor.
Perhaps and ironically, the worst thing that could happen to the stock market is a broadening end of the national lockdown - as the millennials and other go back to work, and can't sit in front of computer and bang stocks around all day.

Summing Up My Market View
In early April, with stocks much lower than today, I delivered a very upbeat view of the markets ("Does the Continuation of a Rip Your Face Market Rally and the Mother of All Short Squeezes Lie Ahead?") - as the S&P Index, for the second time in the last three years, slipped appreciably below my "fair market value" calculus of about 2800.
In early May in, "A Time to Plant And a Time to Pluck Up That Which Is Planted", I outlined the case to reduce equity exposure as stocks rose above my "fair market value" and moved towards the top end of my projected S&P trading range (of 2550-2950).
At around 6 pm Friday night I wrote:"The markets closed near the highs of the day and S&P futures are about 10 handles higher than the closing price.I am putting out more (SPY) on the short side at $293.40 in the after hours as the S&P index is now within 15 handles of the upper end of my trading range forecast for the next three to six months (2950)."

This morning S&P futures are -17 handles and (SPY) is trading at approximately $291.25.
I am not sure who took the markets higher after the close on Friday but I have constantly argued about opportunistically taking advantage of this sort of action, especially as the regular trading session's strength took the markets very close to my 2950 top end of my projected trading range.
Again, I conduct myself by trading and investing unemotionally, with a calculator and an often contrarian view.
I have been a proponent of buying extreme fear and apparent value (late March) created by the spread of coronavirus and selling optimism and lack of value (now) delivered by the curve's current flattening and some evidence of progress on the scientific and medical fronts.
Perhaps, ironically, as the millennials return to work, an important source of demand will leave the building.
Upside reward no longer dwarfs downside risk as was the case six weeks ago.
Indeed, the near polar opposite condition of March exists today, in the middle of April, for the markets. (Check out Divine Ms M's morning column on the rising euphoria in he Citigroup Panic/Euphoria model and the overbought conditions - particularly in the Nasdaq)
It is time, again, for me, to grow cautious on the outlook for equities and pluck up what was planted in March.

For the reasons to be discussed in my opening missive (that follows), my Trade of the Week is to short (SPY) .

* Got gold?
U.S. Debt as a Percent of Total U.S. GDP:

Danielle DiMartino Booth writes that few will stay in Vegas or talk about it:

• Men permanently losing jobs since the onset of the Coronacrisis rival the run-ups in their ranks in the last two recessions; we view this development in this cohort as the most economically damaging to households' forward consumption prospects
• Investors who like to "gamble" in equities are not as confident in the stocks' gains supporting their spending on a go-forward basis; the persistent decline in Bloomberg's Consumer Comfort Index's buying climate in 2020 has decoupled from the S&P 500
• At 60.2%, labor force participation fell to the lowest since 1973; the 70% of small businesses foundering awaiting a PPP lifeline, a second wave of layoffs stemming from demand destruction and a slow embrace of densely attended Vegas conferences present headwinds

Sprawled out on 40 acres and replete with a trapshooting range, nine-hole golf course, squash, badminton and handball courts, as well as extensive landscaping with imported Oriental date palm and Spanish cork trees, the cowboys of the desert had never seen anything like it, nor was it to their liking. The staff wore tuxedos and Siegel -- Bugsy, that is -- preferred the clientele dress with "class," in formal attire while in the casino. On opening night, December 20, 1946, Jimmy Durante headlined and Hollywood's elite, including Joan Crawford, Clark Gable and Lana Turner, turned out in fine form... for one night. Despite the Flamingo's 3,626 rooms, there were no accommodations for the gamblers who took their winnings elsewhere after the gala opening night. Las Vegas' first casino on the Strip lost $300,000 in its first week of operation and closed two weeks after opening.

Within two months of its March 1, 1947 re-opening, Siegel's revamped business model turned a profit. While it was too little, too late for Siegel, Vegas never looked back. That is, until November 22, 1963, the day JFK was assassinated, and then March 18, 2020, the day the Strip closed for the second time in its history. Casino operators are hoping Memorial Day brings with it a re-opening of their properties at a maximum of 50% occupancy and gambling limited to social distancing norms.

The more pertinent question is: Who will be there to greet at guest reception? It's apparent there is some pent-up demand. At an average resale price of $588 on SeatGeek, the freshly relocated Las Vegas Raiders command more than any other NFL team in the ticket resale market. It's clear a crush of fans has the desire to attend the Raiders' September 21 home opener against the New Orleans Saints.

The Vegas of today, however, is one that's re-branded itself as a posh destination at which to dispose of prodigious amounts of disposable income. The $1.15 trillion body blow to wages and salaries over the past two months (blue line) suggests there's a bit of recouping required to cross the bridge back to spending freely.

Such was the din of reassurances about the 18 million temporarily out of the workforce, we chose to focus on permanent job losers and those least likely to regain employment quickly as the economy reopens. Let's start with males in the workforce who've lost their jobs these last two months (red line). That gets us to "just" 363,000, a figure that rivals the runups in their ranks in the last two recessions.

Are we discriminating against women breadwinners with prejudice? If only. The Coronacrisis has targeted sectors dominated by women -- healthcare, hospitality, restaurants and retail -- all falling into the lowest-paying categories vs. the last recession, which waylaid higher-income male construction and manufacturing workers. Add to that the childcare and home-schooling that have forced many primary caregiving women to leave the workforce.

It's a (sad) fact of life that males out-earn females, so we view this payrolls screen as the most stringent, the most economically injurious. Understanding we've introduced some duplication, we add to this cohort the 1.25 million aged 65 and older who've lost their jobs in the last two months (yellow line). It's no stretch that there will be plenty of younger workers to fill positions seniors had occupied when unemployment benefits run dry come July.

As for the "wealth effect" being extolled in the media tied to the presumed 33-day, 34% bear market that ended on March 23, households have their doubts. That's a new phenomenon. In the rally that preceded the world's "shortest bear market rally," the buying climate released weekly in Bloomberg's Consumer Comfort Index (orange line) marched in lockstep with the S&P 500 (green line). The correlation was a near perfect 0.96. Since the market peaked, however, the correlation has collapsed to 0.06. Investors are not confident in stock market gains supporting their spending.

Given only one in three small business owners who had applied for PPP loans had received them as of last week, investors' doubts about end demand is firmly grounded. As hard as it is to conceive, the 60.2% labor force participation rate (LFPR), which matches a January 1973 low, could fall further in May as small businesses that never received a lifeline shutter for good. As for the LFPR's ultimate resting point, that has yet to be tested by a second wave of layoffs stemming from demand destruction and the Class of 2020. In May and June 2019, 3.9 million new entrants to the workforce graduated in America.

While the desert air might be ideal, it's doubtful liability attorneys will greenlight sponsors scheduling packed Vegas conferences until the Strip's re-opening has proven a success. Look no further than Macau, where gaming revenues fell 97% in April over the prior year, a deeper plunge than re-opening month April's 80% decline. Between permanent job losers' income depletion and demand destruction, Raiders fans may have their pick of cheap hotel rooms come that first Allegiant Stadium kickoff.