I have a special surprise for tomorrow.
"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

As I have previously mentioned (see below), John Mauldin has been conducting his annual Strategic Investment Conference.
The conference concludes tomorrow.
Starting early tomorrow morning, and throughout the entire day, I will be providing a synopsis of the important conclusions made from each of John's all-star list of speakers.
Get ready for some special and value added thoughts that will help you in your decision making process:

* Last week, John Mauldin's Strategic Investment Conference began -- it continues this week.

* As some of you know, John is the author of Thoughts From the Frontline -- one of the very bes*t sites.

* Originally scheduled for Dallas, Texas, the conference is being held virtually.

* Here is a description of this great event.

* The conference will attempt to answer three core questions: First, how deep a shock is the current recession going to be, and what does the recovery look like in the near term. Second, what is the longer-term fallout on the economy, the markets and society? And, third, 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 Thursday -- the last day of the event.

Enjoy the evening and thanks for reading my Diary.
Be safe.

It's been a relatively narrow trading range for the last few hours. No additional trades.

We are now 800 S&P points above the mid-March low.

I will be outlining my Thursday presentation at John Mauldin's Strategic Investment Conference this afternoon so my posts will be less frequent and less wordy!

Thanks for understanding.

This afternoon we will learn on FinTV that everyone covered their shorts and went long in mid to late March.

But this elephant, to quote Grandma Koufax, never forgets!

As Divine Ms M writes, "Price has a way of changing sentiment."

* Opinions are like butts, everyone has one...
* Listen to everyone, read everything - but independent in view!

In "Technically Speaking" I cautioned that it is important to listen to the "Billionaire Bears" (or for that matter any rigorous "talking head", and that includes me!) but stick to your discipline and don't follow anyone blindly:

Finally, I wanted to comment on the billionaire's market forecasts - paraded on FinTV all week: an uber bearish Stanley Druckenmiller, a downbeat David Tepper, a worried Jeff Gundlach, and the others.

Listen to them carefully, but avoid hyperbole and don't abandon your risk appetites and profiles - stick to you disciplines and time frames.

For every bearish Druckenmiller, Tepper and Gundlach, there is a Cooperman (market is generally fairly valued but there are undervalued stocks), Marks and Miller.

As, importantly, "the billionaire bears" are not short, they are net long and own their favorite stocks.

And, like all of us, these guys are often wrong but the key to their overall success is that they quickly respond to changing conditions.

They all could flip on a dime, particularly if the health and medical communities come up with therapeutic relief or a vaccine.

And that is all I have to say about the subject!

Twitter's (TWTR) shares are way behind FAANG.

Time for some "ketchup?"

Tuesday's "crisis is over rally" prompted by vaccine hopes hit a wall on late Tuesday trading as doubts on vaccine results began to arise.

Futures look for a bounce on Wednesday morning. Resistance looks like Dow 24700 to 24900 and S&P 2965 to 2990.

Vaccine results will obviously rule the day.

Stay safe.

Arthur

* Last night (VIAC) declared its regular quarterly cash dividend of $0.24/share.

* This morning, VIAC announced that live sports will return to CBS in June.

* The post Covid-19 world, less global and less urban from Knowledge@Wharton
* Family Guy vs. CNN - who explains economics better?
* Buffett's critics are shortsighted.

Peter has more on sentiment, NIRP and other data this morning:

You don't need central bank induced negative rates to have negative rates. The UK sold 3 yr gilts totaling 3.75b pounds at a yield of .003%. Now we can call that a 'technical' difference and that it is still essentially zero. BoE Governor Andrew Bailey does speak today and I do expect him again to downplay the implementation of negative rates. After the experience seen in Europe and Japan with NIRP, it is completely beyond me why it is even being debated.

The CPI in the UK in April came in about as expected with a headline gain of .8% y/o/y and a core rise of 1.4%. Producer prices saw sharp declines unsurprisingly. There remains this amazing obsession with avoiding deflation, nonsensically I believe, but prices are going to go where they are going to go in response to supply and demand. Either way, the only focus of central bankers right now is buying time to better economic growth. The pound is little changed as are gilt yields and the FTSE 100.

As for my belief that inflation does follow this current period, here are the reasons:

1) The cost of doing business is going higher as companies implement multiple steps to be covid 'compliant'. 'Compliant' will entail all the steps needed to stay clean and safe.

2) Productivity numbers will go down as we spend more time and money on this 'compliance.' Think about all the actual compliance people in the banking system post financial crisis that produce nothing but make sure regulatory rules are being followed.

3) The cost of labor can thus go higher and more money might have to be paid to employees in certain 'higher risk' industries. Also, if generous unemployment benefits get extended past July 31st, it will take higher pay to entice many workers off the sidelines.

4) The supply of things will take time to adjust to the rise in demand. As an example, according to Sea Intelligence Consulting, spot container rates are higher by 25-40% y/o/y because of capacity cuts in the shipping sector.

5) You can be sure that the Fed and other central banks will way overstay their welcome with all this money raining from the sky.

After hearing from Jay Powell yesterday and multiple Fed members over the past few weeks, today's FOMC minutes from the meeting three weeks ago will be uneventful.

Bullish sentiment according to II continued its ascent higher with Bulls up for the 7th week in the past 8. Bulls rose to 49 from 47.1 with anything above 50 beginning the process of getting extended. Bears fell for an 8th straight week falling to 24.1 from 26 last week. Bottom line, the sentiment gauges really have been all over the place. We have bullishness within this data point and the Citi Panic/Euphoria index but bearishness seen in last weeks AAII and a neutral read in the CNN Fear/Greed. I do believe that the AAII read on individual sentiment is capturing people's economic mood more so than chasing stocks higher like the II gauge is likely doing.

Thanks to low rates and maybe the greater desire for suburban living, purchase applications to buy a home rose 6.4% w/o/w and is now down just 1.5% y/o/y. This is the 5th straight week of gains. Refi's though fell another 6.3% w/o/w and I think are still getting caught up in the growing forbearance challenges. They do though remain up by 160%.

Overnight stock futures staged a strong rally.
After being about -10 handles, the S&P futures are +33 at 630 a.m. ET.
And I have no clue why the reversal occurred.
I have added to my (SPY) short at $295.55 in premarket trading -- as we are on top of the high end of my expected trading range.

Danielle DiMartino Booth on the carnage called retail:

• Redbook record same store sales contraction for the week ended May 16 of -9.5% over the prior year was notable on its own; the disparity between Discount Stores, up 4.9% YoY, and Chain Store & Traditional Department Stores, down 41.9%, was biblical
• The PPP loan program has delayed the inevitable for many retailers, who will shutter come the summer months as evidenced by retailers such as Pier 1 being forced to liquidate; retail commercial real estate will be pressured further with the ascent of online shopping
• Multi-line retail construction spending will continue its decline into 2021; leveraged loans backing retail commercial real estate will be further impaired as scores of retailers are forced into bankruptcy while closing stores for others will be the sole route to survival

Pleasantville started out as a simple montage of the black-and-white world of a late 1950s TV sitcom. But when two intruders from the 1990s, David (Tobey Maguire) and Jennifer (Reese Witherspoon), show up, the monochromatic gradually morphs into technicolor, one color at a time. A tongue turns pink, car brake lights suddenly glow red and a maraschino cherry radiates red on ice cream at the soda shop. Director of the 1998 film, Gary Ross described it as a world of predictability breaking down: "A character stares at a rose, he's blown away. There's constant reaction to bits of color...It's like a virus that spreads."

With all due sensitivity to the mention of a contagion, we too were blown away, but by another shade of red, that of the Johnson Redbook Retail Sales Index. Street veterans may recall how this weekly indicator of retail chain-store sales activity was once a major market mover. That was back in the day when reports were printed on paper and received via facsimile.

Like clockwork, Redbook's weekly data still hit the newswires every Tuesday mornings. But investors have stashed the tenterhooks awaiting its arrival. At the risk of boring you, competition from Bank of Tokyo Mitsubishi's weekly retail sales report and chain stores losing their predictive reliability for retail sales post the big-box advent rendered Redbook data somewhat moot.

But these days, any weekly data set deserves a second look, and so we did. What struck us about Redbook wasn't the record low -9.5% year-over-year contraction in the week of May 16. It was the massive divergence between Discount Stores, up 4.9% year-over-year (YoY), and Chain Store & Traditional Department Stores, down 41.9% YoY.

We've Feathered before about the big-box discounters capitalizing on their "essential" status. While that premise stands, the huge double-digit drop for mall dwellers from forced shutdowns has yet to run its course. Appropriately illustrated in red, the Redbook series depicts the Coronavirus shock in today's chart. As per Redbook, "store traffic and sales so far have been slow after re-opening as shoppers are becoming more comfortable shopping online for curbside pick-up and home delivery due to safety concerns."

In the orange line above, Jefferies Economics confirmed that retail closures by location have only declined modestly. As for the failed Paycheck Protection Program (PPP), many small retailers will be forced to close for good. Look for a fresh swell of job losses in this beleaguered sector by early July when PPP workforce lockups expire.

While we will see a bottom in apparel's share of total retail sales (blue line), it may never recapture its prior 4% to 5% range. Before COVID-19, clothes shopping was fun, entailing trying many things on and capriciously leaving the store with more than what you'd had your sights on to begin with.

Online shopping doesn't let you try it on before you buy it. Plus, the introduction of sizable restocking fees for clothes or shoes that don't fit may deter the post-Coronavirus buyer from splurging in filling their virtual shopping cart.

Fewer workers to office environments and working from home indefinitely will also not offset the business casual attire clothing budget they once set aside. The upshot: extended discounts to clear inventory and suppressed stock rebuilding. The silver lining is the winners of the compositional shift - specialty pajama makers and athleisure outfitters.

Retail as a blighted commercial real estate play already is a known known; investors have long shunned the mall in its death throes in favor of "industrial" fulfillment centers to satisfy the shift to e-commerce. The grounded fear is that Coronavirus will accelerate this process as evidenced by Pier 1 expediting its demise yesterday to full-on liquidation. As bad as things have been, the slow grind down in retail commercial property prices seen through the National Council of Real Estate Investment Fiduciaries (NCREIF, green line) is likely to face a cliff moment once more data for 2020 are released.

The thing is, new retail capacity was already being curtailed. Call COVID-19 the proverbial salt in the wound. As QI's amigo at Bloomberg Pimm Fox wrote yesterday, "higher labor costs from paying more workers (and) bigger budgets for cleaning and rising shipping rates could conspire to suppress earnings." Might we add, "further."

Suffice it to say, the 17-month YoY losing streak for multi-line retail construction spending (yellow line) should extend well past this calendar year. While some may debate the next Great Depression being catalyzed, the retail building sector already has punched that ticket.

Red is the common color. Fallout from the pandemic will leave a lasting imprint on the broader retail sector. The fallout from soon-to-be bankruptcies will drive yet another dagger into the heart of commercial real estate. Retail developers may need to update their resumes. Holders of leveraged loans backing retail beware.