Added to both (SPY) and (QQQ) shorts on the late afternoon rally.

I am calling it a day.

Thanks for reading my Diary today and all week.

Enjoy the weekend.

Be safe.

* I moved to a large net short exposure today

Here are the prices of my additional shorts made in Friday's trading session

* (QQQ) at $230.86
* (SPY) at $302.22
* (CAT) at $119
* (AAPL) at $319.65 

As mentioned earlier, I am now large net short in exposure.

* The Citigroup Panic/Euphoria Model is at the highest reading since the Bull Market started in 2009
From my pal, Tobias Levkovich

I have moved my Caterpillar (CAT) and Apple (AAPL) shorts to medium-sized this afternoon.

Heading shortly to a (liquid) lunch.

Moved to large net short in exposure by reestablishing (CAT) and (AAPL) shorts, as well as adding to (QQQ) short. 

Today's MSCI Expiration is rumored to be potentially massive (despite Wall Street water holes being closed).

Wild card could be China - is thought to have been a factor but some adjustments may be taking place as rumors of press conference circulate.

Good luck.

* I have liquidated a lot of my long positions and have been averaging into Index shorts lately
* I worship at the altar of fundamentals and not of price momentum
* Monday I will present a more lengthy analysis of my concerns over the balance of 2020

I continue to adjust my net exposures based on the relationship of share prices to my calculus of "fair market value." This path I have taken in my career is a fundamental approach to trading and investing -it is the business I have chosen.  

Price is meaningful to me but not based on its momentum but rather in the relationship of price to value.

A widening gap, when prices move below intrinsic value, is a cause for celebratory buying to me and a gap, when prices move above intrinsic value, is a cause for celebratory selling/shorting to me.

I do this dispassionately and I am unaffected by price momentum (in part exaggerated by passive products and strategies but also my traders'/investors' emotions) as I am an opportunistic investor and not one that worships at the altar of price.

I worship at the altar of fundamentals and a calculator.

Again, for emphasis, there are many ways to profit from the markets - others trade and invest successfully through a disciplined approach of reacting and following price and other factors to make their trading decisions. (Unfortunately some mono-factor strategies, like "unusual call activity," make the trading process more simple than it is - forget about that it has no practical or academic evidence of success over time).

My approach (as they often protest through their writing or tweeting) is an anathema to technical practitioners just as their approach is foreign to me. So, don't look for me to practice that strategy as I anticipate and don't react - look to others like Tim or Rev who have a bonafide and documented record of trading successes.

For Me...

When the S&P Index fell below my version of fair market value of 2800, on the way to under 2020, I aggressively (and unemotionally) moved to a large net long exposure. Unlike some who worship at the altar of price momentum and were frightened by the drop (and rendered inactive) I embraced the long opportunity. (This approach is not for everyone, but it suits me.)

Today the S&P intrinsic value is about 2800 (spot cash is around 3030) and I have been averaging into a large net short exposure. (I average in because I acknowledge my inability to time with precision, especially in a regime of heightened volatility.)

Some of those same traders that were appalled at buying the late March/early April weakness are now appalled at shorting/selling the recent strength. As Grandma Koufax used to say, "Dougie, horses for courses." Again, I respect different approaches but technical trading/investing based on reacting to prices is not on my menu. Nor is tofu!

The rip your face off rally and mother of all short squeezes- that I envisioned in early April is probably over and I have capitalized on it as my net exposure was large (long).

In the last few days (and weeks) I have profitably eliminated a number of long investment positions including (BA) , (FDX) , (DIS) , (MS) , (HLT) , (H) , (VNO) , (GS) , (VIAC) (a profit in some accounts but not in the aggregate), (CMCSA) , (GLD) , (PZZA) , (TWTR) and (PENN) (ugh). (Previously I liquidated most of my Alphabet (GOOGL) , all of my Facebook FB and Amazon (AMZN) for large gains)

I am left with no growthy names (as I see a pivot to value), a large exposure to financials (even though I have sold my (GS) and (MS) for nice gains), several packaged foods names ( (PG) , (KHC) , (SJM) and (THS) ) and a couple of speculative stocks (e.g., (GE) ).

I am short the Indices (large) and bonds. I have no individual stock shorts but I am looking to reshort Apple (AAPL) and Caterpillar (CAT) . (Most should not bother with shorting, as I have discussed in my Diary over the last 23 years).
__________

Long GE (large), PG (large), KHC (large), SJM (large), THS (large), BAC (large), C (large), WFC (large), PNC (large), JPM (large).

Short SPY (large), QQQ (large), TLT (large).

* The financial system was imperiled in late summer 2007 though the bulls argued the Fed will come to our rescue
* With the benefit of hindsight, the Fed was not successful
* Sound familiar?

Here is a great debate I had with Jon Najarian on Fast Money (with Dylan Ratigan) in August, 2007 (right before the market fell apart)

The core arguments presented by Jon and the other bullish panelists on Fast (look how young Guy Adami appeared!) was that the Fed was our friend and that modest EPS revisions lower were already priced into the market after a near -10% drop in stocks.

My best idea in the debate was to short the private mortgage insurers - Radian (RDN) , MGIC (MTG) and PMI. (The stocks fell by over 95% in the next 1 1/2 years!)

My pal Jon's favorite idea was to buy the large money center banks - which I was short and a year later were all technically bankrupt as the world's financial system was in chaos.

Today, the Fed is still seen as our savior.

History rhymes.

* My revised levels

I don't want there to be any ambiguity about the size of my positions or about my buy and short levels as I strive for as much transparency as possible.

"When the time comes to buy, you won't want to."

-- Walter Deemer

"When the time comes to sell, you won't want to."

-- Walt Deemer

I promised to update my "levels" at least once a month. The last update was on May 5.

I would emphasize that my growthy ideas (e.g., FAANG names) have buy levels well below current share prices - reflecting my perception of a continued pivot from growth to value.

Here are some of my new individual buy/short levels of stocks that I want to add to or reestablish on weakness, and in the case of shorts, to sell on strength:

BUYS

-- Facebook (FB) $190

-- Amazon (AMZN) $2,100

-- Alphabet (GOOGL) $1,250

-- Papa John's (PZZA) $69

-- FedEx (FDX) $122

-- Hartford Financial Services (HIG) $35

-- Goldman Sachs (GS) $188

-- Twitter (TWTR) $27

-- Macy's (M) $6

-- Dillard's (DDS) $30

-- Kohl's (KSS) $18

-- Comcast (CMCSA) $35

-- Bank of America (BAC) $25

-- Citigroup (C) $48

-- JP Morgan Chase (JPM) $95

-- Wells Fargo (WFC) $27

-- Procter & Gamble (PG) $115

-- SPDR Gold Shares (GLD) $155

-- Kraft Heinz (KHC) $30

-- ViacomCBS (VIAC) $17

-- Walt Disney (DIS) $105

-- Morgan Stanley (MS) $36

-- Verizon (VZ) $53

-- Micron (MU) $40

-- T. Rowe Price (TROW) $98

-- Penn National Gaming (PENN) $17.50

-- Hilton Worldwide (HLT) $70

-- Hyatt Hotels (H) $52

-- Vornado Realty Trust (VNO) $36

-- General Electric (GE) $7 (speculative)

-- PNC (PNC) $102.50

-- TreeHouse Foods (THS) $51

-- JM Smucker (SJM) $115


SHORTS

-- Apple (AAPL) $310

-- KKR & Co. (KKR) $28

-- Blackstone Group (BX) $52

-- Caterpillar (CAT) $118

-- T Rowe Price (TROW) $112

-- Franklin Resources (BEN) $24

-- SPDR S&P 500 ETF (SPY) $297

- Invesco QQQ (QQQ) $225

- Bonds (TLT) $160

__________

Long PG (large), THS (large), SJM (large), BAC (large), C (large), WFC (large) JPM (large), PNC (large), GOOGL (small), HIG (small), KSS (small), M (small), GE.

Short TLT (large), SPY (large), QQQ (large).

* On coronavirus conspiracy theories.

* Howard Marks' latest commentary.

* Day trading replaces sports betting.

Peter on inflation and confidence:

Ahead of US inflation data today at 8:30am we saw inflation news also from Japan and Europe. The Japanese read was specifically in Tokyo for May and it rose .5% y/o/y ex fresh food and energy, well more than the estimate of up .1%. It's rare that we see a higher than expected print in Japanese inflation and while the BoJ might be happy, I don't believe the Japanese citizenry is during this economic downturn. We'll see though if this lasts or not. Food prices are not just rising in the US, they rose 2% y/o/y in May in Tokyo and fresh food jumped by 4.5% y/o/y after a 6.1% y/o/y spike in April. Bottom line, while some, including our central bankers, are worried about falling prices, nonsensically I believe as its just a natural consequence of the economy and therefore is just a reset, I don't think we should be rooting for higher prices, aka 2% growth considering the state of the consumer.

The consumer confidence index in Japan in May did tick up to 24 from 21.6 and which compares with 30.9 in March and 38.3 in February. Expect a gradual recovery to continue as more things reopen and get back to some normal. For April, Japanese retail sales fell 9.6% m/o/m, more than the estimate of down 6.9% but with April being the heart of the shutdown, what relevancy does any April data have anywhere. I'll give some more anyway.

In April Japan's unemployment rate rose only .1% to 2.6% but on the surface that's misleading as 4.2mm went on furlough. If included, the unemployment rate would have been around 11%. Also, 1mm lost jobs but there was only a 60k increase in unemployed (those still looking). The reason for the little change in the unemployment rate was because the labor force shrunk by almost the 1mm lost jobs.

There wasn't much of a response in the Japanese markets though Japanese stocks have outperformed of late. For all the criticism over the years of Japanese companies because of all that cash sitting on their balance sheets, it has been never more valuable than now. Many Japanese companies have the best balance sheets in the world currently.

JAPANESE CONSUMER CONFIDENCE

Core CPI in May in the Eurozone hung in there with a .9% y/o/y rise, the same pace as April and actually one tenth more than expected. Only because of the decline in energy prices did the headline gain become only .1% as expected. Services inflation was higher by 1.3% y/o/y vs 1.2% in April and 1.3% in March. I'll ask the ECB who is contemplating even more bond buying, is now the time to continue to push for a higher cost of living for the European people?

I will argue again that over the coming 12 months it will be higher inflation that is the biggest surprise due to broken supply chains. Here is another example, iron ore prices are breaking out to a multi year high on supply problems out of Brazil.

IRON ORE

I posted this last evening, probably after many subs left for the day.
Here is the riposte:

May 28, 2020 ' 05:58 PM EDT DOUG KASS

In Memory of Mark

I wanted to end today's posts by paying homage to someone we lost this week, nine years ago: CNBC's Mark Haines.

CNBC's Mark Haines passed away on May 24, 2011.

I still miss him. His death was a great loss to his family, friends and CNBC.

I probably guest hosted Squawk Box with Mark on over 35 to 45 occasions from 2003 to the time of his death (in those days guest hosts were allotted a full three hours).

Here is a column I wrote on the fifth anniversary of Mark's death -- check out the great video of the match race I had with him at The Meadowlands Racetrack(!):

It's just a box of rain,
I don't know who put it there.
Believe it if you need it,
Or leave it if you dare.

But it's just a box of rain,
Or a ribbon for your hair.
Such a long long time to be gone,
And a short time to be there.

-- The Grateful Dead, Box of Rain

My friend Mark Haines of CNBC passed away five years ago today, and it still stings.

I appeared via telephone on CNBC's Fast Money with Mel and the gang shortly after Mark's death and offered my teary-eyed thoughts , which I wanted to share with everyone again this morning.

Below is what I wrote about Mark upon his death five years ago:

"I have known Mark for about eight years, starting when I began to guest-host Squawk Box with him, Joe and David in 2003.

A lot has been said this morning on CNBC about Mark -- his broadcasting techniques and strengths, as well has his personal idiosyncrasies.

What I most remembered about Mark was his strength of broadcasting during a crisis -- whether it was a financial, geopolitical or social crisis.

But today, I will write about something this morning that most don't know -- his hobby was betting on thoroughbred horses. And for many years, he was proud to tell me that he had computerized the entire Hialeah Racetrack's meet.

His favorite page in the newspaper wasn't the business section. His favorite page was the racetrack entries at Aqueduct, Belmont, Saratoga, Gulfstream and Hialeah in the New York Post and Daily News. And, again, what few know, is that during commercial breaks he could be seen handicapping the horse races.

My fondest memory and funniest story about Mark Haines was about six years ago during a guest-host gig I had on Squawk Box. It was the week of the Hambletonian race at the Meadowlands racetrack (the harness-racing equivalent of the Kentucky Derby).

Two days before I was on Squawk, CNBC taped a match race between Mark and myself at The Meadowlands. Mark had never driven a standardbred, but he loved the racetrack and said to me, 'What the heck, I will take a shot.'

I had so much fun in that race. (I beat him by a nose!) And after we went over the finish line, I asked him did he have fun, too?

Mark's reply: 'Dougie, I would rather put a needle in my eye than do this again.'"

That was Mark -- ever so honest and truthful.

Here's a 2011 clip of Carl Quintanilla announcing Mark's death on CNBC.

R.I.P. my friend.

Danielle DiMartino Booth forecasts the decline of the vacation home:

• Whereas homes priced north of $500,000 fell for a second straight month, new home sales priced below $300,000 drove April sales, which rose 0.7% vs. expectations of a decline of 22%; new homes sold between $150,000-$199,000 rose to 12% of the total, doubling in April
• New homes accounted for 15% of aggregate U.S. home sales, 50% more than the norm, while existing home sales fell to 85% of the total; the new/existing home sales mix will likely rebalance close to its historical norms as Open Houses displace virtual house shopping
• Vacation home investor income has fallen substantially as consumers have sheltered-in-place and shunned travel; small investors being squeezed will likely list millions of their 19.3 million single-family homes to shed the weight of multiple mortgages

"Two weeks" were too good to be true. As things turned out, $200,000 for a million-dollar distress sale mansion was also an impossibly fortuitous deal. The first collaboration of Tom Hanks and Steven Spielberg gave us the aptly named Shirk Brothers, sleezy carpenters who reassured the owners of 1986's The Money Pit that the job would take "two weeks." As door frames are ripped out of walls, the electrical system catches fire, and first the chimney and then the main staircase collapse, a parade of contractors repeated the timeframe fabrication: "Two weeks." But it's the climax of the bathtub crashing through the floor that gifts movie watchers with Hank's hysterical laugh identical to that of a manic sea lion.

The intrepid first back-lot tour guests of Hollywood's Universal Studios might even be treated to a clip of the scene as their guide jokes with them. In mid-May, California Governor Gavin Newsom said theme parks could open as soon as one month later. Open Houses for listed homes are also still a no-no, which could explain pending home sales' 54% decline over the prior year in the seven days through May 15.

Less straightforward: Atlanta's pending sales are down by 51% over the same period and those in Dallas are off by 64%. If only we could check the data for the week ended May 22. Alas, Redfin's pending home sales data has up and disappeared from its website.

Veteran housing expert and QI friend Mark Hanson first noticed that the national pending home sales data had been removed a week ago. After making an inquiry to Redfin Wednesday, he was informed that they were aware of the issue and hoped to get the data back up in days. Instead, within 24 hours, the city-level pending home data also performed a vanishing act.

Like us, Hanson gives short shrift to coincidence: "They removed it when their 'fauxdex' started going viral because it conflicted with it. But I don't care about a sentiment index rallying. I care about pending sales."

We have to agree that we're not enthused about a seasonally adjusted gauge of buyer inquiries being up 16.5% over where they were in January. We're also not convinced that the 9% rebound in mortgage applications over last year is anything to write home about given so many have been pre-qualifying themselves online while they've sheltered in place. Lending standards have tightened, and jumbo mortgage rates remain three percentage points north of the 10-year Treasury yield (yellow bars) which helps explain why new homes priced above $500,000 fell for a second straight month in April.

This contrasts sharply with homes priced below $300,000, which were responsible for the blowout in April new home sales - they were expected to dive by 22% to a 480,000 annualized rate and instead rose by 0.7% to 632,000. The sweetest spot was new homes sold between $150,000-$199,000; their share doubled in April to about 12% of the total.

Dig a little deeper. New home sales accounted for 15% of all U.S. sales in April, 50% higher than the norm. The flip side is that existing home sales slid to 85% of the total. QI amigo Peter Boockvar speculated on this historical disconnect: "No one was out looking other than virtually. Anyone who wanted to buy had to look at new construction instead and that was also easier to visit." Housing, Meet process of elimination.

We also noted that for the first time in seven weeks, the Bloomberg Consumer Comfort Index ticked up to 35.5 from last week's 34.7, which marked a March 2014 low. Bucking the nascent trend were those making between $75,000-$99,000, whose sentiment continued to slide hitting a November 2013 low. Recall that only workers making $75,000 or less were eligible to receive stimulus checks. And unlike the 68% collecting unemployment that exceeds their prior income thanks to the CARES Act's extra $600 a week, the jobless in this category are only bringing in roughly 70% of their former take-home pay.

This same cohort likely represents last week's rebound in Google searches for "unemployment insurance." As joblessness moves up the income ladder, we expect pending home sales, which fell by 35% in April, to fulfill the Redfin data's path to the -46% mid-May reading in the nation's biggest (open and closed) cities (red line).

We'll be sure to refresh the data if Redfin fixes their website. As for their buyer inquiry "faudex," we're compelled to mention that May housing inquiries are always higher than they are in January. It's this little thing called seasonality, which is why you see the same pattern in their data going back four years.

Where we do concur with the publicly traded realtor is their assessment that the vacation home market will be "toast" in the words of Glenn Kelman, Redfin's CEO. We too expect many of the 15.5 million Airbnb-type small investors who own 19.3 million single-family homes to rush their homes on the market to get out from under multiple mortgages they assumed they could always cover. One money pit in the midst of a recession is enough to maintain. Multiple ones, not so much.