"Just one more thing."

* Was it a classic sell on the news? It might have been!

- Lt. Columbo

* My actions today were as extreme (going from large net long in exposure to small net short) as in any one trading session in several years

* More on "Group Stink"

The comfort of the crowd, herd and consensus, as I noted in this morning's opening missive,"The Rip Your Face Apart Rally and Mother of All Short Squeezes Will Likely Continue -- 'Get It While You Can'" often produces the foul odor of "Group Stink."

"It takes nothing to join the crowd. It takes everything to stand alone, and to buy when others are selling, and sell when others are buying."

I was struck by the near unanimity on FIN TV -- with the Dow exploding by over 1,600 points this morning -- that the market now has a "green light" to head higher.

I didn't hear one skeptic or naysayer all day, as traders and investors were intoxicated by the remarkable response to the vaccine.

Spyders (SPY) traded -$10/share from the day's morning high and closed the day only +$4.40 higher while the Invesco QQQs (QQQ) were -$11 off of the earlier high and closed -$6 from Friday's close.

I have often written that one must trade unemotionally -- and today was a very good example of that credo.

There are a number of other important market tenets that have guided me over the years. One of the most important ones is:

"Bull Markets are borne out of bad news and Bear Markets are borne out of good news."

Equities bottomed in the third week of March, when fear of Covid-19 was at the extreme and businesses closed down.

By contrast, stocks may have have made a 2020 top coincident with the great vaccine news announced early this morning.

For the first time in a long while the S&P (at this morning's height) traded at a near 20% premium to my calculus of "fair market value (3000-3100)."

Now, at the very least, it may be the time for corporate profits to grow into the nearly unprecedented rise in prices and valuation since the March lows 1350 S&P handles ago.

Much more early Tuesday morning.

I have moved to a small net short exposure for the reasons mentioned in my Diary throughout the day.

I will have a lot to discuss tomorrow morning

Enjoy the evening.

Be safe.

Back to market neutral.

I will be out for 1 1/2 hours on some personal errands.

* I am trading unemotionally and based on changing reward vs. risk

* I have moved (GS) to small-sized.

* I have added to the following longs: (WMT) , (SJM) , (GOOGL) and to (AMZN) on this morning's market weakness.

* On the "whoosh" higher I reduced (VTV) and (VBR) to small-sized. I'll add back on weakness which I expect.

* Disney (DIS) got silly at +$16 and reduced from medium-sized to small-sized.

I plan to move back to Market Neutral from small net long in exposure on any further market strength.

* Moved to small net long in exposure!

* Reward vs. risk has deteriorated as today's market move borrows from future gains

* A classic sell on the news opportunity?

* Established a (SPY) short hedge - between medium and large-sized - at $363-$365

* Sold half of my (GM) long over $39/share - as reward vs. risk has changed from a month ago when shares were close to $30. (Twice our Trade of the Week in last few weeks)

* Disney (DIS) is +$15.80/share and I just halved the position to medium sized

* I have reduced (GS) to medium-sized and (MS) to small-sized

* Covered small sized shorts in (ZM) , (AAPL) , (SQ) and (CVNA)

* Reduced value ETFs from very large to medium sized - (VTV) and (VBR)

* Pressing my expanding homebuilder shorts

* Reduced (GLD) to medium sized in premarket trading

Amazing news from Pfizer with 90% efficacy. This hopefully is the beginning of the end of our fight against Covid. As I've been saying on the hopes of this, we need to shift our attention to those parts of the market that have been the most hammered because of Covid and away from the work from home stocks that have had such an incredible year because Covid is not forever. I've also said that bonds are the sale of the century and I now expect long term interest rates to head much higher. I wouldn't be surprised to see a 1-1.5% 10 yr yield in coming months as this vaccine gets rolled out in Q1 and Q2. The 10 yr yield has almost gotten back what it lost since the election, back near .90%. The 30 yr yield is up by 7 bps to 1.68%, matching the highest since March. The inflationary pressures we've seen are only going to intensify in 2021 as demand in many areas of the economy come back faster than the supply side. Oil was the last commodity not to have rallied and I now expect it to join the party.

Likely most importantly for stocks and bonds from here is that the Federal Reserve, along with all central banks that have gone to the ends of the earth this year to print money and lower rates, need to start the discussions about reversing what they've done. If Covid is why they've done what they've done, then a workable vaccine is why they need to start pulling back. Good luck to them.

The trade story out of Asia continues to improve as Taiwan said its October exports jumped 11.2% y/o/y, about double the estimate of up 5.4% led by electronics. Imports though fell by 1% y/o/y but not as bad as the estimate of down 2.2%.

In September, German exports rose 2.3% m/o/m, about in line with the estimate of up 2%. Imports though were unchanged vs the forecast of up 1.5%. Germany also benefits from the economic improvement in China and the rest of the region.

I have moved back to small-sized in net long exposure. 

This is something I did not anticipate at 6 am and reflects the swiftness and magnitude of the upside move that has borrowed from future gains - expected over the next month - and has put us into a large overbought.

This could be a classic sell on the news.

The magnitude of the rally almost certainly borrows from further gains I anticipated over the next month or so.

But I am certainly not sure.

I have shorted (SPY) between $363-$365 against my long book.

I reduced to medium-sized net long in exposure but I am considering reducing my exposure further now.

I have made some sales/shorts against my long book - bringing me down to medium-sized net long. 

Be back but trading aggressively.

* And some pre-market trading moves I have made...

I want to be as real time and transparent as possible - so I am not going to let my opener stay up before writing, as I commonly do! 

Here are three of my Comments written after I wrote my opener and coincident with the vaccine news:

dougie kass

The vaccine news will likely take the markets to new highs. https://www.cnbc.com/2020/1...
My opening missive already was written and with editors earlier this morning.
But here are some addendums and updates:
1. Short Bonds (TLT)
2. Look for a strong pivot away from growth and towards value today
3. Don't be fearful of buying lagging value stocks - groups like banks who are asset and rate sensitive (the magnitude of the rise could surprise many)
4. Don't be fearful of shorting market leading growth stocks - ZM, CVNA, SQ and AAPL are my candidates
5. Amazon and Google should be laggards (I own both and have so for some time)
6. A pairs trade - SPY long/QQQ short - should prosper

Dougie

dougie kass

I have covered my tag ends/small shorts remaining in AAPL, CVNA, SQ and ZM in premarket trading.
I now have no shorts in my book.
Dougie 

dougie kass

I sold down my GLD to medium sized in premarket trading.
Dougie

* I am uncharacteristically bullish as "The Biden Bump" continues

* New highs may very shortly lie ahead as "a President Biden Without Onerous Taxes" may present an ideal setup for the markets into year-end

* Moreover, it should not be ignored that we are likely - rapidly - moving closer to the scientific and medical communities' progress on therapeutic and vaccine solutions aimed at combating Covid-19

* The "hardest trade" is to hold on or even buy into the recent market strength - but the "hardest trade is often the best trade"

* As of 6 am S&P futures were +52 and Nasdaq futures were +234 handles

* Catching large and unexpected rallies by being bold, anticipatory and contrarian is imperative in a likely lower return investing backdrop

* I expect the markets to get even more "overbought" in the short term and move to all-time highs before a bonafide correction occurs

"In this world, if you read the papers, darling
You know everybody's fighting ah with each other
You got no one you can count on babe
Not even your own brother
So if someone comes along
He gonna give you some love and affection

I'd say get it while you can, yeah
Honey, get it while you can, yeah
Hey hey, get it while you can
Don't you turn your back on love, no, no"

- Janis Joplin, Get It While You Can


"I continue to see new highs over the short term, and I end the day in a large long net exposure with the lowest short gross exposure in many moons."

- Kass Diary, Improving Breadth and an Impressive Follow-Through of Market Strength (Thursday, November 5) 

It is important to note that, in a low return environment it is imperative to take bold, anticipatory, contrary and sometimes unpopular moves in order to "get it while you can."

I have been a consistent buyer on all dips . As noted Friday morning - I continued to add to an already large net long exposure and holdings on Friday morning's swoon: 

Nov 06, 2020 ' 11:15 AM EST DOUG KASS

Adding to Net Long Exposure

I added modestly on this morning's weakness to my already large net long exposure.

Thursday's "A Continuation of a Rip Your Face Market Rally and the Mother of All Short Squeezes May Lie Ahead" summarized my near term optimism:  

* The Indices may hit a new high by year-end

* Markets may respond positively to a divided house of government and to a more central leaning Democratic Party (who apparently will control the White House for the next four years)

* The biggest factor behind the current rally may be that there was no election sweep (for either party) and that the likely implementation of tax policy will be more measured than feared

* A changing market structure in which price momentum based products and strategies ("who buy high and sell low") may accelerate the move of higher stock prices

* I am raising my S&P "fair market value" from 2800-3000 to 3000-3100

* I start the day with an uncharacteristically large net long exposure and with the lowest gross short exposure in a long time

...I went on to provide a lengthy perspective of my optimistic market outlook: 

Seven months ago in a column entitled "Does the Continuation of a Rip Your Face Market Rally and Mother of All Short Squeezes Lie Ahead?" I posited that a spectacular rally from the March, 2020 lows may lie ahead.

Indeed, the markets rallied in record time and by an extraordinary (percentage) amount.

Today I ask the same question - whether a rip your face rally and mother of all short squeezes lies ahead?

I believe this might be the case - at least through much of the balance of the year.

I am uncharacteristically positioned large net long, with the lowest gross short exposure in years, on the basis of a number of conditions that emanate from what I have described as "The Biden Bump":

In my Diary and, again in yesterday's Bloomberg interview, I posited that stocks could rally spectacularly over the near term:

* With the perception, in part, of election uncertainty and the quicker spread of Covid-19, market participants have been positioned defensively and cautiously.

* We have exited the weakest period of the calendar (August to October) and are entering a two month timeframe in which stocks are seasonally strong.

* We are ever closer to vaccine and therapeutic advances by the medical and scientific communities.

* Should the market's rally continue (and this morning S&P futures were +65 handles and Nasdaq futures were +345 handles), the evolving market structure change - in which the market is dominated by products and strategies that follow and chase price and price momentum - could catapult the markets higher rather swiftly. Remember, in risk parity and other quant strategies, "buyers live higher and sellers live lower." They are and might continue to buy high.

* The Fed is totally committed to its current monetary policy.

The Biden Bump, a term I coined many weeks ago to describe a market that could boom on election clarity, is continuing.

Elections have social and economic consequences - and this one's investment ramifications may be especially important and quite beneficial to investors over the short term: 

APresident Biden Without Onerous Tax Increases?

* There was no repudiation of President Trump policy, nor will his devotees be cast out as lepers as some expected. While Trump may be emboldened, the slim margin and makeup of Congress will be something of a limiting factor, from a policy standpoint.

* The inroads of the progressive Left of the Democratic party were overstated and roundly renounced in the election. A soul searching period of message and policy recalibration likely lies ahead for the Democratic party, who could seek a message that has broader appeal.

Regardless of outcome, it is clear that our country is divided and that wide sweeping policy initiatives are unlikely over the next few years.

- Kass Diary, A Political Upset That Might Have Only a Limited Market Impact Over the Near and Intermediate Term?

The roots of our country's division, abetted by social media, have taken root over the last few decades.

Without question, the animus and partisanship have grown exponentially in the last four years.

Whether it is one's view that President Trump sucked the oxygen out of the room and promoted a degree of divisiveness that made policy compromise with the Democrats impossible or more difficult, or whether it is one's view that a Pelosi-led Democratic Party was too left leaning and resulted in the same lack of policy compromise with the Republicans -- the November Election has consequences and we can now look upon the potential promise that a Democratic led Executive Branch and split control over the Congress could be a clearing event towards compromise that has not been seen for years.

The concept of checks and balances is one of the most important foundations of our government.

It should be emphasized that the relationship between former Senator Joe Biden and Senator Mitch McConnell is not as bad as some believe. Many have forgotten that, in the second term of the Obama Administration the two (then) Senators actually had a successful working relationship. Biden and McConnell know better than most how the Senate operates effectively.

Now, a divided government of a more centrally leaning Democratic Party than previously thought combined with a likely Republican controlled Senate is a potentially tasty cocktail of healthy stimulus and likely only modest fine tuning and changes in individual and corporate tax laws (e.g., carried interest, 1031 real estate exchanges, etc.). Importantly, anti-trust moves against the market leading technology giants will likely be moved to the back burner of purgatory - though perfunctory Congressional meetings will be held but without much teeth and little impact. Finally, interest rates may well be lower for longer now - supportive of higher valuations even despite slightly lower economic growth as the risk free rate of return used in dividend discount models moves close to zero).

As a consequence of all these developments (and other factors), I have raised by S&P "Fair Market Value." I might be too low and the possibility of a revision higher of my calculus is increasingly possible: 

Raising S&P "Fair Market Value"

Based upon recent political, economic, interest rate, inflation events and factors, I am raising my "fair market value" for the S&P Index from 2800-3000 to 3000-3100.

While the markets are currently above my new "fair market value", I have often written that markets spend most of their time below and above intrinsic value.

This may be one of the times in which equities are sustained for a while above intrinsic value.

Bottom Line

I have never been a Perma Bear. In reality I am a Contrarian who frequently avoids the comfort of crowds and the consensus by rejecting "Group Stink".

It takes nothing to join the crowd. It takes everything to stand alone, and to buy when others are selling, and sell when others are buying.

The market is filled with reactionary strategists, commentators and other "talking heads" who are convinced that price is truth. Many of whom had expected a retest of the March, 2020 lows and have been skeptical since. I know what it means to be "offsides" - its not a great condition to be in!

I believe that market structure, and other factors, has changed the game - rendering the value of charts today less than in the past.

In other words, "price is not truth."

My 2020 strategy has been to take bold, anticipatory moves with an unemotional disposition.

This often results in taking unpopular positions and "going against the tide (of price)" in buying stocks when others are barfing them out - December 2018 and March 2020 were good examples - and selling/shorting into complacency, speculation and over enthusiasm (early September 2020).

The hardest trade today is to hold and even buy the recent market strength.

I believe that the hardest trade may be the best trade.

I expect a continuation of the mother of all short squeezes and a rip your face apart rally that began a few days ago to continue over the near term.

I continue to expect new all-time highs in the Indices. 

My sentiment exactly:

Danielle DiMartino Booth on permanent job losses and on the gutting of small businesses: 

• Permanent job losers hit 4.5 million in October, exceeding the ranks of temporary workers for the first time since April; temporary job losers fell to 3.2 million, a 29.1% share of the jobless, with those out of work in this cohort for 27+ weeks near doubling to 1.3 million
• Though the part-time worker share rose 0.2% to 4.5% in October, job losses for college grads were 1.7 million in the last two months; demand destruction and a three-month high rate for large bankruptcies put recent gains in the ASA's Staffing Index for temporary workers at risk
• Moody's and CNN Business's Back-to-Normal Index fell to 80% the week of November 4 after hitting a pandemic high of 83% the week of October 28; surging case counts, falling new home listings, and a drop in small business hours worked led to declines in all 50 states

Technology is the enemy of crime. We have Juan Vucetich to thank for launching the modern investigation. In 1892, two young boys were brutally murdered in Necochea, a village on the outskirts of Buenos Aires, Argentina. Even after torture, the police could coerce a confession out of Velasquez, a man who had been courting the boys' mother. But there was a bloody fingerprint which prompted investigators to contact Vucetich, a pioneering scientist whose system was used for the first time to solve the crime. As it was, the mother did it. The next major breakthrough arrived a century later. In July 1986 in Leicestershire, England, DNA was first used to convict Colin Pitchfork, a rapist and murderer. As Hollywood has taught us, UV alternate light sources can reveal seminal fluid, saliva and urine stains...but not blood. For that, you need the chemicals Luminol, BlueStar or Fluorescene. When applied to surfaces, blood, bone and teeth fragments and certain narcotics glow in the dark.

We're dismayed to report that the technology to reveal evidence of temporary job cuts is decreasingly discernible. In October, permanent job losers hit 4.5 million (blue line), eclipsing temporary workers for the first time since April. The last time this number was so high was November 2013 as the labor market was slowly healing from the Great Financial Crisis (GFC). Excluding that prolonged contraction, you have to go revisit 1980s double dip recession, which saw 4.8 million permanent job losers, to cite parallel labor market damage. The 1990-91 and 2001 recessions saw peaks of 4.4 million and 3.8 million, respectively.

It's also time to recognize "temporary" as something that lasts for only a short time. After peaking north of 18 million in April, equivalent to 78.3% of the unemployed, the percentage of job losers in the temporary bucket has shrunk to 3.2 million, or 29.1% of the total. Within this cohort, 1.3 million have been temporarily unemployed for more than 27 weeks, a near doubling in the space of one month (red line). Realistically classified as permanent pushes the total to 5.8 million, 2.4 million shy of the 8.2-million GFC peak. Moreover, the re-classification puts the total of the unemployed for 27 weeks or more, a.k.a. long-term unemployed, at 3.6 million, a third of the total.

What are the odds we revisit GFC highs? Stated differently, what percentage of the 10 million who lost their jobs and remain unemployed will find a job in coming months? October's job gains of 0.45% were on par with September's 0.48%. But both were a fraction of June's 3.6% gain.

The re-opening benefits are nearly exhausted, a discouraging development in light of October's job gain makeup. With a hat tip to QI amiga Philippa Dunne, the combination of job gains in Bars and Restaurants, Retail and Temporary was nearly two-thirds the headline gain and three times the sectors' share of total employment. Moreover, those working part-time for economic reasons rose 0.2% to 4.5%, down from April's 8.2%, but nearly double pre-pandemic levels.

Low-paying job creation is being countered by continued losses among white-collar workers. April's job losses for those with college degrees (green line) were 3.9 million. The four months that followed saw a near recoupment of 3.6 million jobs. But since then, 1.7 million have lost their jobs. The demand destruction at root is evident in layoff announcements from ESPN and Lionsgate motion pictures.

With nationwide hospitalizations on track to surpass record levels this week, employers will continue to favor temporary workers. Large bankruptcies (yellow line) have ticked back up and are tracking a three-month high rate in November, raising the risk the improvement reverses in the American Staffing Association's Staffing Index, a weekly read on temporary and contract workers (purple line).

Moody's Analytics and CNN Business created a Back-to-Normal Index, comprised of 37 national and seven state-level indicators. A 100% reading would indicate the economy had returned to its pre-pandemic level of output. After hitting a post-pandemic high of 83% in the week ended October 28, the index slipped to 80% in the week ended November 4. Surging case counts, falling new home listings, declines in small business hours worked and dwindling restaurant activity triggered declines in all 50 states.

The data are more meaningful with faces on them. Harrisburg, Pennsylvania's Bricco restaurant is closing after serving patrons for 14 years. Ravenous, which opened in Saratoga Springs, New York in 1999 is also closing at the end of this month. And Austin, Texas based Snap Kitchens will close at least 20 of its 33 locations.

Retail-mageddon marches on and is poised to accelerate into year end. Private equity-backed Pet Valu will close all 358 of its U.S. stores and its Chester County, Pennsylvania headquarters. Benge's Shoe Store, a family-owned shoe store that's been in Grand Junction, Colorado for 109 years, is saying goodbye. And Pazols Jewelers, which opened in 1920, will shutter its Muncie, Indiana store after the holidays.

Finally, state and city restrictions promise to launch a fresh wave of redundancies that will affect many who've just returned to the workforce. Encore Boston Harbor anticipates furloughing up to 1,000 workers in response to a 9:30 curfew on casinos. On Friday, Southwest Airlines warned of its first involuntary furloughs in the company's 49-year history. COVID-19 continues to provide ample evidence it is an enemy of the service sector.