* Ss (S&P) over Ns (Nasdaq). Again and for the second day in a row.

* Breadth was 2-1 positive.

* Bonds continue to get smoked - higher in yield, lower in price. ( (TLT) - $1.25/share).

* Crude +$1.22/barrel.

* Gold +$21.70.

* FAANG plus M(SFT) weak, again. Downside leaders were (MSFT) , (AMZN) and FB .

* Homebuilders rallied by +4% after falling 8%-9% on Monday.

* Packaged foods were tasty with (SJM) and (THS) +++.

* Banks performed well considering the magnitude of yesterday's rise.

* (PZZA) back up after some recent weakness.

* (WMT) back up.

* Value ETFs strong. (VTV) and (VBR) .

* (GM) is a beast.

* So is (DIS) .

My conviction level is not too high and I end the day a bit higher than small-sized net short in exposure. 

Thanks for reading my Diary today - I hope it was value added. 

Enjoy the evening. 

Be safe.
__________ 

Long GLD, AMZN (large), GOOGL (large), SJM (large), THS (large), XLF (large), VTV (small), VBR (small), WMT (large), GM (small), DIS (small), PZZA.

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

I had a lot of questions about the predictive nature of the VIX. 

I thought this tweet was a good one - which I agree with:

* Not all investment views are created equal

* I am not currently particularly confident in market view

* This helps to explain my small to medium-sized net short exposure

* However, in rare times, one should go for the jugular but not on a steady diet!

"The best lack all conviction, while the worst are full of passionate intensity."
- William Butler Yates

I have spent most of 2020 taking large contrary bets based on a high degree of conviction - even when the market was moving over the very short term in the opposite direction of my view. 

However, at current market levels I do not have a big conviction with regard to short term direction. 

Conviction is something that few talk about. 

To me, it seems many are consistent in their beliefs - rarely vacillating in conviction and always expressing confidence. 

But that is a rather silly notion as we can't be constant in our conviction - particularly in a world of uncertainties. 

In a previous mid-2019 column, "Not All Investment Views Are Created Equal," I discuss the concept of conviction: 

* All market views are not equal - nearly every investment view should have a different level of conviction

* My short term market outlook is now blurry

I like to write that the only certainty is the lack of certainty.

But, as an old acquaintance recently said to me, today there are more possible outcomes, some of them adverse, than at any other time in history.

Strategists, commentators and other "talking heads" are fond of voicing a strong market view and conviction - even when the uncertainties are considerable. Few say, "I don't know," as I suspect they think it indicates "weakness." That is plain silly and phony. To me, this sort of confident narrative is really a sign of weakness, as conviction can not be consistently strong when viewed against those uncertainties.

Though I don't always succeed, these days in particular, I aim to be flexible in view and opportunistic in practice.

The concept of conviction is rarely discussed when people offer up market views - but I will harp on the subject this morning.

It is said that opinions are like buttholes -- everyone has one (and that includes me!)

It seems that in today's investment world in particular almost everyone has an opinion and a view on nearly everything. In many cases these views are delivered by self-confident messengers who seem to never be in doubt but are often wrong.

It also seems, that the more anonymous the person is, the more confident is the view! The Twitter platform comes to mind.

Few say, "I don't know."

But this is not a representation of reality.

The fact is that a view invariably is associated with differing degrees of conviction.

Nearly every strategist, analyst and portfolio manager is first asked about a "view" in the business media, but I can't remember the important follow up question: "What is your conviction level associated with that view?"

This very simple concept gets little discussion, but it should as it is very important, sometimes as important as a given view itself.

As an example, last night I "liked" Clemson. Based on my analysis I thought the spread of six points (Alabama was favored) was too great given Clemson's talent (of a Trevor Lawrence kind) and momentum, among other factors. But my conviction level was not high, so I wagered a small amount with Badgolfer -- thanks, Mikey! -- on Clemson to win.

The Clemson Tigers easily won the college championship by a score of 44-16, blowing out the Crimson Tide.

It is also true when investing that not all views are equal.

Investment Convictions Today Should Be Lower Than in the Past

There are four major factors that recently have contributed to rising uncertainty:

* Global central bankers may be about to withdraw liquidity -- The possible pivot toward tighter money reduces system liquidity. Liquidity and volatility are inversely related, so less liquidity means more volatility and less predictability.
* The market structure has changed -- The dominance of passive products and strategies are also contributing to the new regime of volatility that began in early 2018.
* Policy uncertainty and political turmoil
* The world is growing more flat, networked and interconnected -- Non-coordination and lack of cooperation among the largest countries in the world represents a profound and new risk. I continue to ask these three questions every day, as the answers might serve to raise uncertainties but also may be viewed as valuation busters in the fullness of time:

• In a paperless and cloudy world, are investors and citizens as safe as the markets assume we are?
• In a flat, networked and interconnected world, is it even possible for America to be an "oasis of prosperity" and a driver or engine of global economic growth?
• With the G-8's geopolitical coordination at an all-time low, how slow and inept will the reaction be if the wheels do come off?

The reason I want you to remember these questions is that the answers might serve as valuation busters in the fullness of time..."

- Kass Diary, "This Ain't No Seder, I Now Have Eight Questions" (2017)

Differing Conviction Levels and the Uncertainty of Views

"I'm astounded by people who want to 'know' the universe when it's hard enough to find your way around Chinatown."
- Woody Allen

Besides the four contributors that form the foundation of growing uncertainty, there are other factors that may reduce conviction of views.

Price is an important consideration.

The Rare Time of High Conviction Should Be Followed in Practice

"Soros has taught me that when you have conviction on a trade, you have to go for the jugular. It takes courage to be a pig. It takes courage to ride a profit with huge leverage."
- Stanley Druckenmiller

I didn't want to end this missive without mentioning that, though uncertainties reign, when your conviction is high you should not be reluctant "to go large."

In the last 30 years, George Soros and Stanley Druckenmiller are the best practitioners of convicted and concentrated investment positions/bets.

This was also the case, at least for me (on a more limited scale), when the S&P in the last week of December 2018 collapsed to 2340 (now at 2560 only a week later) and I moved to a large net long exposure.

Then there is the rare bird, Berkshire Hathaway's (BRK.B) Warren Buffett, who, more than anyone in modern investment history, has a documented history of confidence and large, concentrated portfolio investments that have manifested in the delivery of remarkable investment returns over the last five decades.

For the reasons addressed in this morning's missive, my conviction levels over the last few years are far lower than they have been in the past, especially when compared to when I started out in the investment business more than four decades ago.

For me, my conviction is strongly a function of rising uncertainties -- in policy, politics, market structure and interconnectivity -- as well as the difference between current share prices and my calculus of intrinsic or fair market value. While it is counter-intuitive to momentum-based strategies, my conviction rises when the spread between current share price and intrinsic value widens. As the spread contracts, my conviction is reduced.

These factors help to explain my weightings -- small, medium and large -- which tend to be a reflection of my varying conviction levels and the consideration that it is increasingly hard to find the ideal entry point!

In the final analysis, all investment views are not equal.

Bottom Line

"Our destiny is frequently met in the very paths we take to avoid it."
- Jean de La Fontaine, Fable 16

This is not the time to be balls to the walls.

At least for me, it is not a good time for high conviction exposure, net long or net short, as the moving parts are multiple and the probabilities attached to various business/economic scenarios are low.

However, I do feel - with increased confidence, that, as we move towards the end of this year, markets will get better definition and will likely begin to refocus on the powerful and accumulating intermediate headwinds - often discussed in my Diary - in early 2021. Some of those factors include:

* Uncontrolled and undisciplined monetary and fiscal policy which has led to a rising private and public sector debt load that will serve as a governor to economic and profit growth

* The specter of higher corporate and individual tax rates

* The lack of coordination and cooperation around the world which bodes poorly for world trade

* The possibility of rising interest rates and an inflection point (higher) in inflation and in inflationary expectations

* The risk associated with rising valuations, based on traditional historical metrics, in a global economy gutted by a virus

Update - Midday

Rebound in the averages seems to be grappling with some resistance at the moving averages, particularly the Dow and to a lesser degree, the S&P.

It would not be good if they wound up taking the Dow down and making it all three averages closing in negative territory. That would mean that the bulls were unable to seize what looked to be the vaccine opportunity and, we may go in for a couple of days of rethinking.

Stay wary and watch the Dow, which needs to close in plus territory.

Stay safe.

Arthur

Packaged food stocks are tasty today after a few days of weakness. 

I continue to buy dips.

As promised, within the next week or so I will have a lengthy series on our number one potential economic and market problem - debt loads in the private and public sectors in a rising rate environment:

* I remain large short bonds

With the 10 year yield at the highest level since March, the US Treasury's 10 year note auction of the biggest amount on record of $41 billion was soft side. The yield of .96% was spot on with the when issued but the bid to cover of 2.32 was below the one year average of 2.46 and dealers got stuck with 32% of the paper, well above the 12 month average of 25% and the most since May 2019. 

Not even the highest yield in eight months was enough to produce a better level of demand for 10 year notes. Is it all the supply that is overwhelming the market, notwithstanding the Fed's help? Is it the vaccine news that implies much better economic growth in 2021? Will that growth leave us with higher inflation? All of the above I believe. The implied inflation rate in the 10 year TIPS is up by 3.5 bps after yesterday's 6.5 bps rise. At 1.76%, it's just 4 bps from matching the highest since May 2019. 

Here is the four year chart of the 10 year yield:

Here is a four year chart on the 10 year inflation breakeven:

I haven't mentioned the CNN Fear and Greed Index in a while. 

Here it is! 

Nice rally off of the lows - not surprisingly led by Nasdaq/tech which had cratered over the last 24 hours, both absolutely and relative to value. 

As mentioned in my opener, we could see a continuation of that rally as a mean reversion over the short term. 

I would be inclined to short growth again on a stronger rally. 

Here is a good back testing of similar periods in time (from Nomura's McElliggott).  

But for now sitting tight and giving the market a wider berth to advance.

"Meet" Bret Jensen and I differ in views on the outlook for homebuilding stocks - which is a good thing as it provides subscribers with an option! 

Yesterday my homebuilding shorts declined by about -8% as fixed income took a nose dive. 

Bonds continue to rise in yield and are lower in price today. 

The debate: 

Bret Jensen

D.R. Horton NYSE issues FY2021 guidance that exceeds the average analyst estimates, as the housing boom shows no signs of stopping as both housing inventory and mortgage rates remain low.
The homebuilder also increased its quarterly cash dividend by 14% to 20 cents per share.
D.R. Horton's stock gains 2.9% in premarket trading.
Sees fiscal 2021 consolidated revenue of $24.0B-$25.0B; consensus is $22.9B.
Sees 77,000-80,000 homes closed in the fiscal year ending Sept. 30, 2021 vs. 65,388 in FY 2020 and consensus of 76,020.
Fiscal 2020 Q4 EPS of $2.24 beats the average analyst estimate of $1.78 and increased from $1.35 in the year-ago quarter.
The current quarter results include an income tax benefit of $15.8M related to federal energy efficient homes tax credits that were retroactively reinstated earlier in the year.
Consolidated revenue for the quarter ended Sept. 30, 2020 was $6.40B, exceeding the consensus estimate of $5.89B and up from $5.04B in Q4 2019.
Q4 net sales orders of 23,726 rose 81% Y/Y and value of $7.3B increased 84% Y/Y.
Q4 cancellation rate fell to 19% vs. 23% a year earlier.
Sales order backlog at Sept. 30, 2020 was 26,683 homes vs. 13,613 homes at Sept. 30, 2019; backlog by value was $8.19B vs. $4.14B a year earlier.
"With 38,000 homes in inventory, an ample supply of lots and continued strong sales trends in October, we are well-positioned for another great year in fiscal 2021," said Chairman Donald R. Horton.

dougie kass Bret Jensen

The market is a great discounter.
Zoom was nearly $600 a few weeks ago when everyone was zooming and EPS and sales results were stellar and above expectations. Now $382.
Same with builders.
Bear markets are borne out of this sort of good news.
Higher mortgage rates and higher home prices are sowing the seeds for a housing downturn.
I short Homebuilders on every rally.
Dougie

I now have tagend positions - ergo less than small! - in (MS) , (GS) , (DIS) , (VTV) , (VBR) and (GM) . 

I am now between small and medium-sized in net short exposure.

I don't like a thing I see in this market - its changing complexion/leadership (from growth to value - it's hard to see stocks behaving well when tech is such a high percentage of the Indices), the weak action in bonds and the poor price momentum in stocks. 

But, frankly, I am afraid to expand my shorts - I am currently small net short - on price weakness, as it hasn't paid historically.

On October 22nd I outlined, "Some Investment Themes to Consider Over the Next Few Months." 

Let's revisit the column: 

As you map out your strategy for year-end and for 2021, here are some themes to consider:

* Short Fixed Income: Bonds are among the most risky and least efficiently priced asset classes extant. The 10 year note yield is about to break to the upside (of its 200 day moving average) - the 30 year yield already has. A large, Democratic-led February stimulus package could be a catalyst for the 10 year US note to climb over 1% in the near term. (I would note that TLT peaked at $172 in early August and is now trading at $155)

* Short Homebuilders: The sector is negatively influenced by the rate of change in bond yields. With mortgage rates rising and home prices catapulting higher the seeds of slowing home demand are being sown. Peak Housing may be at hand in the next few months. After having tripled from the March, 2020 lows homebuilder stocks are vulnerable. (See my comments on bonds, TLT, above!)

* Short "Growth": Growth has benefited from a low risk free rate of return which has expanded valuations. This tailwind of 2019-2000 could become a headwind to high price earnings multiple stocks, and maybe for the market as a whole.

* Short Stocks That Have Had Large Valuation Expansion: Again, interest rates rising are non supportive of further P/E expansion and argue in favor of multiple contraction. Apple (AAPL) is the poster child.

* Long Value: There is so much money in "growth" that any incremental fund flow losses and pivot into value could have a forceful marginal impact on demand/supply equation for value stocks - which are very cheap relative to growth. A Democratic administration will likely lead to a lengthy regulatory attack which most companies, I have written, will endure profitably.

* Long Banks: I have written that 3Q2020 likely represented a cycle low in net interest income/margin. This, coupled with historically low valuations - that rival 2009 - could light the fire of the much hated bank stock universe over the next few quarters.

Eight days ago my Trade of the Week was long (XLF) at $23.86/share.  

In pre-market trading, XLF was at about $27.05. 

I have no plans to exit this trade.

From Neil The Real Deal: 

Neil S

Walmart to test deliveries by self-driving car with General Motors' Cruise
Published Tue, Nov 10 20209:00 AM EST

Key Points
Walmart said that it will kick off a pilot with Cruise, a majority-owned subsidiary of General Motors, to better understand how driverless cars could be used for deliveries.
Starting next year, customers in Scottsdale, Arizona can order from their local store and get their purchases dropped off by a Cruise car.
Walmart is working with six different autonomous vehicle companies, including Cruise, Ford and Alphabet-owned Waymo.

https://www.cnbc.com/2020/1...

Peter asks, "Will the shift continue?": 

With tech such a dominant foundation of the S&P 500 as we know with many the 'work from home' play, we can't rule out the possibility that this index, along with the NASDAQ, bottomed on March 23rd at the depths of the shutdown and topped on November 9th on the great news of a very effective vaccine. Again, valuations also now matter for this group. As for the rest of the market like value/commodity stocks, banks, leisure and hospitality, and overseas, Asian stock markets, to name some other groups and regions, they now have rays of light and I continue to expect them to outperform from here.

The October NFIB small business optimism index was unchanged m/o/m at 104 but the internals were more mixed. Plans to Hire fell 5 pts and Positions Not Able to Fill gave back last month's 3 pt rise. Current Compensation trends were flat but at a high level and Compensation Plans rose 2 pts to the highest since February. Capital spending plans fell 1 pt while those that said it's a Good Time to Expand was unchanged. Those that Expect a Better Economy fell 5 pts but paradoxically those that Expect Higher Sales rose 3 pts. Earnings trends improved by 9 pts and now has risen sharply from the -35 print back in June. To my growing inflation theme, those that expect Higher Selling Prices rose for the 5th month, by 2 pts to match the highest level since July 2019. Lastly, and most likely reflecting pre election unknowns and of course Covid, the Uncertainty Index rose 7 pts to the most since November 2016, the previous presidential election month. That, and with the Pfizer news should certainly reduce that 'uncertainty' in the next survey.

Bill Dunkelberg, the chief economist at the NFIB, said "Leading up to the presidential election, small business continued to focus on stabilizing their businesses but were uncertain about the future economic conditions due to Covid government regulations on all levels. We see solid momentum going into the 4th quarter, and another good quarter could get the GDP back to its 2019 closing levels."

NFIB

HIGHER SELLING PRICES

With the very positive Pfizer news we definitely see an end to what Covid has wrought but we also have to understand that there is still a tough winter ahead until there is mass inoculation and selective restrictions will be in place in many sectors. My initial reaction though is that any soft economic data points we see in the coming months will get a pass because we know it will be 'pre vaccine.' It is also why I think rates will continue to move higher and I hope Fed members in their upcoming speeches will be asked in their Q&A's about how they view policy in 2021 with a vaccine. They cannot with a straight face say rates will stay at zero for 3 years and that QE will continue at $120b per month (it was $80b during QE Infinity) for years to come since the ONLY reason why they are at zero and they are doing such aggressive QE is because of this virus.

Fed members Kaplan, Rosengren, Brainard, and Bostic all speak today. Hopefully they'll get asked because the Pfizer news changes everything. Will the Fed take policy to where the puck is going or will they pull a Yellen and not raise rates until 6 years after the previous recession ended. If they repeat the latter, the long end of the Treasury market will be doing it for them.

The Fed's Senior Loan Officer survey was released yesterday and here is some of what it said for businesses. "Regarding loans to businesses, respondents to the October survey indicated that, on balance, they tightened their standards and terms on C&I loans to firms of all sizes. Banks reported weaker demand for C&I loans from firms of all sizes." For commercial real estate in all major categories (construction and land development, nonfarm nonresidential loans, and multifamily loans) "banks tightened standards and reported weaker demand." For households, "banks tightened standards across all categories of residential real estate loans and across all three consumer loan categories - credit card loans, auto loans, and other consumer loans - over the third quarter of 2020 on net." Notwithstanding the stronger standards, "Banks reported stronger demand for credit card loans, auto loans and most categories of residential real estate loans."

Bottom line, banks got stingier with businesses and companies saw softer demand for loans and while consumers want more credit, banks are taking a closer look in extending them. This is not what accelerating economic growth is made of. Hopefully though that changes in Q2 2021.

We saw inflation data out of China with CPI up .5% y/o/y, the same as the core rate but below the estimate of up .8%. Food price inflation which has been rampant for the past two years is finally slowing down led by pork prices (post swine flu) but also in part to tough comparisons. As seen in the below CRB food index, food prices are rising led by corn, soybeans and wheat. PPI fell 2.1% y/o/y, two tenths more than expected but with industrial metals prices rising, this will eventually hook higher again. These numbers are not market moving and China stock markets, both the A and H shares, were the only major market in the red overnight.

CRB FOOD INDEX

CRB RAW INDUSTRIALS

Shifting to Europe, the German November ZEW index fell sharply to 39 from 56.1 and that was below the estimate of 44.3. Current Conditions were down by 5 pts to -64.3, a touch below the forecast. ZEW said "Financial experts are concerned about the economic impact of the 2nd wave of Covid and what this will entail. The ZEW indicator of Economic Sentiment has therefore once again significantly decreased in November, indicating a slowdown of economic recovery in Germany. There is also the additional worry that the German economy could head back into recession." Fortunately for Germany, the most recently announced shutdowns have been much more mild when compared with March and April but does point to the still tough winter ahead of what should be a much brighter spring.

Ahead of a new round of shutdowns in the UK announced in October, the September jobs data already showed weakness. For the 3 months ended September, employment fell by 164k jobs, more than the estimate of 150k and the unemployment rate rose 3 tenths to 4.8%. This is still being suppressed by the job/wage subsidization program in place. More up to date, the October jobless claims figure positively saw a decline of 29.8k while September was revised sharply lower by almost 70k to -40.2k. I'm sure November will see a rise again. The pound quietly is rising to the highest level in two months as it does seem progress is being made on Brexit. I expect a much higher pound when the deal is sealed.

BRITISH POUND

(Monday's comments and update appear at the end.) 

Monday morning began with an enormous sigh of relief rally after Pfizer announced the development and availability of a vaccine with an amazing 90% indicated efficacy. Most medical types had only hoped for something more in the line of 50 or 60% and 90% is way, way up there.

Later in the day, there was some pullback as people began to realize this particular vaccine requires exceptional storage facilities, including very, very low temperatures and might not, therefore, make it available to certain rural sections and certainly not the less developed countries.

Also, at midday, the market broke out into a beneficiaries of the back to normal and then, profit taking in stocks that had been beneficiaries of a "stay at home/work at home" perception. Despite the late pullback, led by the high techs, that sent Nasdaq into negative territory, overall, the breadth of the market was still good as there was heavy involvement across a broad spectrum of sectors.

The celebration of the vaccine superseded to a large degree any election developments. McConnell's statement indicated that the Republican mainstays will probably allow the President time to file various lawsuits, challenging the results. That led traders to believe we probably won't begin to have a real sense of the things until around December 15th, when the Electoral College will meet so the State Legislatures and Election Officials will have to pick those the electors in the week or so before hand.

Nevertheless, the Senate looks to be not in anybody's pocket and that is good for divided government at least in the markets eyes. The Georgia election for two senators in January may turn out to be the most expensive Senatorial elections in the history of the United States. You should only own a small TV station in Georgia. Santa Claus will arrive a little late.

At dawn this morning, the futures indicate we may continue to see some of the sorting through that appeared Monday afternoon. The stay at home or work at home beneficiaries will likely continue to be pruned back.

Further, Eli Lily's announcement of an antigen infusion treatment raises hopes that the whole Covid problem may be soon become somewhat more workable and, therefore, less concern to the economy. Big question remains, with Trump doing court challenges will he bother for a lame duck stimulus package.

So, for now, a bit of a rerun of yesterday afternoon.

Stay tuned and keep one eye on the newsticker.

Arthur

__________

News on Pfizer vaccine supersedes all previous market action. Not only is vaccine apparently 90% effective but its development is a completely new vaccine procedure, which could hold promise for a variety of other diseases, in which you just dial up the RNA of the virus involved and reconfigure. That may be wrong. But, if so, we moved hundreds of years ahead in vaccine development and possibly all medical treatment.

Meanwhile, President Trump must be trying to figure out how can he get the election restarted all over again.

More data later in the day.

Stay safe.

Arthur

__________

Update - 1:30 p.m.

Cocktail Napkin Charting - Vaccine inspired spike takes Dow to new high just under 30,000.

Interestingly, mild pullback has stayed above the old high, which was circa 29,400.

Could be interesting to watch.

Stay safe.

* Yesterday may have represented a classic "sell on the good news"

* While many were cheering about the vaccine news, I was waiting to sell, red tickets in hand

* Some stocks and sectors had a great year yesterday

* And some stocks and sectors got schmeissed

* With so much of the Indices tech heavy - it is hard to see tech stocks suffer and the market advance at the same time

* On Monday I moved from large net long to small net short - it was the biggest daily swing in my aggregate net exposure in years

* Monday was also an example why unemotional trading/investing is so important

* Given the market's pivot, it may be time to consider a Berkshire Hathaway long

"Did he doubt or did he try?
Answers aplenty in the bye and bye
Talk about your plenty, talk about your ills
One man gathers what another man spills"
- The Grateful Dead, "St. Stephen"

The abrupt move of value stocks over growth stocks on Monday was likely consequential and represented an exclamation point of what I have been expecting for 1-2 months:

The thunder we hear in South Florida is not the bad weather - its the pivot from growth to value. Yesterday value stocks outperformed growth stocks by over 5% - that's the largest one day gap in history.
- Dougie Kass (@DougKass)

While this amazing gap in relative performance could close a bit at any point in the next few weeks - it seems to me to be a likely signpost of profound change in the market's complexion over the next 6-12 months. 

In my late day summary I wrote the following: 

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.

That said, certain stocks,  on the long side, had great years yesterday - Hilton (HLT) , Hyatt (H) , Disney (DIS) , Goldman Sachs (GS) , Morgan Stanley (MS) are some examples of gapping stocks to the upside. Some banks rose by over +10% in the trading session, while our value-based ETFs climbed strongly. While certain stocks and sectors - like homebuilders, which I am short - had declines of nearly -10% on Monday. 

I was as active Monday as I have been in any day in several years: 

* I established a large (SPY) short at $363-$365

* I reduced GS, (GM) , MS, DIS, (VTV) and (VBR) to small sized from large sized

* I added to (WMT) , (SJM) , (GOOGL) and (AMZN) longs

* I covered my (ZM) , (AAPL) , (SQ) and (CVNA) shorts in the belief that we not only should "sell the news" but we should consider "covering (shorts) on the news"

* I added to my homebuilder package of shorts

* I reduced (GLD) from large to medium-sized 

The motivation for my moves were singular and calculating - as the upside reward vs. downside risk had flip flopped in the last several weeks from favorable to unfavorable. 

We All Herald and Rejoice in the Vaccine Announcement But Vaccine Risks Are Multiple

While I am not a scientist, I wanted to briefly discuss some of the risks associated with the implementation of wide scale use of Pfizer's (PFE) vaccine. 

To begin with, the current escalation in the spread of Covid-19 represents real near term economic and business risks over the next 3-6 months before large scale distribution is made. 

More from JP Morgan:

Bottom Line

Saint Stephen with a rose, in and out of the garden he goes
Country garden in the wind and the rain
Wherever he goes the people all complain...
Fortune comes a crawlin', calliope woman, spinnin' that curious sense of your own
Can you answer, yes I can
But what would be the answer to the answer man?"
- The Grateful Dead, "St. Stephen" 

Monday's trading session provided a possible exclamation point to a rather important change in market direction, context and complexion. 

While many have been focused, lectured and/or written about the merits of growth stocks over the last two months I was shorting (ZM, SQ, CVNA, homebuilders, etc.). This morning there will be "crickets" from those growth stock proponents. 

Even with the recent swoon, technology stocks represent an outsized and historically high percentage of the Indices. Indeed, the market has been a call on tech stocks for the last decade. 

I find it difficult to see tech stocks suffer and the overall market to advance at the same time. 

Pivots also usually result in a new regime of volatility, which means more not less investing and trading opportunities: 

"For several years I have written that we live in a society and amid markets that lack the predictability of the past. The world is interconnected more than ever before, transparency is heightened, and cooperation/coordination between the world's largest countries is at a low, while the dominant trading and investing entities worship at the altar of price momentum.

This means less "trending" and heightened volatility."

Remember, one man gathers what another man spills. Please reread this column for an explanation - some of my observations/conclusions lie here: 

"I never recommend stocks. Rather, the intent of my Diary is to explain what, how and when I conduct my trades and investments.

It's your ball (and money). Gestate your ideas by doing your own research, which is complemented by rigorous analysts, strategists, technicians and other industry practitioners' analysis that you have learned to respect over time.

But I will freely give the following advice:

* Read as much as possible.

* Avoid self-confidence and dogma.

* While sticking with your discipline, be flexible and stay open-minded.

* Embrace opportunities.

* Trade and invest unemotionally.

* Consider all outcomes.

* Expect the unexpected.

* Always consult the contrary.

* Do your own homework.

* Recognize your time frame and risk appetite.

* Consider probabilities, upside/downside -- not specific price points/targets."

Finally, there will be multiple long opportunities as an outgrowth of the possible pivot - one such opportunity may be going long Berkshire Hathaway (BRK.A) (BRK.B) . 

Stay tuned.
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Long GS (small), GM (small), MS (small), DIS (small), VTV (small), VBR (small), WMT (large), SJM (large), GOOGL, AMZN (large), GLD.

Short SPY (large), Homebuilders large.

The biggest move in bond yields since March 2020.

Danielle DiMartino Booth on New York City's blues":

• Per ISM-NY, Forward Guidance for revenues six months out rose to 60.0 in October, the highest reading since January's 64.3 print; similarly, October's Employment Index rose to 58.4, the strongest showing since December 2019 and a sign of optimism for the Big Apple
• Pfizer's vaccine announcement yesterday sent NYC Office REITs skyrocketing, with Vornado and SL Green spiking more than 35% and Empire State Realty up 27%; despite the jump, REITs remain down 39-50% as Manhattan Office occupancy is still at only 15%
• At 13.3%, New York's Office vacancy rate is at a 24-year high while leasing activity remains down 57% YoY after the worst nine-month run since 1995; though United Airlines' strong Thanksgiving travel expectations are a good sign, to return to normal NYC needs a vaccine

There's a mysterious aesthetic about wooden roller coasters. From a distance, the interlocking crisscross of hundreds, even thousands, of pieces of lumber resembles a giant harp. Up close, the thunderous rumble cannot be mistaken for anything but a runaway train - on a closed course (of course). One's cited favorite is tied to your hometown. But there is only one national icon - The Cyclone. Opened at Coney Island, in Brooklyn, New York in 1927 and covering 3,000 feet of track in a minute and fifty seconds, the Cyclone carries 24 passengers and reaches speeds of 60 miles per hour. Its biggest drop is 85 feet at a descent angle of 58.1 degrees, making the Cyclone the second-steepest wooden roller coaster in the world. Mercifully, it was saved from demolition in the 1970s and listed on the New York State Register of Historic Places in 1991. As the president of the Gravesend Historical society wrote, "Unlike the Dodgers, the Cyclone will never leave Brooklyn."

Speaking of ups and downs in New York City, the Six-Month Outlook within the Institute for Supply Management (ISM) New York affiliate's Report on Business has oscillated from the 40s to the 60s three times in the last six months. Also measured on a 50 breakeven scale, there's been record post-pandemic volatility in the City's Outlook index. This forward-looking measure for the New York City metro area has schizophrenically registered eight straight double-digit moves - either up or down - the most ever since the series' 1993 start.

The COVID-19 shock is proving to have a more long-lasting impact than the other one still fresh in our minds, 9/11. Without visibility on the horizon, urban flight promises to continue depressing rents and office occupancies. All parties from the municipal government to landlords to local businesses are being buttressed every which way.

It's understandable that ISM-NY procurement professional members have so little conviction in what the future holds for the local economy. When queried about their own firms, they've got much more clarity which we illustrated in today's chart. Forward guidance for revenues over the next six months rose to 60.0 in October, surpassing February pre-COVID level of 50.0 to reach the highest since January's 64.3 reading (blue line). This marked the first sign of optimism in nine months.

Sales constitute business activity in this heavily service-oriented economy consisting of five boroughs. The top line is always beyond a company's control. Any hint of hope prompts a search for validation that it's not a one-off event. For that, we entered into evidence October's Employment index which rose to 58.4, the strongest showing since December 2019's 60.8 print (red line).

While a comforting corroboration of revenue gains' resilience, it's no all-clear. That's why we've depicted the spread between expected revenues and employment (green bars) to give a sense of the magnitude of improvement - three straight positive monthly reads. However, the August-October average of 3 is four times smaller than normal, incremental healing but not discharge-paper worthy.

In fact, NYC's COVID cases are rising anew. According to Johns Hopkins, in the five days ended November 6, average case counts of 1,231 were the highest since early-May and a tripling off summer's low point. We can't say that's "nothing," but we can contextualize - seven-day hospitalizations of 50 are nearly invisible on the chart that peaked north of 1,500 in the spring.

As welcome as the health front news is, New York City remains the embodiment of "densely populated." A vaccine is a must to reopen the city, hence the elation when the Pfizer news hit three hours before yesterday's open, igniting every stock exposed to the City. Office real estate investment trusts (REITS) Vornado and SL Green both spiked more than 35% while Empire State Realty gained 27%. Apartment REIT Equity Residential surged and its peer AvalonBay jumped 25%. Local lenders New York Community Bancorp and Signature Bank tacked on double-digit gains. Even so, the REITs are down between 39-50% this year while the banks are off by a fifth.

To put how Big the Apple is in U.S. real estate, at $5.5 billion, NYC MSA accounts for 18% of the Commercial Mortgage Backed Securities (CMBS) universe. Not surprisingly, 58% of New York's delinquencies are in Retail and Lodging. That doesn't mean Office is in rude form - at 13.3%, vacancies are at a 24-year high and leasing activity is down by 57% vs. a year ago after the worst nine-month run since 1995. Manhattan office occupancy is estimated to be 15%.

To return to work, NYC needs a vaccine. For its entire economy to rebound, tourism must follow. Hence the reassuring news of United Airlines' expectation that Thanksgiving travel would be the briskest since March prompting the addition of 1,400 domestic flights. In 2018, New York drew more than 65 million tourists, many of whom landed at United's New York hub, Newark Liberty International Airport.

We wish this good news could save the holidays. Alas, The Macy's Thanksgiving Day Parade, Rockefeller City's Tree Lighting, the Rockette's "Christmas Spectacular," and the New York City Ballet's "The Nutcracker" at Lincoln Center have all been closed to the public or cancelled. Think The Cyclone being shuttered times four. And NYC mayor De Blasio is threatening partial shutdowns if positivity continues to rise. We thus look hopefully to the spring in anticipation of Broadway re-opening and ending the long-term structural economic damage already inflicted.

Exaggeration and hyperbole are often used as argument.

In reality Stan has a very small position in bitcoin and prefers gold: