* S&P futures -15 handles

Break in!

The Treasury Secretary announced this afternoon that it will not extend beyond Dec. 31 some of the bailout's emergency loan programs (in corporate credit, Main Street and municipal lending) that were established in conjunction with the Federal Reserve. In a letter to Fed Chair Jerome Powell, Sec. Steve Mnuchin said that the programs (backstopped by the Treasury with funds under the Cares Act) have met their stated objectives.

Here is the complete statement from the Treasury:

"Today U.S. Treasury Secretary Steven T. Mnuchin sent a letter to Chairman of the Federal Reserve Board of Governors Jerome Powell requesting a 90-day extension of the Commercial Paper Funding Facility (CPFF), the Primary Dealer Credit Facility (PDCF), the Money Market Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF).

With respect to the facilities that used CARES Act funding (PMCCF, SMCCF, MLF, MSLP, and TALF), I was personally involved in drafting the relevant part of the legislation and believe the Congressional intent as outlined in Section 4029 was to have the authority to originate new loans or purchase new assets (either directly or indirectly) expire on December 31, 2020. As such, I am requesting that the Federal Reserve return the unused funds to the Treasury. This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds," said Secretary Steven T. Mnuchin.

In the unlikely event that it becomes necessary in the future to reestablish any of these facilities, the Federal Reserve can request approval from the Secretary of the Treasury and, upon approval, the facilities can be funded with Core ESF funds, to the extent permitted by law, or additional funds appropriated by Congress. I am deeply honored to have worked on executing these programs and hope that because of our collective actions, Congress will show similar trust in Federal Reserve Chairs and Treasury Secretaries in the future."

The Treasury wants the almost $500 billion to be returned and to be reappropriated by Congress.

In response, the Federal Reserve - which has been clear in recent weeks of the importance of these programs to be continued - responded swiftly and atypically:

"The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy."

This is what Zero Hedge said: "This, we are sure, will infuriate The Fed. In recent weeks they have been vocal about the need for these programs to remain in place."

Thanks for reading my Diary today.
I hope it helped you make some good trading and investing decisions.
Enjoy the evening.
Be safe.

I am offering more Apple (AAPL) on the short side at prices slightly above the last sale.

Walmart (WMT) has regained some of its recent losses today, rising by +$2.72 to $151.81.

I have reduced my medium-sized WMT position to small-sized just now.

As mentioned recently, I had a very large long position going into the quarterly report a few days ago. I began to sell the day before the announcement and sold further on the initial thrust higher in pre-market trading on Tuesday 

Walmart was placed on my "Best Ideas List" less than four weeks ago at $137.

I would be a buyer under $145/share.

Nice rally off of the lows and I am pleased I cut back my (SPY) and (QQQ) shorts in the pre-market and reduced my put position by eliminating the Novembers. 

I have sold my December SPY and QQQ puts as well this afternoon - leaving me with no puts left.

I plan to reshort the Indices and move to large-sized on the next move higher - maybe $358-$360 on SPY, and $292.50-$294 on QQQ.

For now I will stay away from the puts as a regular diet of options is not my approach. 

* And exposure definitions

* I have reduced my net short exposure from very large to medium today

After covering some of my (SPY) and (QQQ) shorts in pre-market trading, and taking off my SPY and QQQ November puts - expiring tomorrow - I am now medium-sized net short in exposure, down from very large net short at the beginning of the day. 

Here is a reminder of the definition of my size positions in individual stocks, in the Indices (short and long) and with regard to total exposure.  

Currently here are my "definitions" of small, medium and large:

For Individual Stock Longs

Small: Under 1.5%

Medium: Between 1.5% and 3%

Large: Between 3% and 6%

For Individual Stock Shorts

Small: Under 1.0%

Medium: Between 1.0% and 2.0%

Large: Between 2.0% and 3.5%

For Index Longs

Small: Under 15%

Medium: Between 15% and 35%

Large: More than 35%

For Index Shorts

Small: Under 10%

Medium: Between 10% and 25%

Large: More than 25%

From here I want to go to my portfolios' aggregate net exposure - what is small, medium and large percent exposure in net terms (longs less shorts)? Here I define total net exposure, in precise percentage terms, for the purpose of explanation to our subscribers. Remember, there is an asymmetry between longs and shorts - so the differences, in percentage terms, between small, medium and large weightings differ between long and short!

Net Portfolio Exposure (Long)

Small: Under 20%

Medium: Between 20% and 50%

Large: More than 50%

Net Portfolio Exposure (Short)

Small: Under 15%

Medium: Between 15% and 35%

Large: More than 35%

* Investors are bullish on housing stocks. (Not one naysayer I am short homebuilders.)

* Zoom (ZM) has become a "verb." (I did well on this short and plan to reestablish it on strength.)

* Stocks look higher in 2021 and for the next decade. (I am net short, see my opener.)

* The economy will look like a hockey stick in 2021. (I have argued against this occurrence.)

* S&P profits will hit a new all-time high in 2021. (I doubt it.)

* Apple (AAPL) will continue its dominance of the high-end smart phone market. (I just reshorted AAPL yesterday on the basis of possible weakening in iPhone unit sales.)

* Energy stocks are unattractive at almost any price. (Doing research on this sector now.)

* Bond prices will remain low. (I am short (TLT) .)

Selling ViacomCBS (VIAC) - not even maybe. 

Really stupid.

Update - 12:30 p.m.

The continuing virus surge and some new concerns about the orderly transfer of power seems to be holding the bulls at bay. I tend to believe the transfer of power is not going to be a factor in that ultimately, as I said in this mornings comments, Trump would still declare the election to have been stolen but, will exit on Inauguration Day. We will wait and see.

Meanwhile, my good friend and fellow trading veteran, Dennis Gartman, notes some cautionary signs in executive insider sales vs. purchases. Some hint of over enthusiasm among investors. Dennis is usually pretty good with the caution flags. We are still waiting to see if they can retest the recent highs, which are resistance.

Traders are unwilling to step across the line this minute. We will wait to see if the expected Georgia recount results, due this afternoon, have any influence. Barring any major surprises, it is hard to see where that can affect markets.

Stay alert. Stay safe.

Arthur

* Sell at the sound of trumpets

* With the median home price +15.5% year over year - the seeds of a residential housing downturn are being sown

* I am short homebuilders

Existing home sales in October, likely reflecting contract signings done in the summer, totaled 6.85 million, above the estimate of 6.47 million and up from 6.57 million in September. That is now quickly approaching the 2005 peak of 7.25 million. All four regions saw month over month increases. The number of days on the market was just 24 vs. 26 in September and 27 in August. 

The problem remains inventory as months' supply fell to just 2.5 from 2.7 and relative to the long term average of about six months. This is leading to growing affordability issues notwithstanding the offset of lower rates. Both the median and average home price (the latter more skewed by mix) both rose to a record high. The median price is now up +15.5% year over year and the average price by +12.3%. 

First time buyers made up 32% of total purchases vs. 31% in September and 33% in August, and remains stuck in the low 30's as the benefit of low rates is offset by the need to come up with an ever growing level of a down payment because of sharply rising prices. All cash buyers made up 19% of purchases, matching the most since February with many of these second homes but that is the same pace as one year ago.   

With the robust demand with limited supply, it's not surprising to see the price gains we're seeing and why we need an increase in new construction. The last NAR's Metro Median Area Prices and Affordability quarterly report saw home price gains "in all of the 181 metropolitan areas NAR tracks. 65% of those metros show double-digit price increases." The Fed's goal of lowering short rates and in turn watching long rates follow has certainly boosted housing but these price gains have completely offset the benefit of low mortgage rates and then some in terms of affordability. Low rates certainly lower the monthly nut than otherwise but if rates eventually rise and home prices fall, for those that put down 5%-10% only need that price decline to wipe out their equity. The Fed is thus playing a dangerous game of encouraging this, AGAIN. 

Here is the 20 year chart of existing home sales: 

Tesla's (TSLA) market capitalization has risen to over $470 billion. 

I am very close to reshorting the shares.

* A Covid fighting tool is in your phone. 

* Tesla's biggest fan works for its competitor. 

* Infrastructure - Canada vs. U.S.

Out of my SPY and QQQ November puts for a loss. 

Still in December options Long SPY puts, QQQ puts. 

Peter on the data and sentiment: 

I wrote last Thursday that strictly from a sentiment standpoint, the level of bullishness was a negative for stocks on a short term basis. And notwithstanding the Moderna news Monday, the SPX is below where it was last Wednesday. Yesterday Investors Intelligence said Bulls rose closer to 60 at 59.6 from 59.2 while Bears fell to 18.2 from 19.4. That near 60 level and the more than 40 pt spread in Bulls/Bears is another negative. That could change though next week after the selling in the past two days because the AAII reading last week which was uber bullish last week saw some moderation in that positivity. Bulls fell 11.5 pts to 44.4 after the 17.9 spike last week. Bears though were only up 1.5 pts to 26.4 after the 6.6 pt drop last week. Thus, less bullish but still very complacent.

Confirming expectations that the ECB will add and/or recalibrate its current monetary policy at its meeting in December, Christine Lagarde today said that after they "responded promptly and forcefully to the 1st wave that hit the euro area economies, we will address the current phase of the crisis with the same approach and determination." She also said "The key challenge for policy makers will be to bridge the gap until vaccination is well advanced and the recovery can build its own momentum. It is thus more important than ever for monetary policy and fiscal policy to keep working hand in hand." That pretty much sums up what monetary policy is everywhere, a financing vehicle for government spending and a financing gift for those companies that can access the capital markets. For every other business, mostly small and medium sized, they need to rely mostly on the banks and we know what's happened to their profit margins from current policy which in turn limits their desire to lend. The Euro STOXX 600 bank index is down 1.7%.

All these banks need is just an upward sloping yield curve and every single time they are on the cusp of getting it, the central banks take it away. Think about that if the Federal Reserve decides in December to extend out the maturities of their QE program.

In order to buy that time, the Bank of Indonesia cut its benchmark rate today by 25 bps to 3.75% unexpectedly but they at least have rates to cut.

Australia reported a much better than expected jobs number for October with a gain of 178.8k vs the estimate of down 27.5k with both full time and part time jobs being added. While a surprise relative to expectations, the Victoria region in particular began to end Covid restrictions. That region is about 25% of Australia GDP. The ASX closed up on the day by 1/4 of a percent but the Aussie dollar is also lower vs the US dollar.

In the UK, with more selective restrictions, the CBI industrial orders index fell to -40 from -34 but that was as expected. CBI said "Output volumes have declined at their slowest pace in over a year in our November survey. But order books have softened again as global demand has been hit by intensified lockdowns, and manufacturers have trimmed their expectations." We just got to get thru the next few months. The pound is down slightly after the recent rally as the dollar is higher broadly after a 5 day losing streak.

Turkey is slowly shaping up to be a really interesting place to invest after years of complete disarray led by its economically illiterate President. Erdogan seems to be finally learning after his finance minister son in law resigned two weeks ago and Erdogan himself said he wanted to get back the "confidence and trust" of investors. Today its central bank hiked rates to 15% from 10.25% as expected and the lira, the disaster currency of the world over the last few years outside of the Venezuelan bolivar, is rallying by 2%. They said "The Committee has decided to implement a transparent and strong monetary tightening in order to eliminate risks to the inflation outlook, contain inflation expectations and restore the disinflation process." The Turkey stock etf has had a nice bounce over the past week but look what it's done over the past 10 in dollar terms.

TUR ETF

* Entry price is a significant factor to future investment returns

* Price is less truthful today than in the past

* Strike a balance between trading and investing in a volatile market without memory from day to day

* Be a "second level thinker"

* The rising delta in my put position has taken me into a too large net short exposure and I have taken off some of my SPY and QQQ shorts in pre-market weakness

* I will likely also reduce my put positions in the early going - bringing me back to a more manageable but still large net short exposure

* The S&P Index remains about 15% overvalued and I remain bearish on the market's outlook at current prices

"The NYSE is the only place in the world that when the sign says 'Every day high prices', everyone gets excited. If Walmart had the same sign, instead of 'Every day low prices', no one would show up."
- Peter Boockvar 

Time and time again traders and investors robotically and often emotionally follow price and ignore the simple notion that higher stock prices are the enemy of the rational buyer and lower prices are the ally of the rational buyer. 

Too often as stock prices rise, investors cheer and commonly ignore the consequences of buying at a high and elevated entry price. 

And, too often as stock prices drop, investors panic and commonly ignore the consequences of selling at a low and depressed exit price. 

Thanks to a changing market structure - in which active investing ("stock picking") is now overwhelmed by passive investing - helping to explain the popularity and proliferation of exchange traded funds and the emergence of quant strategies and products that worship at the altar of price momentum. In its essence, "buyers live higher and sellers live lower."

This evolution in market structure has arguably resulted in the least informed investor base in history as machines and exchange traded funds know nothing about price and everything about value. 

Of course, the upside is that the imbalance between current share prices and value are, with greater frequency, creating an recurring and unusual opportunities for the dispassionate trader and investor who have a sense of value. 

You can see in my Diary that, as a money manager, I am often attracted to the abundance of short term imbalances that are the residue of the changing market structure and I constantly try to strike a balance between trading and investing - unemotionally capturing opportunities. Sometimes it works, sometimes I fail in this process. 

In the last two years, at a time in which passive investing has exacerbated underlying volatility, short term trading opportunities are developing with greater frequency as political, geopolitical, health, social, economic and other factors have expanded in frequency in a heightened period of uncertainty in which a multitude of outcomes - many of them negative - are possible. 

In other words, current prices have become less truthful. This means to me that charts are less reliable today than in the past. 

2020 is a clear indication of the impact of the juxtaposition of market structure, volatility and price "untruth" as the greater frequency of a widening spreads between share prices and "fair market value" has become almost a permanent condition - producing a move from the February highs to the March lows and back to the near recent highs. 

In its extreme, and in relatively short order, we have moved form the "Fear of Being In" in March to the "Fear of Missing Out" in November. In order to perform well, these emotions must be locked away from our investing cerebellum - not repeated as an explanation of price action - as the financial media does routinely in their end of day market reviews. 

Unfortunately, confidence swells at extremes. FIN TV and many traders and investors missed the opportunities eight months ago at the March low and may have gone more heavily invested just at the wrong time near the November high. 

The concept of the market as a discounting mechanism is also too often missed or misunderstood - as "first level thinking" too often dominates the airwaves and our portfolios. 

In March when fear was nearly without precedent, I made the case that to be negative at 2200 on the S&P was to ignore the influence of the Federal Reserve and the innovation of our scientific and medical communities, among other variables. I bought aggressively and went large net long in exposure. 

And at the November high, greed was robust as many traders and investors, elated by the vaccine news, failed to be "second level thinkers" and acknowledge not only the continued economic risks and reality but, importantly, that the market may have been already discounted the better economic and profit prospects. 

The calculus of upside reward vs. downside risk is an essential part of my investment process. With a view towards intrinsic value, it allows me to capitalize on the non truth and volatility of prices. When many are losing their heads it is important to have a signpost of value, as it allows one to unemotionally be opportunistic as a trader and investor. 

I simply can not ignore risk vs. reward - as I worship not at the altar of price momentum but rather at the altar of "margin of safety." 

Let's go over a few charts which amplify the importance of entry level on our returns. 

The first chart is from a column I wrote yesterday: 

Nov 18, 2020 ' 10:00 AM EST DOUG KASS

Chart of the Day

On a price to sales basis, stocks are at the highest level in history (at 2.71x).

This is the 100th percentile of its historical distribution in over four decades of the stat being recorded.

If you want to get bullish at these prices, like strategists Morgan Stanley's Mike Wilson, Credit Suisse's Jonathan Golub, and Goldman Sachs' David Kostin, I wish all the best of luck.

I am now at a large short net exposure in equities.

Price is what you pay, value is what you get.

The second chart, from my pal Lance Roberts, underscores the risks of buying high (when the spread between current prices are at a large - my calculation is the market is about 15% to 17% overvalued - S&P 3550 'actual' vs. my calculation of estimated "fair market value" of 3050). 

Lance takes the price to sales (my chart above) and adds three other factors, Tobins Q, Shillers CAPE and Market Capitalization to GDP (Warren Buffett's favorite measure) in deducing that, based on  a composite of the four measures, future returns over the next decade are likely to be only +2% to +3%.    

* The X-axis is the standard deviation of the measure from its long-term mean. 

* Ex Market Cap to GDP is trading at a 1.5 standard deviation from its long-term average. 

* Price to Sales is at a 2.59 deviation or about 300% more than its long-term average. 

* Y-axis is the forward 10-year returns.



The next chart is from my buddy and mathematically savvy golf partner, Cresset's Jack Ablin. 

* No dispute price-to-sales ratios are pushing an all-time high. One mitigating factor is profit margins, particularly among large caps:

As to where value is by sector,  "Navigating the Noise"  where Richard Bernstein shared this last chart with me after reading my Chart of the Day Post which compares the enterprise value to sales of the Russell Index to the S&P and Nasdaq Indices: 

My Strategy

Yesterday I added to my (SPY) and (QQQ) shorts and initiated a trading short rental in Apple (AAPL) .  

When coupling the additional shorts above with the sharp drop (of about 70 handles from the morning high in the S&P Index to the closing low at day's end) resulting in a rising delta in my SPY and QQQ puts and an expanding short exposure - threw me "over my skiis" to a very large net short exposure. This is uncomfortable for me and I will definitely be reducing my short book (likely be selling off some of my put positions). 

I have already reduced in pre-market trading my newly large-sized SPY and QQQ shorts back to medium-sized this morning. 

As to the general market outlook, as discussed in yesterday's opener, "The Spread of Covid-19 Will Dent Economic Growth Over the Next 2 Quarters," I reject the bullish 2021 S&P EPS estimates that have become commonplace as stocks have elevated (as I explain my bearish rationale further). The column "bears" reposting: 

While S&P earnings estimates delivered by Wall Street strategists are moving up - perhaps in an attempt to rationalize high stock prices - the reality on Main Street is far different than that optimism.

While two days does not a trend make, I have observed that interest rates in the last two days have declined - and bond prices have risen - indicating some market skepticism regarding domestic economic growth.

With a disappointing domestic recovery growing in likelihood, the possibility of the Federal Reserve changing course next year coupled, arguably, with the likelihood of higher corporate tax rates - ambitious S&P consensus EPS estimates seemed destined to drift lower as 2021 goes by.

Yesterday afternoon, Credit Suisse's Jonathan Golub commentary - he was neutral to cautious previously - is consistent with the above observation of emerging undue optimism. He writes:

S&P 500 to 4050 by Year-End 2021, 12.2% upside

We are initiating our 2021 S&P 500 price target of 4050, representing 12.2% upside from current levels (10.8% annualized). This is based on EPS of $168 in 2021 (previously $155), and $190 in 2022 (previously $170). These estimates imply EPS growth of 20% and 13% in 2021-22. Our target suggests multiples will contract from 21.9x today to 21.3x by year-end 2021, as earnings grow into currently elevated multiples.

Golub believes that the near term risks are real but are likely to fade:

Near-Term Risks Real but Likely to Fade

While optimistic, we see a number near-term risks: (1) investor optimism is extremely extended, (2) production and distribution challenges could hamper the vaccine's rollout, (3) rising case counts could result in shutdowns, disrupting the holiday season, and (4) stimulus could remain politically unattainable. On a positive note, the successful vaccination of seniors and front-line workers could expedite the renormalization process well before herd immunity is achieved.

Morgan Stanley's Mike Wilson lives at $183/share and Goldman Sach's David Kostin holds to a $170/share 2021 S&P EPS estimate.

I am at below consensus, with a $150-$155/share projection.

My friends at Miller Tabak take a different view from Golub and the other bullish investment strategists, on the economic destruction caused by Covid-19 (something I discussed yesterday morning):

Tuesday, November 17, 2020

Fall Covid-19 Surge Finally Doing Significant Economic Damage

We are seeing the first clear signs that the ongoing surge in covid-19 cases is having an adverse impact on the U.S. economy. Google's mobility data is one of the best high-frequency measures of real economic activity. Mobility has tracked GDP throughout the pandemic, plummeting in the spring, followed by an increasingly slow recovery. To identify the impact of the fall covid-19 wave, we compared recent changes in mobility by state to the number of new cases. For each additional 30 cases per 100,000 residents (which corresponds to 100,000 more new daily cases nationally), households have reduced their movement to retail and recreation locations, groceries, and pharmacies by about 3%. They are also reducing their movement to workplaces by about 1%.

Figure 1: 7-Day Average of U.S. Mobility (% change from Baseline) in 2020

These declines suggest that the fall wave will noticeably dent 4Q20 and 1Q21 growth. But the impact, so far, is much smaller than the declines from the spring when lockdowns caused nationwide mobility in some categories to fall by almost 50%. The unemployment rate falling below 7% despite cases being over three times higher than the spring makes clear that stay at home orders had at least as big of an economic impact as the public's own choices to restrict its economic activity in order to avoid the virus. Figure 1, above, shows that the virus continues to keep mobility well below its pre-pandemic levels. But the fall wave has only made things moderately worse.

A bigger downside risk is that the fall surge will lead to more stay at home orders. A few states, including Oregon and New Mexico, have re-imposed theirs and other states, including Michigan and California, have enacted significant new restrictions. The impact of these measures is not yet identifiable in the mobility data. We doubt, however, that stay at home orders will become as widespread or as long-lasting as in the spring, partly because public opinion surveys suggest that half of the public would not obey them. But if we are wrong, then the lack of fiscal support could make their economic impact even worse. As long as cases remain elevated, covid-19 will weigh on growth, possibly causing it to completely stagnate. But government closures of many businesses would risk a double-dip recession.

Bottom Line

Thanks to the wonderful vaccine news, seasonal strength in the equity markets and near resolution of the election -- with a kicker from price momentum-based products and strategies -- stocks have been levitating. 

With the risks to the downside in the economy and in corporate profits growing, the market's aggregate risk now overwhelms the upside reward. 

Sic transit gloria. 

I am buying value stocks and shorting the markets more aggressively.
__________

Long BAC (large), C (large), JPM (large), WFC (large), MS (small), GS (small), SPY puts (large), QQQ puts (large), XLF (large) ("Trade of the Week").

Short SPY, QQQ, AAPL (small).

Two more from Lisa:

Danielle DiMartino Booth on the poor Christmas retail spending outlook:

• Homebase's trackers of small businesses open and employees working have tailed off, with both down near 20% vs. January's benchmark; meanwhile, Weeks Needed to Purchase a New Vehicle hit 33.13 in October, per Cox and Moody's, exceeding pre-pandemic levels as spending power stalls
• Despite last month's Amazon Prime Days, Tuesday's headline retail sales missed expectations, rising only 0.3% month-over-month; with eight of the 14 retail spending categories posting declines, October was the first month in six to see negative breadth for consumer spending
• QI's Unemployment Expectations Volatility Index had the lowest conviction and highest uncertainty ever for future unemployment in November; virus concerns and headwinds from the uncertain labor outlook increase the risk of a sales backslide and a Black Friday miss

"The lights are on, but no one is home" has been tweaked with a tinge of post-pandemic cynicism "The lights are on, but everyone is home." At least that's our read of the irony of today's announcement that Boeing finally received clearance from the FAA to put its fleet of 737 Max back into the skies. The fall from world's largest airplane manufacturer predates COVID. Airbus rang in the 2020 New Year having just overtaken Boeing for the first time since 2011. Beginning in March 2019, Boeing was hit with not one, but two, major air disasters. An Indonesia Lion Air's flight plunged into the Java Sea followed five months later by an Ethiopian Airlines crash. The hope is to put this chapter behind them with the FAA greenlighting the Max contingent upon upgrades to software and onboard computers and requisite hours of pilot simulator training.

Boeing's lights will be switched back on. But the damage is done with many estimates suggesting a third of air travel will not return for many years. Vaccines notwithstanding, Zoom and its peers have made a permanent mark on the business travel that is airlines' bread and butter. That explains the angst in Boeing's upstream supply chain which is bracing for a multitude of planned projects being woodshedded over the next decade. As many as 4,700 planned aircraft have been scratched from production schedules. Cuts to future demand equate to two and a half years' worth of production disappearing nearly overnight. These ripple effects are sure to send more permanent pink slips to aerospace supply firms as workforces are rightsized to shrunken capacity.

Aerospace is not alone in shifting to survival mode in the last week or so. As COVID case counts rise unabated, across urban and rural areas alike, business see the manifestation of declining revenues they tried to hold off on budgeting for. The first reflex is to cut headcount. Media and Entertainment, Transportation Services and Education make up an eclectic list of yesterday's announced layoffs:

• ViacomCBS will cut 100 corporate positions in finance and marketing. This piles on to May's post-merger restructuring redundancies emanating from integration of Viacom and CBS. At the time, that entailed 450 positions; that number has continued to rise.
• New York's Metropolitan Transit Authority (MTA), the nation's largest mass-transportation system, warned yesterday of service cuts between 40% and 50% for subways, buses and commuter train lines if relief aid from the Federal government is not forthcoming. The upshot: 9,300 job cuts and an increase in fares and tolls. These would take effect in May of 2021 and exponentially increase the burden on the local economy. The MTA is seeking $12 billion in Federal aid and would also need issue $3 billion in municipal bonds.
• In a double blow to the Big Apple, New York City's (NYC) public-school system, the largest in the country, was forced to go virtual after the COVID positivity rate breached the 3% threshold. The two-week shutdown will produce ripple effects that could force the re-closure of restaurants, gyms and businesses deemed high risk and nonessential.

Is NYC's news the proverbial tip of the iceberg? Large metro areas constitute a significant amount of economic firepower. Regions with high concentrations of people and businesses translate into vital forces for earned income. For an economic recovery predicated on the recovery in consumer spending, these seeming anecdotes could be coming to a smaller metro area near you.

Small businesses will be the victims, again. Some of those include your local auto dealer. We've depicted both in our left chart above. Homebase's pandemic tracker of small businesses open (blue line) and employees working (orange line) began to tail off through mid-November. Juxtaposed against that is Cox Automotive and Moody's Analytics Vehicle Affordability Index (green line). This brand-new indicator rolled out Tuesday measures the number of weeks of income needed for a median-income household to pay off a new vehicle. The Index illustrates the trade-off between record new vehicle prices and households' spending power. At 33.12 in October, the level breaches pre-pandemic levels.

Our chart at the right zooms out to the broader retail space. Despite a delayed Amazon Prime Day(s) in mid-month, October retail sales came in light of market expectations. The "control group" that feeds sell-side economists' consumer spending forecasts ground to a near standstill (0.1% October versus 0.9% September). Last month also marked the first month in six with negative breadth for the 14 retail spending categories - eight declines to six advances.

Risk of a November backslide is rising in lockstep with U.S. fatalities pushing record highs, reflected in the extreme flatness of US households' unemployment outlook. Our November Unemployment Expectations Volatility Index revealed the lowest conviction ever and highest uncertainty ever for the forward path of the unemployment rate. This metric is defined by the standard deviation of the three responses for unemployment expectations - lower, same and higher - in the University of Michigan's (UMich) consumer survey. In the past, UMich consumer guru Richard Curtin has highlighted unemployment expectations' quality as a leading indicator for consumer spending.

The lights are on at home...literally. Holiday light season has glaringly started early in hopes of cheering up nervous households. Lit lights can't reverse the fourth-quarter's consumer spending profile starting off the quarter with less momentum. The most uncertain labor outlook in history will not likely salvage November's "Black Friday." The risks are rising for an outright sales decline when reported next month.