"Just one last time."
-Lt. Columbo

I thought this tweet from Liz Ann Sonders was interesting:

.

Thanks for reading my Diary today.

Whether it is politics, macroeconomics, the market outlook or picking individual stocks -- as you all know by now I believe that opinions are like butts, we all have them (at that includes me!).

Though I am sometimes unsuccessful, I try -- as mentioned in the previous column -- to deliver hard-hitting, non-consensus market and company views that are punctuated by common sense.

I write about what I think will impact our markets -- and that, at times, includes politics as well as social change and developments.

My interpretation of policy and current politics on the markets is outlined directly and some may disagree vehemently with my conclusions. I hold no bad feelings to those that disagree with me.

While my views may appear to some as being dogmatic, I try not to be (though it becomes harder as one grows older).

I try not to gloat about successful ideas.

On many subjects I am often wrong and always in doubt.

When wrong, I admit it.

I don't write my Diary for the purpose of another income stream -- I write because I enjoy what I am doing and I like to share my ideas.

Nor do I write my Diary in order to sell a service to others.

I am old school; writing down the logic of my ideas helps me as when I am wrong I can return to my Diary and figure out why in an attempt to never duplicate the mistake.

And when I see B.S. I call it out -- as I did today. 

In the final analysis I have been here for over 24 years now so I must be doing something right.

At least I hope so.

Enjoy the evening.

Be safe.

"You've got to be very careful if you don't know where you are going because you might not get there."

- Yogi Berra 

We are fortunate to have a number of new subscribers that have joined Real Money Pro this year - so I wanted to reposte this column from yesteryear:

So I want to rehash several subjects - for their benefit:

* How to be resourceful, unemotional and opportunistic under stress - arguably, keeping one's head on straight when some others might be losing theirs

* The unabridged user's guide and purpose of my Diary as well as my core investing tenets

Trading and Investing Under Stress

Earlier this week I published a column, "How I Cope In A Heightened Period of Volatility and Uncertainty."

I try to stay dispassionate and unemotional during times of stress, but this environment has tested my gumption.

I also try to stay objective in my calculus of value (and analysis) -- changing my assumptions, which directly alter my investment conclusion, when my fundamental assumptions are revised.

That calculation of individual and market "fair value" lies at the epicenter of my portfolio's construction and my decision-making process. To me, its strict interpretation provides me with a investing road map and, I hope, a "margin of safety."
In times of heightened volatility and uncertainty that we face today, I attempt to be in balance, remain objective and always stay within the confines of my risk appetite and profile and trading/investing time frames.

Finally, given the above, I continue to recognize that market structure doesn't give a damn about my calculus -- broad, unexplained swings of volatility in prices can happen at any time for whatever reason as machines and algos know a lot about price, but little about value. So, I always remain posed for opportunities that quant strategies run amok may provide me.

Conviction correlates with volatility and uncertainty. In times like this, I must pay heed to the heightened regime of volatility that is the residue of a changed market structure and the worldwide economic and health uncertainties. As a result and regardless of my calculation of market reward vs. risk, most investors -- me included -- must err on the side of more and not less conservatism in portfolio construction and market view (always maintaining a keen eye on my portfolio's VAR, "value at risk").

So, while my more aggressive long positioning (in response to an attractive upside/downside) over the last two weeks is aimed at a time frame measured in months, not days or weeks -- I must always keep my head out of the sand, be fast afoot and fully recognize and accept my portfolio's short-term vulnerability to the potential risks associated with current market structure and the global economic landscape.

It is important to remember that bull markets are borne out of bad news and bear markets are borne out of good news.

The Thai bhat crisis, the Russian debt crisis, 1987's portfolio insurance fiasco, the dot.com bust, The Great Recession of 2007 to 2009 all gave birth to great bull markets. (And vice versa -- euphoria and complacency give birth to bear markets.)

The 2015 Unabridged User's Guide to Investing and the Diary

Back in August 2015, I published "The Unabridged User's Guide to Investing and The Diary."

It's a good time to repost this missive - in order to remind old subscribers and explain to new subscribers:

Too many traders and investors are less thoughtful and more impulsive with regard to buying and selling securities than when they purchase a refrigerator or a television.

Too many want an easy path to investment riches -- ideas coming forth from business television, or books that purport to explain "how to make millions" in the market. Even stock ideas from friends, relatives or on Twitter are often seen as pathways to investment success.

But there is no easy path for consistently profitable investing. It requires a lot of hard work.

The investment and asset-allocation processes can hold more weight and is more complex than nearly any other business decision. A host of variables, known and unknown, contribute to the investment alchemy. As well, subtle and unconscious influences and personal biases affect the process as we all seek Mr. Market's metaphorical green jacket (like the one won by Jordan Spieth in this year's Masters golf tournament).

What follows are some basic tenets that form my investment consciousness, which are admittedly simple to write about but far more difficult to execute.

Know Thyself, Work Hard, and Don't Get Emotional

• If you don't know yourself, Wall Street is a poor place to find yourself. There is a reason why there was a church on one side of the old New York Stock Exchange building and a cemetery on the other.
  · If you enter the hedge fund biz, remember Darwin. It is survival of the fittest, the smartest and the most practical. The hedge fund industry is populated by some of the most obsessive and idiosyncratic practitioners extant, most of whom are highly educated and possessive of a greater-than-normal cerebellum. Differentiate yourself by your process and by routinely working harder than anyone else (e.g., my day routinely starts at 5:00 a.m.). As John Maxwell wrote, "Successful and unsuccessful people do not vary greatly in their abilities; they vary in their desires to reach their potential."
  · Do not get emotional in making investments, and however eloquent the strategy is, it is the results that count. The ecstasy of getting investment performance right is always eclipsed by the agony of getting it wrong. If you are uncertain or temporarily lack confidence, raise your cash positions and reduce your risk profile.
  

The Investment Process Is Methodical

• If you are a fundamentalist, write a brief synopsis of each investment analysis/conclusion. It will serve to crystallize your investment analysis, and it is an excellent personal and investment discipline. (It is the principle reason why I write my diary.) Moreover, an ex post facto reflection on why one achieved past success or failures is usually illuminating, instructive and often leads to fewer mistakes. After all, as philosopher Benjamin Disraeli once wrote, "What we have learned from history is that we haven't learned from history."
  · If you are a technician, keep all your charts, just as the fundamentalist should write up a summary of each investment. Reflecting on past mistakes/successes is as important to a technician as it is to a fundamentalist.
  · A combination of mostly fundamental and a dose of technical input is usually a recipe for investment success.
  · Regardless of one's modus operandi (fundamental, technical or a combination of both), logic of argument and power of dissection are the two most important ingredients in delivering superior investment returns. Common sense, which is not so common, runs a close third!

Stay Objective and Independent

• Neither be a Cassandra nor a Sunshine Boy! It is much easier to be critical than to be correct, as financial disasters are always impending by the ursine crowd. Conversely, the outlook is never as perfect or clear as it is seen by the bullish cabal.
  · Within limits, stay independent in view. Above all, remember equilibrium is rarely observed in the stock market. To quote George Soros, "Participants perceptions are inherently flawed" (at least to varying degrees).

Investment Discipline Is Key

• Let your profits run and and press your winners, as knowing when to seize opportunity is one of the basic principles to investing. But stop your losses, as discipline always should trump conviction. In "Reminiscences of a Stock Operator," Edwin Lefevre wrote, "I did precisely the wrong thing. The cotton showed me a loss and I kept it. The wheat showed me a profit and I sold it out. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit." Woody Allen put it even better: "I don't want to achieve immortality through my work. I want to achieve it through not dying."

The Past Is Not Necessarily Prologue to the Future

• History should be a guide but not a jailer. There is little permanent truth in the financial markets as change is as inevitable as it is constant. Do not extrapolate the trend in fundamentals in your company analysis nor in the trend in stock prices. Be independent of analytical and investment conclusions, greedy when others are fearful and fearful when others are greedy, but always remember that possessing a variant view has outsized risk as well as outsized reward.

Risk and Reward Should Be Assessed Properly

• In buying a stock remember risk/reward is asymmetric. A long can climb to indefinite heights and one can only lose 100% of the value of each investment. Buy value, but only with a catalyst. When longs have high short interest ratios, investigate the bear case completely.
  · In shorting a stock, remember risk/reward is asymmetric. A short can only return 100% (a bankruptcy) but can rise to indefinite heights. Never make conceptual shorts without a catalyst. Avoid shorts when the outstanding short interest exceeds five days of average trading volume.
  · Use leverage wisely but rarely as financial markets are inherently unstable. While the use of leverage can deliver superior investment returns when the wind is at your investments' back, it can also wipe you out when events fail to conform to your expectations. Only the best of the best consistently time the proper use of leverage.

Knowledge of Accounting Is a Must, but Meetings With Management Have Little Value

• There is no substitute for a thorough knowledge of financial accounting. Accounting can be misleading, opaque and unaccountable, but free cash flow rarely lies.
  · If you must meet with management, do so to understand a company's core business but remember that managements infrequently, if ever, view their secular prospects with suspicion. In the late 1980s Warren Buffett wrote in his letter to Berkshire Hathaway's shareholders that "corporate managers lie like Ministers of Finance on the eve of devaluation."

Be Open to Others' Ideas, but Rely on Your Own Analysis

• Always be self-critical, and once your view is formulated, be open to criticism from others that you respect. Take their criticism and test your thesis (constantly). Avoid what G.K. Chesterton once mused, "I owe my success to having listened respectfully to the very best advice, and then going away and doing the exact opposite." Bullheadedness will get you into trouble in the investment world.

Only Invest/Trade When Distractions Are Limited

• Invest/trade/speculate only if you are not dependent upon the investment profits to maintain your standard of living.
  · A stable personal and financial life, outside of investing, is typically a necessary ingredient to investment success.
  · Take vacations and smell the roses. When you return you will be rejuvenated and a better investor/trader.
  · Be well-rested and in good shape physically."Investing is 90% mental; the other half is physical" (another Yogi-ism).
  · Keep your investment expectations reasonable and expect to make mistakes as perfection is not attainable. Nevertheless, by all means, try to chase perfection as the byproduct will be investment excellence.

Read As Much as Possible

• Learn from those investors who have excelled by reading and re-reading the classic books on investing.

In terms of my own contribution to your knowledge base, let me reiterate the objectives and goals of my Daily Diary:

To begin with, never lose sight that I "eat my own cooking." I trade and invest actively, sometimes in size, with real money from my investors. When I screw up and make trading and investment mistakes, it is financially painful to me. These are not paper trades like many other services provide. When my ideas go awry, I can't help but also be affected emotionally with regard to subscribers who have embraced my ideas. You should all know, I take this to heart.

Secondly, I work hard in delivering my Diary to you, starting my day at about 5 a.m. and often staying after 6 p.m. Maybe I don't work quite as hard as Jim "El Capitan" Cramer (who has a remarkable work elan and ethic), but I work damn hard for subscribers.

Here is what I try to achieve every day in delivering a value-added view:

• Above all, to keep subscribers engaged by providing profitable short-term trading and thoughtful investment ideas on both the long and short side.
  · Deliver (an often) variant and non-consensus view based on hard-hitting analysis of individual stock ideas, sector work and market views.
  · In doing so, at times I intentionally want to make you uncomfortable with some of your investments and with consensus notions -- playing devil's advocate -- for the purpose of having you often question your holdings. That's a healthy process!
  · When appropriate, my individual analysis will be extensive. Other times I will highlight an investment case more briefly with bullet points and in summary form.
  · Actively share insights and observations I gain from individual company management visits, telephone and conference calls.
  · Communicate transparently what, why and when I implement trading and investment ideas.
  · I try to deliver both fast money ideas and slow money ideas, depending on market conditions. I indicate the size (small, medium, large) of all my trades and investments so subscribers can recognize my relative commitment, conviction and weighting.
  · Communicate, sometimes in detail, an analysis of macroeconomic events that might influence the capital markets.
  · Pass on breaking business news that can impact markets/sectors/stocks.
  · Write in an easy and even fun manner through the intersection of serious research and pop culture. I want to keep you informed AND entertained.
  · Communicate special, one-off ideas -- for example, The Trade of the Week, Best Ideas list, Tell Me Something I Don't Know, The Most Important Thing, etc. (There will be additional different ideas and new columns in the near term).
  · I endeavor to be objective and try not to be self-confident in view as I have learned over a couple of decades that Mr. Market is here to embarrass the most people, most of the time. Mr. Market doesn't exist to make us money -- that is our job.
  · Interact respectfully with our subscribers in the Comments section and with other contributors in the Columnist Conversation area. In doing so, I encourage you all to challenge my/our views and theses. The only thing I ask is for you to be respectful, as I will be with opposing views.
  · I will qualify my views, as the only certainty in this business is the lack of certainty.
  · I will always admit my mistakes. More importantly, I will write about why I made boners, hopefully learning from each experience.

Finally, my Diary, Jimmy Cramer and the contributions of others should not be taken in isolation. Our contributions should be used in conjunction with doing your own homework.

You hold the responsibility and pull the trigger to your own investment decisions -- we do not.

As stated above, our ideas are simply jumping-off points and investment input upon which more primary research should be performed by all of you.

I hope this outline of my core investment tenets and objectives and goals of my Diary are useful to all of you.

I will be writing more on Suze and MicroStrategy (MSTR) tomorrow morning: 

Mark Anthony

Suze Orman Deja Vu?
At the height of the Dot.com bubble, Suze Orman appeared on CNBC. A caller asked her opinion of initiating a Trading position in QQQ. She said "Sure, if you want to buy QQQ 'for a Trade'"...
It seemed clear at that moment, that the 'Top' was finally in. Which happened to be true.
As she spoke about Bitcoin yesterday, echoes of the 2000 peak in Speculative Froth may have come full circle.

frdgrouper1

Dougie,
could you clarify the following?
Goldman Sachs which was -$5 yesterday is down another four beaners today.

I am pressing both shorts now.

If I was active I would be buying more ViacomCBS (VIAC) here at $41.65.

if you aren't active how are your pressing shorts?

dougie kass frdgrouper1

As I have mentioned in my Diary the trading that I am doing (and it is not very active) has been solely in my personal account (and pension plan) for several months.
We had anticipated a June 1 launch for Seabreeze Capital Partners LP but paperwork, additional investors ("a high class problem") etc. have resulted in about a four week delay.
We are launching Seabreeze on July 1 (and that is a firm date)!
As I emphasized (in weightings) my recent trades have been small and infrequent.
After July 1 I will be doing zero personal trading as my funds will be in Seabreeze as I view personal trading as a conflict with my Partnership.
Dougie

Good stuff from Lance Roberts.

Yesterday on CNBC, popular financial host Suze Orman said she purchased Bitcoin through an initial investment in MicroStrategy (MSTR) made on June 5, 2020 at about $125/share. 

The problem with that statement was that MSTR had not yet disclosed its holdings in Bitcoin at that time. They may not have even held bitcoin at that time!  

MSTR revealed the purchase of ($250 million of) Bitcoins for the first time on August 11, 2020 - more than two months after Orman said she "played" MSTR  because of its Bitcoin exposure in June, 2020. At that time, in August, 2020 it was one of the largest cryptocurrency acquisitions ever made by a public company. See here. 

An explanation of this situation should be made by her or by CNBC - post haste! 

Hindenberg Research delivers a negative analysis on DraftKings (DKNG) . 

Given my view on banks and brokerages - I shorted small positions in (MS) and (GS) yesterday.

Jun 14, 2021 ' 12:05 PM EDT DOUG KASS

About the Banks

Repeating for emphasis: I would no longer be long the banks.

I am now short (MS) and (GS) .

Goldman Sachs which was -$5 yesterday is down another four beaners today.

I am pressing both shorts now.

If I was active I would be buying more ViacomCBS (VIAC) here at $41.65.

If the facts change...

If we had a $1 for every time we heard a Fed member say they want to run things hot... The problem with that approach is it eventually flames out or the analogy I've given, when wanting to drive 200 mph in a 55 an accident was bound to happen. Thus, this policy eventually becomes the architect of its own demise in terms of effectiveness. Well, the most interest rate sensitive part of the market, that being housing, has hit a wall and is now burning out (mortgage apps to purchase a home is at the lowest in 13 months). I remain bullish long term on housing because of the Millennial demographic and 10+ years of under investment in new homes but it is clear that home price sticker shock driven by a dearth of inventory and a lot of demand, egged on by historically low interest rates, has empirically slowed the pace of transactions.

Lumber prices thankfully for builders and buyers continues to correct but even with the pullback from $1686 (per 110k board feet) on a closing basis to $996.20 yesterday, it is still triple the average price over the past 15 years. Does triple the price mean that inflation is NOT transitory or that it is now that it is off from over $1600? Calling that transitory I think is ridiculous. Another way of thinking about it, if oil goes from $50 to $100 in one year and then the next falls back to $90 the following year, is that now deflation? Only from the point of view of a central banker it is. I remain bullish on commodities and commodity stocks (particularly energy, ag and copper) by the way. Years of underinvestment are not going to be solved by a 6 month rally in prices.

Does the Fed alter policy in light of this obvious reality in housing or do they continue as is because their models tell them to? Does the Fed question their QE program in light of the seemingly daily records being reached of the use of their RRP program which touched $583b yesterday? So, is it enough that QE takes Treasuries and Agencies off the market and RRP puts it right back in to get them to question QE? Are the last two CPI numbers that were well above expectations enough to get them to waver on their uber dovishness? I say all this because we must ask whether a change in the facts moves the needle with policy driven by bureaucratic, establishment thinking.

The reopening (temporarily stunted by the new push out of a full reopen) and successful vaccine rollout in the UK drove a 93k person drop in May jobless claims while April was revised to a drop of 56k from the initial print of down 15k. That May decline is the most since 1996. As for the April jobs data, for the 3 months ended April employment rose by 113k vs 84k in the month prior but about 20k less than expected. The unemployment rate did tick down by one tenth to 4.7% and wage growth was faster than expected. With the 4 week push out of the full reopening announced yesterday, there isn't much of a market response to all this data. I do remain bullish on UK stocks and the pound.

*Inflation in the pipeline is advancing rapidly

Producer prices in May jumped +0.8% month over month after a +0.6% rise in April, +1% increase in March, a +0.5% gain in February, and after a +1.3% spike in January. Paul Volcker is spinning in his grave, especially when he sees where monetary policy is currently calibrated. These are month over month gains but against the easy comp, they are up +6.6% year over year. As for the core rate it was up +0.7%, two tenths more than expected and that is now the third straight month with that increase. Thus, we've got to a +2% producer price annual rate in just three months. The core rate is up +4.8% year over year. 

The goods side increase of +1.1% month over month ex food and energy (food prices spiked +2.6% month over month  by the way. Energy prices rose +2.2%) was driven by higher prices for non-ferrous metals like aluminum, copper, lead, nickel, tin, and zinc. 

With respect to services and something I've been harping on for many quarters now, transportation costs continue to spike. 'Truck Transportation of Freight' prices jumped +3.9% on the month and by +16% year over year. Rail prices were up by +1.1% month over month and +5.1% year over year. Air transport though took a breather, giving back the past few months of gains as more passenger planes come back on line and they take a lot of cargo. Not surprisingly, auto retailing margins jumped by +27%. As people start to shop again, apparel/footwear/accessories retailing prices were up by +4.1% month over month and +11.4% year over year.  Anything related to the house saw price spikes, such as furniture, flooring/floor coverings, hardware/building materials/supplies, and major household appliances. Thanks to the higher stock market, 'portfolio mgmt' prices rose +2% month over month and +31% year over year. 

I didn't need the PPI stats to tell me that we're experiencing intense price pressures. Just ask any business in the real world but at least we can quantify to what extent where we have to go back to the 1970's to see this type of behavior. Those that see this inflation as transitory, many of which didn't see the inflation coming to begin with, will be right at some point but that's like saying the inflation in the 1970's was transitory too because it eventually slowed. Either way, businesses and consumers are having to deal with this NOW, regardless of what economists think about temporary or not. And, the global level of interest rates being so low and monetary policy being so extreme have NO shock absorbers whatsoever to deal with anything not so transitory. 

With respect to these price pressures, we are seeing ONLY THE BEGINNING of the pass thru to the rest of us.  

Let's focus on the inflation in the pipeline within the PPI report. Processed goods prices ex food and energy rose by +2.3% month over month after a +2.9% gain in April, and a +3.2% rise in March. Yes, month over month increased that used to be similar to year over year gains. As for  unprocessed goods, prices exploded by +9.2% month over month at the core level. Multiple years of gains in only one month!  

Here is an 11 year chart on Core PPI (month over month):  

Core retail sales fell -0.7% month over month in May, two tenths more than expected but more than offset by a 110 bps higher revision to April. The numbers are so distorted by the checks that were sent out in March that we can only guess what is related to that and what is organic. Yes, we know that about 25% of the checks were spent but now some of that is on services rather than goods. Also, these are NOMINAL changes and thus not taking away the impact of inflation which we know is impacting spending decisions now for certain things. Maybe reflecting people now shopping again, online retailing fell for the fourth month in the past six. 

Also, keep in mind that while the Fed is focused on the 7.6 million people that didn't come back to work relative to February 2020, more than double this are receiving enhanced unemployment benefits where about 40% are receiving more than what they were making when working according to the U of Chicago. So, it is almost like many of those 7.6 million are still working with respect to their 'wage' gains. Is the Fed understanding this when talking about this cohort? 

Finally this morning, the June NY manufacturing index fell to 17.4 from 24.3 and that was below the estimate of 22.7. The internals were VERY volatile. Smoothing out the components saw new orders fall to its six month average as did backlogs and employment. Prices paid and received both receded off record highs but remain well above its six month average while Delivery Times (supplier constraints) rose again. Inventories went negative. 

The overall six month business outlook rose +11.1 pts to 47.7, the highest since last June. Capital spending plans though disappointed, falling to six month lows. 

Businesses are optimistic about the economic rebound but also that is tempered by the difficulty in procuring materials and delivering product that in turn is slowing growth.

Rolf Thrane

Maybe we have it all wrong. Debt load doesn't matter - public or private, we can run with a public spending deficit of give or take 1 X collected tax revues forever. Having a 10 to 20 trillion balance sheet at the Fed - No problemo. But why bother collecting taxes or increasing taxes at least. What will that do?

badgolfer22 Rolf Thrane

It can't last forever, but it can last much longer than we can imagine...see Japan for example.

dougie kass badgolfer22
Yes it can last quite a long time - but not without adverse consequences.
Just look at long term chart of Nikkei
https://www.macrotrends.net...
Dougie

Rosie comes back: 

"The Umich survey showed pretty clearly that consumers aren't paying these higher prices and after the spending spree on merchandise over the past 15 months, they don't have to. The household sector is maxed out on $2.5 tln of goods expenditure which is unprecedented. No pent-up demand. Inflation will come, and it will go. It's not about what companies can charge; it's about what consumers can pay.Wages? Really? Have a look at the Atlanta Fed tracker; it's at an 8-month low."

And I response back to Rosie: 

The past 6 months in CPI is worthless, although the rising progression is obvious.

Passing along price pressures to consumers is only just beginning.

The past 6 months of PPI price pressures is only now getting passed on.

Wage gains and higher inflation expectations are only now taking hold.

Also, within CPI the BLS said rents rose +0.2% month over month in May.

Apartment List said its May survey saw a month over month price increase of +2.3% in May ALONE - after a +2% rise in April.

Services inflation is only just beginning to heat up.

And Rosie responds back to me: 

1. Inflation is a lagging indicator.
2. 80% of the CPI is running at a 1.6% SAAR over the past six months; the other 80% (+22% SAAR) classifies as a 6 SD event.
3. Last time inflation ran this "hot" was in August 2008 ; a year later, it was -1.5%; the Fed switched to a de facto tightening bias in the summer of 2008 while the ECB actually did raise rates ...
4. It's not about where we have been; it's about where we are going .... I've never seen such a fixation before on the most lagging of lagging indicators; I find it amusing to tell you the truth

And I respond back to Rosie: 

"Whether we have supply side constraints or not, the Fed will always slow growth when they start taking away all the accommodation. We only have credit cycles now. But that isn't an argument for forever QE and rates at zero forever. Current monetary policy is completely out of whack with where inflation is. And, expect another round of Democratic spending in 2022 so they don't lose the House or the Senate in the midterms."

Dougie

From Rosie, in response to "The Fed Is Often Wrong But Never in Doubt":

"When the Fed embarks on tightening cycles, recessions invariably follow 80% of the time....demand is going to slow sharply with all the fiscal stimulus wearing off (without it, GDP would be 6% lower from where it is now) without the Fed having to do a thing; and unless Powell starts a farm or semiconductor facility, there isn't much he can do to circumvent a supply-side constraint...but he can generate the conditions for a recession....and the economy and markets are so leveraged it won't take much in the way of rates to accomplish that...just in time for the 2022 midterms."

* I wish Janet Yellen was more like Richard Fisher

* Has the structure of the labor market been permanently transformed?

* There is nothing worse than an entitywith this much power to run with no controls, metrics, or any form of accountability

Several (rambling) rants in no particular order: 

I know of someone who recently had a meeting with the Secretary of Treasury (Janet Yellen) several weeks ago. It was a video conference with several industry CEOs - the purpose of which, in theory, was for Yellen to get their perspectives. On the surface one would think good for Janet Yellen for doing that. After all its important to get the perspective of actual industry leaders, as opposed to just relying on models, theory, and "Group Stink" from her colleagues. This is one of the things I always liked about Richard Fisher, former President of the Dallas Fed. One may agree or disagree with Richard on policy - but he was the one member of the Fed who constantly referenced and relied on his conversations with executives to form part of his perspective on what was going on in the real world. 

Sadly, what was in theory a meeting about Yellen getting some perspective from CEOs, was, well not exactly that. My impression was the individual felt lectured, in a somewhat condescending and pedantic fashion. Apparently the CEOs brought up concerns about significant inflation. And instead of being listened to, they were lectured as to why any inflation was not as significant as they thought and would almost certainly be "transitory." CEOs then indicated their response would be to try and preserve margins every way possible, and one way they would do this was to manage down labor in addition to passing on price. Instead of listening, they were told they wouldn't really be able to do that either due to market forces or something like that. So much for actually listening and getting some perspective! 

My prediction regarding labor over the short term is that we will see what is currently happening continue to happen - shortage of workers as some people prefer to collect checks and one-time payments to get them back to work. Over the mid to longer term, there is another impediment to job growth. CEOs have now grown as distrustful of labor as labor is of CEOs. Not only are some people refusing to go back to work, others with jobs are refusing to return to the actual office. Every job that can be automated will now be automated, especially as labor rates have bumped up (those will stick, hard to go back down). Every job that can be disintermediated will be. Anything that can go abroad where the wage gap is now even bigger, will go abroad, which is the opposite of what should be happening. 

The employment problem will likely get structurally worse because of all of this. 

Side note, one executive told me before this started they could secure shipping containers out of China for about $3,500 each. Now they are putting in offers at around $22K-$25K each - I forget the exact number she mentioned - and are not getting many takers at that price. 

It is my view that the media is partially complicit with regard to the inflation issue. Without making a policy argument (I am a progressive Democrat), it is clear the mainstream media is providing public relations for the current administration, for example, and there are a litany of examples I could give. Until recently there was barely a peep out of the media regarding inflation. If Trump was still President - this is certainly not a pro-Trump comment just a compare and contrast - inflation would be headline news every day, as it should be. There would be kicking and screaming across the board, as there should be. There would be an enormous amount of focus on the increased cost of food and shelter, and how this damages the poor, as there should be. Headline after headline about the wealth and income gap, as there should be. They would be kicking and screaming about Federal Reserve policy and all the Trump money printing in the face of increasing prices and an economy that has returned to normal, as there should be. 

Now there is nothing to hold the Fed accountable. Nothing from the media, nothing from the Executive Branch, nothing from the Fed's own mandate which is being ignored. I believe this might be the single biggest issue facing the country right now, and barely a peep from the media in its coverage as lectures from Powell and Yellen as to why everyone is wrong and how this isn't really happening and a potpourri of other baloney. 

Another side note. And I am not really surprised that government data significantly has understated inflation - which came in slightly hot, as compared to expectations, and equities and bonds rallied. I felt this one coming. It almost feels like it has been scripted. Consistent with above points about the media. 

Fairy Tales

The world is, increasingly, in make believe land - in which there is little natural price discovery. Things that exist, like speculation and even digital currencies, can be made not to exist in some form, just like closing your eyes when there is a hungry tiger staring at you from 10 feet away. Sadly closing your eyes doesn't stop the tiger from eating you, it only stops you from seeing the tiger before it does so and actually gives you no chance of avoiding it! 

Speaking of closing your eyes, here is a snippet from an ever bullish equity strategist (who was much less optimistic about the markets in March/April 2020) as to why inflation is not an impediment for the markets. Umm... if price is getting passed through - I agree it is, even if Janet Yellen says market forces won't allow this to happen - isn't the inflation problem going to get worse? 

"Concern: Rising Inflation: Last week's CPI reading of 5% YoY and rising commodity prices have investors concerned that profit margins will come under pressure. Our work indicates that companies are experiencing substantial pricing power which should lead to greater profitability despite higher input costs."

One more interesting article below which links to a piece by David Stockman (also linked to below) where he obliterates the base effect argument. Simple and elegant rebuttal, all one needs to do is look on a two-year basis. Related point also is why again is 2% - fake under-reported inflation - such a magic number to begin with? Then a link to another interesting article about our fake inflation metrics.

"During the last eight months the growth rate for the two year stack has risen from 1.48% to 2.55% per annum. And we don't recall a word in May 2019 about that year's reading being particularly deflationary. It was actually up 1.83% from May 2018." 

With regard to my prior points, here is an interesting article by my old pal Stephen Roach - its message is much more eloquent and to the point than I deliver.

On this subject, one more important issue. As mentioned in my previous column, the Fed has not defined what "transitory" even means. A purposeful and devious strategy? In theory, we could have 15% inflation for three years straight, and one could argue that is "transitory."

The Fed is out over their ski's, and ignoring their models. mission and mandate, and they still will not give us specifics with regard to what "transitory" is and for how long? If they did do this, their forecast would have already been blown up, because last month's CPI print was well north of what everyone was forecasting, even when the CPI is fakish and utterly suppressed home price inflation amongst other things. Pretty bad when the fake metric isn't even close to what anyone expected. At a minimum, we are owed an explicit forecast of what they expect inflation to be, by month, for the next 1-3 years. That is not too much to ask! They are already ignoring their mandate, so they need to provide a set of metrics to which they are held accountable to. 

Just like anyone else in any business! You need to have a budget, lay it out and it must be adhered to and delivered. 

There is nothing worse than an entity, like the Fed, with this much power to run with no controls, metrics, or any form of accountability. 

Rants completed.

* The Federal Reserve is offsides

* Adverse outcomes come out of wrong footed and undisciplined policy

* The Fed has created the loosest financial conditions ever and has encouraged speculation and the purchase of long-dated assets

* "The Bull Market in Complacency" has continued and has set record highs

* Credit spreads are at record lows and are vulnerable

* The upside reward vs. downside risk for equities has deteriorated markedly

Yesterday, on Squawk Box, Paul Tudor Jones warned that the Federal Reserve - in light of its mission and models - is being too expansive. 

This is something I have spent many months discussing in my Diary - most recently in a Bloomberg Interview one month ago: 

May 11, 2021 ' 01:25 PM EDT DOUG KASS

Remember My Bloomberg Interview Last Week?

* In the interview I cautioned about the vulnerability of technology stocks, rising inflation and the risks associated with our markets

Six days ago I appeared with Tom Keene and Paul Sweeney on Bloomberg Radio.

Here is the podcast (I am at the 33 minute mark).

I wanted to recall some of my primary investment conclusions:

* Why I anticipated a "market hurricane."

* The Fed is often wrong but never in doubt - they are currently taking a dangerous policy route.

* I was taking out my WIN (Whip Inflation Now) President Ford buttons.

* There were many signposts to derisk including inflationary pressures, the inability of stocks to respond favorably to good EPS reports, rates are and stocks have become to weaken (at the same time) and we are seeing a peak rate of change in economic and profit growth.

* Most importantly, modern fiscal theory is joining modern monetary theory - with adverse consequences.

* What was a 100 basis point increase two decades ago - because of the higher national debt - equates to 20 basis points today.

* We might soon be in Zimbawe - from an inflation standpoint!

* Adverse outcomes come from undisciplined policies.

And, others, like Stan Druckenmiller, have done the same, here and here. 

It is hard to believe that the Federal Reserve is so offsides. 

The key question is why?

I have been warning that much higher home prices (and reduced affordability) would create a cyclical peak in residential real estate (homebuilder stocks have begun to roll over recently).

This 20-year chart shows that homes are less affordable for the Average Joe than they were leading up to the 2008 Great Decession:

U.S. corporate debt is now equal to about half the nation's GDP -- up from 40% 10 years ago:

Another one from Lisa: