"Just one more thing."

- Lt. Columbo

Good news for Invesco (IVZ) investors.

IVZ reported October month-end assets under management of $1.593 billion, an increase of 4.3% from September's month end.

Total net inflows were $18.8 billion.

"Fin TV has become almost like watching a cocky heavyweight fighter who of hubris who doesn't even put up his guard against his competitor."

- Kass Diary,The Gloves Are Off and The Guard Is Down 

In the past I have gotten some pushback about being critical of the business media.

Some of that criticism is justified - but "bear" with me as I try to make a point about where we may be in this remarkable Bull Market.

If you watch FIN TV (as most of us do) you will see repeated recommendations of Coinbase (COIN) over the last month. Here is an example.

In listening to the explanation for holding the shares I was unimpressed with the glittering generalities and the limited substance in their rationale for owning Coinbase.

I spent a lot of time doing research on the company -- which doesn't make me special. But, based on that analysis, I had expected a sales and earnings shortfall. (Frankly, given the strong share price momentum I was questioning my own analysis and was worried that even if the company missed it wouldn't matter and the shares would continue to advance. That is how it felt this morning when (fearfully) I shorted an oddlot at $367).

My guess is that none or very few of these holders in the business media (who had mentioned owning the shares) had ever even spoken to the management of Coinbase and probably even fewer combed seriously through the company's financials. I would bet alot of money than no one had developed a serious spread sheet on Coinbase.

The bottom line is that I did the work and, despite that, I was losing on my short up until the close of trading today.

That kind of summarizes the strength of this market.

As I warned in my opening missive, "You Are Watching Cable 10 - Aurora Illinois Community Access Channel" this lengthy period of easy money has gotten everyone drunk again.

Friday 'sputs my views and the state of the markets (and market participants) even in better focus:

Nov 05, 2021 ' 01:25 PM EDT DOUG KASS

The Gloves Are Off and the Guard Is Down!

* As pundits float like a butterfly and sting like a bee

"I told you I was the greatest of all time. I told you I would beat Sonny Liston."

- Muhammed Ali

As the market has ramped over the last few weeks, I have noticed the lack of substantive arguments and the growing abundance of glittering generalities underlying stock recommendations by "talking heads" in the business media.

Content seems to be inversely related to the price of the S&P Index - the further the Index rises, the less analytically based the purchase recommendations have become.

Fin TV has become almost like watching a cocky heavyweight fighter who of hubris who doesn't even put up his guard against his competitor.

But for now the boxer is still Muhammed Ali, The Greatest of All Time!

The reasons underlying my negative market view are multiplying.

Bottom Line

This column represents another reason - investment rationale is growing ever more shallow and investors' guards are down.

Thanks for reading my Diary and enjoy the evening.

Be safe.

I have covered my (COIN) short ($309).

I plan to reshort strength.

Coinbase (COIN) had a large top-line miss.

Just walked back into my office -- need to hear the conference call.

Correction: A previous version of this diary entry had the incorrect disclosure. Kass was short COIN at the time of writing.

"I am going to write a good Diary on Real Money Pro today... and I am going to help people. Because I am good enough, I am smart enough and doggone it, people like me."

- Daily Affirmations With Dougie Kass

The last Affirmations was about the supply chain interruptions.

Today's Affirmations is about today's investing "yutes."

Best quote from this article today, referencing this guy Michael Martocci who said:

"... At this point in life (he's 26), he prefers risky investments that could double or triple his money over those promising 'market type returns.' Most young people don't really care about the downside, Mr. Martocci said. They care about the upside and it being this fun thing."

"I am not a licensed therapist, though. I deserve good things. I refuse to beat myself up. I am an attractive person. I am fun to be with."

Thomas C

Tesla down on insider selling worries and takes some EV peers along for the ride

Tesla (TSLA) is sharply lower as the sale of $109M worth of TSLA stock by Kimbal Musk adds to the anxiety over the impact of brother Elon Musk potentially selling 10% of his holdings.

While it was been speculated for a long time that Elon Musk would need to sell shares at some point to cover tax bills, Michael Burry is also pointing to the personal loans Musk took by using TSLA stock as collateral, although in typical fashion that tweet has now been deleted. Burry also worked in a Dutch tulip bulb reference to describe the current stock market.

Shares of TSLA are down 10.40% on the day, but are still more than 40% higher from their level six weeks ago and are showing a 65% YTD gain.

The electric vehicle is having a rough day with the mother ship struggling. Arrival (ARVL -26.6%) is the biggest declines after its earnings report disappointed, while Proterra (PTRA -9.9%), Canoo (GOEV -7.2%), Lucid Group (LCID -6.7%), Lordstown Motors (RIDE -5.1%) and Nikola (NKLA -4.1%) are also lower.

Chinese EV stocks Nio (NIO -5.6%), Li Auto (LI -4.5%), XPeng (XPEV -4.9%) and Kandi Technologies (KNDI -18.8%) are all down after Tesla saw a sequential monthly decline in China-made local deliveries.

I have pressed my Starbucks short today.

Weak auction with a yield one basis point above the when issued, the bid to cover below the one year average and dealers with 85% of the auction. 

Rates are still lower on the day - the yield curve has flattened (2s/10s narrower by 3 bps) in front of the taper. 

Real yields continue to drop - as five year breakevens are close to 3%, and basically at the highest level this year. 

Here are a couple of interest rate charts provided to me by Peter Boockvar:

5s/30s Yield Spread

10 yr INFLATION BREAKEVEN

I am staying with the balance of my Tesla (TSLA) short. 

I remain of the view that the company's shares are materially in excess of 50% overvalued.

I have two more doctors appointments at 2 pm and 3:15 pm - actually one is a vet appt! - so I will be in and out for the next few hours.

I am back buying on a scale, starting at $218.30 and bidding lower, in Boeing (BA) again.

Narratives, bullish and bearish, are often built with little substance or analysis - in order to justify a position. 

Relatedly, I wanted to reposte something that Peter Boockvar wrote this morning about the impact and timing of the infrastructure package:  

"As for the newly passed physical infrastructure package, DJ reported yesterday that the Association of Equipment Manufacturers said its members expect to see the impact not until the first quarter of 2023. There is no such thing as shovel ready but, because of all the current supply challenges and dearth of labor, maybe that's a good thing. Either way, as the spending is spread out over 10 years, about $50 billion per year is not relevant for our current $20+ trillion economy in terms of an aggregate growth driver of substance."

"And we haven't even seen the OER (owners equivalent rent) impact on the inflation data."

From Peter Boockvar:

The October PPI rose .6% m/o/m headline and .4% core and also .4% taking out trade. The headline and ex trade was as expected while the core increase was one tenth less. Due to rounding, all the y/o/y increases of 8.6%, 6.8% and 6.2% are as forecasted.

Goods prices again led the way with a 1.2% m/o/m headline gain and .5% ex food and energy. Over the past 6 months, this figure is up 13.4% annualized. The core goods rate is up 9.2% annualized over the past 6 months. The standout was the 12.5% m/o/m spike in auto's/auto parts and 99.5% y/o/y increase. Yes, a doubling.

Wholesale service prices were up .2% m/o/m and are up 6.2% annualized over the past 6 months. With respect to transportation costs where every single item has to deal with, 'Truck transportation of freight' prices rose 2.5% m/o/m and 16.3% y/o/y. Air transport prices rose by 3.2% m/o/m and 8% y/o/y. By rail, up .5% m/o/m and 7.3% y/o/y. The BLS said "over 80% of the October increase in prices for final demand services can be traced to margins for automobiles and automobile parts retailing, which rose 8.9%."

Inflation in the pipeline remains robust with core processed goods prices up 1.1% in October alone and by 19% annualized over the past 6 months. This is not the 1970's, it is worse at least from this measure. At the early stage measured by unprocessed goods, prices jumped 8.4% m/o/m and 1.1% core.

Bottom line, while today's data was as expected, the numbers are certainly eye opening in terms of the pace of gains. Inflation breakevens are unchanged with the 5 yr at 2.95%, just a few bps from a record high. The 10 yr breakeven is down by 1.5 bps to 2.61%. Nominal yields continue to fall on the Brainard interview news and also an in line report today. Tomorrow's CPI, more relevant for the markets, is expecting to see a .6% m/o/m gain and .4% core. Versus last year, a headline increase of 5.9% is expected and by 4.3% core. We'll see to what extent rents are more accurately captured.

HEADLINE PPI y/o/y

CORE PPI y/o/y

Market breadth at 11:45 am.

I covered some more of my Tesla (TSLA) short just now ($1077).

As for the newly passed physical infrastructure package, DJ reported yesterday that the Association of Equipment Manufacturers said its members expect to see the impact not until the first quarter of 2023. There is no such thing as shovel ready but, because of all the current supply challenges and dearth of labor, maybe that's a good thing. Either way, as the spending is spread out over 10 years, about $50b per year is not relevant for our current $20+ Trillion economy in terms of an aggregate growth driver of substance.

So after inflating the valuations of just about everything via zero rates and QE for years and certainly well after the COVID emergency ended, to the point that household net worth (including value of stocks, bonds and real estate in particular) as a percent of disposable income as of Q2 is at 786% vs about 650% at the height of the housing bubble and 615% at the March 2000 peak of the tech stocks, the Fed in its biannual Financial Stability Report tells us that "Asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, progress on containing the virus disappoint, or the economic recovery stall." Thanks.

From Fed's Flow of Funds statement, HOUSEHOLD NET WORTH as a % of DISPOSABLE INCOME

Here's another 'thanks.' Philip Lane, the ECB chief economist, said yesterday "Extensive monetary accommodation is required to ensure that inflation pressure builds up on a persistent basis." So in response to the higher inflation that the ECB has actively encouraged Politico reported a few weeks ago that "The French government will give a 100 euros payment to citizens earnings less than 2,000 euros per month after tax to help them deal with rising energy and fuel prices." Why there is not more outrage outside of Germany of what the ECB is doing is because the ECB is financing the budgets of each country.

Finally today on central banks, I guess Treasuries are rallying today on the possibility that the dove Lael Brainard gets the top job instead of Powell getting reappointed. I'll say this, if Brainard's donation in 2016 to Hillary Clinton's presidential campaign is any indication, not a good look for an institution that is supposed to be apolitical and independent at least optically, I'll make a call that if she is Fed Chair, maybe they'll finish QE in June but they won't raise rates until AFTER the midterm elections. This all said, both Powell and Brainard are doves so the eventual approach won't be that much different with respect to monetary policy.

The October NFIB small business optimism index fell to 98.2 from 99.1. That matches the lowest since February. I mentioned yesterday the labor market components and noteworthy today is the 7 pt jump in those expecting Higher Selling Prices to 53%, the highest in the 40 yr history of this survey. This is NOT temporary I say for the umpteenth time. Capital spending plans rose 3 pts after falling by 2 last month and there was little change in Plans to Increase Inventory because even if one wanted to, they physically can't right now. Those that Expect a Better Economy fell 4 pts to the weakest since November 2012 and is just 1 pt away from matching the lowest on record since 1981. That is saying a lot. Those that said it's a Good Time to Expand fell 1 pt to the lowest since February 2021. Because of the margin squeeze for small business who has less pricing power, Positive Earnings Trends weakened by 3 pts to -17, the lowest since August 2020.

The NFIB said "Small business owners are attempting to take advantage of current economic growth but remain pessimistic about business conditions in the near future. One of the biggest problems for small businesses is the lack of workers for unfilled positions and inventory shortages, which will continue to be a problem during the holiday season." At least big companies have both the financial wherewithal and resources to manage the tough supply driven environment but it certainly is just not as easy for small businesses.

HIGHER SELLING PRICES

EXPECT A BETTER ECONOMY

The November ZEW German investor confidence index in their economy rose to 31.7 from 22.3 and that was well better than the estimate of 20. Current Conditions in stark contrast though fell to 12.5 from 21.6 and that is because "the experts assume that the supply bottlenecks for raw materials and intermediate products as well as the high inflation rate will have a negative impact on the economic development in the current quarter." Expectations rose because "For the 1st quarter of 2022, they expect growth to pick up again and inflation to fall both in Germany and the eurozone." Either way, this number is not a market mover and the IFO is more relevant since it asks actual businesses. The euro is little changed, sovereign bonds are rallying in step with US Treasuries but inflation expectations are rising. The DAX is up .25%.

There is a strong and almost universal view that equities are moving higher because of the likelihood of a reacceleration in domestic economic growth. 

So, riddle me this... if this is the case why are rates plummeting? 

Today the yield on the 10 year US note has dropped by another five basis points to a yield of under 1.45%.

* A lengthy period of easy money has gotten everyone drunk again

* My investingprogram and process have been boring over the last few months

* But to me, I am being rational in a bubble that grows daily

* "Aerosmith's music is still playing" as the markets have recently taken on a decisively speculative beat

* Everybody's getting fat 'cept Papa Kass

* "Party on Wayne, Party on Garth"

"Live in the now."

- Garth, Wayne's World

I fully recognize that we have been in a backdrop of extreme optimism and speculation - and that many traders and investors have profitably embraced the multiple opportunities, from the mundane to the not so mundane. 

By contrast, my broader (ursine) market view and risk averse nature have kept me from participating with much of the ceremonies. 

In part my lack of participation is a function of my wrong footed market view, and in part I am unwilling to partake in speculation when I view individual equity reward vs. risk as unattractive. 

Being out of sync sucks but it is also a function of one's risk profile/appetite and general market views. 

"And no one is getting fat, 'cept Mama Cass...

Duffy's good vibations and our imaginations

Can't go on indefinitely."

- Creeque Alley, Mamas and the Papas  

I will observe from afar the speculation - as I did with SPACs early in 2021 - which ended badly - and when stocks ripped back in early 2000 and in the fall of 2007. As a routine matter, I just won't play in that sand box - just as I wasn't when Citigroup's (C) Prince declared that, in the summer of 2007, "the music was still playing" or as the Dot.Com bubble inflated in the late 1990s. During those periods, like today, I felt foolish as everyone was getting fat 'cept Papa Kass.  

But, unlike others, who are quick to criticize  - on Twitter and elsewhere - those that are not playing in the church of what is happening now, I respect the ability of those that embrace and profit from the opportunities. 

A Lengthy Period ofEasy Money Has Gotten Everyone Drunk Again

I view the current environment as a likely culmination of a speculative era and not the start of a protracted era of speculation. But, as always, I could be mistaken. 

This era has, at its foundation, central bankers who have provided the liquidity, and negative real yields, that have produced massive retail inflows, historically high valuations and limited fear. 

The cherry on the top has been the changing market structure away from active management and towards passive investing, who generally base their strategy on price and momentum and not fundamentals. 

Along the way speculation has blossomed, creating an epic cycle that, arguably, in dollar terms, is larger than the Nifty Fifty Bull Market or the Dot.Com Boom: 

* Fundamentals (read: inflation and inflationary pressures, supply chain disruptions) are unchallenged by those that are long.

* Politicians, on both sides of the pew, lost all their discipline as they embarked on what I have described as Modern Fiscal Theory.

* A marketing genius, David Portnoy - who has no background in investing - was seen as a trading and investing guru embraced by investment professionals who should have known better.

* Meme stocks - most recently (DWAC) , (CAR) , etc. - emerged, many of which, like AMC Entertainment (AMC) , were, too, embraced by investment professionals who should also have known better.

* Gamma squeezes, with weekly call options, became a new term and has become a commonplace trading strategy.

* SPACs, with huge promote fees, became an asset class.

* And then there is a vast and growing stable of digital currencies - some of which don't just double overnight, some rise by thousands of percentage points. 

The most amazing feature to me is how little this era, and the associated policies, are being questioned or challenged. 

In a backdrop of speculation, my investing ideas are boring - I know that. 

Remember that good vibrations and our imaginations can't go on indefinitely. Someday the leaves will turn brown and the sky will be grey on a winter's day. 

When Michelle and John Phillips of The Mamas and the Papas wrote "California Dreamin'" - they intended to express their longing for the warmth of Los Angeles while being in a cold New York City. I, too, long - for lower stock prices. 

But for now, Wall Street's dreamin' is becomin' a reality and we are watching Cable 10 Aurora Illinois Community Access Channel - where both Wayne and Garth are partying on to the glaring, palpable and undeniable sounds of Aerosmith.

From Danielle DiMartino Booth:

• The S&P 500 Basic EPS Hotels was never negative until 2020, and has stayed in contraction for the last seven quarters; despite their historically tight correlation, hotel occupancy has recovered to pre-pandemic levels while hotel profits lag on account of higher input costs
• Since bottoming out in April 2020, hotel workers have seen their aggregate hours worked recover 111%; meanwhile, linen/uniform supply workers have only risen 38%, diverging from the former as services previously contracted out are brought in-house to cut costs
• Per Cirium, airlines are increasing flights between the UK and U.S. by 21% MoM as U.S. borders are re-opened to vaccinated travelers; inflows from nonresident travelers should drive service consumption, though this will manifest in GDP accounting as export services

PayPal's (PYPL) quarter was unloved:

Another one from Lisa:

The Fed blows a bubble and then warns about the risks of it imploding.