For the third day in a row, Mr. Market delivered a powerful breadth thrust:

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I will stick to my earlier comments:

Sep 12, 2022 ' 03:14 PM EDT DOUG KASS

Minding Mr. Market (Part Deux)

With less than 60 minutes left in the trading day, equities are holding most of their gains likely in anticipation of a better than expected CPI to be released ahead of the opening.

With most recognizing the probability of a cooler inflation print the question is not as much whether market participants will rejoice on the news -- but, rather, what will the machines and algos do in light of the continued good price action.

I was relatively inactive today- from the standpoint of both trading and investing.

I remain of the view that we are in a relatively narrow trading range over the next few months and, possibly, for the balance of the year.

Thanks so much for reading my Diary today.

Enjoy the evening.

Be safe.

Wolf Street on natural gas futures prices.

With less than 60 minutes left in the trading day, equities are holding most of their gains likely in anticipation of a better than expected CPI to be released ahead of the opening. 

With most recognizing the probability of a cooler inflation print the question is not as much whether market participants will rejoice on the news - but, rather, what will the machines and algos do in light of the continued good price action.

The banks lost the pocket trip (this morning) and have been forced to go first over into the second turn! (Harness racing verbiage for the trip got more difficult!).

Perhaps I jinxed the group earlier with my cheerleading!

Solid market which bounced nicely off the intraday lows.

Not doing much.

I shorted (small/insignificant) Apple (AAPL) $162.67 this morning.

I rarely do Ludacris Forecasts - it's usually when the market is way down and I "predict" a recovery during the day.

The reason I don't do them is because they tend to be wrong and embarrassing - large reversals are unusual.

But, maybe, maybe stocks could end lower after the big gap today... and Thursday and Friday.

That would be Ludacris!

I am no longer long Alphabet (GOOGL) . 

Our research suggests that consensus expectations may be too high for this much favored security.

At 10:45 am:

(Good) Breadth

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Biggest Movers

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Heat Map 

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With the forecast upside/downside ratio moving to a negative number (1:3 or 100 S&P handles up, 300 S&P handles down), I have made some more (SPY) sales at $411. Remember, precision not intended, this is simply a "guideline." 

Still net long - but reduced.

From Gary "US Bonds": 

123gary

I can live with the below estimate. Dougie, THANKS, for your bank research over the years:

Bank of America price target lowered to $45 from $51 at Deutsche Bank
Sep 12, 2022 ' 07:12 AM EDT Wells Fargo price target lowered to $60 from $62 at Deutsche
JPMorgan price target lowered to $155 from $174 at Deutsche Bank
PNC Financial price target lowered to $200 from $215 at Deutsche Bank
Citi price target lowered to $52 from $55 at Deutsche Bank
Wells Fargo price target lowered to $60 from $62 at Deutsche Bank
Morgan Stanley price target lowered to $92 from $105 at Deutsche
Huntington price target lowered to $15.50 from $16.50 at Deutsche

Bank stocks continue last week's tear.

From Peter:

While I've been thinking that a lower than expected CPI tomorrow would result in a 50 bps Fed hike in a few weeks rather than 75 bps, reading closely to what voting members Waller and Mester said on Friday tells me otherwise.

Governor Waller said, "The consequences of being fooled by a temporary softening in inflation could be even greater now if another misjudgment damages the Fed's credibility. So until I see meaningful and persistent moderation of the rise in core prices, I will support taking significant further steps to tighten monetary policy." Mester said, "I would welcome a good report on inflation, but I don't think that one report is going to change my view that we're just really at a high inflation level, and the risks are that it stays high."

I'll say it really doesn't matter whether they hike 50 or 75 at this point, assuming they still hike at the last two meetings again as whether the fed funds ends up at a 3.5, 3.75% or 4%, the aggressive pace and high level (relative to the zero it stood at the beginning of the year) will still have its notable impact on economic growth and multiples. QT will still be taking place rather aggressively and at least to the economic impact, it takes quarters to cycle through and that is what we still have ahead, along with a drop in corporate earnings.

If you didn't see in today's WSJ, "Sliding Earnings Post Next Test for Markets." In the piece, "Analysts have cut their estimates for third-quarter earnings growth by 5.5 percentage points since June 30, according to John Butters, senior earnings analyst at FactSet. That is more than usual and marks the biggest cut since the second quarter of 2020, when the Covid-19 pandemic and ensuing lockdowns brought economic activity to a standstill."

We can then of course debate what the right P/E multiple is to place on peak profit margin driven eps estimates and I'll argue again it won't bottom at 17x. That said, many stocks now have multiples much lower than that and thus look much more attractive relative to the S&P 500 index.

The news flow was really quiet overseas but we are seeing another drop in European natural gas prices because of the expectations of the cap, continuously being discussed, that the EU wants to place on Russian energy. Dutch TTF is down another 7% to 190 euros per MWH. In turn, German power prices are down almost 6% and has been the relationship recently, the euro is up about 1% vs the US Dollar and is quietly at a 4 week high.

Also of course helping was the big ECB move, at least big for them. European stocks and bonds are following with their gains. While we can all hope that we've seen the worst with their with the energy shock, and markets have already adjusted, the pain will still be acute this winter and god knows what Putin does next.

The UK economy grew by .2% m/o/m in July but after falling by .6% in June and that also was below the estimate of up .3%. The June drop had a lot to do with the Queen's jubilee and the days off people took. Services were ok in July but construction and industrial output contracted. We know the energy challenges the country faces and the enormous costs of capping prices for both households and business.

Also, the mourning period for the Queen will also entail work holidays that will drag down September activity. The pound though is rallying due to the broad dollar weakness. The BoE will be meeting next week instead of this and it will be either 50 bps or 75 bps higher.

DXY

douglas cassel

Fed interest rates hikes don't occur in a vacuum. Such hikes in the past have resulted in things "breaking", like an asian currency crisis or a new Long Term Capital management. Much of the financial press has not considered the risks of interest rates hikes causing a new crisis that forces the Fed to stop far before they or anyone else projects. Such an event, if not accompanied by an economic meltdown, would be at least short term bullish.

dougie kass douglas cassel

Peter Boockvar has been talking talking about leveraged loan concerns for months as a lot of junk rates companies have now seen a spike in their cost of capital since this debt is floating rate.
But for now, default rates are non threatening.
Issuance has slowed.
I see nothing systemic (to be concerned about) in the leveraged loan market currently.
Dougie

dougie kass douglas cassel

In the past, at previous peak economic/eps cycles, there were boatloads of leverage in certain economic sectors that triggered a "break"/exogenous event.
I can't detect a sector today (e.g. mortgages) where that sort of leverage exists.
Yes there will be "one offs" but nothing systemic as far as I can see DC.
Dougie

tim dougie kass

Debt load private and public?

douglas cassel dougie kass

may I suggest the corporate leveraged loan market?

* Reducing net long exposure further...

I am covering half of my October (SPY) $413 puts for a profit, and selling (short) October SPY $400 calls against the remaining short puts. 

These moves reduce my net long exposure.

This weekend I was mentioned in Randy Forsythe's Up and Down Wall Street column in Barron's: 

A Housing Bubble and Kim Kardashian: More Troubling News for Markets

Dynamic duo? Reality star Kim Kardashian and former Carlyle Group investor Jay Sammons have launched SKKY Partners, a private-equity firm.

Can there be a better sign of a market top than when celebrities pile into it? Especially celebs whose main talent is to appeal to the public's tastes, or lack thereof. While they might be acutely attuned to what's happening in fashion, music, or the movies, they can be late in latching onto financial trends to which their sole connection is an insatiable desire to wring as much money as possible from the zeitgeist.

All of which is brought to mind by news that Kim Kardashian is launching a new private-equity venture. Truth be told, I don't know what she or the rest of her reality-show family is famous for, other than for being famous. But Kim has leveraged her millions of followers on social media to become a huge entrepreneur, with interests ranging from women's undergarments to faux meat. That indeed is a talent not to be discounted.

Her entry into private equity recalls other celebrities' forays into financial spheres just ahead of those markets' top ticks. Most recently, all manner of celebs plunged into cryptocurrencies, most notably actor Matt Damon, who touted Crypto.com in a now-infamous Super Bowl ad in which he intoned how "fortune favors the brave."

Doug Kass, the head of Seabreeze Partners-who flagged the prevalence of cryptocurrency ads at the time-further pointed out in an email this past week how other worthies, from rapper 50 Cent to quarterback Aaron Rodgers to New York City Mayor Eric Adams, took their paychecks in crypto. In case you need to be reminded, Bitcoin traded Thursday at around $19,200, less than half its quote on Super Sunday in February and a mere 72% below its peak last November.

Private equity hasn't suffered big losses. But, according to a Sept. 8 note from Citi Research's quantitative global macro strategy group, private asset prices tend to lag those of the publicly traded markets, which are quoted second by second on screens. Weakness in public equity markets portend lower private-asset valuations, according to the report.

Kim's entrance into the rarefied world of private equity may be about as propitiously timed as Barbra Streisand's furious pursuit of initial public offerings at the height of dot-com mania in 1999. (Babs told Fortune back then that she had quadrupled her money in America Online shares, but averred that she didn't pretend to be a maven "like the guy in Barron's last week who can analyze all the companies and so forth.")

If private markets do get marked down one to two quarters after the public ones, as Citi says they have historically, that points to similar trouble for the former. I wouldn't shed any tears for Kim K. or any other A-lister able to get past the velvet ropes into private-equity funds. None are apt to be prowling dollar stores in search of ramen noodles, even if their PE holdings go to zero...

* On this day, as has been the case for the past 21 years, my eyes remain full of tears.

I repost this opening missive annually with a heavy heart...

Death leaves a heartache that no one can heal but love leaves a memory no one can steal.

"What do you want me to do,
To watch for you while you're sleeping?
Well, please don't be surprised when you find me dreaming too;
It's just a box of rain,
I don't know who put it there.
Believe it if you need it,
Or leave it if you dare;
But it's just a box of rain
Or a ribbon for your hair;
Such a long, long time to be gone,
And a short time to be there.

- Grateful Dead, Box of Rain

As many subscribers are aware, on every anniversary of the World Trade Center tragedy on Sept. 11, I honor my closest friend who was lost 21 years ago -- Chuck "Brown Bear" Zion -- as well as the other victims of the terrorist attacks that day.

After more than two decades, it doesn't get easier.

Relatedly, three years ago I received this email from a mutual friend of Chuck's, Don Gher:

Dougie

A bit of a tear in the eye as I think about tomorrow. I remember the first time you and I talked. You called me and said Chuck told you we should meet. As we were about to hang up after talking, I said you should ask Chuck what was the best baby gift he ever received. About a minute after we hung up, my phone rang and I heard, "A leather bound book of magazines from the week Zachery was born with his name and birthday embossed in gold on the front!" Chuck proceeded to tell me that all these years later, there were times with no one in the house that he would pull the book out that I had made for him and, as he flipped through it, he would cry remembering when Zach was born.

Stay safe, my friend.

Donald L. Gher, CFA

This past Thursday I received another email from Don:

Dougie

As we approach the day Chuck was murdered with so many others, I saw the following 9/11 prayer in my Parish Newsletter that is so appropriate and comforting:

May all of us remember with

love and compassion this day.

May we grieve with those who still mourn,

And share memories with those who cannot forget.

May we draw strength from those who bravely responded,

And gave their lives to save others.

May we stand with strangers who became neighbors that day,

And remember their generosity and hospitality.

Above all God may we remember your faithfulness

And learn to trust in your unfailing love.

Xavier University

Peace

Don

Sadly, Chuck Zion's dad, Rabbi Martin Zion, has passed away. Two years ago, the lovely Jane, Chuck's mom and Rabbi's wife, died. They have joined Brown Bear after all these years of separation.

Please read this column, "Keys to a Life Well Lived," that I had written about Rabbi Zion, based on a letter he sent me in October 2016, two months before his death:

"Who is wise? One who learns from every man ... Who is strong? One who overpowers his inclinations ... Who is rich? One who is satisfied with his lot ... Who is honorable? One who honors his fellows."

- Ben Zoma, Ethics of the Fathers

Today marks 21 years since the Sept. 11 World Trade Center tragedy. (Please take some time that day to watch Ground Zero Rising, Jim "El Capitan" Cramer's brilliant documentary on the attack and the subsequent rebuilding).

Sept. 11, 2001, is a day that we will forever remember with clarity and disbelief. I lost my best friend, while members of TheStreet community lost one of our own -- the late Bill Meehan.

It still seems like only yesterday to me, and it's a day that I'll forever remember vividly. As I've written before, 2001 will for many of us forever be annus horribilis, the year of disaster.

On this day, as has been the case for the past 21 years, my eyes remain full of tears. I'm drafting this column in memory of all of those I knew (and didn't know) who lost their lives in the World Trade Center, in Pennsylvania and in Washington, D.C.

As I've written previously, it's said that death leaves a heartache that no one can heal, but that love leaves a memory no one can steal. And so it will be today as we observe the anniversary of the Sept. 11 attacks.

As I've done in each of the intervening years, I want to use my opening missive to repeat the thoughts that I've often expressed about Sept. 11. As always, I dedicate this column to those who were lost -- especially to my best pal, Chuck Zion (a.k.a., "Brown Bear"):

"Chuck worked at Cantor Fitzgerald, the brokerage firm that lost nearly 700 employees 18 years ago. It was the hardest-hit company in the World Trade Center tragedy, accounting for nearly one-quarter of the building's deaths that day. I lost many friends at Cantor on Sept. 11: Eric, Pat, Timmy -- too many to count. So did many others. And of course, we all lost one of TheStreet's own, Bill 'Budman' Meehan.

In Cantor Fitzgerald's equity division, none had more of a presence (literally and figuratively) than Chuck Zion. He was known to his friends and clients as 'The Brown Bear,' a sensitive, giving and caring friend; father to Zack; son to Martin and Jane; and husband to the amazing Carole ('Cheezy'). His love was pure, and there was never any pretense -- not wordy, he was on point.

The largest producer over the past decade at Cantor Fitzgerald, Chuck was master of his universe. He was straightforward and clear-cut, a no-nonsense and respected partner who was remarkably generous but never, ever wanted others to know it. He gave often and substantially but always anonymously, without strings attached. Chuck, who also worked at Salomon Brothers and Sanford C. Bernstein, put on some of the largest trades in the history of the equities market. He was the player the 'big boys' went to when they wanted anonymity. And I am talking multimillion-share trades, the really big prints.

And it was Chuck who introduced me to Bill Meehan. He even had me fill in for Budman on a few occasions in the Cantor Daily News.

I cherished and loved Chuck Zion -- he was my confidante and a brother that I never had. When I moved to Florida in the late 1990s, Chuck introduced me to his father and mother -- asking me to take them out once or twice a year, to look after them a bit. In time, Rabbi Zion and Jane became more than casual dinner mates; they became my mother and father, so Chuck and I really were like brothers (though absent the same blood).

I spoke to Chuck every morning at around 6:15 a.m. If I didn't call him on my direct line to Cantor's trading desk by 6:20 a.m., he'd get angry and yell at me in no uncertain terms! Invariably, legendary money managers Neil Weissman, Stanley Shopkorn, Dan Tisch or Phil Marber (Cantor's former CEO) would interrupt our daily calls. He would take their calls, and then shortly, Chuck would call me back. We rarely talked about the stock market, preferring to talk sports and food (his favorite activity!). Sometimes Chuck would tell me to check out Maureen Dowd's editorial piece in The New York Times ('Dougie, she is mandatory reading'), or who was on Imus that morning. I got him to buy a couple of harness horses with me for fun and he got a kick out of them as we followed their losing races. 'We'll get him next time,' he would say (his credo) -- though we never did!

We played golf together (Chuck wrote the word 'Lost' on each of his golf balls because he lost so many of them that he wanted the other players to know they were his), usually with Phil Marber or SAC's Andy Smoller. We talked NCAA football and basketball, especially about Syracuse University's teams (his alma mater). But mostly we talked about our children.

The Friday before Sept. 11, 2001, was my last day in the office, as I was leaving for Europe for 10 days. That day we spent a lot of time talking about his son Zack, reminiscing about the trip Zack and I had recently taken to New Haven to Yale University, where he watched me lecture at Dr. Robert Shiller's class on short-selling. Chuck was so proud of the way Zack had become a man. And he was nervously awaiting Greenwich High's football season with such anticipation. (They had won the state title the previous year, with Zack playing the offensive line.) Every time he talked about the upcoming season, his voice would rise several decibels. He was the proudest father on the face of the earth.

That Friday morning, the last day I spoke to Chuck, I was playing a Grateful Dead song in the background and I had Chuck on the speaker. Chuck was never what I would call 'into' music. He was certainly not a fan of the Grateful Dead -- maybe Motown, but not the Dead. Surprisingly, in our early morning talk, Chuck remarked how beautiful the song was. The song was Box of Rain, and the lyrics captured the concept of how short life can be.

Chuck's New York Times obituary is still taped to my stock monitor in my office as a forever reminder of his loss. The paper is now aged, yellowed and torn, but the scars still seem fresh.

Today, after writing this missive, I will again share Chuck's memories with his many friends (like Phil Marber) and with numerous longtime subscribers to TheStreet and Real Money Pro (like Don Gher who has already sent me a note and prayer). They were all Brown Bear's business associates, recipients of his wise advice or just friends -- and who, as they have every year, will pass on their day's thoughts to me in e-mails or phone calls, which I eagerly anticipate and will always cherish.

Real Money Pro subscriber Don Gher mailed me a classic story [three years ago] about Brown Bear. Don was thinking about Chuck and relayed that one of his pals, ex-Cantor Los Angeles and Dallas trader Eddie Weber, told him that one day he was at Cantor's NYC office, and he and Brown Bear walked out of the World Trade Center to grab lunch. There was a hot dog vendor there, and Chuck asked how many he had left. The guy said 12, and Chuck said, "Sold!" And then they proceeded to eat all of them. That was my brother, Chuck -- an original.

I will never forget Mark Haines' report on CNBC of the first, second, third and fourth incidents that day, as I watched the horror on a television on a cruise ship in the Mediterranean.

And I will never forget the real-time reporting -- the confusion and emotion -- at TheStreet on that fateful day, the revelation of the extent of the tragedy and the follow-up tributes by our contributors. (TheStreet's headquarters were physically very close to Ground Zero.)

Ironically or sadly, the Jewish New Year (Rosh Hashanah) and Yom Kippur (the Day of Atonement) quickly followed on the heels of Sept. 11, 2001.

The most poignant recollection on TheStreet was the following post by Jim "El Capitan" Cramer, who recalled an incident at his synagogue. To this day, it always brings me to tears:

"At our synagogue last night on the eve of the Jewish New Year, our rabbi asked us to shout out the names of friends and family that we'd lost that day. There were so many names, it was frightening and I was glad we had left the kids at home. I felt honored to yell out Bill's name. And I feel honored to have gotten to meet and work with him in his short time on earth. Oops, wanted to cry as I wrote that. Could feel it coming on. Nope, no can do. Not with that picture of him in my mind wearing that funny floral shirt. He wouldn't want us to remember him in any other way than with laughter. God bless your soul, Bill. God bless the Meehan family."

- Jim Cramer, Remembering Bill Meehan

Today I will also share my fond memories of TheStreet's and Cantor Fitzgerald's Bill Meehan with his good pals Jim Cramer, Tony Dwyer, Herbela Greenberg and others, and we will all toast him as so many subscribers did in the fall of 2001.

"All that's necessary for the forces of evil to win in the world is for enough good men to do nothing."

- Edmund Burke

Fortunately, on May 2, 2011, some very good and courageous men gained revenge for Osama bin Laden's deeds some 10 years earlier. I hope bin Laden rots in hell, but revenge doesn't reverse the loss of so many.

As Samuel Johnson once wrote: "Revenge is an act of passion; vengeance of justice. Injuries are revenged; crimes are avenged."

I suppose that living and remembering are the best forms of revenge.

Thanks for reading this, and thanks for letting me wear my feelings on my sleeve.

... As you watch the annual tribute in downtown New York City on Sunday, I think about our lost loved ones and how lucky we all are. We all miss you, Chuck.

Below is a plaque memorializing Chuck at Temple Emanuel in Davenport, Iowa, where his dad Rabbi Martin Zion led the congregation:

Finally, I have dedicated my book, Doug Kass on the Market: A Life on The Street to Chuck Zion -- so that every time I pick up my book, I think about and feel ever closer to my pal.

Such a long, long time to be gone,
And a short time to be (t)here.

* Yell and roar, but sell some more

The Good News: Stocks have made a spirited recovery over the last week - something I suggested could happen in my Diary. The positive factors that I previously cited were a more favorable upside/downside, dour investor sentiment/positioning, a lessening of supply chain bottlenecks, and a more rapid than expected drop in inflationary pressures, etc. 

The Bad News: The S&P Index, adjusted for this morning's rise in equity futures, approximates 4090. Unfortunately, relative to my anticipated trading range over the balance of the year (S&P 3825-4225) this provides an upside of only about 135 handles against a downside of 265 handles, for a nearly 2:1 negative reward vs risk - precision is not intended! 

This helps to explain why I am scaling out of a portion of my (SPY) position on strength. I sold some SPY this morning, as posted, at $409.18. 

Buyers Live Higher (And Sellers Live Lower)

Given the profound evolution of market structure in which active investing is dwarfed by passive products and strategies, equities could continue to rise, especially if tomorrow's CPI is weaker than expected by the consensus. Remember that passive investing, which knows everything about price and nothing about value, worships at the altar of price momentum - as buyers live higher.

Nonetheless, I will stick with my calculator (in hand), enjoy the rise in equities but selling on strength just the same without emotion or dogma. 

In other words, yell and roar, but sell some more...

Good stuff:

This is a good resource for short term traders:

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U.S. Economic Surprise Index

Dougie Kass @DougKass

The business media and Twitter are inhabited by self confident knaves, most of whom have no or little process and, too often forget their trading/investing boners in order to sell you a service or in an attempt to raise viewership. It has become a waste of time/off (TWTR) for while.

German Two Year Note Yields rise to the highest level in 11 years:

Goldman Sachs maintains neutral on RH (RH) with a $246 price target.

More Bramo:

From Bramo:

* The market (and money) never sleeps -- and neither do I, it appears!

* Stock futures were higher, dropped lower and now are the morning's highs.

* Brent crude was stronger overnight, +$0.83 to $93.68.

* Gold is +$8.30 on a weaker US dollar. I still can't work it up to buy.

* Soft commodities are mostly green.

* Bond yields are slightly lower. The yield on the 10-Year is -2.1 bps basis points to 3305%. I added to Treasuries on yield strength all last month.

* Despite the two day gains, the S&P oscillator remains oversold, at -5.78% . The oscillator has been a good short-term trading tool over the last few months!

"Workin' on our night moves
Trying to lose the awkward teenage blues
Workin' on our night moves
In the summertime
And oh the wonder
Felt the lightning
And we waited on the thunder
Waited on the thunder."

- Bob Seger, "Night Moves"

I described the importance that overnight futures trading holds for me here. It is a guidepost to my strategy in the regular trading session.

Moreover, the overnight/early morning futures hold opportunities as they are (1) inefficient, though liquid, and (2) it seems fear and greed is often exaggerated outside the regular trading session.

Stock futures were higher by nearly 27 handles..

Brent is +$0.83/barrel.

Soft commodities are advancing.

The 10-Year U.S. Note yield is -2 basis points at 3.30%. I continue to buy Treasuries.

S&P futures peaked at +28 and bottomed at -5. At 5:12 a.m. ET futures were +26 handles.

Nasdaq futures peaked at +98 and bottomed at -22. At 5:14 a.m. ET futures were +94 handles.

Here is a synopsis -- and link -- to some of my columns I believe were important. The intent is to review the logic of my market moves and other factors. 

There were no columns or trades reported as I was out of the office on Friday. 

However I sold some (SPY) early this morning at $409.18.