Forget What the Crowd Thinks, I Remain Manifestly Bearish

"I won't tell you that the world matters nothing, or the world's voice, or the voice of society. They matter a good deal. They matter far too much. But there are moments when one has to choose between living one's own life, fully, entirely, completely - or dragging out some false, shallow, degrading existence that the world in its hypocrisy demands. You have that moment now. Choose!" 
--Oscar Wilde

Sometimes you need to sit alone on the floor in a quiet room in order to hear your own voice and not let it drown in the noise of others.

I am sitting on that floor now, and thinking -- and shorting more.

Too many traders and investors think they know what will happen in the markets. They establish one, specific price target, usually clothed in certainty.

But the most successful traders and investors work with probabilities of outcomes.

I continue to maintain a historically high net short exposure because I believe we face numerous political, geopolitical, economic and market outcomes that could end badly -- very badly.

After Wednesday's "fire and fury" ("TV-tough") statement by President Trump regarding North Korea, I repeated five of my concerning questions:

* In a paperless and cloudy world, are investors and citizens as safe as the markets assume we are?

* With the G-8's geopolitical coordination at an all-time low, how slow and inept will the reaction be if the wheels do come off?

* Remember when the big argument in favor of President Trump was that he was a dealmaker who knew how to get things done? That was when he was doing real estate deals. Now he has to deal with 535 other politically partisan legislators in Congress on their own real estate turf.

* Does the administration have the depth of experience, understand the extent of the legwork and organization required for passing legislation, or have a coherent idea or shared vision of what it wants to achieve and what problems it means to solve?

* If President Trump can't easily put through a health care package, what does that mean for more difficult regulatory reforms and his tax and fiscal policy?

I then repeated my top 10 market concerns.

In the afternoon, Mr. Market exhibited its customary rally as the "invisible hand" brought the market at the close to breakeven on the day, continuing the three-week trend of limited daily moves. On that score, here is a tweet from the Divine Ms. M:

Wednesday's "stick save" has frustrated many who are short S&P-related instruments as a hedge.

Anecdotally, I would suggest we recently have passed the "give up" stage, in which, under a period of stable market closes (see Divine's comments) and last-hour "stick saves," many of these short hedges have been taken off, mostly out of frustration. I view this as bearish.

Short sellers are now the equivalent of dodo birds. Much like the blackjack player who in the fullness of time can't beat the dealer, they are worn out and have grown extinct.

I find few longs that currently meet my investing standards.

My perception of the market's reward is declining while the market's risk is increasing, and in my view the downside may be a much as four times the upside over the next 12 months.

Over the last two days I have added to my Trade of the Week, long SPDR S&P 500 (SPY) September $252 puts.

This morning the S&P futures are down by about nine handles. European bourses are materially lower after suffering most of the week (what happened to the consensus of European Union stocks over U.S. stocks as the weight of a stronger euro will hit European exports?). Oil is up $0.22 a barrel, the dollar is stronger, gold is up $5 an ounce and bond yields are little changed, with the 10-year U.S. note yield set at 2.234% (I initiated a short bond position earlier this week). Two of the FANG stocks -- Alphabet (GOOGL) and Amazon (AMZN) -- continue to break lower in premarket trading this morning.

"To see victory only when it is within the ken of the common herd is not the acme of excellence."

--Sun Tzu