"Just one more thing."

- Lt Columbo

I just sent this email to Melissa Lee on "Fast Money" about AMC (AMC) . Here are some of my points:

1. AMC has not materially improved its balance sheet -- look at net debt, it has barely budged. The recent Mudrick deal only raised $230 million.
2. To suggest AMC should produce content is patently absurd. The name can't financially compete with (DIS) , (NFLX) , (DISCA) , (VIAC) or anyone else.
3. AMC will never make more than a few pennies with its shares mushrooming from 140 million to nearly 500 million shares.

Thanks very much for reading my Diary today.
I hope it was value added.
Enjoy the evening.
Be safe.

For grins and giggles I have personally sold a very small amount of (AMC) July 2 $65 calls at about $30.50. 

I would not recommend this to anyone!

"Meshuganah is Trump." (In yiddish, craziness is threefold)

- Grandma Koufax

The Macerich Co. (MAC) is +9% as the stock is being confused by some who are playing (AMC) .

This morning I was interviewed by Paul Sweeney and Tom Keene on Bloomberg. 

It was a fun segment. 

Let's go to the tape (at the 7 minute mark).

AMC (AMC) has more than doubled today. 

At about 1 pm 550 million shares of AMC traded - about 100 million shares greater than the shares outstanding. 

I just heard a talking head on Fin TV say he is buying call options because of the "unusual call activity."

This is gambling and not speculating. 

And most, if not all, should hide their portfolios and children away from this advice because it will, in the fullness of time, prove harmful to your investment well being and health.

The AMC (AMC) story will likely join the boom/bust annals of modern investment history. 

I am looking at some put options to get short.

Knowledge@Wharton on What Lies Ahead on Inflation?

* COVID has changed economics.

* Americans don't want to move to low paying jobs. 

* Hacker lexicon. 

I will distribute the full podcast of my Bloomberg Radio appearance later this morning. 

But, for now, here are some of the points I tried to make: 

To quote wrestling icon Rowdy Roddy Piper..."I have come here to chew bubble gum and kick ass. and I am out of bubble gum."

I am reasonably convinced that the market's upside reward is dwarfed by the downside risk.

All the signs are there - valuations and investor expectations (on the domestic economy and with regard to corporate profits) are greatly inflated and speculation has run amok. The artificiality and the absence of natural price discovery - created by zero interest rate policy - are so conspicuous they can not be ignored by any investor that requires "a margin of safety" when they invest.

My pal and ace technician Helene Meisler has a great description of today's market enthusiasm... She says that "price has a way of changing sentiment." Sentiment is getting giddy with higher prices. Just the polar opposite of March 2020 when all were fearful and it was the time to be greedy.

Indeed it is my view that the difference between where the S and P is today, lets call it 4200 is further from intrinsic or fair market value (of about 3200-3300) that at any time in quite a while.

Like many, I am respectful of the market's recent momentum which we all know is fueled in large measure by the liquidity delivered by our fiscal and monetary policies and authorities.

I think we are in the process of making a major an important top. But, tops are processes (while bottoms are more typically events).

Bull markets are borne out of bad news - consider march 2009 or march 2020 At both junctures I got very bullish as you know. Most recently, fifteen months ago I predicted on Bloomberg Surveillance and elsewhere, and I might add uncharacteristically, that we would see a rip your face off rally and mother of all short squeezes.

Bear markets are borne out of good news - consider early 2000, the Fall of 2007 or maybe even June 2021. It happens when demand is sated.

Let others get excited about the reopening giddiness (which was inevitable as we discussed more than a year ago) -- I hear that first level thinking too much by the talking heads in the financial media.

Let others ignore that the S and P has nearly doubled since March 2020. Not me. Looking at the rear view mirror is not the fountain for delivering superior investment returns. To me, buying here, is like drinking contaminated water.

So while I am not yet net short, I have one step out the door. And my hedge fund launch this month might be timely from the standpoint of setting up shorts We will see.

I guess what I am saying is that it is important to recognize that managing money is not about what happened yesterday or today. It s not about the dogma (of being a Perma Bear or Perma Bull)....it is more about nuance, common sense, analysis and discounting.

When stocks are cheap I buy when stocks are expensive we short.
What I do during the days is analyze companies . I am not looking at the WallStreetBets and reddit forums and, hopefully, produce an intelligent judgement of value which is weighed against current share prices to determine the upside reward vs. downside risk.

At times Mr. Market disagrees with this exercise, but my experience is that mean reversion back to or even below fair market value is inevitable. I give you December 2018 and March 2020.

"On a boat in the middle of a raging sea,
She would make a scene for it all to be
Ignored.
And wouldn't you be bored?
Strange brew, kill what's inside of you."

- Cream,Strange Brew

The surprisingly strong market breadth yesterday has morphed into a flat breadth picture this morning.

Thomas C

Wells Fargo takes on media consolidation landscape after Warner Bros. Discovery - (VIAC)

With the setup now clear for Warner Bros. Discovery as the next big scale player in entertainment, Wells Fargo turns its attention to what comes next for consolidation in the media sector - and who's got the toughest decisions going forward.

"We think the Discovery/WarnerMedia transaction (DISCA, T) represents a Media maxim: (Direct-to-consumer) is a content arms race, and scale is most necessary," Steven Cahall and the team write. "More content leads to stronger engagement, which reduces churn, creates pricing power and drives margins."
And Netflix NASDAQ and Disney NYSE are "putting this playbook to work" while others hope to follow in their footsteps, he writes.

The newly named Warner Bros. Discovery should be a top-three DTC player. Pro forma, Wells Fargo expects that the combination will have $20B in DTC content by 2024, putting it tied for third with the combination of Amazon.comNASDAQ and MGM Holdings OTC - and that's before allowing for John Malone's hint that more asset purchases could be forthcoming.

And that means the toughest decisions "concerning being mercenaries, breaking up, scaling up or merging in" lie ahead for Comcast NASDAQ and ViacomCBS (VIAC, VIACA), Wells Fargo says.

In a deep dive, it's modeled companies' content value based on the framework that streaming represents two aspects of the content - ongoing spend (originals, sports, licensed content) and library (such as Disney's and HBO's strong hits). That analysts point to Disney as tops, with 2024 total content value of $47B ($37B ex-sports), practically all of which Disney is moving to DTC.

It's followed by Warner Bros. Discovery ($36B), NBCUniversal/Sky ($34B) and Netflix ($28B), while Amazon and MGM get to $22B. Amazon should continue scaling, as should Apple (AAPL, $10B content value), Wells Fargo says. 

Against those figures, ViacomCBS has a lot ($24B), but "is it enough amidst these peers?" With it the No. 5 player in content value, and Paramount Plus fifth or sixth in terms of streaming value, ViacomCBS has perhaps the biggest decision to make with tough competition ahead, and "it's worth considering all the options especially since scaled studios are now proven to be rare gems."

The best option, Wells Fargo says, maybe to follow in Fox's (FOX, FOXA) footsteps and monetize not the networks but the Paramount and CBS TV studios - which, using the MGM valuation, could get the stock to $65-$70/share (vs. $42.60 today).

As for Comcast, NBCU and Sky is a "formidable stable of content" but value looks trapped without a clear strategy. "We see Comcast's options as: (1) selling/merging the studios; (2) getting more aggressive with streaming; or (3) doing nothing. We think No. 1 is best for shareholders but least likely; No. 2 is worst but also unlikely; and No. 3 is most probable."

Meanwhile, thinking really big: If Warner Bros. Discovery wants to make another deal, adding either NBCU or ViacomCBS would make it the world's biggest content company.

More evidence that inflationary pressure particularly on the goods side is a global phenomenon, the Eurozone said its producer price index rose 1% m/o/m in April after a 1.1% increase in March, a .5% rise in February, a 1.7% spike in January after a .9% jump in December. Annualize those m/o/m increases, and you have PPI running at 12%. Goosed by easy comps, the y/o/y PPI rise in April was 7.6%. As the April figure though was as expected there wasn't any reaction in market based inflation expectations nor nominal yields but it still raises the pressure on the ECB as they get ready for next week's meetings. Reflecting though how behind the 8 ball these central bankers are, all we're debating here is when they start slowing the pace of bond buying. We are nowhere near the place where overnight and deposit rates will be increased. ECB president Lagarde by the way speaks this afternoon as does the head of the Bundesbank Jens Weidmann who at some point will have to explain to his constituency why he is presiding over higher inflation in Germany and sitting there and doing nothing about it.

German retails sales in April missed expectations but we can dismiss it due to the selective shutdowns in the back half of that month. The euro is trading back below $1.22 vs the dollar and the German 10 yr yield is down by 1 bp to -.19%.

The Chinese yuan did weaken in response to the move yesterday by the PBOC which increased FX reserve requirements for the 1st time since 2007. The fall in the yuan is off the highest level since May 2018. I believe the Chinese are fine with their strengthening currency, particularly in light of the inflation being experienced, particularly on the commodity side. But, they don't like one way markets and they seemingly want to slow down the pace of gains.

OFFSHORE YUAN

I mentioned my bullishness last November on a Turkey turnaround after Erdogan fired his finance minister son in law and installed a hawkish central bank head. I reversed course and sold my Turkish stock when he fired that central banker and hired a dove. Today Erdogan said "I spoke with our central bank governor today. It's an imperative that we lower interest rates. For that, we will reach July and August thereabouts so that rates can begin to fall." In response, the Turkish lira is falling to a fresh record low vs the US dollar. Erdogan has certainly done an amazing job of destroying the purchasing power of its citizenry. He became president in 2014 and here is a currency chart dating back to that. There is a reason why gold has existed as a store of value for 4000 years and bitcoin now exists.

While mortgage rates were little changed w/o/w, mortgage applications continued to soften. Purchases in particular fell by 3.1% w/o/w and are down by 1.6% y/o/y. This component now sits at a one year low. So now the housing market is SO HOT that the pace of transactions continues to slow. Stagflation. Refi's fell by 4.6% w/o/w though are up 6% y/o/y. With refi's near the lowest level in 16 months, it is also clear that the impetus to refi with historically low mortgage rates is now over. We are seeing the definition of the law of diminishing returns with the Fed's low rate policy in the most interest rate sensitive part of the US economy. Thus, the Fed is no longer providing 'powerful stimulus' as Jay Powell has said and that is because we are no longer responding to it for a variety of reasons. Again, monetary policy at this point is all about keeping asset prices elevated and monetizing the US deficits.

The slide rule redeemed itself and did so in spades yesterday as the market virtually opened at the top of the day and then receded under the influence of the yield of the ten-year bond.

As you we will recall or can reconfirm by reading below, in the pre-opening comments, we had suggested that the bulls would have to tangle with the outside resistance numbers, which the slide rule told us were Dow 34780; S&P 4248 and Nasdaq 13850.

We also wondered whether given June's spotty reputation, we would benefit from new money for the new month. At the end of comments, which you will also reconfirm below, we noted that at dawn, the futures indicated that there was new money for the new month coming in by the shovel full.

At any rate, the opened very smartly higher but almost before the bulls could pull the cork out of the champagne bottle, things began to recede. The primary concern, which I raised in the midmorning update was that some of the economic numbers were strong enough to raise yields on the ten-year and, they were approaching a kind of mythical 1.65%, which some traders felt could be a third rail target. It got as high as 1.64% and stocks faded away.

We noted that in the midmorning update, which we reprint for you here.

Midmorning Update

The key averages all tested the resistance on the opening with the Dow actually eking slightly above. They quickly retreated, however, as the economic data encouraged a move up in the yields on the ten-year.

Traders big fear is that yield might touch 1.65%. They think that could have a bit of a third rail effect. The pullback has nevertheless been somewhat moderate. We have held just slightly above Friday's lows.

To help your memory, those lows were Dow 34520; S&P 4203 and Nasdaq 13747. On any further weakness today, it will be important that they hold above those lows, otherwise we would seem to be beginning to potential build for a reversal.

The game is still on the table. So, the guidelines are Friday's lows with careful attention to what happens when and if the ten-year reaches 1.65%.

Keep your seatbelt fastened and have a good afternoon.

Stay safe.

Arthur
__________

So, to review the numbers, as mentioned in the pre-opening comments, they were going to challenge those highs. To review - Dow 34780 and the midmorning high, the actual opening high was 34849; the target in the S&P was 4248 and, the actual intraday was 4234 again on the opening basically and in the Nasdaq the target was 13850 and the actual intraday high was 13836.

As noted in the midmorning update, which you just hopefully read, we had said that pullback could easily result in the test of the noted lows and, again the slide rule proved himself an accomplished student. The targets had been on the downside Dow 34520 and, the actual intraday was 34542 and the S&P targeted 4203 and, the actual was 4197 and, the Nasdaq was 13747 and, the actual was 13678. So, we will doff our cap to the slide rule after an occasional bumpy day or two has seems to have gotten their act together.

We will now assume that the market will have to refocus its seasonality and, see where we want to pick up from here.

Overnight, foreign markets are mixed with small changes.

In Asia, Japan is slightly better while China, Hong Kong and India show small losses. The stocks in Europe are also mixed with small changes. German retail sales dropped a bit and, that may have been a slight drag on what is going on. U.S. futures are also mixed with small changes.

The calendar is not overwhelming. We are going to get this morning mortgage data. The ADP jobs report will be carefully watched as a possible hint of Friday's numbers and, then we get several Fed speakers. In early afternoon, we get the Fed Tan Book, which is the summary of the attitudes of the 12 districts as interrupted by one at a time. We will assume that they watch the various Fed speakers a little more closely because the upcoming meeting in mid-June is a rather important one.

The bulls challenge, obviously, is to try and break out of this weekslong rectangle as we noted. We got to the upper edges once again but failed to push through. The slide rule suggests that the milestones for today, at least in the beginning, will be yesterday's range.

So that means resistance in the Dow is up at 34850; S&P 4234 and Nasdaq 13836. They need to hold support at Dow 34542; S&P 4197 and Nasdaq 13670. They will also be checking out the crypto currency markets, which seem to have a bit of a mild influence on equities so any further volatility there will be watched by traders.

Obviously, once again, a critical point to watch will be the yield on the ten-year. First, the influence is what direction it is moving in and, secondly, its proximity and relationship to the 1.65% level.

Let's let the market tell us. Remain wary, nimble, and please stay safe.

Arthur

Investors should be scared and not revel in this morning's premarket rise in AMC's (AMC) shares from $32 to $44. 

This is the sort of speculation and indiscriminate buying that is seen at the end of a Bull Market.

I will be on Bloomberg at about 9:30 am this morning with Sir Thomas Keene and Jon Ferro - talking speculation, markets and, of course, the great New York Yankees (Frazier goes yard to win the bottom of the 11th inning last night). 

Be there or be square.

Remember nine months ago when "Group Stink" hated energy(?):

From an old pal:

From my former associate at Putnam: