• In a paperless and cloudy world, are investors and citizens as safe as the markets assume we are?
• In a flat, networked and interconnected world, is it even possible for America to be an "oasis of prosperity" and a driver or engine of global economic growth?
• 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?

The reason I want you to remember these questions is that the answers might serve as valuation busters in the fullness of time...

- Kass Diary, "This Ain't No Seder, I Now Have Eight Questions" (2017)

I am exhausted and I plan to leave right at the bell today. 

First, thanks for giving me this platform to express my market and company views - today and the for the last 24 years (yikes!). 

Second, thanks for participating actively in our Comments Section this week. 

As you all know I am always in doubt and often wrong - but there are few things - see my quote above - I am confident in expressing at the end of this long week: 

* I am reasonably confident that late 2021/early 2022 marked a broad and important stock market top.

* Given the wide array of uncertainties, we are likely in a lengthy and heightened regime of volatility.

* Inflation will be persistent and sticky over the next 18 months.

* Supply chain problems will also persist well beyond what the consensus expects.

* Globalization is a thing of the past - it will be expensive with inflation to make the transition away from globalization.

* The world is interconnected and the risks associated with financial contagion have never been more acute.

* Market structure changes which benefited the markets in 2019-22 may contribute to the weakness in 2022-23.

* Speaking of market structure, quantitative strategies and products are leveraged and will exaggerate market moves, particularly on the way down).

* Consensus 2022 S&P earnings forecasts are too high.

Enjoy the weekend. 

Be safe.

Professor Galloway's No Malice/No Mercy - College Town!

In light of the horrible action/performance in the Nasdaq, here is a repost of the column I wrote earlier this week: 

Mar 07, 2022 ' 08:45 AM EST DOUG KASS

The Day The Nasdaq (and Speculation) Died

* A man who tries to carry a cat home by it's tail will learn a lesson that can be learned in no other way

* For months I have been vehemently warning about the risks associated with trading and investing in speculative gewgaws pushed by many

* The drop in speculative stock values over the three to nine months has been historic and painful

"Speculation is the most dangerous when it looks easiest."

- Warren Buffett

24 Years of My Real Money Pro Diary

For more than two decades my Diary has been committed to contributing hard-hitting, logically reasoned, analytically thorough and, at times, unpopular and outside of consensus analysis and commentary. My primary objective is to make the column value-added, informative and fun to read. Importantly, I try to deliver my messages and views in a style and format that is combined with pop culture and humor - and, hopefully, in an honest, transparent and self-deprecating way.

My columns, especially my opening missives, are often integrated with references from comedians, philosophers, poets, lyricists, etc., and include parodies and metaphors to slam home my views. I do this in an attempt to differentiate my output from the typically dry and commonplace commentary on the economy, individual companies and investment themes.

Having been the son of an extremely hip and complex jazz musician - Dr. Saul Kass - and having produced some rock and roll concerts, I have been especially drawn to music and their lyrics, and I often integrate the message of a song's lyrics with an investment theme.

Here is my latest rendition of Don McLean's "American Pie" - "The Day The Nasdaq Died."

Have some fun with it!

The Day The Nasdaq (and Speculation) Died

A long, long time ago
I can still remember
How the Nasdaq used to make me smile.

And I now know what investors do at any chance
Is to get themselves a margin loan in advance
And maybe add some more Peloton to the pile

But r/wallstreetbets recommendations made me shiver

With every tweet that David Portnoy delivered
As the gewgaw bubble was growing on the market's doorstep
The traders couldn't keep from taking one more step

I can't remember if I cried

When I read about Chamath Palihapitia's latest SPAC demise
But you could lose your capital and your pride
The day the Nasdaq died

So bye-bye, to your piece of the pie
Investors poured their money into Cathie Wood's ARK funds
Now their equity account's dry

It's less than three months from an all-time high
Singin', Could we go back where we were last July?
Could we go back where we were last July?

Did you buy stocks you never heard of
Like Carvana at $300 or above
If the anonymous fools on Twitter told you so?

Now do you still believe in buying weekly call options with Robinhood?

Were you in the last SPAC or IPO?
And will you continue to ignore the lack of free cash flow?

Well, I know that you were margined, too
'Cause you always take an intermediate-term view
Even your Stratton Oakmont broker shut you down
No more buying power could be found

The traders never worried on the whole way up
Buying Virgin Galactic Holdings from the back of a pickup truck
But I knew some week they will all run out of luck
The day the Nasdaq died

I started singin',
Bye-bye to your piece of the pie
Investors poured their money into Cathie Wood's ARK funds
Now their equity account's dry

It's less than three months from an all-time high
And singin', Could we go back where we were last July?

Could we go back where we were last July?

Now for more than 13 years we've been on our own

And moss grows fat on a rollin' stone
But that's not how its always gonna' be

This year as SPACs, blank check firms and direct listings sang for the king and queen
In suits they borrowed made of green
And with voices that didn't come from you and me

Oh, and just as the pandemic was turning 'round
PayPal slapped speculators down
The courtroom was adjourned
A guilty verdict was returned

And when the SEC and FINRA were falling asleep
Warren Buffett's cash pile kept on rising in his Omaha park
While Novogratz sang dirges and dogecoin came out of the dark
The day the Nasdaq and speculation died

(Refrain)

Helter-skelter in the upcoming summer swelter
The bulls flew off into their fallout shelter
The Dow was at 33,000 but falling fast

And in the business media the "talking heads" landed foul on the grass
Though Belski and Kostin were still trying for a forward pass
With Tom Lee on the sidelines in a cast

CNBC's air was filled with the Bull's sweet perfume
But the Nasdaq wasn't playing their marching tune
The gamblers all got up to dance
Oh, but they never got the chance!

'Cause caution began to dominate the field
As the long bond climbed more than 100 basis points in yield
Was price discovery ever really repealed?
The day the Nasdaq died?

(Refrain)

Oh, with investment strategies and products all in one place
Bill Miller was somehow lost in space
Too old and with no time to start again

So come on; Fed be nimble, Fed raise again!
Is Chairman Powell still chanting a loose policy amen?
'Cause more cowbell and QE is the market's only friend

Oh, as we watched the speculative stocks fall
Too many will receive a margin call
No broker born in hell
Could break that bear market's spell

And as the futures dropped into the night
To douse the sacrificial light
I saw Boockvar and Rosenberg laughing with delight
The day the Nasdaq died.

(Refrain)

Well I met with Fast Money traders long Facebook, Snowflake, Coinbase and General Motors from January
And I asked them to explain their views
But they just frowned and turned away

The Halftime traders marched towards JP Morgan's store
Where they made their fortune years before
But the brokerage demanded to see the cash before they could play

And on my Bloomberg, the ticker streamed - the Perma Bullsweeped and the Perma Bears dreamed.
But not a bullish word was spoken
The SPACs and IPOs all were broken

And the three ARK ETFs the traders acquired last
ARKX, ARKG and ARKQ
Couldn't catch a bid and faded fast
The day the Nasdaq died

And they were singing (sing it for me now!),
So bye-bye to your piece of the pie
Investors poured their money into a broken market
Now their equity account's dry (everybody!)

It's less than three months from an all-time high
Singin', Could we go back where we were last July?
Could we go back where we were last July?

Bye-bye to your piece of the pie
Investors poured their money into a broken market
Now their equity account's dry

It's less than three months from an all-time high
And singin', Could we go back where we were last July?
Could we go back where we were last July?

Nice move on (TLT) - we scooped some up when shares were trading lower this morning.

I am pressing my (TLT) long.

From Peter Boockvar:

The initial March UoM consumer confidence index fell to 59.7 from 62.8. That's below the estimate of 61, the weakest print since September 2011 and is now only 4.4 pts from the November 2008 when the financial system was imploding. Most of the weakness was seen in the Expectations component which was down 5 pts m/o/m while Current Conditions was lower by .4 pts m/o/m. Also of note, one year inflation expectations jumped to 5.4% from 4.9%, the highest since 1981. We can blame the more than doubling in the index of people that see higher gasoline prices in the coming year, not surprisingly as it is a price most of us see every day. There was no change in the longer term view on inflation as it held at 3%.

Employment expectations did improve by 3 pts but income was unchanged. This is where the pain of inflation is hurting both psychology and the pocketbook as the mean % of those 'expecting family income will beat inflation over the next 5 years' fell to just 34.3% from 36.5% in February and vs 37.1% in January. That's the lowest since August 2014.

On the question of 'will the country have continuous good times over the next 12 months', it fell 14 pts to 52, the lowest since late 2011.

Spending intentions were mixed as it fell for those that said it's a good time to buy a house but rose for vehicles and major household items after the recent weakness.

We can bottom line this continued deterioration in consumer confidence with this one line from the UoM, "Personal finances were expected to worsen in the year ahead by the largest proportion since the surveys started in the mid 1940's." The job market answers was the bright spot within the survey as it was slightly better.

There was an influence of the Ukrainian tragedy in the answers too as "24% of all respondents spontaneously mentioned the Ukraine invasion in response to questions about the economic outlook."

UoM

One yr Inflation Expectations

Mean % of those expecting a rise in REAL income in coming 5 yrs

Repeating for emphasis... Russia is done.

Is China telling Putin, "enough already?":

Last night at about 10 pm EST Reuters reported on comments from Chinese Premier Li Keqiang speaking at a news conference after the annual parliamentary session, 'the Ukraine situation was "disconcerting" and that it is important to support Russian and Ukraine in ceasefire talks.' About 8 hours later the IFX headline hits the tape that Putin told the Alexander Lukashenko, the head of Belarus, "There are certain positive developments, as far as negotiators from our side informed me." As China is the only friend of Russia's that matters right now, let's hope one is stepping up its influence of the other.

So yesterday morning we saw the 7.9% y/o/y CPI print and at days end the Atlanta Fed said its February Wage Growth Tracker rose 5.8% y/o/y. That's the quickest pace since this data was first collected in 1997 but obviously not fast enough in the aggregate. If though you are aged 16-24 (the good ole days), you're in better shape as wages are higher by 11.4% y/o/y.

If you're moving from one job to another, it's higher by 6.6%, the most since 1998. If one is in the top tier of wage earners, wage growth is more modest, up just 3.2% y/o/y, though up from 2.9% in January. It's quicker for the bottom tier as wages are now up 5.9% from 5.8% in January, and to a 20 yr high. Bottom line, a higher cost of living is a problem in itself but even more so when wages don't keep up.

Atlanta Fed Wage Tracker

Atlanta Fed 16-24 Wage Growth

Atlanta Fed Job Switcher Wage Growth

It's most like a pipe dream that the Chinese economy will grow at a 5.5% rate this year as 30% of their economy reliant on residential real estate continues to contract but they'll give it their best shot optically, fiscally and monetarily it seems. Their February aggregate financing data came out this morning and we must combine it with January because of their holiday and it was lower than expected by about one trillion yuan. Money supply growth also slowed.

When a sector of an economy, whether consumer or business wants to delever or is already choking on too much debt, no amount of fiscal or monetary stimulus will matter until that aversion to debt changes. Just ask the Japanese. H share stocks in Hong Kong continue to suffer with now worries about NY delisting but if one has a Hong Kong listing, the shares are really fungible. The A shares rallied by .4%. For both the sake of the Chinese economy, and the rest of the world that relies on Chinese growth, they need to get past Covid.

Here is the market breadth - flattish - at 10:26 am, and the biggest market movers:Breadth

View Chart »View in New Window »

Heat Map

View Chart »View in New Window »

Movers

View Chart »View in New Window »

I added to FedEx (FDX) at $213.59.

The action is gross - that is a technical term I learned at Wharton!

That said, I shorted more March (SPY) $422 puts at $6.15.

Covered the balance of my (SPY) short rental from this morning just now at $427.65.

Break in!

VP Harris says that Putin shows no sign of engaging in serious diplomacy.

Equities fall right back down.

I am taking one half of this morning's premarket trading short rental in (SPY)  - shorted at $431.77 - at $428.60 for a nice gain.

* My revised levels

I don't want there to be any ambiguity about the size of my positions, or about my buy and short levels, as I strive for as much transparency as possible.
This column is a continued commitment towards that sort of disclosure.
"When the time comes to buy, you won't want to." (March 2019)

- Walter Deemer

"When the time comes to sell/short, you won't want to." (August 2021)

- Doug Kass

I promised to update my "levels" at least once a month.

My last update was in late January. A lot has transpired since then and, as you can see, I have taken down my buy levels considerably.

My "official coverage list" now includes 115 names (68 longs and 47 shorts).

Given my cautious market view I have lowered a number of "levels" to buy and to short in this month's column.

Here are some of my new individual buy/short levels of stocks that I want to add to or reestablish on weakness, and in the case of shorts, to sell on strength:

BUYS

-- Facebook (FB) $200

-- Amazon (AMZN) $2875

-- Alphabet (GOOGL) $2,550

-- Papa John's (PZZA) $100

-- FedEx (FDX) $220

-- Hartford Financial Services (HIG) $67

-- Goldman Sachs (GS) $335

-- Twitter (TWTR) $32

-- Macy's (M) $25

-- Dillard's (DDS) $185

-- Kohl's (KSS) $46

-- Comcast (CMCSA) $42.50

-- Bank of America (BAC) $40.25

-- Citigroup (C) $52.50

-- JPMorgan Chase (JPM) $132

-- PNC (PNC) $180

-- Wells Fargo (WFC) $49

-- Procter & Gamble (PG) $147

-- SPDR Gold Shares (GLD) $182

-- Silver Trust (SLV) $23.50

-- Kraft Heinz (KHC) $37

-- Walt Disney (DIS) $132

-- Morgan Stanley (MS) $83.50

-- Verizon (VZ) $51

-- Micron (MU) $72

-- Penn National Gaming (PENN) $41

-- Draft Kings (DKNG) $17.50

-- Vornado Realty Trust (VNO) $45

-- TreeHouse Foods (THS) $34

-- J.M. Smucker (SJM) $122

-- General Motors (GM) $41.50

-- Ford (F) $16

-- Boeing (BA) $182

-- AMD (AMD) $103

-- Microsoft (MSFT) $283

-- PayPal (PYPL) $95

-- Walmart (WMT) $140

-- Vanguard Value (VTV) $141

-- Vanguard Small Cap Value (VBR) $170

-- Financial Select (XLF) $35.50

-- ViacomCBS (VIAC) $29

-- ViacomCBS Convert Sub. Debt (VIAC) $52

-- Discovery (DISCA) $24

-- Discovery (DISCK) $24

-- Coinbase (COIN) $155

-- GDS Holdings (GDS) $30

-- AdvisorShares Pure US Cannabis ETF (MSOS) $22

-- ETFMG Alternative Harvest ETF (MJ) $9

-- Tilray (TLRY) $5

-- Ayr Wellness (AYRWF) $14

-- Terrescend (TRSSF) $5.25

-- Curaleaf (CURLF) $7

-- Cresco (CRLBF) $6

-- Trulieve (TCNNF) $22

-- Verano (VRNOF) $10

-- Green Thumb (GTBIF) $18

-- FibroGen (FGEN) $13

-- A T&T (T) $23

-- Invesco (IVZ) $18

-- Wynn Resorts (WYNN) $74

-- Alibaba (BABA) $90

-- Johnson and Johnson (JNJ) ($165)

-- Green Brick (GRBK) $21.50

-- Elanco (ELAN) $27

-- Sonos (SONO) $25.50

-- Ark Restaurants (ARKR) $19

-- Live Nation (LYV) $102


SHORTS

-- Netflix (NFLX) $475

-- ARK (ARKK) $80

-- Carvana (CVNA) $135

-- Zoom (ZM) $145

-- Tesla (TSLA) $950

-- Rivian (RIVN) $75

-- KKR & Co. (KKR) $64

-- Blackstone Group (BX) $127

-- Caterpillar (CAT) $220

-- Fastenal (FAST) $58

-- Beyond Meat (BYND) $100

-- T Rowe Price (TROW) $200

-- Franklin Resources (BEN) $32

-- Peloton (PTON) $40

-- Hilton (HLT) $150

-- Plug Power (PLUG) $33

-- Delta Air Lines (DAL) $38

-- United Air Lines (UAL) $44

-- Marathon Digital (MARA) $35

-- MicroStrategy (MSTR) $520

-- GameStop (GME) $125

-- AMC Entertainment (AMC) $25

-- Ginkgo Bioworks (DNA) $8

-- Digital World Acquisition (DWAC) $60

-- Robinhood (HOOD) $17

-- Krispy Kreme (DNUT) $16

-- F45 Training (FXLV) $13

-- Wayfair (W) $145

-- Mastercard (MA) $360

-- Visa (V) $225

-- American Express (AXP) $165

-- Starbucks (SBUX) $95

-- JOYY (YY) $35

-- Lightspeed Commerce (LSPD) $35

-- Sleep Number (SNBR) $70

-- Berkeley Lights (BLI) $10

-- Match Group (MTCH) $105

-- Home Depot (HD) $365

-- Royal Caribbean (RCL) $70

-- Carnival Cruise (CCL) $20

-- C3AI (AI) $20

-- Roblox (RBLX) $47.50

-- ROKU (ROKU) $135

-- SPDR S&P 500 ETF (SPY) $445

-- Invesco (QQQ) $345

-- Russell Index (IWM) $212.50

-- Bonds (TLT) $145
__________

Long TLT, MJ, FDX, ARKR, GRBK, ELAN, GTBIF, GLD, TRSSF, CRLBF, AYRWF, TCNNF, MSOS, VRNOF, SLV, LYV, FGEN, CURLF.

Short SPY puts, DWAC, SBUX, AI, LSPD, SNBR, CVNA, HOOD, DNUT, RBLX, FXLV, CCL, DNA, ROKU,,BLI, RCL.

In support of my (SPY) short:

On the Ukraine headline I added to (TLT) at $134.18.

See here:

View Chart »View in New Window »

* A Berkshire (BRK.B) acquisition of Federal Express make a lot of sense

You gotta show him that you care just for him

Do the things he likes to do
Wear your hair just for him, 'cause
You won't get him
Thinkin' and a-prayin', wishin' and a-hopin'

'Cause wishin' and hopin' and thinkin' and prayin'
Plannin' and dreamin' his kisses will start
That won't get you into his heart
So if you're thinkin' of how great true love is

--Dusty Springfield, "Wishin' and Hopin'" https://www.youtube.com/watch?v=ycbgHM1mI0k

On Thursday I repurchased FedEx FDX at about $217 a share. Here is what I wrote: 

Mar 10, 2022 ' 12:25 PM EST DOUG KASS

I Bought Back FedEx

I can't help but look at the good price action in a sea of red and think back to my old Surprise (back a few years) that FedEx (FDX) could be acquired by Berkshire Hathaway (BRK.A) (BRK.B) .

The price and the franchise are exactly in conformance with what appeals to Warren Buffett... and The Oracle has the cash.

Stay tuned.

I have been thinking this thought for about two years. This is taken from my 2020 Surprise List:

Surprise #7 Berkshire Hathaway and Warren Buffett Surprise the Markets - On Several Fronts

Berkshire Hathaway, with over $130 billion of cash, acquires FedEx (for $55 billion) in a spirited bidding contest against Walmart (WMT) . There are several important catalysts to the transaction - Buffett understands FDX's business and the deal would expand his scale in transportation - where he already enjoys a stronghold in rails with subsidiary Burlington Northern. Moreover, despite the recent Amazon issue, FedEx has a wide business moat with a vast distribution presence and a large fleet of vehicles. Finally, FedEx' shares have been pummeled (-20%) because of a difficulty in adopting to digital commerce and the company could be purchased on the cheap at under 20x earnings.

Berkshire makes two more large acquisitions - reducing its cash position by $100 billion to $30 billion.

Fires in California grow entirely out of control, shutting down much of the power grid in California - and hobbling the state's economy. President Trump does not come to the aid of the state until too much damage is done. But Buffett helps and provides bankruptcy financing by Pacific Gas and Electric (PCG) . While it is normally impossible to buy a regulated utility, at the request of regulators Berkshire ultimately takes control of the company.

Contrary to being a "forever holding," Berkshire unloads a portion of its Apple (AAPL) long investment after the stock becomes too large a percentage of its portfolio.

At the May, 2020 Berkshire Hathaway annual meeting in Omaha, Nebraska, Warren Buffett surprises his shareholders and announces that Ajit Jain will be his successor .

The Oracle of Omaha invites me back to the 2021 Berkshire Hathaway Annual Meeting to ply him and Charlie Munger with tough questions.

Just wishin' and hopin'.

Check the chart out

View Chart »View in New Window »

.

I have taken a short trading rental in SPDR S&P 500 ETF (SPY) at $431.77 just now (Spoos +65 handles)

Apparently there are some positive developments in the Ukraine conflict.

From the Dow Jones newswire:
RUSSIA'S PUTIN SAYS THERE ARE CERTAIN POSITIVE SHIFTS IN TALKS WITH UKRAINE

Respectfully, there is a tendency to blame market conditions on the principal players/actors, such as hedge funds that have been caught wrong-footed and are being liquidated or are experiencing redemptions from investors.

Ironically, it was uncommon in the previous Bull Market of 2019-2021 for anyone to argue that outsize inflows into hedge funds/passive ETFs/equity funds were causing an artificial ramp in equity prices as they plowed those inflows into stocks.

To me, it is the reality of a materially changing and adverse economic backdrop that is serving to be the most important contributing factor to the market's decline:

WolfStreet on the carnage.

Chinese ADRs are yet another example of how Wall Street markets what they can make money on and not what investors can make money in.

With over 100 economists at the Fed and a battery of economists in the administration, these organizations are useless from a forecasting standpoint:

* The market (and money) never sleeps

* The market has no memory from day to day

"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 in this column a few weeks ago. It is a guidepost to my strategy in the regular trading session.

It was a modestly bearish evening/early morning for futures. Gold is flat and Brent crude, possibly contributing to the equity futures weakness, is not giving it up (+$4.47 to $116/barrel).

S&P futures peaked at +23 and bottomed at -25. At 3:30 a.m. ET they were at -9 but by 5:40 a.m. ET we were back at +23.

Nasdaq futures dropped as low as -131. At 3:30 a.m. ET they were at -35 but by 5:40 a.m. ET they were +80.

I am flat (SPY), covered my SPY call short in the whoosh lower on Thursday and I remain short the March SPY $422 puts (with an expiration next Friday).

* Sluggish economic growth and persistent inflation represents the 2022-23 reality
* "Slugflation" is market unfriendly

We have seen the future - its "slugflation," as reality sets in (at Goldman Sachs). 

As my friends at Miller Tabak see sustained and stick inflation in this morning's commentary: 

Underlying Inflation May Be Settling in at 6%

The February CPI data were much better than the awful January figures. With food and energy prices at risk of rising especially rapidly, it is even more important to look at measures of core, not headline inflation. Given data problems with measuring shelter (41.4% of February core-CPI), it is also essential to consider core-CPI ex shelter. Figure 1 shows that core (blue), shelter (red), and core ex-shelter (green), CPI-inflation were all between 5.9% and 6.2% (m/m, annualized). With core ex-shelter actually falling from 9.4% to 5.9%, its lowest since September 2021, this report is overall slightly encouraging.

Core (blue), Shelter (red) and Core ex-shelter (green) CPI-Inflation (m/m)

These data rule out any sort of major surprise at next week's March FOMC meeting and a 25 bps hike is thus certain. Although the February data are broadly in line with market expectations, it is important that, in comparison to the FOMC's December Summary of Economic Projections, they are abysmal. Then, the Fed projected three rate hikes to bring 2022 core-inflation to 2.7%. We expect the Fed to revise this to 125 bps of rate hikes to bring core-inflation to 3.6% (which implies 3% annualized inflation from March through December). We now expect 150 bps of hikes with core-inflation coming in at 4.25% in 2022.

There is also a very good chance of a 50 bps hike at the Fed's early May meeting. CME's Fed Funds rate futures put the odds of this at 37% but we think that they are closer to 60% (these odds also encompass the chances of an inter-meeting rate to bring the Fed Funds rate up to the 75-100 bps band in May). We are curious to see if there are any dissenting votes next week from members who would prefer a 50 bps hike right away. Chairman Powell's public commitment to 25 bps provides a strong incentive for more hawkish members to go along in order to present a united front. For every one FOMC member who publicly votes against a 25 bps hike because they prefer 50 bps, there will be at least one who votes yes, but who would privately prefer a bigger move. Even two or three dissenting votes next week would force Powell to quickly make another hawkish pivot to maintain consensus.