At 4:23 p.m.

Akamai Technologies  (AKAM)  and Progyny  (PGNY)  are among biggest decliners.

The unanimity of market optimism today in the business media is something to behold.

I thought I would post this - partially in response:

Wolf Street howls about the next recession. 

* I want to throw up in my mouth...

"Inflation is going to be a bumpy ride."

- Fed's Daly

- Last few months has left considerable uncertainty about the next few months regarding inflation.

- Range of scenarios are facing the Fed right now.

- Balance shoot does not offer any signal about monetary policy.

- Getting different signals from firms who say consumers seem to be getting choosy but input prices are not yet declining.

- We don't know how the economy will evolve, only know how we would react under different circumstances.

- Right now there is no evidence that the labor market is approaching a worrisome position, labor market remains healthy.

- Still see inflation that is too high.

On Viking Therapeutics  (VKTX) :

Reading61

$VKTX-#VK2809 should readout the phase 2B Voyage 52-week data from liver Biopsy in near term for MASH. The main bar Viking's VK2809 will look to surpass will be vs $MDGL #resmetirom/(#rezdiffra) since that is the only approved drug on the market for MASH ( Stages F2 and F3). 

The key data will be on Fibrosis improvement. Previously resmetirom showed a MASH resolution of 30% absolute and 20% PBO adjusted and a greater than one stage improvement in Fibrosis with no worsening of MASH of 26% which turned out to be 8% PBO adjusted. At 12 weeks, in the Voyage phase 2B study , Raymond James commented on VK2809 vs Madrigal resmetirom saying: “the Viking drug showed a comparative "2-fold reduction in liver fat" with the "fat reduction being >60%." 

They also commented that VK2809 safety being better than resmetirom saying "Rate of TEAE's leading to study discontinuation was in-line with placebo compared to >2x the PBO discontinuation due to AE rate for 100mg resmetirom". Since VK2809 basically had a “two-fold” improvement liver fat improvement over rezdiffra, it is not unreasonable to expect that it will significantly outperform rezdiffra on Fibrosis/NAS resolution as well.

With S&P cash +20 handles, I am adding to my SPY, QQQ call shorts.

"There have been times in my life that I've been awash in so many opportunities that I could have invested everything by nightfall, and then there's other times (like now) ... when we just haven't seen anything that makes sense, that moves the needle"

- Warren Buffett (Berkshire Hathaway's 2024 Annual Meeting)

Like Warren Buffett, I continue to view the market as overvalued.

At the core of my ursine outlook is the specter of "slugflation" (sluggish economic growth and sticky inflation).

* Sluggish Economic Growth: I am growing increasingly concerned about domestic economic growth as the lagged impact of cumulative (or "stacked" inflation) takes hold.

The U.S. economic surprise Index has turned negative for the first time in a year:

The labor market is cooling off:

Job openings are dropping to the lowest level in over three years:

The ISM Services PMI moved below 50 for the first time since Dec 2022. ISM Manufacturing PMI has been below 50 for 17 out of the last 18 months. The only times when both PMIs have been below 50 at the same time:

* July 2008 (recession)

* July 2009 (recession)

* April-May 2020 (recession)

* December 2022

* Today...

US manufacturing and services employment has simultaneously contracted for three consecutive months. Over the last 20 years, this has happened ONLY twice, during the 2020 pandemic and 2008 Financial Crisis:

* Sticky Inflation:

The broadest measure of U.S. labor costs (a large component of the CPI) rose by +4.2% over the last year - far above expectations:

The prices paid component of ISM Manufacturing has moved up to its highest level in two years, potentially signaling higher inflation for longer. This was a leading indicator of the inflationary spike in 2021-22:

* Stacked (or Cumulative) Inflation: Inflation has already begun to eat into company top line sales - the rapid rise in admission prices of the theme parks at The Walt Disney Company and in the high cost of meals and coffee at McDonalds and Starbucks. We remain short all three of these stocks!:

_____

Other factors concern us as well.

Equity valuations are climbing despite irresponsible fiscal leadership in Washington, D.C. that render any attack on controlling the rapidly expanding U.S. deficit as unlikely in a backdrop of extreme partisanship and in front of the Presidential election in November, 2024:

By most historical metrics, stocks are valued in the 90% tile or higher:

The S&P 500's Price/Earnings ratio moved up to 24.3x in Q12024, which is 31% above the median Price/Earnings ratio since 1988 (at 18.5x):

The suppression of interest rates over the 2008-2022 interval and the rabid fiscal largesse since Covid have artificially distorted our economy and our markets. But, the long and variable lag of monetary policy actions over the last two years is now beginning to be felt particularly in the commercial U.S. real estate markets.

Disturbingly, a domestic economic downturn might coincide with a need to continue large fiscal expenditures - raising the chances that individual and corporate tax rates are raised in an untimely manner (in order to fund that spending.

As noted previously, stocks seem particularly overvalued relative to interest rates. Relatively high interest rates have continued to produce a paper-thin equity risk premium (which is at the lowest level in almost two decades). Noticeably, the S&P dividend yield (1.38%) compares unfavorably to the return on 6-month Treasuries (5.34%):

In summary, investors are not being compensated for the multiple risks we see.

All the factors described above - and others - will likely contribute to disappointing corporate profits (relative to consensus expectations) and lower stock market valuations.

Tactical Strategy

Investing is the intersection of economics, analysis and psychology.

The understanding of a company's "intrinsic value" and weighing that calculus against the current share price provide us with the determination of a security's upside reward v. downside risk. This is the essence of value investing. It also provides us, in theory, with a "margin of safety" - a lodestar to our investment strategy.

The input of one's analysis forms the basis for the accuracy of the reward v. risk proposition.

I am respectful of the market's price momentum which is influenced importantly by a changing market structure in which passive investing has vastly eclipsed active investing. That said, I have no issue, when justified by my analysis, with adopting a contrarian position and going against the tide.

A non-consensus view may be especially appropriate now - particularly in the face of higher/inflated equity prices coupled with the accumulated fundamental headwinds discussed in this commentary.

In doing so, I am reminded of a famous quote from Larry McCarthy - a trader of fearless resolve and one of the most respected junk bond traders on Wall Street:

“Higher prices bring out buyers. Lower prices bring out sellers, and size opens eyes. Time kills trades. When they’re cryin’ you should be buyin’. When they’re yellin’ you should be sellin’. Takes years for people to learn those basics – if they ever learn them at all.”

To conclude, I am a disciplined contrarian and I select equities (long and short) through hard-hitting analysis, with a calculator in hand.

I plan to be patient in continuing to pursue a risk-averse strategy concentrating on pairs trading with a small short overlay over the near term.

Beyond the next few months I fully expect equities to finally fall back to an area that represents value to us.

Representative Longs

My representative longs include Goldman Sachs  (GS) , Morgan Stanley  (MS) , St. Joe Co  (JOE) , Peapack Gladstone Financial  (PGC)  , DraftKings  (DKNG) , Valvoline  (VVV) , Viking Therapeutics  (VKTX) , Green Brick Partners  (GRBK) , Freshpet  (FRPT) , Elanco Animal Health  (ELAN) , Johnson & Johnson  (JNJ) , Exxon Mobil  (XOM) , Chevron  (CVX) , Procter & Gamble  (PG)  and Sprott Uranium Miners  (URNM) .

Representative Shorts

My representative shorts include McDonald’s  (MCD) , Walt Disney Co  (DIS) , Starbucks  (SBUX) , Tesla  (TSLA) , PowerSchool Holdings  (PWSC) , Medical Properties Trust  (MPW) , Winnebago  (WGO) , Sleep Number  (SNBR) , B. Riley Financial  (RILY) , Freedom Holding Corp  (FRHC) , Petco Health and Wellness  (WOOF) , Warner Bros. Discovery  (WBD) , Chegg  (CHGG) , FIGS  (FIGS) , Blackstone Mortgage Trust  (BXMT)  and Xponential Fitness  (XPOF) .

I have been short Pool Corp  (POOL) .

My friend Whitney Tilson wrote the stock up today - off to a meeting - but will publish it in the next few days.

From Randorama:

Randy

CFRA, an independent research provider, Keeps Hold Opinion On Warner Bros. Discovery, Inc.

• We think more work is needed to turn WBD around. We cut our target $0.50 to $8.50 on a forward TEV/EBITDA of 6.1x our '24 EBITDA estimate of $9.9B, below peers. We lower our '24 LPS to -$0.75 (-$0.50) and keep our '25 EPS at $0.15; our respective revenue forecasts are $41.1B (prior $41.6B) and $42.2B ($42.5B). WBD posted a LPS of -$0.40, a wider loss than consensus. 
• WBD will partner with Disney (DIS 105 ***) on a shared Direct to Consumer (DTC) platform for MAX, Disney+, and Hulu to drive revenue sharing, reduce customer churn, and remove middlemen like Roku (ROKU 59 ***) or Apple TV. DTC realized $86M adj. EBITDA and flat revenue Y/Y with advertising +70%, flat distribution, and content -46%. MAX's domestic unit had 52.7M subs (+700K Q/Q) and ARPU of $11.72 vs. $11.65, while international had 46.9M subs (+1.3M) with ARPU of only $3.75 vs. $3.88. Weak advertising revenue (-11% Y/Y) in the Network unit led to -8% revenue Y/Y and -8% adj. EBITDA comps. Studios posted weak -12% Y/Y revenue and -70% EBITDA.

Mag 7 is not looking so hot on an intraday basis:

View larger here.

Today is a research day.

I won't be doing much trading - all things being equal. 

Since the week ended February 2nd, initial jobless claims has remained in an extremely tight range of 208k-213k (outside of one print of 200k around President’s Day holiday) but that trend was broken in today’s figure and not in a good way. The 231k number is the highest since August 2023. 

There was no holiday, no seasonal adjustment change noted so something to watch just as the evidence piles up that the pace of hiring is slowing. The 4 week average rose to 215k from 210k. Continuing claims, delayed by a week, totaled 1.785mm, still hanging around the highest since November 2021.

In response, the 2 yr yield fell by a quick 3 bps as did the 10 yr yield. See below the move.

Initial Jobless Claims

Continuing Claims

2 yr Yield intra-morning 

Some of my names:

Elanco price target raised to $20 from $18 at BofA BofA raised the firm's price target on Elanco to $20 from $18 and keeps a Buy rating on the shares. With the core business driving a beat, "solid" Q2 guidance, and the 2024 product approval timing pushouts being shorter than expected by some, the firm calls the Q1 report "an encouraging update" from Elanco.
Elanco price target raised to $23 from $19 at Barclays 05:19 ELAN Barclays raised the firm's price target on Elanco to $23 from $19 and keeps an Overweight rating on the shares. The firm sees more share upside following the recent 25% rally. Elanco is at the cusp of a launch cycle redefining its value, the analyst tells investors in a research note.

KKR price target lowered to $113 from $115 at Jefferies Jefferies analyst Daniel Fannon lowered the firm's price target on KKR to $113 from $115 and keeps a Buy rating on the shares. The firm has updated estimates and highlights some of the primary themes for the industry following Q1 earnings for the alternative asset managers. In general, activity levels "across the board are off to a slow start in 2024," but "optimism was universal" across deployment levels, monetization opportunities and fundraising, the analyst tells investors in a group recap note.

Occidental Petroleum price target lowered to $68 from $70 at Wells Fargo Wells Fargo lowered the firm's price target on Occidental Petroleum to $68 from $70 and keeps an Equal Weight rating on the shares. The firm says that steady performance from L48 reflects combination of increased uptime, lower base decline rates and D&C productivity gains across both Permian and Rockies.

View larger here.

View larger here.

Upside

-ZIMV +20% (earnings, guidance)
-APP +16% (earnings, guidance)
-MGNI +14% (earnings, guidance)
-TARS +14% (earnings)
-YETI +13% (earnings, guidance)
-BMBL +11% (earnings, guidance)
-ASLE +10% (earnings)
-EQIX +10% (earnings, guidance)
-LVLU +9.2% (announces $2.5M stock repurchase program)
-KVYO +8.7% (earnings, guidance)
-HUBS +8.5% (reportedly Alphabet made progress in potential takeover deal discussion for HubSpot; reports earnings, guidance)
-HOOD +7.1% (earnings, guidance)
-JXN +5.9% (earnings)
-CRL +2.0% (earnings, guidance)

Downside

-EMKR -41% (earnings, guidance)
-CTMX -33% (earnings)
-CDLX -29% (earnings, guidance)
-RBLX -27% (earnings, guidance)
-EPAM -23% (earnings, guidance)
-BYND -15% (earnings, guidance)
-BLZE -13% (earnings, guidance)
-DUOL -13% (earnings, guidance)
-TERN -8.9% (names Scott Harris chief development officer)
-EXAS -8.7% (earnings, guidance)
-SEDG -8.1% (earnings, guidance)
-GDRX -8.0% (earnings, guidance)
-ABNB -7.9% (earnings, guidance)
-OM -7.0% (earnings, guidance; to reduce workforce)
-SMSI -6.9% (earnings)
-ARM -5.9% (earnings, guidance)
-MODG -5.2% (earnings, guidance)
-BGS -4.8% (earnings, guidance)
-VNDA -4.3% (earnings)
-TPR -3.5% (earnings, guidance)
-WBD -3.1% (earnings) 

From Peter:

A few of you mentioned that you weren't able to open the BREIT article I sent a link for yesterday, if not and still interested in reading it, email me a request and I'll send in a different form, peter.boockvar@bleakley.com

It's clear where commercial real estate construction is not much taking place in, that being for office buildings, multi family, industrial, for example, as all deal with excess supply. It's also clear where it is taking place, for government incentivized chip and battery plants, among other things but also for data centers. 

The April Dodge Momentum Index (measuring construction) rose to 173.9 from 164 in March and they said it "saw positive progress in April alongside a deluge of data center projects that entered the planning stage. Outsized demand to build Cloud and AI infrastructure is supporting above average activity in the sector."

On the flip side, "Most other categories, however, faced slower growth over the month. Across these industries, it's likely that owners and developers are grappling with uncertainty around interest rates and lending standards, thus delaying their decisions to push projects into the planning queue."

I'll argue again, from what I'm seeing, the US economy is remarkably mixed and uneven.

Let's talk Buy Now, Pay Later in light of the Affirm earnings yesterday and this Bloomberg article I read yesterday talking about a Harris Poll of users of BNPL. "A recent survey conducted by Bloomberg News by Harris Poll found that 43% of those who owe money to BNPL services said they were behind on payments, while 28% said they were delinquent on other debt because of spending on the platforms."

Also, "More than half of respondents who use BNPL said it allowed them to purchase more than they could afford, while nearly a quarter agreed with the statement that their BNPL spending was 'out of control.' Harris also found that 23% of users said they couldn't afford the majority of what they bought without splitting payments, while more than a third turned to the services after maxing out credit cards. The findings also show that the spending, which for more than a third of users has exceeded $1,000, isn't entirely on big-ticket items. Almost half of those using BNPL say they've started, or have considered, using it to pay bills or buy essential items, including groceries."

Finally of note, "About 42% of those with household income of more than $100,000 report being behind or delinquent on BNPL payments." So now impacting middle income consumers.

Bottom line, this doesn't read well, these are big numbers and I was pretty shocked by them. 

Now to the Affirm conference call, and whose stock was down 9.5% yesterday after a 3% fall on Tuesday, maybe after this article came out, as well as in sympathy with the Shopify numbers. Business though seems ok at least right now.

They said their Q4 fiscal quarter "is a seasonally stronger quarter. We see strength in categories like travel and ticketing, you see that reflected in our guide...Credit performance was stable and yield outperformed our expectations, which we see as an opportunity to modestly increase risk exposure by offering credit to more consumers, but as always, we remain firmly in control of credit outcomes. Funding capacity increased slightly q/o/q." (from their shareholder letter, which also said, "Our consumers love Affirm." 

I'm sure they do.

They also said Gross Merchandise Volume (GMV) "was diversified across categories and products, with all categories except sporting goods and outdoor growing y/o/y." They said electronics and home/lifestyle rebounded, that were recent underperformers.

On credit quality, they said 30+ day delinquencies declined a touch both y/o/y and sequentially but said this is in line with "normal seasonal behavior" and they "may increase in the coming two quarters due to the end of the US tax return season." It seems that 'Pay in 4 Loans' is where their net charge-offs are the lowest.

Bottom line, trends in BNPL are really important to be watching and we can see that it is clearly a growing driver of consumer spending decisions for lower income buyers.

Sticking with the consumer, this was from Dine Brands, the owner of Applebee's and IHOP:

"During the first quarter, like others in our industry, we saw large areas of the country experienced poor weather, impacting sales and traffic. And consumer caution with respect to economic conditions persisted in the post-holiday period. As a result, the consumer has become more price sensitive, as indicated by the response to our limited time promotions. For example, at Applebee's 28% of our transactions were tied to a limited time offer or promotion, which was up from 19% in the previous quarter as well as the prior year."

"We also continue to see guests trade down from higher prices items at both IHOP and Applebee's, another indicator that guests are managing their wallet."

Cheesecake Factory is trading up pre market and had a good quarter "with revenues finishing near the high end of our expected range and superior operational execution contributing to better than projected profitability."

"The Cheesecake Factory restaurants, comp sales and traffic once again meaningfully outperformed the industry, underscoring the strength of consumer demand for our brand and demonstrating our ability to capture market share." They said of note that "staffing success is a key contributor to the improvement in our guest satisfaction scores."

To quantify their numbers, it was all price that drove the top line, at 5.2%. Traffic was at a negative 1.5%. "All of that traffic piece was related to the January weather. So effectively, we've been running flat traffic now for two quarters...we see the consumer that's coming in our restaurants being very steady."

If you've never been to Flower Child, owned by Cheesecake, I definitely recommend it and they said "comp sales for Flower Child were the highest of any of our core concepts."

On their cost side, "we expect effective commodity inflation of low single digits for Q2...We are modeling net total labor inflation of mid-single digits when factoring in the latest trends in wage rates and minimum wage increases, as well as other components of labor."

Uber was happy with their traffic trends. "Demand for the products remains strong."

Lyft said "Total rides grew 23% y/o/y, reflecting strong demand across use cases. Growth in early morning commute and weekend evening trips was particularly strong, which is a continuation of the trends we saw in the back half of 2023."

Reynolds Consumer Products, the maker of tin foil and Hefty garbage bags among other things, and who benefits from more eating at home rather than out, and a stock we own, said this:

"When we reported results in February, I spoke to volume as being under pressure across the consumer staple sector. During the quarter, demand was modestly better than expected in some of our categories, and share gains also contributed to our retail performance...However, factors including reduced consumer savings, increasing credit card debt, continued inflationary pressure, and elevated interest rates continue to pressure consumption in our categories."

The Bank of England left their cash rate unchanged as expected at 5.25%. The vote was 7-2 with those 2 wanting to cut rates by 25 bps. After reading the statement from them I didn't get a sense that they are looking to cut rates anytime soon as a committee (until Bailey spoke). They did say "Key indicators of inflation persistence are moderating broadly as expected, although they remain elevated."

Also, "Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC's remit." 

They use the word 'sustainably' too. The seemingly noncommittal stance on the statement here had the 2 yr gilt yield little changed, down 1 bp and the pound a touch weaker vs the US dollar. However, post statement, Governor Bailey is saying that rates may fall "more sharply than markets expect...it is likely we will need to cut bank rate" but no "preconception about how fast or far to cut." The 2 yr gilt yield is now lower and the pound is further softer.

2 yr Gilt yield intraday

In Asia, China reported April exports that rose 1.5% y/o/y, about as expected while imports grew by 8.4%, about double what was anticipated. Tech products and autos were particularly strong on the export side. Higher commodity imports drove that side of trade.

I keep hearing some argue that the Chinese should devalue the yuan and it makes no sense to me. They already have a huge trade surplus and a weaker yuan is not something Xi wants I believe.

Lastly of note, in Japan in March base pay rose 1.7% y/o/y, which matches the February pace and is the best since 1997. Take note too that the 10 yr JGB yield jumped almost 4 bps overnight to .92%, the highest since November. The 2 yr yield was up 2.5 bps to .31%, the highest since 2009.

While the yen is weaker again, just maybe this yield move was in response to the minutes that came out from the last BoJ meeting. One member said "If underlying inflation continues to deviate upward from the baseline scenario against the backdrop of a weaker yen, it is quite possible that the pace of monetary policy normalization will accelerate."

Another member said "If the outlook shown in our April quarterly report is realized, our 2% inflation target will be sustainably and stably achieved in about two years and the output gap will be positive. Therefore, there's a chance our policy interest rate will be higher than the path currently priced in by the market."

This follows Ueda yesterday to parliament saying they could hike rates to stem the yen weakness. This is a big watch here as it matters for global bond yields. I think long yen could be a trade here.

Base pay y/o/y in Japan

2 yr JGB Yield

* I call BS, again - to a complicit business media who cheerleads through "warning signs"

* Often sending the retail lemmings off the cliff...

CNBC's interview with Robinhood's CEO who "addresses" the company's receipt of a Wells notice:

The above "softball" interview was done by the same cheer leading reporter (Kate Rooney) who, a month before his indictment, conducted a superficial and non confrontational interview with FTX Sam Bankman-Fried:

Here are my more expansive thoughts on the failure of Fin TV, from late 2023:

The Fall of FTX - Be Like Larry (David) Because Fortune Doesn't Favor the Brave or the Gullible (Matt Damon)

"History is filled with almosts. With those who almost adventured and almost achieved but ultimately for them it proved to much. Then there are others, the ones who embraced the moment and commit. In these moments of truth, these mere mortals, just like you and me. And, as they peer over the edge, they calm their minds and their nerves with four simple words that have whispered since the Romans... Fortune favors the brave."

-Matt Damon, FTX commercial

Yesterday Sam Bankman-Fried, FTX's founder and chairman was convicted of seven counts of fraud and faces up to 100 years in prison.

Here is a good summary of the rise and fall of Elizabeth Holmes in cargo shorts (Sam Bankman-Fried) in a recent 60 Minutes episode.

As I summarized in a November 22, 2022 column in my Diary investors, the beautiful people (e.g., Vogue's Editor in Chief Anna Wintour), government officials (Senator Mitch McConnell, President Biden, etc.), sports figures (Tom "My boy Sam" BradyAll 3 Tom Brady FTX commercial ' FTX Tom Brady and Gisele Bundchen - YouTube , Shaq, Steph Curry), actors (Larry David, Matt Damon) and the business media (CNBC, Et al.) were duped in the weirdest, but to some of us, the most obvious of frauds:

* Once again investors have been duped by "an empty wagon" - this one was named FTX and was "managed" by Sam Bankman-Fried

Most of the cheerleaders, above, were paid off and were terribly conflicted.

The business media cheered though the "warning signs" (some of which are discussed in this column) were abundant.

The most egregious and vivid example of poor reporting, cheerleading and the absence of healthy (and critical) skepticism in the interviewing process was seen in this gushing Kate Rooney interview on CNBC with Sam Bankman-Fried which occurred only four weeks before SBF's indictment.

But there were many others, especially in the business media that cheered SBF (and his celebrity) on.

The few critical and objective critics, like Keith McCullough and my old friend Mark Cohodes, were confined to Twitter (and other less conspicuous venues) and did not have a broader platform for distribution of their skeptical views in the business media:

I continued with my criticism one year ago:

* There will be more revelations and more losses due to counter party failures and vanished cryptos in the endless tentacles of an interconnected crypto sphere

* There were plenty of FTX enablers (many of whom were conflicted) - including strategists, commentators and members of the business media

* Sam Bankman-Fried was neither the JP Morgan or the White Knight of Crypto -he was just another empty wagon and fraud

Some were on to SBF's scam, but like my criticism, there was little coverage:

Keith McCullough on X: "How pathetic (and sad) is it that the Old Wall Media who got paid to pump #FTXscam and #SBF to The People... is the same media trying to get paid on their click-bait tonight as they are all found guilty? @AlderLaneEggs @EpsilonTheory @WilliamCohan @gmorgenson https://t.co/ppPuSMJ284" / X (twitter.com)

I continued a year ago:

* Larry David had the ticket, FTX wasn't a safe way to get into crypto - it wasn't like the invention of the wheel, the fork, the toilet, coffee, the right to vote, the light bulb, the dishwasher, putting a man on the Moon - it wasn't even portable music

* It wasn't new, 'It stinks' - one of the worst ideas Larry ever heard... traders/investors should have "curbed their enthusiasm"

In this column I called out FTX/Fried's enablers and I hope that a lesson has been learned (Hint: Most will not!)

"Like I was saying its FTX, its a safe and easy way to get into crypto... Eh, I don't think so. And I am never wrong about this stuff. Never!"

Larry David, here.

"Bitcoin is evil and stupid.... Crypto is an investment in nothing and the guy who's trying to sell you an investment in nothing says, 'I have a special kind of nothing that's difficult to make more of. It is an open sere full of malicious organisms.'"

- Charlie Munger, Berkshire Hathaway, here.

"What we have learned from history is that we haven't learned from history."

- Benjamin Disraeli, former exchequer of England

"As my friend Jim Chanos likes to say, "Legal Fraud" happens in America... Until The People lose a LOT of money."

- Keith McCullough

FTX's epic failure has plumbed the deaths of human investing folly.

It is singularly the fastest destruction of such a large amount of capital ($32 billion) of all time:

View Chart »View in New Window »

FTX is Bernie Madoff, Theranos, Baldwin United, Enron, Worldcom, Tyco International, Bre-X Minerals, HealthSouth, ZZZZ Best, the dot.com stocks (that collapsed in the early 2000s), the Covid gewgaws (of 2020-21) and Cathie Wood's portfolio -- all wrapped into one big slice of "Group Stink":

View Chart »View in New Window »

Here is an example of some (FTX) "stuff" you can't make up:

View Chart »View in New Window »

I Blame Many... Especially The Business Media Who Blindly Paraded Sam Bankman-Fried to Celebrity Status

* Much like they have done with Theranos' Elizabeth Holmes and ARK Invest's Cathie Woods

Cryptocurrencies were confidently pushed by leading market strategists Fundstrat's Tom Lee believes Bitcoin will Hit $200,000 in 2022 , commentators in the business media - who, benefiting from the commercial relationship, delivered puff pieces and pitched softballs in interviews with Sam Bankman-Fried FTX still has $1 billion to deploy, says CEO Sam Bankman-Fried - blindly paraded Sam Bankman-Fried to celebrity status and by high profile investors and private equity firms.

And crypto was pushed by the two pied pipers of crypto, Galaxy Investors' Michael Novogratz and Micro Strategy's Michael Saylor, both of whose previous business failures/blowups were well known but ignored.

FTX/crypto went mainstream and even engulfed the then "golden couple" of model Gisele Bunchen and NFL quarterback Tom Brady - who took an equity stake in FTX last year and appeared in a prominent television commercial... who were investors in FTX.

As I have noted in my Diary and in Barron's, Matt Damon (during the Super Bowl) erroneously told us MATT DAMON ENDORSES CRYPTOCURRENCY that fortune favors the brave. Here is my early October column on the subject, "Beware of Celebrity Endorsements of Stocks and Other Asset Classes."

At least "Curb Your Enthusiasm's" Larry David had the ticket.

As noted above, arguably also contributing to the ridiculously inflated valuation of FTX, NFTs, other crypto dealers and phony cryptocurrencies, were the large amounts of money that went into the advertising coffers of leading business media platforms.

The amount of FTX's influencing peddling was extraordinary - it had little bounds, ranging well beyond the media and into entertainment, sports and politics.

Here is an example of the influence peddling incorporated in outsized contributions to individuals seeking office from both parties:

View Chart »View in New Window »

Calling Out Sam Bankman-Fried's Enablers

There were numerous conflicts of interest by those that had been compensated directly or indirectly by FTX.

Not calling them out by name lets the con artists off the hook - as people's life savings have been lost.

I can't help not to name one particular individual - because he is among the most self confident, who is never in doubt and often wrong - he was one of the few ones who confidently and delightedly publicly disclosed his role as a spokesperson:

"In managing the decision of which projects to invest in - I am very fortunate my deal flow is amazing. I have to disclose I am a paid spokes person to FTX and a shareholder there, too. I am a big advocate for Sam because he has two parents that are compliance lawyers. If there is any place that I can be and not get into trouble its going to be FTX."

- Kevin O'Leary (Mr. "Not So" Wonderful)

Here is more:

"If there is ever a place I can be and I am not going to get in trouble, it is going to be at FTX"

Mr. Wonderful @KevinOlearyTV

- GuruLeaks (@Guruleaks1) November 11, 2022

But most of all, the FTX and the collapse in cryptocurrencies represented hubris, a loss of common sense, the absence of analysis - in a financial world that, these days, seems to know everything about price and nothing about value - and embracing of "group stink" by even some of the most sophisticated investors or our era (Paul Tudor Jones, Sequoia, Tiger Global, Third Point, Soft Bank, Lightspeed and Circle). Factbox: What are FTX's investors saying? - Reuters.

There were other signs. like this:

In the months leading up to its demise, FTX spent hundreds of millions of dollars on a marketing spree - which included a 19 year sponsorship as they purchased the naming rights last year to The Miami Arena, home of the NBA's Miami Heat, another warning signpost.

Within that sign there were other indications:

View Chart »View in New Window »

Didn't investors see the signs when Celsius, Voyager Digital and venture fund Three Arrows Capital all failed months ago?

"Next time I come on I am going to wear a Sam Bankman-Fried tee shirt."

- The Mooch on CNBC

Wasn't the nonsensical (and synergy-lacking) purchase by FTX Ventures of 30% of A's SkyBridge Capital a sign?

"What people are missing is the closeness of our two firms... Sam as a person and the culture that he is setting for FTX and the long term vision... We put $40 million into bitcoin on our balance sheet. if you understand the 1907 crisis when JP Morgan stepped into the crisis. Sam is the JP Morgan of our day. He will be at the top of the crypto food chain."

- Anthony Scaramucci

Or El Salvador's embracing of bitcoin as a parallel currency.

More Lessons Learned

Unfortunately, as has been the case throughout financial history - it is only a few outsiders that reveal the truth. Like Harry Markopolos who revealed the Madoff fraud and Jim Chanos who uncovered frauds in Baldwin United and Enron. And recently, Marc Cohodes, Mike Lewitt and Keith McCullough that saw right through Sam Bankman-Fried's BS.

Cryptocurrency regulation has been lacking and the absence of such regulation has likely led to the FTX fraud.

But, to me, the lesson to investors, is to perform better due diligence and to not foolishly jump on speculative band wagons without doing research and considering "the value you get" (source: Warren Buffett).

I have been an outspoken bear, even entitling one of my columns, I Call BS.

In light of FTX's bankruptcy I feel it is important for me to post my prior columns on the illusion of cryptocurrencies - here is May 11th's "I Remain at Outspoken Bitcoin Bear".

Bottom Line

"Virtue sometimes pretends,. Vice is always sincere."

- Mason Cooley

FTX was a monumental failure - a failure of accountability and transparency, filled with numerous supporters possessing clear but often unexposed conflicts of interests and driven by fraudulent actions - "borrowing" customer funds and creating FTX coins and using/showing them as reserves, among other nonsensical and bogus moves.

With a good perspective on history, we can have a better understanding of the past and present and thus a clearer vision of the future.

Learn from history and, importantly, who you can trust as a resource in your trading and investing process.

Be independent of view and do your analysis.

Always be a skeptic.

Be Larry David.

Because (it) FTX stinks like fish from the head - as Larry David reminded us in the television commercial.

Sam Bankman-Fried was not the next Warren Buffett, he was the next Bernie Madoff.

As Joe Frazier once said "An empty wagon makes the most noise."

Speaking of The Oracle of Omaha, I have long concurred with his partner Charlie Munger who described Bitcoin as stupid - because it is very likely to go to zero - evil - as it undermines our currency system - and made him look foolish compared to somebody else - like the Communist leader in China who correctly banned Bitcoin. Here is a great video of Warren and Charlie discussing bitcoin at this year's Berkshire Annual Meeting.

P.S. - You may not make any money reading this column, but you will likely save a lot of money in the future - if you pay heed to the signs and analysis!

BY DOUG KASS

NOV 3, 2023 9:40 AM EDT

* Markets took a breather on Wednesday after several days of strength

* As previously mentioned, volumes remained low in the recent rally - a divergence or warning signpost?

* For emphasis, equities are not compensating investors for risks and are expensive against interest rates and rising inflation

* The S&P Short-Range Oscillator is still in overbought - at 4.28% v. 3.83%

* Bond yields are +2 to +4 bps

* The U.S. dollar continues stronger against the yen:

* Oil is rallying after recent weakness ... Brent is +$0.44

* Gold is -$7.80 and silver is +$0.22

* Bitcoin is -$1,000 (-2%)

It was on a sweet Thursday
Monday, Tuesday, Wednesday all had passed
Came the day I'd waited for at last
And you were there, with love to spare

Making it a sweet Thursday
Not like any other day I'd known
Giving me a dream to call my own
A dream that you are sharing too

- Johnny Mathis, Sweet Thursday

This daily Futures feature is like inside baseball. I try to show you and write about what I believe thoughtful hedge fund managers are looking at when they awake -- let's call it our normal routine -- setting the stage for their strategy for the day. The market is a complicated mosaic and the more info you have, the better trader and investor you will be!

The market (and money) never sleeps -- and neither do I, it appears! I have previously described the importance that overnight futures trading hold 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 are often exaggerated outside the regular trading session. I frequently try to capture those efficiencies by trading actively both in the pre- and after-market sessions.

Here are brief observations I wanted to highlight and provide a summary of overnight price movements in various asset classes:

* Stock futures were lower overnight. S&P futures peaked at +1 and bottomed at -17. Nasdaq futures peaked at -13 and bottomed at -85. At 6:13 a.m. ET, S&P futures were -10 and Nasdaq futures were -46:

* Commodities are mixed to higher. Brent crude was +$0.45 to $84.04:

* The S&P Short-Range Oscillator grew more overbought last night at 4.28% v. 3.83%.

* The VIX is at 13.26 (+0.26). Given the low vol I am out of straddles/strangles now.

* The US dollar is very strong against the yen and a tad higher v. euro and pound:

* Interest rates are 2-4 bps higher. The yield on the two-year Treasury is 4.85% (+1 basis point). The yield on the 10-year Treasury is +3 basis points at 4.51%. The long bond yield is also +4 basis points at 4.67%:

* Overnight, the inversion of the 2s/10s Treasuries curve is flat at -34 basis points.

* Gold is -$6.70 at $2,315. Silver is +$0.23 cents:

* Bitcoin is -1% or -$1.000 and is $61k.

Here is a synopsis of some of my columns I believe were important, or in the event you were out for the day and/or did not read my Diary. The principal intent is to review the logic of my market moves and other factors:

Daily Affirmations on "Talking Heads" 

Watching FIN TV (more on this today!)

Atlanta Fed GDPNow

What Commercial Real Estate Problems?

Cramer on Disney

Cannabis Reality

Getting The BOOT (new short)

The Latest From Howard Marks

Credit Default Swaps (Burry, The Big Short)

Here were yesterday's trades:

* Shorting More SPY, QQQ

With S&P cash reversing from the lows and only -2 handles lower on the day, I am shorting more June in the money calls on SPY, QQQ.

This is a valuable table for short-term, momentum-based traders:

* Again!

* We remain short....

Today's press release indicates more operating and financial headwinds lie ahead.

From JPMorgan:

US: Futs are weaker as the yield curve bear steepens and USD strengthens. Pre-mkt, Mag7 names are all in the red with Semis lower, too. Cmdtys are stronger with Ags/Energy outperforming Metals. Jobless data is not expected to be market moving but keep an eye on the 30Y bond auction.

and...

EQUITY AND MACRO NARRATIVE: In a week without major catalysts, the market has tread water with Fedspeak aligned with expectations (higher for long; data dependency; eventually will hit 2%; bias to cut but could hike). Yesterday, we saw some de-risking into next week’s CPI. AI, Inflation, and Earnings are the 3 major catalysts, and all return next week. Today shapes up to be a quiet session.

“You should be far more concerned with your current trajectory than with your current results.”

- James Clear

Bonus - here are some great links:

* Silver Tests Resistance 

* Investor Optimism May Spell Trouble

* Why Apple Remains a Beast 

* Latin America's Leadership

I am back shorting  (SPY) /QQQ common:

* SPY $516.68

* QQQ $439.47

Tesla  (TSLA)  Talk:

* ABNB and ARM gap lower in after hours

Bulls have emphasized the rear-view mirror of better-than-expected reported 2024 EPS.

Bears are emphasizing the after-hours disappointment in forward guidance at  (ARM)  and  (ABNB) .

I am in the latter camp.

More on my market view this morning...