Thanks for reading my Diary today and all week.

I hope it was helpful!

Enjoy the weekend.

Happy Mother's Day.

Be safe.

At $7.60 (-$4.77) down to tagends on  (XPOF)  short

Investment short  (XPOF)  trading halted, again.

-$3.77/share or -31%.

An investment short, Exponential Fitness  (XPOF) , has been halted.

Here is the news.

From Peter:

Positives

1) With a 11 bps drop in 30 yr average mortgage rate, purchase apps rose 1.8% w/o/w and refi’s were higher by 4.5%.

2) 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 though, "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."

3) From ZipRecruiter: “there are also positive signs emerging as we begin the year. Q1 '24 is the first quarter with a sequential increase in quarterly paid employers since 2022 and is a potential indicator of stabilization in the hiring market. While not yet a return to normal seasonality, where revenue ramps from Q1 to Q2, we see this as an early sign that the labor market downturn is potentially reaching a trough." They saw particular "strength in government and education."

4) From MSG Entertainment: On what they are seeing with consumer spend in answer to an analyst question, "In regard to your 2nd question in terms of softening of consumer spending and demand and you referenced McDonald's and Starbucks, we're not really seeing that. We see that on a couple of different data points that would support that. Most of our shows continue to sell out. For our 4th quarter shows, we're pacing ahead of the prior year in terms of our sell through percentages vs where we were the same point last year. 

We still have a lot of acts that are selling, that are adding additional shows because of demand. So in terms of events and tickets, the demand is very healthy, which supports just what we're seeing in the live experience sector in general, both here and amongst our peers." Finally on this, "I would speculate that we enjoy certain tailwinds that I think maybe McDonald's and Starbucks don't in terms of, again, the kind of the burgeoning popularity of live experiences and the continued return of New York City tourism from the pandemic. So by virtue of that, we are not seeing that kind of softening of demand."

5) From Cheesecake Factory: "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."

6) From Uber: "Demand for the products remains strong."

7) From Lyft: "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."

8) From Simon Property: "Our tourist oriented properties outperformed the portfolio average in the quarter with a 6% increase in sales...domestic tourism continues to excel, and I think people, at the end of the day as part of when they go on holiday, they love shopping as part of that experience, dining, shopping, being with their families."

9) From Camden Property Trust: They see 'Signed Blended Lease Rates' up just .6% y/o/y in April with a 1.8% fall in 'Signed New Lease Rates' mostly offset by a 3.4% rise in 'Renewal Rates.' Their 1st quarter, thru March, saw blended rental rates down .9% y/o/y.

10) Q1 GDP in the UK exceeded expectations with a .6% q/o/q increase vs the estimate of up .4%. Private consumption overall was softer than estimated but offset by fixed investment and industrial production and particular consumer spending on services.

11) 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.

12) The China private sector focused Caixin services PMI for April was 52.5 vs 52.7 in March and that was as forecasted. This part of their economy has certainly outperformed manufacturing. Caixin said "Central to the latest expansion in services activity was another rise in new business...Moreover, the pace of growth was the fastest since May 2023 and solid overall. Panelists attributed the rise in new work to improved demand conditions and a broadening of customer bases on the back of business development efforts."

13) In Japan in March base pay rose 1.7% y/o/y, which matches the February pace and is the best since 1997.

14) India's service sector, along with manufacturing, continues to shine in the region as it printed 60.8 for April, though down slightly from 61.7 seen in March.

15) The service sector is also carrying the economic weight in Europe as their PMI was revised up by .4 pts to 53.3 from the initial print seen a few weeks ago. That is up from 51.5 in March and the best read since May 2023 led by Spain and Italy and their tourism industries, both outperforming Germany and France.

16) The Riksbank cut rates as expected to 3.75% and said maybe two more this year. Let’s hope it’s the right move. The BoE held steady but hinted at rate cuts this year. The RBA also did nothing but will hold rates at current levels for a while it seems.

17) German trade data in March saw exports up .9% m/o/m, 3 times expectations but follows the February drop of 1.6%. Some of this was a pick up in exports to China after their February holiday.

Negatives

1) As measured by the UoM, consumer confidence fell sharply in May with its index down to 67.4 from 77.2 in April and that was also well below the estimate of 76.2 and the weakest since November 2023. Both main components fell notably too. One yr inflation expectations jumped to 3.5% from 3.2% and that is the highest since November 2023. The 5-10 yr guess was up one tenth m/o/m to 3.1%. Expectations for higher gasoline prices was a factor here as they also rose to the most since last November. That higher inflation expectation figure helps to explain why just 29.6% (mean perspective) think their family income will beat inflation over the coming 5 years, the lowest since 2012.

The employment component fell by a large 15 pts m/o/m to 70 and that matches the softest read since August 2011. The income component was down by 6 pts m/o/m to match the lowest since early 2021 and 2014 not including Covid. Also a problem was the big drops in spending intentions. Those saying it’s a Good Time to Buy a Home fell 21 pts, a plummet based on historical moves. At 26, that is the lowest print on record dating back to 1978. Intentions to buy a vehicle fell 8 pts and by 20 pts for a major household item.

2) Initial jobless claims jumped to 231k, the highest since August 2023. Continuing claims, delayed by a week, totaled 1.785mm, still hanging around the highest since November 2021.

3) From the Fed’s Senior Loan Officer survey, "Regarding loans to businesses, survey respondents reported, on balance, tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes over the first quarter. Meanwhile, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories." Also, "For loans to households, banks reported that lending standards tightened across some categories of residential real estate (RRE) loans while remaining unchanged for others on balance. Meanwhile, demand weakened for all RRE loan categories. In addition, banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs). Moreover, for credit card, auto, and other consumer loans, standards reportedly tightened and demand weakened."

4) The World Container Index saw the biggest one week rise since the spikes in January with the Shanghai to Rotterdam route up by $606 w/o/w to $3,709 and back to the highest level since late February. The Shanghai to LA trip was higher by $617 to just under $4,000 and that is the most since mid March.

5) The April Logistics Manager's Index fell to 52.9 from 58.3 in March, which was the best read in a year and a half. LMI said, "While this still indicates growth in the logistics industry, this breaks what had been four consecutive months of increasing rates of expansion and is the slowest rate of growth observed so far in 2024. The slowed pace of growth is driven by a significant decrease in the expansion of inventory levels. This has cascading effects across the supply chain, as lower levels of inventory led to a loosening of both warehousing and transportation capacity, slower expansion for warehousing utilization and most importantly, transportation prices moving back into contraction." The positive here was that they said the 2nd half of April showed improvement.

6) On 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."

7) From ZipRecruiter: "Though results were above expectations discussed in our last earnings call, the labor market industry backdrop has remained challenging through the first few months of 2024. Hiring levels continue to be subdued and the number of people quitting their jobs also remains low as the Big Stay persisted in Q1…Technology continues to be one of the hardest hit areas of job posting and hiring activity when we look on a y/o/y basis" and "continues to be extremely impacted and is sort of an outlier on the negative end to the same extent that - or in a similar way that government and education are on the positive end of the spectrum."

8) From Warby Parker: "We are seeing sort of more consistency, we'd say sort of month to month, but still we tend to be in the best retail centers across the country and traffic is, still hasn't sort of rebounded to what we would have expected at this point. So, and if we think about the broader optical category, it still has not returned to normalcy."

9) From Tapestry: On North America, "it's really a continuation of what we've been seeing in the market. The consumer is being more choiceful, despite some positive factors in the market. Certainly, the labor market is a positive in the market. We do see consumer confidence is low in North America, likely impacted by sticky inflation. And so, we are seeing an overall more cautious consumer."

10) From Dine Brands: "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…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."

11) From Reynolds Consumer Products: "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."

12) From Expeditors International: "While we are no longer experiencing anything like the widespread supply chain chaos of the pandemic, our industry remains volatile due to global conflicts, stubborn inflation, fragile economies, and uncertain demand. At the same time and despite those conditions, both air and ocean carrier capacity continue to grow, further pressuring rates that have already come down significantly from their peaks."

13) From Disney: "As it relates to demand, while consumers continue to travel in record numbers and we are still seeing healthy demand, we are seeing some evidence of a global moderation from peak post-Covid travel."

14) From Simon Property: "we feel like the malls made a big comeback, physical stores are where it's happening, we're seeing a resurgence and reinvigoration of that whole product." But, "the lower income consumer has been under pressure now for quite some time. We're very focused on that.”

15) From Microchip Tech: "We experienced a major inventory correction in fiscal 2024, leading to a 9.5% decline in revenue to $7.6 billion...We believe we are under shipping to end market demand, as customers and channel partners continued to reduce inventory. This situation has required us to implement ongoing austerity measures, including taking actions to reduce factory utilization, that will persist into the June quarter...As we enter fiscal 2025, we see early signs of demand stabilization but are experiencing low business visibility due to our short lead times and the continued macro uncertainty."

16) From Jones Lang Lasalle: "The year started with some positive momentum highlighted by an increase in bidders and the closing of several large deals in North America. These green shoots encapsulate investors' willingness to deploy capital when market conditions warrant. However, once inflation data came in higher than expected and the hope for several interest rate cuts later this year diminished, real estate capital markets became much quieter again."

17) Taiwan said its April exports rose 4.3% y/o/y but less than half the estimate of up 9.9%. The mix was interesting too as exports to the US spiked by 82% y/o/y driven by tech, communication and other electronic products but fell 1% to China.

18) Hong Kong's April PMI was down a touch to just above 50 at 50.6 vs 50.9 in March. Services too led the way but the overall business outlook still seems tough as "sentiment among Hong Kong SAR (Special Administrative Region) private sector firms remained pessimistic at the start of the 2nd quarter, with firms in the wholesale and retail sector being the most downbeat. Firms cited concerns regarding rising competition and subdued economic conditions affecting sales."

19) Singapore's PMI fell to 52.6 from 55.7 but "business sentiment improved among Singaporean private sector firms in April. The level of confidence rose to the highest since last November with twice the proportion of panelists anticipating better market conditions and business development efforts to support sales."

20) German industrial production in March fell .4% m/o/m but as expected when including the revision to February. They are down 3.3% y/o/y and hasn't risen y/o/y since May 2023.

21) German factory orders in March were softer than expected, down by .4% m/o/m vs the estimate of flat and February was revised lower by 100 bps to a drop of .8%. Order weakness came domestically and from non Eurozone countries. Capital goods were soft while consumer goods did tick up

With S&P cash +7 handles and bond yields near the day's highs, I am back shorting more SPY and QQQ calls -- June expiration, in the money.

No trades since earlier in the day.

Scott Galloway's No Mercy/No Malice... "Big Energy."

Hawkish comments from more Fed members just now.

Getting back to yields - they are the day's highs:

* The yield on the 2 -year Treasury note is +6 bps to 4.863%.

* The yield on the 10-year Treasury note is +5 bps to 4.504%.

* The yield on the long bond is +5 bps to 4.65%.

The potential impact of market structure, and the dominance of passive products and strategies, works both ways - to the upside and to the downside.

I remain fearful that a reversal in price momentum may lead to an exaggerated move to the downside - as it might have done to the upside in recent days.

From Peter:

As measured by the UoM, consumer confidence fell sharply in May with its index down to 67.4 from 77.2 in April and that was also well below the estimate of 76.2 and the weakest since November 2023. Both main components fell notably too. One yr inflation expectations jumped to 3.5% from 3.2% and that is the highest since November 2023. The 5-10 yr guess was up one tenth m/o/m to 3.1%. Expectations for higher gasoline prices was a factor here as they also rose to the most since last November.

That higher inflation expectation figure helps to explain why just 29.6% (mean perspective) think their family income will beat inflation over the coming 5 years. Go back to 2012 the last time we saw a print like that.

As we’re now all watching the labor market, the employment component fell by a large 15 pts m/o/m to 70 and that matches the softest read since August 2011. The income component was down by 6 pts m/o/m to match the lowest since early 2021 and 2014 not including Covid.

Also a problem was the big drops in spending intentions. Those saying it’s a Good Time to Buy a Home fell 21 pts, a plummet based on historical moves. At 26, that is the lowest print on record dating back to 1978. Intentions to buy a vehicle fell 8 pts and by 20 pts for a major household item.

The UoM considers this monthly drop in confidence as “statistically significant” and “This month’s trend in sentiment is characterized by a broad consensus across consumers, with decreases across age, income, and education groups…They expressed worries that inflation, unemployment and interest rates may all be moving in an unfavorable direction in the year ahead.”

As for their comments on the notable deterioration in the outlook for the jobs market, “Almost 40% of consumers now anticipate that unemployment rates will rise in the year ahead, compared with about 32% in the preceding 5 months. This surge is unusually large, about double the size of the typical month-to-month change, suggesting that consumer views on labor markets have materially changed in May.”

And the higher for longer interest rate situation led to a plunge in buying conditions for big ticket items as stated. “Worse yet, consumers expect the pain to continue, as expectations for interest rates deteriorated considerably this month.”

I said a few years ago when the Fed was aggressively raising interest rates that I was more worried about a death by a thousand cuts economic response, rather than a big immediate economic event/decline, and I’m sticking to that. This sure feels much more like a 1.5% type economy rather than the 3%ish that some think we’re still in.

UoM

One yr Inflation Expectations

Median % that think income will exceed inflation in coming 5 yrs

Employment Expectations

Buying Conditions for a Home

* Turning lower...

- NYSE volume 148M shares, 9% above its one-month average

- Nasdaq volume 1.39B shares, 1% above its one-month average

- VIX: up 1.34% to 12.86

Breadth

Biggest Movers

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Nasdaq 100 Heat Map

View larger here.

 "Inflation data has been disappointing. Too early to think about cutting rates."

- Fed's Logan

- We have made substantial progress on inflation, with labor market and economy strong. Still sees inflation hitting 2%.

- Not a soft landing yet. Need to remain flexible on policy.

- There are uncertainties if policy is sufficiently restrictive.

- Neutral interest rate may have risen. Strong economy could be a sign of a higher neutral rate. 

I picked up a small position in Fidelis Insurance Holdings (FIHL) this morning at around $17.50.

The shares are down unfairly after a one penny miss on EPS released last night.

More on the name next week.

The market is experiencing a melt up and I am expanding my Index shorts via short SPY, QQQ calls.

The rally is at odds with the reversal lower in bond prices and increase in yields:

* The yield on the 10-year US Treasury note is +4 basis points on the day, and +5 bps from the day's lows.

Meanwhile, while the University of Michigan had a big miss, the U Michigan one year inflation up to 3.5% from 3.2%.

That is what I call "slugflation." 

When emotion takes over, I trade more aggressively.

A possible explanation:

View larger here,

View larger here.

Upside

-AEMD +137% (reports Positive Results From an In Vitro Binding Study of Its Hemopurifier in Removing Extracellular Vesicles From Cancer Patient Plasma)
-NVAX +120% (earnings, guidance, and removes going concern notice; Novavax and Sanofi announce co-exclusive licensing agreement to co-commercialize COVID-19 Vaccine and Develop Novel COVID-19-Influenza Combination Vaccines)
-LIDR +68% (announces Partnership with Leading Automotive Electronics and Vision Solutions Provider, LITEON)
-NTRA +20% (earnings, guidance)
-SG +17% (earnings, guidance)
-ARRY +16% (earnings, guidance)
-INSG +16% (earnings, guidance)
-ADMA +14% (earnings, guidance)
-SOUN +14% (earnings, guidance)
-AMPS +12% (earnings, guidance)
-GRPN +10% (earnings, guidance)
-IAS +9.7% (earnings, guidance)
-OUST +9.2% (earnings, guidance)
-CDNA +9.1% (earnings, guidance)
-OPRT +7.9% (earnings, guidance)
-FARM +5.4% (earnings)
-FNKO +5.1% (earnings, guidance)
-ROAD +4.9% (earnings, guidance)
-BE +4.3% (earnings, guidance; announces Largest Silicon Valley Data Center Power Capacity Agreement with Intel Corporation)
-ORN +4.3% (announces Significant Contract Award for Port Everglades Bulkhead Replacement Project)
-DOCN +4.2% (earnings, guidance)
-IOVA +4.1% (earnings)
-ACLX +3.4% (earnings; Arcellx and Kite Continue Momentum with Advances in Anito-Cel Multiple Myeloma Program)
-ORGO +3.1% (earnings, guidance)
-PACB +2.3% (earnings)
-CLMT +2.1% (earnings)
-EVH +2.0% (earnings, guidance)

Downside

-MGNX -67% (earnings)
-MVIS -26% (earnings)
-PGNY -26% (earnings, guidance)
-FLUX -24% (earnings)
-EVLV -19% (earnings, guidance)
-AAOI -14% (earnings, guidance)
-FROG -14% (earnings, guidance)
-FIGS -11% (earnings, guidance)
-ZOM -11% (earnings, guidance)
-NVTS -9.6% (earnings, guidance)
-AKAM -9.0% (earnings, guidance)
-AMCX -8.4% (earnings)
-AMN -7.5% (earnings, guidance)
-DNOW -6.9% (earnings, guidance)
-BW -5.7% (earnings, guidance)
-SNES -5.4% (earnings)
-BHVN -5.1% (earnings)
-PHUN -3.1% (earnings)
-RGTI -3.1% (earnings)
-MRNA -2.6% (US FDA does not expect to complete review of mRNA-1345 BLA, investigational respiratory syncytial virus (RSV) vaccine, by May 12, 2024 PDUFA date)
-HGBL -2.4% (earnings)
-U -2.4% (earnings, guidance)
-ARLO -2.1% (earnings, guidance) 

From Peter:

I felt that the Treasury auctions this week were uneventful and mixed which in a market that is now fearful of bad ones, that is ok. I do have to wonder though if the Fed's surprisingly bigger than expected tapering of QT to $25b from widespread market expectation of $30b was a wink and a nod from Jay Powell to Janet Yellen that we got you.

Nothing good will come of a ramp up in the tariff battle and I'll leave it at that.

I mentioned on Wednesday what Maersk said that the Houthis are widening their region of attacks which is again disrupting container shipments. Well, the World Container Index saw the biggest one week rise since the spikes in January with the Shanghai to Rotterdam route up by $606 w/o/w to $3,709 and back to the highest level since late February. The Shanghai to LA trip was higher by $617 to just under $4,000 and that is the most since mid March.

Shanghai to Rotterdam

We remain long and bullish of silver, along with gold. Silver is a unique commodity with half the demand for it being industrial usage and the balance jewelry, tableware and a monetary metal like gold. I bring it up because number one, it is on the cusp of breaking out of a multi year range but also to highlight the growing demand for it from solar panel makers that was mentioned in the WSJ this week. 

The article said, "Demand for silver from the makers of solar PV panels, particularly in China, is forecast to increase by almost 170% by 2030 to roughly 273 million ounces - or about one-fifth of total silver demand - based on current trend projections, according to investment manager Sprott." This as "supply is flat to declining." Of course, they are talking their book so keep that in mind but the demand is big.

Silver

I forgot to mention stock market sentiment yesterday and the Bulls are coming back while the Bears again are disappearing. The extremes are not back to where they were in March but as usual, sentiment follows price. Investors Intelligence said Bulls rose back to 50 from 47 while the Bears shrunk to 18.7 from 19.7. 

AAII yesterday said Bulls rose by 2.3 pts w/o/w to 40.8 and that is a 4 week high. Bears declined by 8.7 pts to just 23.8 and that is a 5 week low. The CNN Fear/Greed index which got into the 30's a few weeks ago which was in 'Fear', is back to 45 which is considered 'Neutral.' Again, nothing extreme but the bearishness that picked up in April has worn off and the Bulls are coming back.

ZipRecruiter has been one of my go to sources for the state of the labor market each quarter when CEO Ian Siegel gives us his thoughts. His business started to slow last year.

From their earnings call:

"Though results were above expectations discussed in our last earnings call, the labor market industry backdrop has remained challenging through the first few months of 2024. Hiring levels continue to be subdued and the number of people quitting their jobs also remains low as the Big Stay persisted in Q1. 

"However, there are also positive signs emerging as we begin the year. Q1 '24 is the first quarter with a sequential increase in quarterly paid employers since 2022 and is a potential indicator of stabilization in the hiring market. While not yet a return to normal seasonality, where revenue ramps from Q1 to Q2, we see this as an early sign that the labor market downturn is potentially reaching a trough."

Their revenues were down 33% y/o/y so hopefully they are experiencing a trough. The believe in this is because quarterly paid employers were 72,000, "representing a 32% decrease vs Q1 '23, but a 1% increase sequentially." We'll see because we know other anecdotal and hard data points are pointing otherwise. Zip sees some more hiring interest from small and medium sized businesses while the NFIB 'Plan to Hire' says the opposite. Something to watch.

They saw particular "strength in government and education." On the flip side though, "Technology continues to be one of the hardest hit areas of job posting and hiring activity when we look on a y/o/y basis" and "continues to be extremely impacted and is sort of an outlier on the negative end to the same extent that - or in a similar way that government and education are on the positive end of the spectrum."

Starwood Property Trust, a stock we own, reported on Wednesday and Barry Sternlicht said this on their call:

"And I think it's pretty clear that for most every property type, things are ok at the property level. And so it's really a question of how do you finance yourself. This is a balance sheet crisis in the United States, not a property level crisis." A point I've made many times here. Class B and C office buildings are fundamentally broken but a 98% occupied multi family apartment building could have trouble if they have debt coming due this year that was initially borrowed pre 2022.

On multi family, another point I've been making about the supply situation and what it means for rents this year and how they will turn up again in the following years. "Most everyone sophisticated in real estate knows that the supply of new apartments is going to fall precipitously as soon as this wave completes more or less in the middle of '25. And then rents should reaccelerate."

Warby Parker added some macro comments on what they are seeing:

"We are seeing sort of more consistency, we'd say sort of month to month, but still we tend to be in the best retail centers across the country and traffic is, still hasn't sort of rebounded to what we would have expected at this point. So, and if we think about the broader optical category, it still has not returned to normalcy."

Tapestry said its top line was driven by international growth, particularly in Europe and Asia while in North America, "revenue declined 3% compared to last year, amid a challenging consumer backdrop."

More on North America, "it's really a continuation of what we've been seeing in the market. The consumer is being more choiceful, despite some positive factors in the market. Certainly, the labor market is a positive in the market. We do see consumer confidence is low in North America, likely impacted by sticky inflation. And so, we are seeing an overall more cautious consumer."

Cedar Fair, who is merging with Six Flags, is getting some of the consumer spend instead. While their first quarter is weak because of colder weather (only 5% of full year attendance and net revenues) , "Our first quarter performance positions us well for the peak summer season ahead and validates the strength of our portfolio and strategy as well as our belief that consumers continue to place a high priority on experiential entertainment."

Madison Square Entertainment, a stock we own, did not meet high expectations but their business is doing great hosting sports, concerts and comedy shows (and Christmas Spectacular during the holidays at MSG) at all their venues. 

"During the quarter, our portfolio of venues hosted more than 1.5 million guests at over 200 live events...A key contributor to this increase was a strong multi-night comedy schedule...For the third quarter, the majority of the concerts at our venues were once again sold out. Sales of single night suites increased significantly and per-cap spending at concerts on food, beverage and merchandise again increased on a y/o/y basis." And finally, the Knicks and Rangers are powering thru the playoffs "with increases in average per-game revenues for food, beverage and merchandise sales" too.

On what they are seeing with consumer spend in answer to an analyst question, "In regard to your 2nd question in terms of softening of consumer spending and demand and you referenced McDonald's and Starbucks, we're not really seeing that. We see that on a couple of different data points that would support that. 

"Most of our shows continue to sell out. For our 4th quarter shows, we're pacing ahead of the prior year in terms of our sell through percentages vs where we were the same point last year. We still have a lot of acts that are selling, that are adding additional shows because of demand. So in terms of events and tickets, the demand is very healthy, which supports just what we're seeing in the live experience sector in general, both here and amongst our peers."

Finally on this, "I would speculate that we enjoy certain tailwinds that I think maybe McDonald's and Starbucks don't in terms of, again, the kind of the burgeoning popularity of live experiences and the continued return of New York City tourism from the pandemic. So by virtue of that, we are not seeing that kind of softening of demand."

Overseas, while dated with us about 1 1/2 months into Q2, Q1 GDP in the UK exceeded expectations with a .6% q/o/q increase vs the estimate of up .4%. Private consumption overall was softer than estimated but offset by fixed investment and industrial production and particular consumer spending on services.

From Rosie this morning:

While everyone has been dropping the U.S. recession call and jumping aboard the “soft landing” bandwagon, a range of leading indicators have been showing rising odds of a downturn. We went through the list of indicators of most concern in detail in Wednesday’s Breakfast with Dave, Is the U.S. Sleepwalking into A Recession? 

One of the metrics we highlighted in the report was the Sahm rule, defined as the difference between the 3-month average of the unemployment rate and the lowest 3-month average in the past 12 months (it’s currently at +0.37 percentage points and rapidly approaching the +0.50 percentage point cutoff that signals recession).

But what we didn’t mention is that if you adjust the Sahm rule to the U-6 unemployment rate rather than the standard U-3 (U-6 includes marginally attached workers and those working part time for economic reasons, though this broader definition comes at the cost of a shorter data history to base the rule on), then the recession threshold is even closer to being crossed. 

At +0.63 percentage points, the U-6 Sahm indicator is just a tick below the +0.70 percentage point cutoff we estimated.

"It’s important to note that exiting the market after a decline — and thus failing to participate in a cyclical rebound — is truly the cardinal sin in investing."

- Howard Marks

Bonus - Here are some great links:

New Highs Loading

Utilities Regain Power 

How Much Longer Can This Last? 

Stocks Makes Mom Happy ("Jazzy" Jeff Hirsch)