Thanks for reading my Diary.

I have some research calls to make but I hope to summarize the market's performance later this afternoon.

Enjoy the evening.

Be safe.

Our informal polling of "talking heads" on CNBC continues to have - now that Morgan Stanley's Mike Wilson has capitulated - a unanimously optimistic view of the equity markets.

Over 45 panelists and guests are optimistic on the markets.

There are no bears.

None, nada.

Indeed, to fine tune our poll, the confidence level in that positivity has never ever been greater.

Moreover, the number of micro cap companies advertising on the network in CNBC's Florida market has also never been more abundant. (New symbols buying ad time today include NTRB and ASPI).

Picking at more DKNG with a $43.50 limit this afternoon.

At $59.10, I have moved down to very small Sprott Uranium Miners ETF URNM.

At 1:45 pm...

Breadth

Nasdaq 100 Heat Map

Up at 1 pm is Carter and Guy.

And it is free.

A worthwhile view.

I added to my ProShares Bitcoin Strategy ETF BITO short late this morning:

Speaking of shorts - several are doing well today, and recently, including MCD, SBUX, DJT, WBD, RILY, WBA, CHGG and AFRM. 

Several of these are at all time lows today.

On the long side I have added to DKNG on weakness.

I will be out for the next 1 1/2 hours as I have to secure a passport for an overseas trip this summer.

Radio silence.

With S&P cash now +5.50 I am adding to my SPY, QQQ calls (short).

I added to my Financial Select Sector SPDR Fund XLF short at $42.08 this morning.

I am buying DJT puts (in the money May/June), and I am putting DJT on my Best Ideas List (short).

I lost almost all of my Viking Therapeutics VKTX on Friday's expiration.

Contemplating more buying as I began late last week, but I have more research to do.

* At 10 AM...

Breadth

Mag 7

A drop in bond yields of about 2 bps from the opening is likely buffering any more of a general equity decline.

Masterhedge:

I remain bullish on $NVDA and it remains a top position. Many have hedged out the risk and a hedged pot rarely boils. Nevertheless I am reproducing in part a post from Le Shrub a widely followed Monaco based global macro guy. He can be found on twitter and has his own substack I can highly recommend.

"The consensus forecasts could be nonsense, but it is inevitable that Nvidia’s growth rate will drop below +200% YoY in the next couple of years!

Consensus expects that the revenue growth rate will drop from the current +200% YoY to below +50% in early 2025 and down to +20% by the end of 2025. Consensus expects the first negative quarterly growth print by mid-2026.

What does that mean for the share price?

Lets say we put a 20x P/E multiple on a $75bn projected net income. That’s a $1.5 TRILLION market cap. That’s still pretty good right?

Sure, except there’s a little problem: the current market cap is $2.3 trillion :)

That’s a downside of >35% from here.

This is the problem that Nvidia’s share price will face when the growth rate drops.

Whether Nvidia manages to avoid this, really depends on the questions we posed:

• Is NVDA more than a Capex play now?
• Can NVDA maintain its pricing?
• Are semiconductors still cyclical? (oh boy)
• How will competition fare?

Bear in mind, in this whole discussion we never said that Nvidia is a bad company. Nvidia is an amazing company. Period. The purpose of this discussion is to create a framework for forecasting the trajectory of Nvidia’s share price. Don’t forget that Nvidia accounted for a significant portion of the market’s performance over the last year, so it’s important to know what’s going on. Even for a boomer like me.

 Bostic: "Doesn't expect to cut rates before the fourth quarter"

- Upcoming framework review will be robust given the number of open questions about the economy and policy

- Jury is still out on long-term neutral rate

- Rates are restrictive but efficacy could be weaker

- Policy is having an impact on rate-sensitive sectors and delaying investment

- Is not in a hurry to cut rates, wants to first make sure that policy easing is unambiguous; Plans to wait longer for a rate cut to be sure inflation doesn't start to bounce around

- No longer hearing about difficulties in supply chains; Hopes that goods deflation continues

- Businesses are confident in underlying strength of the economy; Next year or two should see continued sold performance

- The efficacy of monetary policy may be weaker than in the past, but that does not mean it is having no impact at all

And from Fed's Waller: "Restrictive Fed policy is helping cool aggregate demand"

- The last CPI data was a reassuring signal that inflation was not accelerating 

I shorted a small, starter position in bitcoin on the opening (BITO $28.84).

From Peter:

Refreshing to hear...

After seeing so many companies over the years, especially many financial companies in the mid 2000's, waste money on buying back overvalued stock in a robotic way that just gooses short term eps at the longer term cost of stretching the balance sheet, rather than buy when the stock is undervalued, it was refreshing to hear Jamie Dimon being a true steward of shareholder value and company resources. 

He said yesterday, "When the stock goes up, we'll buy less and when it comes down, we'll buy more." Also, as an obvious banking veteran, "buying back stock as a financial company greatly in excess of two times tangible book is a mistake."

JP Morgan's Price to Tangible Book Value

There is more Fed speak today, especially from Governor Waller who has clear authority on the committee in terms of his opinions matching up with Powell for the most part. What we've heard so far from others is their belief that policy is 'restrictive', though certainly not in the financial markets, but it remains a wait and see, play it by ear, stance when it comes to when it will be time to cut interest rates.

Keep in mind that while the ECB is going to cut rates in June, rents in the Eurozone are only about 6% of its harmonized index of consumer prices (HICP) so not really capturing anywhere close to the allocation households have to their housing budget. The Fed of course does include it in a much bigger way when they see CPI/PCE, though it's much greater in the former than the latter in terms of weights.

Meanwhile, the BoJ could be hiking again in a few months and their 10 yr JGB yield closed Monday (unchanged Tuesday) at the highest level since 2012.

10 yr JGB Yield

We're of course seeing what's going on with industrial metal prices, discussed here many times and yesterday too. The CRB raw industrials index yesterday closed at highest level since April 2023.

CRB Raw Industrials Index

With respect to Target's decision to lower prices for up to 5,000 products, its seems that it is focused on food, drink and other non-discretionary household items. This is certainly a good disinflationary impact for the consumer but also a margin hit to Target as they are apparently feeling the competitive pressure from not just Walmart and other supermarkets but from Aldi and Lidl too.

Just like us here and those in Europe, the travel bug is seen in China, even with all their other issues. Trip.com, a stock we own, reported earnings yesterday and said this:

From China, "outbound hotel and air ticket bookings on our platform fully recovered to 2019 levels during the major holiday periods, indicating a strong rebound in demand. In addition to outbound travel, the China domestic travel market continued to exhibit strong performance in the first quarter in response to growing interest of Chinese travelers in exploring their homeland." They also are benefiting from an increase in travel by "the silver generation" as they mentioned.

And travel is growing all throughout the Asia Pacific region "with revenue growing at an impressive rate of around 80% y/o/y." This includes travel into China "driven by the benefits of visa-free policies."

I'll argue again that the growing middle class in Asia, where half the world's population lives, is a very exciting economic growth story over the coming 10 years.

Back to the US, Lowe's, similar to Home Depot, is still dealing with a tough macro as their full year 2024 guidance includes a 2-3% comp sales decline. We'll hear more from the call. For Q1, comps fell 4.1% "as the decline in DIY big ticket discretionary spending was partially offset by positive comparable sales in Pro and online."

Macy's reported a 1.6% y/o/y drop in comp sales within their earnings report. And with the growing focus on consumer delinquencies with credit, Macy's said its credit card revenues fell by 28% y/o/y as "The decline was attributable to the impact of expected higher delinquency rates and net credit losses within the portfolio."

Their 2024 comp guidance of down 1% to up 1.5% was a touch better than the one given in in February when it was down 1.5% to up 1.5% and said "The updated outlook assumes customers will continue to be discerning in their discretionary purchases and provides flexibility to respond to the competitive landscape and promotional environment."

From Palo Alto Networks, whose stock is down sharply pre-market but where demand for cyber security is only growing.

"First and foremost, cyberattacks continued unabated. We're seeing a consistent stream of nation-state activity that is systematically looking for software supply chain and hardware zero day vulnerabilities and attempting to exploit them at scale. Additionally, there continues to be a robust stream of attack activity targeted at large enterprises and pieces of critical infrastructure."

Also, "With AI, we expect the attacks to come at an even faster pace."

"On spending for cybersecurity, we see no change of space or trajectory. Most customers have a series of projects they want to get done, and the only limiting factor seems to be their execution capability."

Maybe why the stock is down, "we saw a greater volume of large deals with some of these customers opting for deferred payments over the term of their purchase, instead of paying upfront as they grapple with the higher cost of money." They also mentioned, "there's been significant volatility in our billings."

Overseas, South Korea said its exports rose 17.7% y/o/y adjusted for working days in the first 20 days of May and semi shipments continue to lead the way as they were up 45.5% y/o/y. Car exports though were down by 4.2%. South Korean and Taiwanese trade data are very important to watch each month.

The manufacturing/industrial recession overseas continued in May in the UK as its CBI industrial orders index fell to -33 vs the estimate of -20. That compares with -23 in April. CBI said, "Manufacturers expect to increase output through the summer months, but any recovery looks set to be fairly gradual, with order books soft and inventory levels relatively high." Gilt yields are lower in response but the pound is little changed and the FTSE 100 is lower, as all European stock markets are this morning.

Upside

-MGOL +234% (earnings)

-BDRX +75% (positive statistically significant Phase 2 clinical trial results of newly-licensed eRapa in Familial Adenomatous Polyposis (FAP) scheduled for presentation at the 2024 Digestive Disease Week Annual Meeting)

-MMAT +27% (announces update on naked short selling investigation undertaken Jun 2023)

-CTXR +21% (achieves primary and secondary endpoints in Phase 3 Trial of Mino-Lok Antibiotic Lock Solution)

-LRMR +18% (US FDA Removed Partial Clinical Hold for Nomlabofusp Program in Friedreich’s Ataxia)

-XPEV +7.3% (earnings, guidance)

-LRCX +4.0% (authorizes $10B share repurchase plan and a 10-for-1 stock split)

-COIN +3.6% (Ethereum Spot ETF reportedly has 75% chance of SEC approval this week; reportedly SEC on Mon asked Nasdaq and CBOE to make minor adjustments to spot Ether ETF filings, which could signal that approvals are near)

-M +3.5% (earnings, guidance)

-LOW +3.0% (earnings, guidance)

-CZR +2.4% (Raymond James Initiates CZR with Strong Buy, price target: $55)

-MBC +2.4% (to acquire Supreme Cabinetry Brands for $520M in cash)

-GAME +2.2% (earnings, guidance)

Downside

-HSAI -11% (earnings, guidance)

-SPT -11% (comments on 'going private' report; currently no process in place to consider a sale)

-ZIM -11% (earnings, guidance)

-NDSN -10% (earnings, guidance)

-VFS -8.1% (reportedly company is under NHTSA investigation regarding crash in the all-electric VinFast VF8 SUV on Apr 24th)

-PANW -6.0% (earnings, guidance)

-EXP -5.6% (earnings)

-PTON -4.6% (to offer $275.0 million aggregate principal amount of convertible senior notes as part of global refinancing)

-BZ -4.5% (earnings, guidance)

-AS -3.9% (earnings, guidance)

-YALA -3.7% (earnings, guidance)

-BL -3.0% (proposed private offering of $500M of Convertible Senior Notes)

-ZM -2.6% (earnings, guidance)

-KEYS -2.4% (earnings, guidance)

-MU -2.1% (raises FY24 capex $8B from $7.5B prior) 

* At the market's circus... Everyone now knows Nvidia!

$NVDA It's gonna pass $1000 tomorrow, and once that psychological barrier is passed... - Steve (@SteveJabba) | Stocktwits

All those nights when you've got no lights

The check is in the mail

And your little angel

Hung the cat up by it's tail

And your third fiancé didn't show

Sometimes you wanna go

Where everybody knows your name

And they're always glad you came

You wanna be where you can see (ah-ah)

Our troubles are all the same (ah-ah)

You wanna be where everybody knows your name

- Gary Portnoy and Judy Hart-Angelo, Theme From Cheers

This iconic song from the iconic TV series Cheers was voted the best television theme of all time.

It sets the stage for a discussion of Nvidia NVDA - which is to report after the close tomorrow.

But let's start with a "little known fact" (and pay homage to Bloomberg's Tom Keene's favorite baseball team) ...

The initial lyrical opening in the theme to Cheers was:

Singin' the blues when the Red Sox lose,

it's a crisis in your life.

On the run 'cause all your girlfriends

wanna be your wife.

And the laundry ticket's in the wash.

But it was changed to:

Makin' your way in the world today

takes everything you've got.

Takin' a break from all your worries

sure would help a lot.

Wouldn’t you like to get away?

Cheers, the Series and the Challenge

Fifteen years ago Nvidia was a relatively unknown equity. No one cared about its positioning in technology much like the TV series Cheers, which was almost cancelled after its first year in 1982 as it ranked 74th in 77 shows.

But like NVDA's stardom in recent years, and the elevation of its founder Jensen Huang, Cheers became one of the most liked TV series of all time - serving as a launchpad for the careers of then unknown actors Shelley Long, Ted Danson, George Wendt, Rhea Perlman, Kelsey Grammer, Kirstie Alley and, of course, Woody Harrelson.

Back to NVDA

There is little question that today, May 21 2024 - unlike in 2010 and even in 1982! - every investor knows the NVDA story and what the company's role is in the AI revolution.

And, to be sure, a beat and raise in the cards.

But the question is, at this point of time in which consensus has materially embraced NVDA's prospects should we consider "second level thinking" - in that those prospects are fully discounted in the current share price.

As a guide to tomorrow's response, here is a chart which depicts how NVDA has performed over the last 20 EPS reports:

But, to be honest, this, looking thru the rear view mirror, tells us very little about tomorrow's likely share price response.

I pride myself in understanding and acknowledging my strengths and weaknesses as an investor.

As a non-Tech person who recognizes his deficiency in really analyzing innovative tech stocks, I have to believe there is quite a lot of double and triple ordering going on - but I don't have the core knowledge base to determine when that "catches" up to Nvidia.

In other words... how long is NVDA's fundamental runway?

Back To The Title of This Column (Everyone Already Knows Her Name)

So, without that knowledge and given the nature of how I invest at Seabreeze, I simply don't go along for the ride and, more likely think, that a reasonable "beat and raise" is likely baked into the share price.

I fully recognize that this a simplistic approach - but isn't it as simplistic for the legions of investors who really are not equipped to have differentiated knowledge or analysis to own outsized position in Nvidia to own the shares after the amazing run it has had?

I Will Let Others Learn a lot From Nvidia

So I am an observer into tomorrow afternoon's EPS release, preferring - for fun - to reminisce back to my column in 2023:

Lydia (Nvidia) The Tattooed Lady

Intro:

Oh this Nvidia (NVDA) EPS release brings back memories.

Childhood days, lemonade, romance.

Many portfolios are wrapped into Nvidia

Met her at the World's Fair in 1900...

Ah, Nvidia, she was the most glorious creature under the Sun!

Amazon, Alphabet, Apple... rolled into one!

In other words... and please sing along with Groucho and me:

Lydia the Tattooed Lady

Oh Lydia, oh, Lydia, say have you met Lydia

Oh, Nvidia, the tattooed lady

She has sales that folks adore so

And GAAP earnings even more so

Nvidia, oh, Nvidia, that encyclopedia

Oh, Nvidia, the queen of tattoo

On her back is the Battle of Waterloo

Beside it the Wreck of the Hesperus too

And proudly above waves

The Red, White and Blue

You can learn a lot from NVDA

La la la la la la

La la la la la la

When a robe is unfurled Huang will show you the world

If you stand up and tell him where

For a dime you can see Kankakee or Paree

Or Washington crossing the Delaware

La la la la la la

La la la la la la

Oh, Lydia, oh, Lydia, say have you met Lydia

Oh, Nvidia, the tattooed lady

When her muscles start relaxin'

Up the hill comes that cool cat Jensen

Nvidia, oh, Nvidia, that encyclopedia

Oh, NVDA, the champ of them all

For two bits she will do a Mazurka in Jazz

With a view of Santa Clara that no company has

And on a clear day you can see Alcatraz

You can learn a lot from Nvidia

La la la la la la

La la la la la la

Come along and see Buffalo Bill with his lasso

Just a little classic by Mendel Picasso

Here is Captain Bezos exploring the Amazon

And Apple's Tim Cook, but with his pajamas on

La la la la la la

La la la la la la

Announced NVIDIA HGX™ H200 with the new NVIDIA H200 Tensor Core GPU, the first GPU with HBM3e memory,

Over on the West Coast they have Treasure Island

Here is CFO Colette Kress doing the rhumba

Is her $4,02 fully diluted earnings number.

Oh Lydia, oh, Lydia, say have you met Lydia

Oh, Nvidia, the tattooed lady

Lydia, oh, Lydia, that encyclopedia

Oh, Lydia, the queen of them all

She once swept an Admiral clear off his feet

The ships on her hips made his heart skip a beat

And now the old boy's in command of the fleet

For he went and married Lydia

Groucho said Lydia (I said Nvidia)

Groucho said Lydia (Investors may sell Nvidia)

La la!

- Groucho Marx, Lyida The Tattooed Lady

NOV 22, 2023 8:10 AM EST

__________

Bottom Line 

Many of you will watch the business media today and listen to the talking heads.

One thing is unquestionable, today and tomorrow you will all be inundated by every talking head who will have a view of NVDA's quarter and its outlook - whether it is informed or not.

With little question or debate, there will be few differentiated views expressed on FinTV with regard to Nvidia.

Sometimes you want to go where people are all the same - do you want to go where everyone knows your name?

For me I will stick with The Oracle's (Warren Buffett) advice:

Because... well, everyone knows Nvidia's name. Cheers 1982-1993, opening and closing theme.

* "The Mike Wilson Top?" (Be still my heart)

* Though the train slowed down it continued on Monday — with investor optimism and the perception of fiscal/monetary stimulation contributing to an ever higher rise in stock prices — ignoring signs of a reemergence of inflation and "higher for longer."

* My continued view is that equities are not compensating investors for risks and are expensive against interest rates and rising inflation as well as other factors.

* Stock futures were slightly lower overnight.

* Banks (and other financial) stocks fell on Monday after Jamie Dimon delivered some reality. (We are short XLF)

* Gold, silver and copper broke out on the opening (Monday) but those gains gave way in the morning — just as equities faltered from highs.

* The S&P Short-Range Oscillator remains deeply overbought — at 4.37% vs. 5.67%.

* Bond yields are little changed.

* The U.S. dollar is a tad wealer against the yen.

* Brent is -$0.51.

* Gold is -$18.90 and silver is -$0.64.

* Bitcoin is +$1,000 (and is over $70k).

* Setting up for today's opener:

Making your way in the world today

Takes everything you've got

Taking a break from all your worries

Sure would help a lot

Wouldn't you like to get away?

All those nights when you've got no lights

The check is in the mail

And your little angel

Hung the cat up by it's tail

And your third fiance didn't show

- Everybody Knows Your Name (Theme Song for Cheers)

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 are slightly lower in overnight trading — again in a ridiculously narrow range. S&P futures peaked at +3 and bottomed at -3. Nasdaq futures peaked at +2 and bottomed at -34. At 6:01 am ET, S&P futures were -1 and Nasdaq futures were -23:

* Commodities are generally lower. Brent crude was -$0.64 to $83.07.

* The S&P Short-Range Oscillator remains deeply overbought at 4.37% vs. 5.67%.

* The VIX is at 12.47 (+0.32). Given the low vol I am still out of straddles/strangles now.

* The U.S. dollar is modestly lower against the yen, euro and pound.

* Interest rates are little changed. The yield on the 2-year Treasury is 4.829% (flat ). The yield on the 10-year Treasury is -1 basis point at 4.426%. The long bond yield is flat at 4.567%. Over there gilts (10 year) is -3 basis points:

* Overnight, the inversion of the 2s/10s Treasuries curve is unchanged at -40 basis points.

* Gold is -$18.30 at $2,420. Silver is -$0.63.

* Bitcoin was +1% or +$900 and is $70.9k.

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:

Minding Mr. Market

Let's Play Two (Second Week in Row the XLF is my short 'Trade of the Week')

Financially Speaking

Only A Few Good Men (Cannabis) Part Deux

The Anti Bitcoinite

Morgan Stanley's Wilson Capitulates

Inflation is Ignored

Narrower Breadth As Suggested By The Runup

Here were Monday's trades:

Very little, save trading around core positions.

"It's not the daily increase but daily decrease. Hack away at the unessential."

- Bruce Lee

Bonus - Here are some great links:

Extreme Nasdaq? 

Best Week (from "Jazzy" Jeff Hirsch)

Most Highs in Years 

The Percentage Life

From Charlie:

The Week in Charts (5/20/24) - Charlie Bilello's Blog