At 4:18 p.m.:

* But be prepared to rip up the position!

The shares of Occidental Petroleum  (OXY)  have dropped from over $71 in April to $60 today. (They are down by about $3 in the last few days — I just came back and reestablished a long into the weakness.)

We are now back to the level that Berkshire Hathaway  (BRK.A)   (BRK.B)  has been a consistent buyer.

Berkshire is loaded with cash (with over $160 billion in Treasuries).

Suppose Berkshire (Buffett) reports (by Thursday) that he has reentered as a buyer of OXY and files an amended and large holding?

The stock likely moves to $62-$65.

An interesting speculative trade is to buy the June 7 (Friday) $60 calls for $0.35 or the $61 calls for $0.11.

I think both represent an overlay.

I shorted more Index calls into the rally because the breadth was inconsistent with the runup:

Break in!

Yellen's remarks likely contributing to the modest selloff from the highs.

Jefferies on Green Thumb:

Green Thumb Reportedly Seeking Boston Beer Merger

WSJ is reporting the US Cannabis MSO, Green Thumb (GTI), is seeking a merger with Boston Beer Company. Such a move would be compelling, in our view. One, it would allow Green Thumb to potentially list on a major exchange, using the legal beer assets as the listed entity. Two, Hemp THC beverages have been seeing significant growth, much of it at the expense of alcohol. Green Thumb could use the Boston Beer distro to make major inroads here.

What has happened? WSJ reports that GTI sent a letter — seen by WSJ — to Boston Beer on Sunday seeking to discuss a potential combination. GTI has said its policy is not to comment on unconfirmed market reports. There has also been no comment by Boston Beer. As background, WSJ reported last week that Japanese whisky maker Suntory was in early talks for a possible Boston Beer acquisition. Boston Beer responded that it remains “fully focused on our operations as an independent company and returning to our growth path”, while Suntory said it wasn't in negotiations (see bevs analyst note, here). According to WSJ, GTI's CEO said in the letter he could make a superior offer for Boston Beer. Assuming these reports are true, given Boston Beer does not want to sell the company outright, and given the impact cannabis is having on alcohol (see below), as well as the long-term growth trajectory, we think Boston Beer could be open to equity. We would also note that Boston Beer has its own foothold in cannabis with a brand known as TeaPot, which makes cannabis-infused iced tea. It debuted in 2022 and is currently available in Canada.

Would provide a pathway for a GTI listing on a major exchange ... One of the advantages for GTI from such a deal would be a potential way to secure a listing on a major exchange. Being a pure-play US cannabis operator — given the current legal status of cannabis in the US — these companies are not allowed to list on a major exchange, while there are very few custodians that will hold the stocks. This, alongside compliance concerns around investing in an illegal industry, means current institutional involvement is minimal. To get around this, there are now two Canadian cannabis operators and two other US MSOs that have created structures that allow listing on a major exchange. This involves having a legal business as the listed assets, and then ring-fencing the illegal US assets via issuing non-voting shares. The other companies that have done this to date have used legal cannabis assets outside the US as the listed vehicle. This would be the first move to use non-cannabis legal assets. It would also be significant for sentiment, in our view, as it would give credibility to cannabis as a proper consumer goods sector, and also potentially open up GTI to investment from traditional alcohol investors. Although it is NASDAQ that has approved such structures to date, and Boston Beer is on NYSE, it would be possible to move exchanges if NYSE is not as receptive.

... while also allowing it to capitalize on growing shift from alcohol to cannabis: An increasing trend we are seeing in the US, especially among young people, is the substitution of alcohol for cannabis. Addiction Journal reported last week that daily cannabis use in the US has overtaken daily alcohol use for the first time. A merged company would also be able to capitalize on this shift in the legal business via Hemp THC beverages, which are federally legal. Hemp THC is now estimated to be a ~$25bn market at retail, and dominated by bevs. In one established state market, Minnesota, at liquor store Top 10 Liquors, Q1 Hemp THC beverage sales exceeded sales for its entire craft beer category. GTI could use the Boston Beer distro to make major inroads here.

With S&P cash +11 handles, and well off the lows, I have added to my  (SPY)  and  (QQQ)  short calls.

Now medium-sized.

From William Blair:

Before the markets opened on Tuesday, June 4, Viking announced top-line 52-week histology results from the Phase IIb VOYAGE trial of VK2809 in biopsy-confirmed metabolic dysfunction-associated steatohepatitis (MASH). In what we view as the most material upside surprise, VK2809 demonstrated significant fibrosis benefit over placebo, despite being underpowered, which we believe underscores the magnitude of the drug’s anti-fibrotic efficacy. The drug candidate’s tolerability profile remains benign, as the frequency of adverse events of interest and discontinuation rate are comparable versus placebo. In addition, no hepatotoxicity or gallbladder disease were reported in the study. Overall, we believe our thesis that VK2809 is the best-in-class MASH drug within the oral modality is affirmed.

Currently, Viking shares are trading down over 15%, which we attribute to the lack of imminent catalysts and the capital and time investment required for a large global Phase III program for VK2809, along with potential emerging competitive datasets (for both obesity and MASH). We view today’s update as a material upside to our previous expectations and do not believe the selloff is fundamentally driven.

Watch Market Call with Guy and Dan now!

And its free!!

Let's go to the videotape.

CNBC just aired an advertisement for a $3.5 million market cap, 60 Degrees Pharmaceuticals (SXTP) (The shares trade at 29 cents).

That followed five other microcap advertisements this morning already. (Most recently, Can-Fite Biopharma (CANF) with a $13 million market capitalization).

CNBC should have as their objective and charter to deliver value-added information and views from knowledgeable panelists and guests.

They shouldn't be going down Penny Lane.

From Peter Boockvar:

The demand for labor continues to moderate

Further evidence of a slowdown in the pace of hiring was seen in the April Jobs Opening data where it totaled 8.059mm vs 8.488mm in March and about 300k under the estimate. The hiring rate held at 3.6% which is one tenth from matching the lowest since 2014 not including Covid. The quit rate also was unchanged m/o/m at 2.2%, matching the lowest since 2018, also not including Covid.

Bottom line, the demand for labor continues to moderate. Treasury yields are falling too in response and lower for a 3rd day after the softer economic data seen which saved the day after the poor Treasury auctions early last week. Stocks are juggling the softer data on one hand with the hopes that it triggers rate cuts sooner rather than later on the other.

Job Openings

Hiring Rate

Quit Rate

From Jeffries on DrafKings  (DKNG)  (added yesterday):

DKNG (Buy / $54 PT / Katz) – We hosted DKNG yesterday and our conversation was bullish. Re: pot’l negative impact/contagion from IL tax increases, we expect any changes to be gradual and anticipate mitigation through adjusted promos, marketing and market access strategies. Mgmt can do more to mitigate the potential tax increases than the street realizes as their mkt access agreements can be renegotiated. While this may be a $40m impact this yr and $70-80m nxt yr, DKNG can overgrow it in other ways. Mgmt. has expressed optimism toward TX legalization and interest in entering FL. Notable near-term growth drivers include Jackpocket launching in new states, strong organic trends (record revenues in March) and investments into in-game betting, a potential differentiator to drive incremental customers/volume upside. Trends are running well for the qtr and hold is normal. We continue to like the OSB category in the face of recent weakness, on considerable growth remaining, with DKNG assuming a bullish posture.

I made the following adds in the energy patch this morning:

*  (OXY)  $59.47

*  (CVX)  $154.45

*  (XOM)  $111.35

Cannabis company Green Thumb (GTBIF)  has apparently expressed an interest in merging with Boston Beer: "Cannabis Producer Seeks Boston Beer Merger," Wall Street Journal.

This is interesting as it relates to GTBIF but, more importantly, to this observer there is an inevitability that consumer products companies begin to indicate interest in cannabis — for obvious reasons.

I added more to  (MSOS)  under $7.70 this morning and have moved to medium sized.

Adding to Trulieve Cannabis  (TCNNF)  and Green Thumb Industries  (GTBIF)  (on weakness).

Shorting more Index calls into the rally to even.

I have covered my short  (SPY)  and  (QQQ)  common — converting into short calls.

On the rally to near breakeven I am now short in the money  (SPY)  and  (QQQ)  calls for July.

The market moved to a bit more oversold.

The S&P Short Range Oscillator has moved from -1.72% to -2.19%.

Reestablished (but very very small) Index shorts:

*  (SPY)  at $526.45

*  (QQQ)  at $452.53

Viking Therapeutics  (VKTX)  has announced positive 52-week histologic data from its Phase 2b VOYAGE study of VK2809 (62.27):

• Up to 75% of Patients Treated with VK2809 Achieved NASH Resolution with No Worsening of Fibrosis as Compared to 29% for Placebo (p=0.0001)
  
• Up to 57% of VK2809-Treated Patients Achieved =1-Stage Improvement in Fibrosis with No Worsening of NASH as Compared to 34% for Placebo (p<0.05)
  
• Up to 48% of VK2809-Treated Patients Achieved Both Resolution of NASH and a =1-Stage Improvement in Fibrosis as Compared to 20% for Placebo (p=0.01)
  
• Adverse Events, Including GI-Related AEs, Similar Among VK2809-Treated Patients vs. Placebo at Week 52; Consistent with Prior Data Reported at Week 12

I am listening to the company's conference call now....

Be back with the "411."

Upside:

-ANNX +49% (Pivotal Phase 3 Trial for First-in-Class C1q Blocking Antibody ANX005 in Guillain-Barré Syndrome Met Primary Endpoint)

CORZ +37% (reportedly gets $5.75/shr takeover offer from CoreWeave; to provide Approximately 200 MW of Infrastructure to Host CoreWeave’s High-Performance Computing Service)

-EQ +33% (Phase 2 Study of EQ101 in Alopecia Areata was positive)

-SGBX +18% (announces Expanded Contract with a Government Contractor to Construct an Additional 11 Technology Modules Additional work order valued in excess of $1M)

-FGEN +16% (US FDA clears Investigational New Drug Application for FG-3165, a Galectin-9 Targeting Monoclonal Antibody, for the Treatment of Patients with Solid Tumors; announces Clinical Trial Supply Agreement with Regeneron Pharmaceuticals to evaluate FibroGen’s Immuno-Oncology Assets, FG-3165 (anti-Galectin 9) and FG-3175 (anti-CCR8), in Combination with LIBTAYO in Upcoming Clinical Trials)

-NEON +16% (files to sell $10.4M in stock)-WIMI +13% (to jointly establish a Micro-Consciousness Quantum Research Center with MLGO)

-SAIA +9.3% (reports Q2-to-date operating data)

-BOOT +7.2% (discloses further improvement into FY25 Q1 QTD across all major merchandise departments; Q1-to-date Store SSS +0.8% v -5.7% in Q4, E-commerce SSS +6.7% v -7.6% in Q4)

-BBIO +7.0% (announces durable month 12 and 18 phase 2 cohort 5 results of Oral Infigratinib in Achondroplasia, and first participant consented in ACCEL for Hypochondroplasia)

-GPCR +6.1% (files to sell public offering of 8M American Depositary Shares and Pre-Funded Warrants)

-GLYC +6.0% (announces Comprehensive Results from Pivotal Phase 3 Study of Uproleselan in Relapsed/Refractory (R/R) Acute Myeloid Leukemia (AML))

-DCI +5.9% (earnings, guidance)

-VKTX +5.0% (52-Week Histologic Data from Phase 2b VOYAGE Study of VK2809 in Patients with Biopsy-Confirmed Non-Alcoholic Steatohepatitis (NASH) demonstrate up to 75% Achieved NASH Resolution with No Worsening of Fibrosis)

-HQY +4.5% (earnings, guidance)-SRRK +3.1% (presents New Data from SRK-181 Phase 1 DRAGON Trial at ASCO 2024 Annual Meeting)

-YETI +2.4% (constructive comments from Jefferies)

-LUXH +2.3% (Board forms Special Committee to review strategic initiatives)

Downside:

-AX -18% (Hindenburg makes short call)

-BARK -12% (earnings, guidance)

-CTRN -8.7% (earnings, guidance)

-DBI -7.7% (earnings, guidance)

-BBWI -7.4% (earnings, guidance)

-PNM -6.9% (affirms FY24 guidance)

-BBWI -4.8% (earnings, guidance)

-TCOM -4.3% (announces proposed offering of $1.3B cash-par settled Convertible Senior Notes)

-GME -3.3% (profit taking)

-FERG -2.6% (earnings, guidance)

-SITE -2.2% (discloses Q2-to-date Organic Daily sales trend -5% to -4% v +1% in Q1)

* Market fave Home Depot dropped by -$7 on Monday. Ominous?

* I remain heavily short consumer stocks...

This is an important column that I penned from two weeks ago (that bears repeating):

MAY 13, 2024 7:56 AM EDT

The Consumer Is About to Roll Over

Just when the consensus appears to be giving up on the notion of a consumer-led domestic economic downturn it is time to revive those concerns.

There are several factors that are contributing to my expectation of a downturn in personal consumption expenditures:

* The cumulative pandemic-era of excess savings has been depleted:

* The shocking impact of "stacked inflation" since 2020 is beginning to be felt by the consumer - witness disappointing results at Nike (NKE) , McDonald's (MCD) , Starbucks (SBUX) , Xponential Fitness (XPOF) , Disney (DIS) and other recently reporting companies.

* As detailed below, there are numerous reasons why interest rates will likely remain higher for longer.

* Shrinkflation is here to stay as consumers get less for more:

* The inflationary impact of lagging expenses - like property, health and auto premiums - are only now beginning to be felt. Last week's data indicated that inflationary expectations are RISING.

* Deglobalization, continued service inflation and other factors will insure the sustenance of relatively high consumer prices and limit the extent of possible monetary ease.

* Fiscal policy - whether in the hands of Biden or Trump - will be constrained in the years ahead. There is not nearly as much scope for fiscal expansion as either had at the start of their respective presidencies.

* The specter of higher individual tax rates lies ahead in order to finance the burgeoning US deficit and out of control US debt.* Mortgage rates are climbing and home affordability is worsening:

* Consumer spending is increasingly skewed towards the wealthy - just look at consumers' recent trade down from beef to chicken(!) and to cheaper private label products:

I am short a number of consumer equities, I plan to short more.

Position: Short MCD (VS), HD (S), SBUX (VS), XPOF (VS), POOL (S), BOOT (S), WGO (S), CHGG (VS), FIGS (VS), AFRM (S) 

From Peter Boockvar:

Modi and the NDA/Yen quietly at one month high/Other notable stuff

There was not a question of whether Narendra Modi was going to be re-elected or not for another term, it was just a matter of by how much. His National Democratic Alliance (his BJP party and their allies) is on track to win a majority of seats in parliament but far less than what was anticipated. Polls over the weekend had the NDA winning anywhere between 353 and 401 seats in the lower house known as Lok Sabha and it's looking like it could be below 300, though above the 272 seat threshold needed for a majority. We (I) have been bullish and long Indian stocks with Modi's business friendly approach since the day he was elected in 2014 but markets their are not liking the possibility of a more narrower coalition and the Sensex is lower by 5.7% after closing at a record high yesterday.

The yen is quietly rallying to almost the highest level in a month vs the US dollar. Two things here, Bloomberg News is citing 'people familiar with the matter' that "The Bank of Japan is likely to discuss the reduction of bond purchases as early as its policy meeting next week." They meet next week and the article further said "BoJ officials will probably consider if the timing is appropriate to slow the pace of bond buying from the current roughly 6 trillion ($38.4 billion) per month and whether they need to provide more details on the outlook to improve predictability, according to the people." This news hit after the market closed so we'll see how JGB's trade Wednesday.

Also, the BoJ Deputy Governor Ryozo Himino said today "Exchange rate fluctuations affect economic activity in various ways. It also affects inflation in a broad-based and sustained way, beyond the direct impact on import prices. That's why we obviously need to be very vigilant to, and analyze very closely, the impact of exchange rate volatility on the economy, prices and their outlook." The exchange rate now really seems to matter to them when conducting monetary policy as the political and societal pressure is finally being realized by the BoJ.

The yen is one of the cheapest currencies out there relative to the US dollar and a rally could be at hand, finally, after being quite the widow maker trade.

Yen

I've argued that the US economy has felt more like a 1.5% ish type growth environment, based on everything I'm seeing and hearing, rather than 3% and after a 1.3% Q1 print, the Atlanta Fed's GDPNow is coming to that range for Q2. Of course there is still one month left in the quarter so anything can change and this will bounce around but if you didn't see, they lowered their estimate yesterday to 1.8% from 2.7%. They started out at 3.9% in late April.

Auto sales in May totaled 15.9mm at a seasonally adjusted annualized rate (SAAR). That is vs 15.74mm in April, just above the 15.8mm estimate and vs 15.05mm in May 2023. Wards yesterday said "Further confirming as a theme for 2024, growth in May largely was centered in the most affordable CUV (crossover utility vehicle) and car segments. Other sectors during the first five months of 2024 have either recorded sporadic gains or fell into steady decline, including some, such as fullsize pickups, that are coming off lengthy periods of strong results. So far in 2024, market strength is with more affordable small and midsize CUVs and small sedans." I'll add, with financing costs high, price matters more than ever now in terms of affordability.

I mentioned yesterday how far home prices are above their longer term trend line. To quantify specifically since the end of 2019 when the Fed was on the cusp of manic monetary policy in response to Covid, the S&P CoreLogic National Home Price Index is up 49%. Owners Equivalent Rent within CPI is up by 23% since then. The Fed's 'lucky' that home prices weren't included in CPI instead or we would have seen double digit inflation.

S&P CoreLogic Home Price Index

Owners' Equivalent Rent in CPI

As Mexico is a growing manufacturing powerhouse due to all the reshoring going on to North America from other parts of the world, it's important we start watching the Mexico manufacturing PMI. Yesterday its May read was 51.2 vs 51 in April and 52.2 in March. S&P Global said its survey was mixed. "On the plus side, demand resilience and the successful launch of new products boosted sales growth and induced a renewed increase in output. Firms then purchased additional inputs for use in production processes."

"That's about where the good news ends, however, as a myriad of challenges adversely impacted several other measures. Subdued demand from Central America, Japan and the US hampered international sales, while worries around competition from mainland China, insecurity, water shortages and election uncertainty dragged down optimism to a 3 1/2 year low."

On pricing, "Input cost pressures climbed to their highest in 17 months, which in turn induced a faster increase in selling prices. That said, the rate of charge inflation remained mild amid sales boosting efforts at most units."

Post Mexican election, the peso is getting hit for a 2nd day and is back at 18 vs the US dollar, a level last seen in October 2023 as markets assume a philosophically similar socialist approach to policy as AMLO.

We did get two more PMI's today out of Asia and both rose back above 50. For Thailand it was 50.3 from 48.6 and Malaysia it's at 50.2 from 49. Again, at least in Asia, there are definite signs of manufacturing bottoming.

The thing of note in Europe was the weak German jobs data. The number of unemployed in May jumped by 25k and that was well more than the estimate of up 7k and compares with 11k in April. Their unemployment rate did hold at 5.9% as expected and the head of the statistics agency there said "The spring recovery hasn't really taken off this year." Bund yields are down as is the euro (giving up yesterday's rally) and the DAX in response.

I am adding to  (OXY)  under $60 in premarket trading.

"A lot of people would rather understand the market than make money"

- Ed Seykota

Bonus - Here are some great links:

The Hindenberg Omen Appears

The Market is Rigged

The Symmetry of the Bitcoin Cycle

Big Moves in Asset Classes

* As bank "paper losses" expand....

Wolf Street howls about the CRE market.