As of 4:40 PM:

Closing Volume

-- NYSE volume 382M shares, 5% below its one-month average;

-- NASDAQ volume 4.28B shares, 23% below its one-month average;

-- VIX: up 4.26% to 12.74

Breadth

% Movers

Nasdaq 100 Heat Map

Thanks for reading my Diary today.

I hope my output was useful.

Enjoy the evening.

Be safe.

With S&P cash +10.55 I am adding to my short  (SPY)  and  (QQQ)  calls (this time in the money for July).

The Apple Live Event has ended with no real breakthroughs with regards to integrating AI into Apple's suite of products.

The Event was a parlor game in which Apple  (AAPL)  just dressed up the presentations to satisfy the AI wolves (aka investors).

There was nothing ground breaking... at all.

* And AI...

Dunno how anyone could live without this stuff. It is wicked smart! 

You: undefined stock went from $1,200 to $120. What happened to its P/E ratio?

Copilot: The price-to-earnings (P/E) ratio for NVIDIA (NVDA) has changed significantly. As of June 3, 2024, the P/E ratio is approximately 64.57¹. However, it’s essential to note that the P/E ratio is calculated by dividing the latest closing stock price by the most recent earnings per share (EPS) number. When the stock price dropped from $1200 to $120, the P/E ratio adjusted accordingly. The previous P/E ratios were higher due to the higher stock price. Keep in mind that P/E ratios can fluctuate based on market sentiment and company performance. If you’d like more historical data, feel free to ask! 

Michael Krauss

NVDA- In terms of selling or shorting Nvidia, I would prefer waiting until it is announced that it will be added to the Dow Industrials average, likely replacing INTC. There’s no better trap of future underperformance over the past 25 years than the “after the rally” distinction of being added to the DJIA.

Dougie Kass

I think the pattern to watch for to nail a top in NVDA will be the growth of a HUGE short position, a sharp high volume drop, a bounce on almost as much volume to a failed second top, and then a slower grind down until retail finally stops buying because it's no longer immediately bouncing to new highs...a classic distribution top.

Don't listen to the "feel" of talking heads in the business media.

Look at history.

From my pal Dan:

Not only are bond yields near their day's highs, but crude oil is ripping higher (+$1.88/barrel).

Again, the data don't matta — until it does.

Apple Events - Apple

* More poor breadth... 

At 10:45 AM:

- NYSE volume 127M shares, 5% below its one-month average;

- NASDAQ volume 1.58B shares, 24% below its one-month average

- VIX up 5.97 to 12.95

Breadth

% Movers

Nasdaq 100 Heat Map

Equities rally as bond prices (and  (TLT) ) hit the day's lows.

Bank stocks are rolling over a bit.

I am pressing my  (XLF)  short.

Masterhedge

Tom Lee - At the start of last week, markets were incrementally dovish, fueled by the soft “pricing” readings in (the ISM surveys, both manufacturing and services). But Friday’s jobs strongish report resurfaced hawkish views as YE2024 Fed cuts tanked from 1.9 to 1.5. In our view, an over-reaction to “strong” data but a reminder (or confirmation) that markets lean hawkish/bearish. We think this is a positive setup for the coming week and we remain constructive on stocks for June overall.

• The most important day this week will be Wednesday: – 6/10 Mon 11:00 AM ET: May NY Fed 1yr Inf Exp – 6/11 Tue 6:00 AM ET: May Small Business Optimism Survey 89.5e – 6/12 Wed 8:30 AM ET: May Core CPI 0.29%e – 6/12 Wed 2:00 PM ET: Jun FOMC Decision – 6/13 Thu 8:30 AM ET: May Core PPI 0.27%e – 6/14 Fri 10:00 AM ET: Jun P U. Mich. 1yr Inf Exp 3.2%e
• Fed fund futures rate expectations have moved sharply in the past week ahead of this week. – prior to May jobs (6/7) – # Fed cuts by Dec 2024 priced 1.9 – post-May jobs, this dropped to 1.5 – thus, this weeks FOMC and CPI reports arguably an outsized impact
• To us, it seems that the plurality of investors are “hawkish” and thus, when we get inflationary-like data, the market rapidly reprices more hikes. And we find that the “hawks” of the Fed are given stronger credence, but they remain the minority at the Fed. The leading indicators all point to softer inflation as evidenced by the U Mich surveys, falling oil, tanking car prices, goods deflation, even the ISM surveys. And while the Fed remains data dependent, the leading indicators point to lower inflation ahead, which in turn, points to a Fed becoming more dovish.
• Looking at the 5 FOMC rate decision post-Fed pivot (last Fall), the base case for stocks is actually constructive. – Equity markets post-FOMC 5 of the last 6 meetings – Post-presser (2:30pm)….5D and 10D gains – Nov 1, 2023……+3.8%….+6.6% – Dec 13, 2023….+0.0%….+1.8% – Jan 31, 2024…..+2.4%….+2.5% – Mar 20, 2024…+0.7%….-1.2% – May 1, 2024……+2.0%….+4.3%
• All in all, very positive reactions post-FOMC meetings. This does imply that the markets have a dovish takeaway from the Fed comments. Or that markets were “nervous” into the FOMC, and thus, this event was the buyable event. The only negative reaction was post the March FOMC. And that was after a string of “hot” CPI prints. So, this naturally puts a lot of focus on the May CPI report, which will be released that morning.

• Economists have been literally using the same estimate for Core CPI for each of the last 7 months: – Month (date)…….est…….actual – Nov (12/12/23)….0.30%….0.31% – Dec (1/11/24)…….0.30%….0.28% – Jan (2/13/24)…….0.30%….0.39% – Feb (3/12/24)……0.30%….0.36% – Mar (4/10/24)…..0.30%….0.36% – April (5/15/24)….0.30%….0.29% – May (6/12/24)…..0.29%
• But as the above shows, the trend has been lower reported Core CPI. We will talk about the key drivers in the next few days of videos and notes but the high level takeaway is that inflation is on a glidepath lower than many believe. The Fed continues to play a waiting game for housing and auto insurance to catch-up and this will play out in lower overall CPI in coming months.

Bottom line: While we expect markets to be nervous this week, we think this will prove to be a positive overall for equities

The main event is this Wednesday with both CPI and FOMC. Overall, a very important macro week for stocks. We remain constructive on stocks in June. There are reasons to be constructive on stocks near term, which we discussed recently.

• The 6 supports/catalysts for the month of June: – first, high probability June a positive month (seasonal below) – second, favorable inflation data points: – third, low utilization of leverage, measured by NYSE Margin Debt – fourth, $6 trillion and growing cash on sidelines, yep, still – fifth, persistent pessimism on market and the US consumer – sixth, EPS season shows AI spending/transformation still strong

* A carry through to higher yields (again) this morning... causing me to sell equity rallies.

* The yield on the 2-year Treasury note is +1 bp to 4.883%.

* The yield on the 10-year Treasury is +3-4 bps to 4.461%.

* The long bond is +4 bps to 4.59%.

The inversion of the yield curve is back down to 37 basis points. 

From Peter Boockvar:

Sorry Benjamin Graham/EU/Air cargo rates/Other good stuff

After watching and wasting my time watching Keith Gill on Friday, this was the perfect picture posted by Sam Ro on Twitter/X that morning before Gill's 'presentation' started.

In response to the parliamentary election results in the EU, the French CAC index is getting hit the hardest, down about 2%, though there is weakness across the board, as Macron in response is calling for an early parliamentary election in France (first round June 30, 2nd round July 7) where the results could influence his ability to get things done. The next presidential election in France is not until 2027.

As for the overall election results, there was a reason why some in the UK were happy to leave the EU and that was to avoid the bureaucratic rule making of the EU parliament. Sovereign bond yields are higher by 5-10 bps and the euro is falling to the lowest level since early May vs the US dollar. Higher European yields though followed a jump in JGB yields and US rates are following. I don't expect immediate notable economic consequences from the election results though with European Commission President Ursula von der Leyen likely getting a 2nd term. The BoJ meets this week.

Euro

With container shipping rates continuing to spike as seen last week, the switch by some to air is resulting in continuing gains in air cargo rates. On Friday the WorldACD Market Data said "Rate surge continues throughout May from Middle East & South Asia (MESA)...Amid continuing strong demand, and disruptions to ocean freight services caused by the attacks on container shipping, average air cargo rates in May of US $2.78 per kilo from MESA to worldwide destinations were up 47% y/o/y with tonnages up 17% higher, based on the more than 450,000 weekly transactions covered by WorldACD's data. And from MESA origins to Europe, May's average spot rate of around $3.35 per kilo was more than double the level in May last year, with the average spot rate in week 22 (27 May to 2 June) up by 128% y/o/y." https://www.worldacd.com/trend-reports/weekly/worldacd-weekly-air-cargo-trends-week-22/

I'll reiterate my belief again that after the inflation spike and inflation slow down, we are not just magically coming down to around 2% and staying there. Inflation volatility is here and will be for a while.

We also saw the Manheim wholesale used car index Friday and it showed a seasonally adjusted .6% drop with prices down 12% y/o/y. They said "While declines in used vehicle values overall were a bit muted in the first half of May, they picked up in the latter half of the month. It's seasonally normal to get some weakening in the market over the Memorial Day weekend; but this month, we experienced a little more softening in the final week. As we move into summer, used retail days' supply remains lower than last year, which could bring in more buyers at Manheim in coming weeks."

The housing affordability crunch was clearly evident in the May Fannie Mae Home Purchase Sentiment Index which fell 2.5 pts m/o/m "as the component measuring consumer attitudes toward homebuying conditions fell markedly, reaching an all-time survey low."

"This month, only 14% of consumers indicated that it's a good time to buy a home, down from 20% last month, while the share believing it's a good time to sell fell from 67% to 64%."

The one positive that can be gleaned by the increase in those who say it's a good time to sell is that maybe they actually put more homes on the market, adding needed supply to the market. As for buyers, "While many respondents expressed optimism at the beginning of the year that mortgage rates would decline, that simply hasn't happened, and current sentiment reflects pent-up frustration with the overall lack of purchase affordability."

In response to the drop in oil prices, the crude oil rig count broke to the lowest level since January 2022 for the week ended June 7 to 492 rigs. it was at 683 in mid March 2020 right before you know what. The rig count for natural gas fell 2 rigs w/o/w to just 98. That was a level last seen in October 2021.

We remain long and bullish oil and gas stocks as it looks like US oil production is topping out, for now, at around 13mm barrels per day. And natural gas still has tremendous demand side drivers with a lot of potential asymmetry in pricing to the upside.

Crude Oil Rig Count

Natural Gas Rig Count

US Oil Daily Production

Back overseas, the Eurozone June Sentix Investor Confidence index rose back to positive territory at .3, a bit better than the estimate of -1.7. Sentix said the internals were mixed as the current situation was -9, "while the expectations component rose by 2.2 pts to +10 pts." Nothing market moving here.

I have taken a short rental in Nvidia NVDA at $120.64 in premarket trading.

I have a tight mental stop on the position — and I would not recommend this to anyone!

That said, please read my continuing saga in my Diary... More Tales of Nvidia to understand why I have taken the position.

Moreover (as previously mentioned):

* Added to SPY short $533.63.

* Added to QQQ short $462.80.

As of 8:14 AM:

 At 8:34 AM:

Upside:

-ICCH +51% (Mutual Capital Group to acquire ICC Holdings, Inc. for $23.50/shr)

-CLDI +23% (Collaborates with SIGA Technologies to Advance Calidi’s Revolutionary RTNova Virotherapy for Lung Cancer and Metastatic Solid Tumors)

-HOTH +18% (announces Joint Development Agreement with Wise Systems International SRL to utilize A.I. for drug discovery)

-OXBR +10% (to evaluate strategic alternatives with consideration for all options including sale)

-DO +8.0% (to be acquired by Noble Corp at ~$15.52/shr in stock plus cash transaction, in $1.6B deal)

-KKR +8.0% (to be added to S&P 500 Index, effective Jun 24th)

-LUV +8.0% (Activist investor Elliott said to take big stake in the co. worth ~$2.0B)

-PROK +6.6% (announces positive interim REGEN-007 Phase 2 trial data and provides clinical and operational updates)

-CRWD +5.8% (to be added to S&P 500 Index, effective Jun 24th)

-GME +5.3% (meme stock strength)

-VSTO +3.4% (confirms $2B+ offer from US-based based private investment firm for The Kinetic Group and rejection of MNC Capital’s latest indication of interest of $39.50/shr)

-GDDY +3.0% (to be added to S&P 500 Index, effective Jun 24th)

-DKNG +2.1% (files mixed shelf of an indeterminate amount)

Downside:

-PERI -25% (cuts guidance)

-HOTH -8% (announces Joint Development Agreement with Wise Systems International SRL to Utilize Artificial Intelligence for Drug Discovery)

-AMD -2.6% (Morgan Stanley Cuts AMD to Equal Weight from Overweight, price target: $176)

* Like many macro and bigger picture risks, growing political change has been largely ignored by investors.

* However, the weekend news in France brings this risk back on the front burner.  

I have outlined a lengthy laundry list of market concerns that I have expressed over the last few months — including (but not restricted to) interest rates higher for longer (as a competitive alternative to stocks), the prospects for slowing economic growth and sticky inflation ("slugflation"), a decidedly partisan Washington DC (which will likely translate into limited fiscal discipline, burgeoning deficits and an expanding U.S.debt loand) and rising geopolitical risks.

I have also highlighted increased political risks — another risk, thus far, ignored by a narrowing but climbing market, arguably stimulated by groupstink and emotion (FOMO, the fear of missing out).

The news in France appears to be confirmation of my concern regarding growing political risks, as reflected in the drop in the value of the euro overnight and in the decline in the French stock market.

Nvidia undefined and Jensen Huang have now achieved more in less than two months than Berkshire Hathaway  (BRK.A)   (BRK.B)  and Warren Buffett have accomplished in sixty years: 

However, the market's reliance on just one stock (NVDA) or a handful of stocks is inherently unhealthy: 

Read this article. AI Is Hurting, Not Helping Your Game

Not a stock guy, or a tech guy — just a golf journalist who is showing how bad of a job AI did at answering basic questions about golf (if you don’t understand golf you may not understand his points in the article. But he is right Google’s AI answers are a combination of incomplete, misleading, and terrible).

I still am not convinced generative AI will ever be good at language. There is too much nuance. The rules are not strict enough. AI is pattern recognition. It is very good at things like reading medical images. Defined patterns and rules. A=B. Or even ok at writing basic code – again rules based. There is much less nuance.

What AI can do for golf is help to design better golf clubs. But that is not new. Has been going on for years and is really just simulation. Or call it machine learning if you want. Run a million simulations of different mishits, figure out which club shape or material or weight distribution handles the combination of mishits the best. Not very complicated either. Typical evolutionary technology. There will continue to be a lot of applications for this type of behind the scenes evolutionary technology, which is not new or earth shattering.

When it comes to generative AI, and language, all generative AI can do is stitch pre-existing web text together. Rapidly. And drop in prepositions and punctuation to make it hang together. But it still cannot understand the nuance. The result is terrible answers when it slaps snippets of different content together to make a sentence. A good answer takes actual intelligence and subject matter expertise.

End users have figured this out, which is why end use for the actual product, the generative AI chatbots, as I showed in an earlier More Tales of Nvidia, has already flatlined at a very low base. It does not work well, people have figured it out, and have stopped using it.

Yet the money that continues to be thrown at this stuff? Nvidia's Jensen is doing quite the job as the head of sales driving the mania, but ultimately there has to be value to the actual output for actual end users.

Then of course there is this.

Concern rises over AI in adult entertainment

“Investing in the market without knowing what stage it is in is like selling life insurance to 20-year-olds and 80-year-olds at the same premium.”

- Victor Sperandeo

Bonus - Here are some great links:

The Economic Week, Roaring Kitty and More 

Only One Pocket of Strength Left In The Market

The HX Podcast 

Copper's Sharp Drop Surprises Bulls

In premarket trading I added to my  (KKR)  short (at $107.77).

The shares are trading higher on a S&P inclusion.

No broadening:

* Uncle Warren bought another 2.6 million shares of OXY between last Wednesday and Friday 

* Berkshire now owns nearly 251 million shares.

(OXY)  was our Trade of the Week on Thursday for this week (timely!).

I moved to a very large position on Friday:

Moving to Very Large Long on Occcidental

I have moved to very large long (OXY).

Position: Long OXY common (L) and calls (S)

BY DOUG KASS JUN 7, 2024 9:48 AM EDT

It became my largest individual equity position:

Now My Largest Long Position

Occidental Petroleum (OXY) is now my largest individual long position.

Position: Long OXY common (L) and calls (S)

BY DOUG KASS JUN 6, 2024 1:59 PM EDT

From Randorama over the weekend:

Randy

2 days ago

Like Dougie Says:

Berkshire Hathaway Bought About 2.6 Mln Occidental Petroleum Common Stock Between June 5 And June 7- SEC Filing

Berkshire Hathaway Inc(BRK/A):

Uncle Warren now owns about 250.6 million shares of OXY

How many do you?

https://occidentalpetroleum.gcs-web.com/static-files/0d80e215-3508-483d-af4c-76963429c2c2

Dougie Kass

At 8 PM Sunday night shorting SPY $533.92 and QQQ $462.83.