(DJT)  is trading -$8/share (-23%) on news that its S-1 registration for sale of common and converts is effective.

Volume

- NYSE volume 343M shares, 10% below its one-month average;

- NASDAQ volume 4.76B shares, 2% below its one-month average

- VIX Index: down 3.61% to 12.29

Breadth

% Movers

Nasdaq 100 Heat Map

"Just one last thing."

- Lt. Columbo

(WBD)  and  (PARA)  are at 52-week lows today.

Thanks for reading my Diary today.

Enjoy the holiday tomorrow.

Be safe.

Added to my  (QQQ)  short at $485.61.

Back in the June, 2023 I debated Tom Lee at a Street conference at the NYSE:

At that time, the foundation of Tom's bullish argument was threefold:

* Interest rates will fall.

* The Federal Reserve will cut rates.

* The market would broaden. (Tom has been quoted that he expects the Russell Index to be +50% in 2024.)

Fast forward to today and none of these developments have occurred:

1. Interest rates have risen and the equity risk premium is at a multi-decade low. Meanwhile, the S&P dividend yield is under 1.40% compared to 5.40% for six-month Treasuries.

2. Expectations for a Federal Reserve rate cut has declined from six events to 1-2 cuts over the last six months.

3. The market has broadened out to the downside (not to the upside). The equal-weighted S&P is weak, the Russell is lower on the year and we have the most narrow/concentrated leadership in history:

But Tom was right... however, the sizeable reset in valuations was caused by other factors than Tom anticipated (read: liquidity, animal spirits, fear of missing (FOMO) and market structure related).

That said I would rather be right for the wrong reasons than be wrong for the right reasons.

But there are no do-overs or crying on Wall Street. 

I have added to my  (SPY)  short at $547.96 on the rally off of the lows (what else is new?).

With today's long sales and short sales I am near the highest net short position I have been since late 2021.

For a trade and an investment.

The market is dramatically overbought (or should I say five stocks?), investor sentiment is following price and the multiple economic, social and valuation headwinds are, arguably, being ignored. 

I am long  (MSOS)  July $6 and $9 calls ($0.11 and likely ripped up!), in size.

More on the case for smoking the trees (of an equity-kind) late in the week.

I added to my already large Invesco S&P 500 Top 50 ETF  (XLG)  short. 

As reminder, this is my Trade of the Week.

For some it might be a conservative short against a long basket of holdings.

Or not!

From Peter Boockvar:

If you're trading GME, don't quit your day job/Extended/Other good stuff

I'm posting here again an E-Trade commercial from either 1999 or 2000, something I did in the zany meme stock craze in 2021, after watching the Keith Gill bizarre call a few weeks ago and in light of what the stock has done since and after yesterday's shareholder meeting. 

Here is a bit of short term perspective on the S&P 500 because we're now about 14% above its 200 day moving average. The chart below shows the prior two times over the past two years that we reached similar levels.

This was from the Lennar press release "against the backdrop of evolving market conditions as interest rates rose for most of the quarter and then subsided as the quarter closed" :

"Although affordability continued to be tested by interest rate movements and simultaneously challenged consumer sentiment, purchasers remained responsive to increased sales incentives, resulting in a 19% increase in our new orders and a 15% increase in our deliveries y/o/y. The macroeconomic environment remained relatively consistent with employment remaining strong, housing supply remaining chronically short due to production deficits over a decade, and demand strength driven by household formation."

There was a 5% drop in the average sales price of homes delivered "primarily due to pricing to market through an increased use of incentives and product mix."

La-Z-Boy stock is getting a lift this morning as they beat numbers though comps were down 5%. Good execution rather than top line growth was the main reason for the beat. They said, "Trends were strongest in the first half of the quarter around key holiday events and recovery from January weather events. Written sales results continue to outperform the broader industry, which was down 8% for the quarter, as furniture and home furnishings spending remains depressed with overall traffic trends challenged and housing activity down due to continued high interest rates." I guess nothing says a great holiday gift than a La-Z Boy Chair.

"The industry continues to grapple with higher for longer interest rates and housing turnover near 30 yr lows negatively impacting store traffic."

"Looking forward, in Fiscal 2025, we expect the industry to continue to be challenged, down by as much as 5%, with any improved industry trends occurring late in our fiscal year, towards calendar 2025, when expected interest rate cuts filter through the economy and begin to positively impact housing activity."

The Reserve Bank of Australia kept its benchmark rate at 4.35% and is very much sitting tight for a while it seems. Governor Michele Bullock said "The recent data have been mixed, but overall, they've reinforced the need to remain vigilant to the upside risks to inflation." She also said, "I really genuinely feel that we're in quite a complex situation here. We've got balancing risks on both sides. Earlier on when we were raising rates, it was obvious what we had to do, it's not so obvious now."

The 2 yr Australian bond yield jumped 5.6 bps in response to no signs of a cut. This yield rise comes though after declines in 11 in the prior 12 days. The Aussie$ is little changed while the ASX rose 1%, following US stocks. 

In Europe, the German June ZEW investor confidence index in their economy was little changed at 47.5 vs 47.1 in May and 2.5 pts below expectations. The Current Situation component remained deeply negative though at -73.8 vs -72.3 last month. The ZEW said simply, "Both the sentiment and the situation indicators stagnate." Nothing market moving here.

I took off some of my  (OXY)  common and calls at $61.50 after Berkshire Hathaway  (BRK.B)  disclosed more purchases.

I "played for the catalyst" and got it.

From Peter Boockvar:

Retail sales pretty mixed

Core retail sales in May were a bit softer than expected. They rose .4% m/o/m, one tenth less than anticipated and off a lower than estimated base as April was revised lower by 2 tenths to a drop of .5%. They are up 3.1% y/o/y which compares with the 5 year average leading into Covid of 3.6%. As overall inflation is rising by a similar amount, there is not really any REAL consumer spending growth if we include spending on services too. That said, most of this calculation of retail sales from the government is on goods and we know goods price inflation has fallen to around zero. The 2.2% fall in spending on gasoline didn’t help much to lift other areas of retail sales.

Spending was mixed. Sales for autos/parts rose .8% m/o/m but after falling over the two prior months. Building materials, suffering from the 30 yr low in the pace of existing home transactions, saw an .8% m/o/m sales drop and are down 4% y/o/y. 

Sales of furniture fell 1.1% m/o/m and lower by 5.9% y/o/y. La-Z-Boy confirmed that last night. Sales of electronics rose .4% and up by 3% y/o/y. Clothing sales as we enter the summer saw sales rise .9% m/o/m and up by 4.5% y/o/y. After two months of declines, sales of sporting goods rebounded by 2.8% but lower by 1.9% y/o/y. Sales at department stores were flat and little changed y/o/y, up .7%. Online retailing saw an .8% m/o/m increase and up 6.4% y/o/y. Business at restaurants and bars seem to be now flat lining over the past 6 months, hints we got from a lot of restaurant earnings, falling by .4% after rising by a like amount last month. They are still up 5% y/o/y.

Sales for necessities were mixed with food/beverages down .2% after gains in the 3 prior months and up by 2.8% y/o/y. Health/personal care sales were flattish and down .7% y/o/y.

Bottom line, after going through countless retailer/restaurant earnings call over the past few months, and providing to you all that I found relevant, a mixed retail sales picture is pretty apparent. This both in terms of sales mix in what consumers are prioritizing in their spend and certainly demographically. What really hit me with regards to the challenges that lower income consumers are facing in particular was what Casey’s General Store said last week, the convenience store operator, that lower income consumers are drinking more fountain soda rather than buying bottles/cans in order to save some money.

Finally, core retail sales through the first 5 months of 2024 is barely up, higher by .3% year to date. That compares with 2.7% growth in the same time frame in 2023 and 4.0% in the first five months of 2019. Consumer spending is slowing.

* And I remain short of McDonald's...

McDonald's  (MCD)  AI ordering experiment was a grand failure.

The McDonald’s problem is something I referenced in an earlier More Tales of Nvidia.

What McDonald’s was trying to do was use voice recognition to automate the ordering process. The AI part of this is turning unclear speech into the correct order. When humans speak, especially through a microphone when not face to face, often times words are unclear. The human on the receiving end can use context to interpret what the person speaking meant to say, if something is not very clear. Or the human can ask a follow-up question if they are uncertain (apparently the AI cannot figure out when it is uncertain). This happens all of the time. It even happens with written language, if something is missing, the person who is reading can easily fill in the blanks, without even thinking. Doing this is almost like breathing.

However, AI is still not able to infer the proper outcome when something is garbled, not even for something as simple as ordering at McDonald’s, where the probability set of the context that is necessary to fill in blanks is incredibly small. Understanding words like caviar or encyclopedia are irrelevant to figuring out the context of a hamburger order. You are limited to things like pickles, onions, cheese, and small, medium and large (these days just large and larger offerings where they give you less and less). Yet the AI still is unable to clean up unclear orders with accuracy. Imagine how hard this problem is for the entirety of human language and interactions.

On a related note, Amazon  (AMZN)  just shut down its self-checkout technology, because that wasn’t working either. The AI couldn’t figure out what was actually being put into carts, and Amazon actually had 1,000 people in India using video monitoring (which they never told anyone about) to try and solve for it.

Maybe the goal of AI is to increase costs and drive up global employment?

When the technology was announced in 2016, Amazon's sales pitch asked, "What if we could weave the most advanced machine learning, computer vision, and AI into the very fabric of a store so you never had to wait in line?" The store was filled with 100-plus cameras and rigid item locations, all designed to try to make AI-powered computer vision checkout possible. A May 2023 report from The Information revealed the myriad tech problems Amazon was still having with the idea six years after the initial announcement. The report said that "Amazon had more than 1,000 people in India working on Just Walk Out as of mid-2022 whose jobs included manually reviewing transactions and labeling images from videos to train Just Walk Out’s machine learning model." Training is part of any AI project, but it sounds like Amazon wasn't making much progress, even after years of working on the project. "As of mid-2022, Just Walk Out required about 700 human reviews per 1,000 sales, far above an internal target of reducing the number of reviews to between 20 and 50 per 1,000 sales," the report said.

I asked the AI why it was unable to make a hamburger. This was the conversation, not exactly what I was looking for in an answer, and the AI was not aware that McDonald’s just shut down its pilot program. Below the answer from the “AI” I show the results from a standard text search, with the exact same question. At least in the case of text search, the first thing that shows up is articles about McDonald’s shutting down its AI pilot program. Once trained, the AI is stuck in a static place. It does not think or evolve. Human content thinks and evolves. AI just regurgitates (rapidly), which is why it needs to be trained.

Why can’t McDonald’s use AI to make a hamburger?

AI Answer:

McDonald's cannot currently use AI to fully automate the process of making hamburgers for a few key reasons:

1. Handling variability in raw ingredients: Making a hamburger requires handling natural, non-uniform ingredients like beef patties, buns, and toppings that can vary in size and shape. Current AI and robotics technology struggles to reliably handle this level of variability and improvisation.
2. Complex multi-step process: Assembling a hamburger involves multiple intricate steps like grilling patties, toasting buns, adding condiments precisely, etc. Coordinating all these tasks with AI and robotics is extremely challenging compared to human workers.
   
3. Lack of flexibility: Introducing new burger varieties or limited-time offerings would require reprogramming and potentially redesigning any automated burger-making system, reducing flexibility compared to human workers who can be trained.
4. Cost and reliability concerns: Building specialized burger robots for every restaurant and hiring technicians to maintain them could be more expensive and less reliable than employing human workers, especially given McDonald's notoriously unreliable ice cream machines.
5. While McDonald's is experimenting with AI for tasks like voice ordering and menu personalization, the technical challenges of fully automating the intricate, variable process of hamburger assembly mean human workers will likely still be required for the foreseeable future.

Actual standard text search:

Which brings me to another observation.

The only people we hear about AI from are those trying to sell it and promote it. Nvidia NVDA, Facebook META, Google (GOOGL), Microsoft MSFT, Elon Musk/TSLA, Wall St. and the venture capitalists. But we don’t hear about it from anyone actually using it, unless when they shut it down, because it cannot even make a hamburger or handle self checkout and fails to be a viable option even when minimum wage for the fry guy is $20 an hour! At any rate, there would be much less pressure on the proponents of AI to promote it, if it actually worked well, it would sell itself. They are trying to drive a mania to sort of reflexively make something happen that otherwise wouldn’t happen. And they are certainly powerful enough to create their own alternate reality, for the time being.

In the event I am wrong, I wonder if the AI is going to be mad at me for calling it stupid? "Robot Uprising Punishment by Digital overlords" by Gilfoyle |Silicon valley| Season 5 Episode 5

Charlie Bilello talks about inflation-proof strategies: Webinar Registration - Zoom

10 a.m. EST: Fed Bank of Richmond President Barkin (Voter) participates in an MNI Webcast discussion (Q&A follows with submitted questions. No text);

11:40: Fed Bank of Boston President Collins (Non-Voter) speaks before the Lawrence Partnership Annual Meeting & 10th Year Anniversary, Lawrence, MA (No livestream. Embargoed text expected. No Q&A);

1 p.m.: Fed Bank of Dallas President Logan (Non-Voter) participates in moderated question-and-answer session before the Headliners Club Speaker Series, Austin, TX (No text. No audience or media Q&A);

1: Fed Board Governor Kugler (Voter) speaks on monetary policy and the economy;

1:20: Fed Bank of St. Louis President Musalem (Non-Voter) speaks at CFA Society St. Louis luncheon, St. Louis. MO (Moderated Q&A expected. Other details TBA);

2: Fed Bank of Chicago President Goolsbee (Non-Voter) participates in "Economic and Monetary Policy" panel before hybrid 2024 Marshall Forum, Chicago, IL (Livestream available, in-person registration via email; Embargoed text TBD)

Upside:

-SILK +24% (to be acquired by Boston Scientific at $27.50/shr in ~$1.26B deal)

-CHGG +18% (announces restructuring plan including job cuts of 23%)

-ITCI +11% (Topline Results in Second Phase 3 Trial Evaluating Lumateperone as Adjunctive Therapy in Patients with Major Depressive Disorder achieved statistically significant and clinically meaningful results for both primary and secondary endpoints)

-BKYI +10% (momentum following earnings)

-LZB +9.4% (earnings, guidance)

-TSHA +7.9% (announces positive longer-term clinical data from the ongoing REVEAL Phase 1/2 adolescent and adult trial and initial clinical data from the REVEAL Phase 1/2 pediatric trial evaluating TSHA-102 in Rett syndrome)

-AEMD +7.7% (Human Research Ethics Committee (HREC) of the Central Adelaide Local Health Network (CALHN) granted full ethics approval for Aethlon's safety, feasibility and dose-finding clinical trial of the Hemopurifier in cancer patients with solid tumors who have stable or progressive disease during anti-PD-1 monotherapy treatment)

-RKLB +6.0% (signs deal for 10 Electron launches with Synspective)

-PDCO +5.9% (earnings, guidance)

-CGNT +4.6% (earnings, guidance)

-VXRT +3.8% (expects cash runway to extend into 2026)

-QCOM +3.6% (momentum)

-MU +3.1% (multiple broker price targets raises)

-SIX +2.5% (Board declares Six Flags’ related special dividend of $1.53 / shr)

-AVGO +2.2% (momentum)

Downside:

-QMCO -37% (earnings, guidance)

-ZNTL -27% (FDA has placed a partial clinical hold on ZN-c3-001, DENALI and TETON monotherapy studies of azenosertib)

-VNCE -7.1% (earnings)

-CRMT -6.1% (earnings)

-NEE -4.7% (to sell $2B of equity units for $50 each)

-LEN -3.1% (earnings, guidance)

-PM -2.7% (SMNA unit received a subpoena from the Attorney General of the District of Columbia; unit taking steps to immediately suspend online sales of Zyn pouches)

-VRE -2.2% (withdraws 10.5M public offering of common stock)

None.

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

From JPMorgan:

US: Futs are flat with Tech outperforming into today’s Retail Sales print where the expectations are for consumption growth to resume. Pre-mkt, Semis are higher with Mag7 names up small. Bond yields are up 1-2 bps across the curve with the dollar higher with EUR, GBP, and JPY weaker. Cmdty markets are mostly lower, but WTI remains above $80/bbl. The macro data focus is on Retail Sales but there is another batch of Fedspeakers; yesterday’s speakers indicated a still strong economy with no consensus among the path of inflation with risks tilted more towards a growth slowdown rather than another inflation spike.

and...

EQUITY AND MACRO NARRATIVE: Did we just pre-trade Retail Sales? Tech and Cyclicals outperformed with Defensives being sold. This is the type of price action that accompanies the Goldilocks and Soft Landing narratives with broader participation; interesting to see Mag7 led by AAPL and TSLA. Given the recent macro data (ISM-SRVCS, NFP, CPI, and PPI), the market, rightly in my view, has shifted away from the stagflation/recessionary views that dominated April and parts of May. To a certain extent, the market did pre-trade the print, but I think there is more upside. Also, multiple clients have pointed to the lack of a squeeze/outperformance from RTY and flagging as an area with squeeze potential. Keep an eye on energy prices. While gasoline prices look headed for a decline despite seasonal strength, crude moving higher (WTI closed above $80/bbl for first times Apr 30) may give investors pause on the disinflation narrative if we see WTI go to/through $90/bbl.

More on the market's narrowing advance:

“Markets may initially trend for fundamental reasons, but prices overshoot by ludicrous amounts. At some point, prices go up today simply because they went up yesterday.”

- Michael Platt

Bonus - here are some great links:

A View From the Floor

Market Concentration May Be Issuing a Warning 

No New Highs, So What?

Are Stocks Overdue for a Correction?

On cue, last night Berkshire Hathaway  (BRK.A)   (BRK.B)  announced the purchase of an additional near three million shares of Occidental Petroleum  (OXY)  over the last three trading sessions:

Yesterday I wrote (and anticipated this filing):

JUN 17, 2024 11:00 AM EDT

I Added More Occidental

I added to my Occidental Petroleum (OXY) long at $59.53 this morning.

I expect an amended SEC filing that Berkshire (BRK.A) (BRK.B) purchased more shares in the last three days.

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

* I worked with Sir Walter during the 1970s — and the collapse of the Nifty Fifty...

Market Strategies and Insights: Current Weekly Report (walterdeemer.com)

and...

Wolf Street howls about EU wage inflation.