Enjoy the evening.

Be safe.

$3.4 billion to sell market on close.

* Those people...

* Next thing you know you will say that they have their own schools!

I am getting warmed up.

Father Curtis told me your little joke...

-"The Yada Yada," Seinfeld

https://youtu.be/vxuo1-29ONE?feature=shared

I am a rabid anti broadite.

I am adding to my  (XLG)  and  (XLF)  shorts.

Yada, yada.

With gains of between +$3 to +$4 (today) in  (XOM)  and  (CVX)  I am taking profits from recent buys on weakness.

At $62.92 I am out of  (OXY)  common and calls!

I plan to repurchase on weakness.

I just took over a $6 profit on QQQ $481.20 and $4 profit on SPY ($546) done in premarket this morning as well as Monday and Tuesday Index shorts (common).

Back to small sized on the common.

I covered my small short in Apple at $210.45

I will return on the short side in a rally from here.

For the second week in a row my Trade of the Week is to short  (XLG) .

I added this morning at $46.28.

This is my fifth or sixth trade in Occidental Petroleum  (OXY)  (buying low end in the range, selling on Berkshire  (BRK.B)  buys).

Remember, Warren Buffett has stated that he has no current intention of acquiring Occidental Petroleum.

I take him on his word and on his revised SEC filing Monday night (when on additional buys he did not change his intention).

From Peter Boockvar:

Sooner rather than later we'll know if it matters/Shipping costs jump again, inflation is not dead, inflation volatility is here to stay/Other

With the Congressional Budget Office raising its fiscal 2024 deficit estimate to almost $2 trillion I believe we are sooner rather than later going to resolve the debate over whether ever rising debts and deficits matter for the direction of borrowing costs. The danger though now is that part of the rising estimates is due to higher interest rates. I get the question all the time as to when will DC care which would result in some action to slow the pace of rising debts and deficits and my only answer is when the bond market forces them to and I'll define that as a 6% 10 yr note yield. That would create some shock to the system I'm guessing that could create some crisis where something might get done.

And, while I don't know if 6% is something we'll see, I still believe the bond bear market didn't just end in a few years and that at least a retest of 5% will happen in the 10 yr yield.

Let's update shipping costs, reminding everyone that almost every single thing that gets produced in this world ends up on a ship at some point. The World Container Index Shanghai to Rotterdam route for a 40 foot container jumped for the 9th straight week by another $690 to $6,867, more than doubling over this 9 week time frame and about 4x where it started the year. The price for a trip to LA rose by $416 to $6,441.

Understand too that we are just months away before holiday stuff hitting the seas. And, air cargo freight rates are spiking too as I've mentioned previously. Inflation is not dead, inflation volatility is here to stay.

WCI Shanghai to Rotterdam

Shanghai to LA

The trend in rents is something I watch very closely, not just from an economic, rates and Fed perspective, but because we own multi family REIT stocks. In case you didn't see this WSJ article.

Yes, we have huge multi family supply coming on line this year but much is concentrated in the overbuilding that has gone on in the sunbelt states. But, I'll argue again that the supply will be easily absorbed with home buying affordability challenges still acute. Throw on the lack of new projects getting started and we're headed for another jump in rental prices in the coming years, after the current slowdown. Inflation is not dead, inflation volatility is here to stay.

By the way, the June NAHB home builder sentiment survey out yesterday weakened again, falling to 43 from 45, a 6 month low. The estimate was for a 1 pt gain to 46. Highlighting the challenged affordability problem, the Prospective Buyers Traffic component fell to just 28 from 30 and that is the lowest since December too and well below 50. The NAHB said "Persistently high mortgage rates are keeping many prospective buyers on the sidelines. Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots."

NAHB Prospective Buyers Traffic

The Swiss National Bank continues to try to catch that falling inflation knife betting that it will stay down. They cut again by 25 bps to 1.25% where no cut was expected. They said "The underlying inflationary pressure has decreased again compared to the previous quarter. With today's lowering of the SNB policy rate, the SNB is able to maintain appropriate monetary conditions." For perspective, a few weeks ago we saw May CPI in Switzerland at 1.5% y/o/y so the SNB is back to NEGATIVE REAL RATES. Playing with monetary fire I say. On the surprise move, the Swiss Franc is falling vs the euro and dollar after its recent rally.

The Norges Bank in Norway disagrees with the SNB approach as they kept rates at 4.50% as expected and said rates will stay at current levels through the rest of the year. "If the economy evolves as currently envisaged, the policy rate will continue to lie at 4.5% to the end of the year, before gradually being reduced."

I wonder if the ECB saw Monday's request by IG Metall, Germany's largest industrial union, asking for a 7% wage increase because of "a persistently high price level." This would be for one year.

After the UK reported a 2% headline CPI rate, as expected, and a higher than headline core rate gain of 3.5% because of stubborn services inflation, the Bank of England kept its policy rate at 5.25% as forecasted. Wholesale prices were mixed as input prices rose more than expected while output charges were about as estimated.

Seven voted to keep rates unchanged while two doves wanted to cut but this was the key line in the minutes from their meeting, "finely balanced" was the decision to sit tight. The pound is falling as are gilt yields in response to that line. So, they seem to have an easing bias too but the challenge the BoE faces is the 5.7% service price inflation seen for May though they remain confident that "Key indicators of inflation persistence have continued to moderate, although they remain elevated."

Their bottom line, "Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC's remit." But maybe less restrictive by year end it seems.

The Bank Indonesia kept its overnight rate unchanged at 6.25% as expected. They have acted and continue to state that they want to stem the weakness in the rupiah.

Shifting back to US housing and some earnings call comments.

From KB Homes:

"Longer term housing market conditions remain favorable supported by an undersupply of new and resale homes, solid employment, wage growth, favorable demographics and rising household formations. However, during the 2nd quarter, we did see volatility return to the market correlated to the rise in mortgage rates. Periods of rate increases create uncertainty for consumers, which can delay their purchase decisions."

They did see however "As the quarter progressed, we experienced a sequentially higher level of traffic in our communities." They are though still relying on incentives to drive traffic. "Mortgage concessions in the 2nd quarter were flat as compared to each of the prior two quarters, with roughly 60% of our orders having some form of mortgage concession associated with them. While we had believed that we could lower our use of these incentives as the spring selling season unfolded and given the strength of the market conditions early in the spring, the move in rates impacted demand to an extent, and we continued using mortgage concessions to support our buyers."

From Lennar, talking big picture:

"There are challenges and there are opportunities. "The demand for housing remains strong, limited by affordability, interest rates and sometimes wavering consumer confidence. Additionally, the chronic housing shortage driven by over a decade of underproduction of housing stock is additionally problematic for families seeking affordable, or attainable supply. Demand remains robust if it can be supplied at an attainable price point with interest rate support that enables the consumer to transact." I'll add, IF is the key word here.

Squaring the earnings results from KB and Lennar with the softening NAHB data is further evidence that the big builders are doing much better than the smaller ones.

La-Z-Boy executed well in the quarter and why the stock jumped this week but did mention in their call they still see "ongoing challenging traffic trends."

* Many cannabis equities now have the potential to triple over the next few years (this is coming from a previously skeptical industry observer!).

* Remarkably, the five largest multi state operators have a combined market capitalization of less than $10 billion! (With share floats appreciably lower it is not inconceivable that there could be a scarcity value (!) in the shares of the dominant players).

* The top cannabis companies have the scale/critical mass and path to profitability, are relatively healthy, have access to capital and will likely dominate cannabis' future.

* It is not far fetched to view cannabis stocks as (potentially) the next set of new compounders in the face of imminent legislative reform (and tax relief) as well as resolution of custody and institutional buyer issues...

My love/hate affair with cannabis stocks (over the last half a decade) has been documented.

I have been a buyer during most bouts of fear and a seller on every single rally (which have principally been based on the anticipation of industry-changing legislation). My core view has been that without custody relief and institutional support, retail participation was not enough to sustain rallies.

However, the conditions (especially of a legislative-kind) facing the cannabis industry — just as the share prices hover near their all time lows — are changing.

For the better...

Up In Smoke

To be sure, fear has been the dominant emotion (as expressed in a fall of the industry's largest ETF moving from over $55 (in early 2021) to $7 (presently). That fear and share-price retreat have been the byproduct of unrealistic expectations. The cannabis bubble chamber of bullishness and an almost religious attachment to the sector) by some has been met (head on) with a host of operating, financial, capital allocation (burnt capital) and legislative disappointments.

My concerns have been numerous:

* That legislative inroads and path to reforms (rescheduling, safe banking, elimination of Section 280E, etc.) would be slower than consensus expected given the hollow promises of politicians and the schism (and extreme partisanship) in Washington, D.C.

* Custody and uplisting restrictions would not easily be remedied and, as a result, limited institutional involvement would plague the sector.

* As retail investors have been consistently disappointed/exhausted and lost such huge sums — it would be difficult, without the support of larger and plain vanilla institutions to sustain rallies in cannabis equities.

* The total addressable market (and potential sales, profits and cash flow) was also lower than the consensus forecast.

* Though heralded as a growth industry, growth would stall out, causing some to question the bullish industry thesis.

* The current state silo structure creates diseconomies of scale and could, in the fullness of time lead to misallocation of capital and writeoffs.

* Certain state dispensary limitations (Maryland, New Jersey, Ohio, etc.) worked against the build of industry consumer brands.

* The trading dynamics of the cannabis sector in which one large, liquid ETF ( (MSOS) ) is the tail that wags cannabis' dog (of company illiquidity) is structurally sub optimal. (It is inherently unhealthy for MSOS to notionally trade $100 million/day while the basket of cannabis stocks trade under $25 million/day.)

* Speaking of suboptimal, the cheapest cost of capital outlet was for many companies to essentially "borrow" from the U.S. government by deferring taxes. That speaks volumes to the limited access to capital that I predicted.

* As we moved out of a period of near zero interest rates to a higher level, the industry's cost of capital would plague a sector that was getting more and more leveraged. I was of the view that most second and third-tier cannabis companies would take on too much debt in planting flags in new states and would have no path to profitability. (The industry's management has been generally weak and some created their own self inflicted wounds.)

Why I Am Now Optimistic on Cannabis

It is now my view that the above concerns have finally been recognized and accepted by even the most non-objective cannabis market enthusiasts. (Read their tweets, listen to their podcasts. The previous energy and enthusiasm has now been replaced by sullen and morose — in the belief that it is only until legislation is signed will the stocks prosper on a sustained basis). 

Now is the prime time for enthusiasm as we have moved much closer to a legislative inflection point which will allow investors to get clarity surrounding the inevitable industry transformation (most importantly in operating and financial terms) — especially given the lowly share prices which incorporate the dense fog of pessimism following five years of falling share prices and lackluster operating results.

Here are some additional reasons (and catalysts) for my short and intermediate-term optimism discussed in an earlier column:

Legislative Reform Lies Ahead

The ramifications of reform are multi-faceted and dynamic — and will, in the fullness of time, unlock the most cannabis industry value.

The likely rescheduling process from Schedule 1 to Schedule 3 (a likely late 2024 event) has major and positive implications for cannabis businesses, capital markets reform and share prices.

There is little question that we are now closer than ever to the most important legislative reforms ever seen for the industry. That path, as I have mentioned in the past have been bumpy (and investors have been understandably devastated), but the reform inroads are now inevitable and, for the first time, lie very much within a reasonable investing timeframe.

This inevitability is not, in any way, being discounted in the market. In fact, MSOS is trading at a price below before the rescheduling announcement.

Rescheduling reform will also provide relief from overly indebted balance sheets and even free up cash for share buybacks. A revision of Section 280E (which prevents cannabis companies from claiming tax credits and deductions for expenses they incur in operating their businesses) will be a cash flow, debt repayment and profit boon for the space — making the Tier One companies even more dominant operationally and financially.

Uplisting and Custody Issues Will Ultimately Be Resolved

Uplisting is an important ingredient to a rerate in valuation. It is even more likely impactful than S3, but the two may go hand in hand because if S3 becomes passed both fixing uplisting and custody (though unpredictable) could come swiftly after the most significant change in federal policy in decades (particularly if an AG memo is forthcoming).

Green Thumb's (GTBIF) interest in merging with Boston Beer (SAM) might be a way around uplisting. More permutations and more creative uplisting techniques likely lie ahead.

Curaleaf (CURLF) and TerrAscend  (TRSSF)  have been listed on the Canadian Stock Exchange — both companies are already getting some custody relief because of their moves. Without custody, industry share prices rely on inflows into MSOS. Custody resolution changes that reliance.

Remember, with such a small company market capitalizations (the top-five companies have an aggregate market cap well under $10 billion) it will not take much of an embrace by potential institutional buyers to have a measurable impact on stock prices.

November's Recreational Vote In Florida Will Be an Important Fundamental Industry Catalyst

Only four months away, this will help the return of the industry's growth story. My baseline expectation is passage. (This is particularly positive for Trulieve).

Product Price Compression May Be Ending

Industry fundamentals are stabilizing in some major markets. The aforementioned Florida opportunity and that of over large and populated states lie ahead.

Industry Bifurcation — The Rich Get Richer and the Poor Go to Prison

The last five years have served as a period of natural selection and survival of the fittest as the industry has dramatically consolidated under the pressure of limited legislative reforms, weak operating results and overleveraged balance sheets.

The top 5-10 Tier One cannabis companies are differentiated, have the scale/critical mass and path to profitability, are relatively healthy, have access to capital and will likely dominate cannabis' future.

Managements Slowly Have Gotten Religion

Cannabis company managements have been forced to manage their businesses' operations and finances more rationally. Out of necessity managements are concentrating on profitable growth and are finally implementing best practices after years of poor execution.

Managements' historically poorly thought out growth and expansion plans have been replaced with the objective of maximizing cash flow and the more efficient use of capital — all steps in the right direction.

The Tier One Cannabis Companies Trade at Very Low Free Cash Flow and Sales Multiples (Without Even Layering on 280E Changes)

Both Green Thumb and Verano, are now even buying back their own shares — that's testimony to the above observations. Should the industry's punitive tax rules be changed (our baseline expectation), more companies could follow with buybacks.

The Tier One Cannabis Companies Will Likely Become Attractive Takeover Candidates

The alcohol and tobacco business are stagnating (at best) and are being disrupted. Today there are more steady and daily cannabis users than steady drinkers.

I have spoken to numerous consumer product companies. The vast majority are quite interested in having ownership in the cannabis space as, among other reasons, the sales synergies are immense. To me it is only a matter of time. Indeed, several more aggressive consumer product companies might seek first-mover advantage and move even before they get an all clear legislative signal.

In theory, CPGs may even hold the key to pushing reform!

Finally, with such small market capitalizations (mentioned earlier) cannabis companies could be tempting takeover candidates for a large swath of companies. In theory and under the best of circumstances there could even be a buying frenzy and bidding wars for some of the major players who are morsels for the large consumer product companies!

Cannabis as the Next Meme?

There remains some possibility that if I am correct about the upcoming legislative reforms that cannabis stocks may be embraced in the same speculative way meme stocks have been. After all, if rescheduling and 280E reform is adopted, uplisting is resolved, institutions can buy and the state silo situation is resolved — this is an admittedly low probability but not entirely unrealistic scenario that cannabis becomes a meme.

Trump and Cannabis

What if, as Hedgeye's Howard Penney mentioned yesterday on Twitter, former President Trump said on the campaign trail...."I will decriminalize cannabis?" Answer: The stocks would rip higher!

That said, I am far less concerned about resistance to rescheduling than at any previous period.

Bottom Line: Will Cannabis Be the Next Compounders?

We are at a likely sentiment extreme as optimism has been thoroughly beaten out of the sector. With MSOS and many individual stock prices at or near all-time lows (in absolute terms and relative to current and prospective cash flows) and given the likely regulatory reforms — the share prices' upside dwarfs the downside (perhaps more so than any time in history).

AI and other segments of technology and pharma (e.g., weight-loss plays) have been mostly exploited as compounders.

Markets will be looking for the next big thing.

Considering the transformational impact of likely legislation on cannabis companies' financial profiles and with the five largest industry players accounting for less than $10 billion in market cap (far less in terms of floats), the cannabis industry has the potential for igniting the animal spirits (just at a point in time in which everyone is down on the space).

Cannabis equities might even get some meme play as a cherry on top!

From Peter Boockvar:

Labor market softening/Multi family construction slowing further/Philly flat lines but wow on inflation expectations

So last week's initial jobless claims jump wasn't such an anomaly. After printing 243k last week (revised up by 1k), the highest since last August, they came in at a still high (relative to trend up until a few weeks ago) 238k for the week ended 6/15, 3k above the forecast. The 4 week average rose to 233k from 227k and that is the highest since last September. Also of note, continuing claims rose 15k w/o/w to 1.828mm, just 1k from the most since November 2021.

Bottom line, the labor market is softening, with now a pickup in firing's, and the only thing that is now becoming the outlier is the BLS establishment survey data.

4 week avg Initial Claims

Continuing Claims

May housing starts were almost 100k below expectations at 1.277mm, down from 1.352mm in April. After holding pretty steady above 1mm since last November, single family starts fell under 1mm at 982k, down from 1.036mm in April. Also, multi family construction starts continue to shrink, totaling just 295k in May and the 2nd month in the past 3 below 300k. It was 258k in March and as high as 490k in December. Outside of Covid, multi family starts are hovering around the lowest since 2013 and we are setting ourselves up for a reacceleration in rental price gains sometime in the 2nd half of 2025, into 2026.

Permits for building multi family units fell to 437k, the smallest figure since October 2018 not including Covid. Permits for single family homes fell by 28k m/o/m to 949k, the least since June 2023.

Bottom line, for multi family the numbers don't pencil out like they once did. For single family, I'll repeat what we heard from the NAHB yesterday: "Persistently high mortgage rates are keeping many prospective buyers on the sidelines. Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages and a dearth of buildable lots."

Single Family Starts

Multi Family Starts

After another negative print seen for the NY regional manufacturing sector, the June Philly index remained positive, but barely at 1.3 vs +4.5 in May and vs the estimate of +5.0. The internals were all over the place but I do want to point out prices received which rose to the highest level since July 2023. Inflation is not dead, inflation volatility is here to stay. I'll say again. Prices paid rose to the 2nd highest level of the year at 22.5.

To this inflation point, 6 month expectations for prices paid rose to the highest level since June 2022 and for those received spiked by 27.4 pts to 58.8, the most since April 2022. The inflation outlook in the NY survey in contrast fell slightly m/o/m.

As for the overall 6 month business activity outlook, in contrast to the NY survey where expectations rose, for Philly they fell to 13.8 from 32.4, a 4 month low. Capital spending plans also declined to a 4 month low.

Bottom line, at least for the two regions that have reported, NY and Philly, manufacturing in June is remaining sluggish. And I'll be watching of course the goods price trend which after falling back to around zero y/o/y, I think has bottomed out. Spiking shipping costs are a main reason.

6 month outlook for Prices Paid

6 month outlook for Prices Received

Most active exchange-traded fund movers before the open, as of 8:34 a.m.:

Most active movers, percentage-wise, as of 8:55 a.m.:

This list is as of 8:48 a.m.

Upside:

-HROW +21% (provides TRIESENCE relaunch update)

-TRVN +21% (announces Preclinical TRV045 Data Providing Insight into Novel Mechanism of Analgesic Effect in Chronic Neuropathic Pain Model and Demonstrating Statistically Significant Anti-Seizure Activity in Epilepsy Models)

-AMPX +10% (signs Multiple Contract Manufacturing Partnerships to Secure over 500 MWh of Production Capacity for SiCore Cells)

-ACN +8.7% (earnings, guidance)

-THAR +7.3% (announces $2.1M private placement for 660K shares at $3.16/shr)

-VUZI +6.7% (enters strategic partnership with Avegant to develop optimized optical modules for AI-enabled smart glasses)

-OCUL +6.0% (TD Cowen Raised OCUL to Buy from Hold, price target: $11)

-KNDI +4.4% (launches ultra-high capacity AA Battery in the U.S., with 2700 mWh energy capacity, 1500 recharging cycles, and minimal power loss)

-ACB +3.9% (earnings, guidance)

-ATAI +3.9% (provides update on Beckley Psytech's phase 1/2a trial of ELE-101 (IV Psilocin) for MDD)

-NVDA +3.7% (momentum)

-DELL +3.5% (building a Dell AI factory with Nvidia to power Grok for xAI)

-HTZ +2.9% (confirms to sell $750M of 2029 notes; discloses profitability initiatives and fleet valuation update)

-KR +2.7% (earnings, guidance)

-GILD +2.6% (Sunlenca (lenacapavir) shows 100% efficacy for HIV prevention)

-CMC +2.5% (earnings, guidance)

-DRI +2.5% (earnings, guidance)

-KBH +2.5% (earnings, guidance)

-SCS +2.5% (earnings, guidance)

Downside:

-MBIO -39% (files to sell 6.1M shares at $0.41/shr in registered direct offering)

-DJT -12% (files to sell up to 146.1M shares)

-NKLA -11% (Board approved a 1-for-30 reverse stock split)

-VNDA -7.6% (Board of Directors determines that recent unsolicited takeover proposals are not in the best interests of the Company and its shareholders)

-GMS -6.6% (earnings, guidance)

-ENPH -5.9% (downside momentum)

-WGO -4.5% (earnings)

-JAZZ -3.8% (Suvecaltamide did not achieve statistical significance at 30mg versus placebo on the primary endpoint of change from baseline to week 12)

* Shorted more  (SPY) $550.64

* Shorted more  (QQQ)  $488.17

(Winnebago ) (WGO) ( misses by $0.18, misses on revs) .

• Reports Q3 (May) earnings of $1.13 per share, excluding non-recurring items, $0.18 worse than the FactSet Consensus of $1.31; revenues fell 12.7% year/year to $786 mln vs the $798.26 mln FactSet Consensus.
• Gross profit margin decreased 180 basis points in the quarter to 15.0% as a result of deleverage, operational efficiency challenges, and higher warranty expense due to a favorable prior year trend, partially offset by cost containment efforts.
• Revenues for the Towable RV segment were up compared to the prior year, primarily driven by an increase in unit volume, partially offset by a reduction in average selling price per unit related to product mix.
• Revenues for the Motorhome RV segment were down from the prior year, due to a decline in unit volume related to market conditions and higher levels of discounts and allowances, partially offset by price increases related to higher motorized chassis costs.
• Revenues for the Marine segment were down from the prior year, primarily driven by a decline in unit volume related to market conditions and product mix.

8:45 a.m.: Fed Bank of Minneapolis President Kashkari (Non-Voter) participates in a fireside chat before the Michigan Bankers Association Annual Conference, Mackinac Island, MI (Audience Q&A expected. No media Q&A. No prepared text. Livestream at minneapolisfed.org); 

4 p.m.: Fed Bank of Richmond President Barkin (Voter) speaks before the Risk Management Association, Richmond, VA (Audience Q&A expected. No new text. No livestream. Media Q&A TBD); 

10:15 p.m.: Fed Bank of San Francisco President Daly (Voter) participates in panel, “The Transformative Power of AI: How is Technology Changing Our Lives?" in coordination with Syracuse University and the Maxwell School of Citizenship and Public Affairs, San Francisco, CA (No prepared remarks expected. Audience Q&A expected. No group media interview. Livestream at https://www.frbsf.org/news-and- media/events/2024/06/mary-c-daly-panel-discussion-transformative-power-of-ai-how-is-technology-changing-our-lives/)

The bad answer to McDonald’s  (MCD)  AI problem, comes from Perplexity, which is the trendy chatbot those in the know seem to be using now. Obviously, it has its issues too. I looked at who its investors are, and unsurprisingly, Nvidia  (NVDA)  is one of them.

Nvidia should really disclose how much revenue they are getting from companies that they have an investment in (directly or indirectly somehow via third parties or any other vehicles they have set up). This should also include indirect sources of revenue as well. Ergo, if an Nvidia part flows through a distributor or any other third-party intermediary, and ends up with a company they have an investment in. Any one customer may not be defined as material, but the aggregation of business from customers they have investments in some way shape or form, could be very material. When this sort of information is not clearly and pro-actively disclosed, especially for issues of this nature, it makes you wonder why it is not disclosed.

This is not too dissimilar from crypto, where Nvidia is being sued for not being clear about how much business they were getting from that end market. We know how that phase of purchases ended in terms of revenue, and what it meant for the stock when the music stopped.

“Investors sued NVIDIA claiming the company misrepresented how dependent it was on revenue from cryptocurrency mining before a market setback in 2018. The company argues that the legal complaint filed against it lacks sufficient specificity to move forward.”

I am not certain about a lot of things. However, I am fairly comfortable saying the current generation of chatbot technology does not work well. We know that from the disclosed data on end demand, which shows a flattening at a very low base. That happens because it is not very useful. Every CIO survey I have seen, some snippets of which I have already sent, also tells you at a corporate level they are not having good experiences with the technology. Then of course, not only did it fail at McDonald’s, it failed for Amazon’s  (AMZN)  self-checkout technology too.

Argue all you want that IBM  (IBM)  and McDonald’s are dummies, but Amazon is not. Having said all of that, it is theoretically possible that what doesn’t work well now, could work really well at some point in the future. It is possible. But it is also possible if it does work, it is delivered with entirely different technology or vendors. I do not think it can ever work well, but I could certainly be wrong. A friend sent me the following from MIT's technology review. They claim generative AI technology will never work well. (MIT are not dummies either).

Prior to my friend's comments (below), and the MIT tech review article, this tweet is also interesting regarding whether or not it can ever work in its current incarnation:

Excellent article just published explaining why with the current approach to GenAI we cannot eliminate hallucinations. No amount of money will fix it until we find another approach to generating information. After reading this article, the data I sent indicating that use case intentions for customer support/interactions have collapsed in their latest survey makes perfect sense. Also makes perfect sense why McDonalds stopped using AI as a stand alone agent or doctors are complaining about getting false data almost 30% of time.

Clearly AI is a great add on, but it is an evolutionary product not a revolutionary at this point. This is not an internet revolution but more something in the scale of GPS navigation/maps. 

I am getting increasingly convinced people will end up very disappointed over the next couple of years.

Why does AI hallucinate?

The tendency to make things up is holding chatbots back. But that’s just what they do.

Why does AI hallucinate?

"The truth of the matter is that you always know the right thing to do. The hard part is doing it."

- Norman Schwarzkopf

Bonus - here are some great links:

1999 vs Now

XLK 

Happy Fibonacci Day

Chasing the Biggest Stocks

Wolf Street howls about foreign buyers of U.S. debt.