One of our most recent investment shorts,  (POOL) , just lowered 2024 EPS guidance from $13.19-$14.19 to $11.04-$11.44.

Here is the release. 

POOL is one of our many consumer-related shorts, which we highlighted in The Consumer Is About To Roll Over.

Last week's (and the week before !) Trade of the Week, Short  (XLG) , is doing its job to the downside today — as the outsized weighted market leaders begin to roll over.

Here are the components of XLG ( (MSFT) ,  (NVDA)  and  (AAPL)  are nearly one-third of the Index).

From last week:

The Anti Broadite

* 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.

Position: Short XLG (L), XLF (M)

BY DOUG KASS JUN 20, 2024 2:35 PM EDT

and...

Trade of the Week: Short This ETF

My Trade of the Week is short Invesco S&P 500 Top 50 ETF (XLG) at $45.55 (Thursday close).

XLG is an exchange traded fund that concentrates in the fifty largest members of the S&P Index.

Here is a list of XLG's largest equity positions.

I am of the view that the reward vs. risk in every one of the fund's top-10 holdings are now vulnerable.

Some/many disagree with me! Trade Tracker.

Some may use this as a portfolio hedge...

Position: Short XLG (S)

BY DOUG KASS JUN 14, 2024 9:08 AM EDT

* At 2:30 p.m...

* As I vomit in my mouth...

"Restrained demand, not improved supply, likely needed to get inflation to 2% goal."

- Fed's Daly 

- Future labor market slowing may mean higher unemployment; at this point, labor market is good, not frothy

- Hard to know if truly on track to price stability

- Inflation not only risk, need to keep an eye on employment

- Need to be ready to respond however the economy evolves

- Seen a lot of improvement on inflation, but not there yet

- Recent inflation readings more encouraging, but hard to know if on track to sustainable price stability

- Bumpiness of inflation data so far this year hasn't inspired confidence

- Must fully restore price stability without painful disruption to the economy

- If there are gradual declines in inflation, slow labor market rebalancing, then Fed can normalize policy over time

- If inflation falls rapidly or labor market softens more than expected, lowering policy rate would be necessary

- If inflation falls more slowly than expected, policy rate must stay higher for longer; policy has to be conditional, need to exhibit care

- Nearer to a point where a benign outcome on labor market could be less likely

I covered this morning's Index shorts (common at  (SPY)  $543.77 and  (QQQ)  $475.17) - for quick profits.

From earlier:

More SPY (and QQQ) Games

Back short common of (SPY) $546.93 and (QQQ) $479.77.

Position: Short SPY common (VS) calls (M); QQQ common (VS) calls (M)

BY DOUG KASS JUN 24, 2024 10:16 AM EDT

Laggard long, Valvoline  (VVV) , is benefiting from the rotation into energy today.

I have sold the balance of my  (CVX)  $158.93 (+$3.65) and  (XOM)  $114.02 (+$3.25).

My Tweet of the Day

* Nvidia's  (NVDA)  Head of Investor Relations Has Resigned...

If AI is the future of the world, and we are just getting started, what is she thinking?

I am pressing my shorts on the rotation out of tech and into energy and financials.

My view is that a sustainable move higher in today's market leaders is unlikely.

From Peter Boockvar:

Sunshine daydream'/Sentiment/You see this AI survey?/Yen teasing 160 again

I experienced first hand over the weekend the still vibrant demand for live entertainment by seeing Dead & Co at the Sphere in Las Vegas. Tickets were expensive, with face value up to $400 per ticket including fees and the secondary market seeing prices up to almost $2,000. I went two nights and only saw a few empty seats. The prioritization of spend still is including live concerts.

Travel too and I saw a great stat in the weekend WSJ talking about how well tourism is doing in the European region. “Europe, especially southern Europe, has benefited more than many other regions. Though it is home to just 5% of the world’s population, the European Union received around one-third of all international tourist dollars - more than half a trillion dollars - last year. This is up roughly threefold over two decades, and compares with about $150 billion for the US.” https://www.wsj.com/world/europe/europe-tourism-economy-american-tourists-f6112f78

I forgot to give you a sentiment check last week but will today as it includes the updated Citi Panic/Euphoria index which remains in Euphoric territory. Investors Intelligence saw Bulls rise to 61.2 from 60.3 and the highest since March when it touched 62.5. Bears rose a touch, by .3 pts to 17.9 and the spread between the two remains well above the extreme read of 40. The AAII read had Bulls at 44.4, down .2 pts w/o/w, remaining near the 2nd highest print since early April. Bears fell by 3.2 pts to just 22.5 and that is the least since late March. What is most interesting, outside of the extreme bullishness seen above, is the ‘Fear’ that is still showing up in the CNN Fear/Greed index which closed Friday at 41. I’m guessing this is because the only thing working right now in markets are just the few mega large stocks we’re all aware of and not much else.

Speaking of those stocks, like the obvious Nvidia, did you see the survey last week from Lucidworks?

“Lucidworks surveyed over 2,500 business leaders involved in AI decision-making to uncover the 2024 reality of generative AI adoption. While enthusiasm remains high, our study reveals a notable slowdown in spending, with only 63% of companies planning to increase AI investments in the next 12 months (compared to 93% in 2023).

“The slowdown is driven by growing concerns around implementation costs, data security, and accuracy of AI-generated outputs. However, there are bright spots: retailers and tech companies are leading the way in deployment, and practical applications like FAQ generation, responsible AI governance, and cost reduction are proving successful.”

"Unfortunately, the financial benefits of implemented projects have been dismal," the study says. "Forty-two percent of companies have yet to see a significant benefit from their generative AI initiatives."

https://lucidworks.com/ebooks/2024-ai-benchmark-survey/

I keep highlighting the ever shrinking US oil rig count and I will again today as the Friday count fell another 3 rigs to just 485, the lowest since January 2022. It’s down for 4 straight weeks and pointing again to a peak for now in US oil production at around 13mm barrels per day. The gas rig count was unchanged at 98, holding at the lowest level since late 2021. We remain bullish and long energy stocks.

Germany’s IFO June business confidence index unexpectedly fell to 88.6 from 89.3 and that is a 3 month low. The estimate was for a slight gain to 89.6. The Current Assessment was unchanged m/o/m but the Expectations component slipped. The IFO said simply, “The German economy is having difficulty overcoming stagnation.” No real surprise, notwithstanding the slight miss, as we know their manufacturing and export sector has been challenged with services outperforming. The euro is actually a bit stronger and bund yields are higher while the DAX is up .5%.

In the UK, the June CBI industrial orders index did improve to -18 from -33 and 8 pts better than anticipated. From CBI, “We’ve seen a stop-start recovery in manufacturing output in recent months, with higher activity over the last quarter concentrated in a relatively small number of manufacturing sub-sectors.”

There is hope though, “But it’s encouraging to see that manufacturers remain confident the economy is heading in the right direction and our June survey suggests that the recovery should broaden out over the summer.”

However here is the caveat, “One note of caution is that order books remain soft. The sharp deterioration in export order books is particularly striking and is something to keep an eye on in the coming months.”

The pound and gilt yields are up too as are UK stocks which we are bullish on and long of some, particularly energy and a supermarket name.

The yen is teasing the 160 level again and we got another few sentences of verbal intervention from the Vice Finance Minister Masato Kanda who said “If there are excessive currency fluctuations, it has a negative impact on the national economy. In the event of excessive moves based on speculation, we are prepared to take appropriate steps.”

We know these words are hollow as a few rounds of FX intervention did nothing sustainably as we know and only more aggressive monetary tightening from the BoJ will be the help needed to strengthen the yen. The Bank of Japan is playing with fire on their glacial pace of shrinking QE and raising rates because a yen move above 160 creates more pain than gain. I expect a rate hike and smaller QE to be announced in July.

venuv

As someone in the AI space, I have to say I have found the dialog on AI here to be the underwhelming 'frustrated bear' kind. Yes it will go down at some point, by some amount .. But this ain't crypto, its reality isn't in question, it's time frame to tangible societal benefit that the public will pay for .. is.

I would welcome a different dialog on - when AI happens (which is a given) which non-AI companies benefit (e.g. Oil Prospecting, which uses a lot of traditional AI)? what is the time frame of their benefit? where is benefit two-sided (e.g. Uber which could benefit or get hurt) but the company may be able to make it asymmetric?

beating a dead drum ain't benefiting anyone's wallet ..

Dougie Kass

My series, More Tales of Nvidia, is for informational purposes.

In fact, it is a skeptical view that you will not likely find elsewhere.

The real reason I publish this series is that I find most in the business media (perhaps it is their time constraints!) talk in very shallow and unsubstantive terms - miles long but only inches deep.

Mine is a view from a layperson who is not a tech specialist but, hopefully, thinks logically and has common sense and brings up some food for thought.

That said... I don't have a dog in the hunt.

For the reasons below, my Trade of the Week is long  (MSOS) : 

Let's Get Chai!

On any weakness I plan to move to a very large position in cannabis.

The likely sequence of key catalysts that I see include:

* S3 rescheduling passage by October

* The Florida adult use referendum passes in November

* Custody and uplisting issues are resolved in the first half of 2025

As each of these events occur, the shares of cannabis companies should move progressively higher.

And, as mentioned in my industry position piece earlier this week on TheStreet Pro, the small market capitalizations and limited floats could create a buying frenzy in the space.

I don't want to sound hyperbolic, but a possible tripling in the share prices over the next few years seems a reasonable expectation as the industry becomes much more profitable, faces new geographies (of growth) and institutional buying/ownership finally becomes a reality.

Position: Long MSOS common (L) and calls (S), GTBIF (S), TSNDF (S), TCNNF (S), CURLF (S), VRNOF (S)

BY DOUG KASS JUN 21, 2024 3:16 PM EDT

Viking Therapeutics presents data on amylin and calcitonin receptors: Viking Therapeutics  (VKTX)  announced the presentation of pre-clinical data from a series of internally developed dual agonists of the amylin and calcitonin receptors at the 84th Scientific Sessions of the American Diabetes Association. The presentation highlights the effects of treatment on body weight, food intake and metabolic profile in healthy rats and diet-induced obese mice as compared to control cohorts treated with vehicle or the dual amylin and calcitonin receptor agonist cagrilintide. The studies were summarized in a poster presentation at the annual scientific conference of the American Diabetes Association, being held June 21-24, 2024, in Orlando, Florida. The study results demonstrate that Viking's series of dual amylin and calcitonin receptor agonists reduced food intake in lean rats in the period from 0-72 hours following a single subcutaneous dosing. At 72 hours following a single subcutaneous dose, Viking's novel compounds resulted in up to 8% body weight reductions compared to vehicle-treated animals. In a DIO mouse model, treatment with Viking's series of co-agonists for 24 days resulted in body weight reductions that were comparable to those achieved in cagrilintide-treated animals. Additionally, improvements in key metabolic markers, including blood glucose levels, were observed in DIO mice treated with the company's compounds for the 24-day time period.

Sold my  (OXY)  for a nice and quick profit (purchased near close on Friday) at $62.24.

Back short common of  (SPY)  $546.93 and  (QQQ)  $479.77.

Amen Brother Dougie, from Doug

From douglass cassell, 5 mins. ago:

Doug K's take on AI must be respected, even with those of us invested in NVDA. That said, depending upon ones' timeline, everyone could end up being correct. Railroads, electricity, radios, computers, cellphones and the internet all went through stages of hype, bubbles, disappointment, and eventual universal adoption and transformation. Such transitions are often messy, lengthy, and branch into paths unanticipated. I suspect AI is not really all that different. The original language models are indeed fascinating, but simultaneously of little real use for most of us. However, that does not mean that the concepts and hardware/software developments are also useless. Mistakes are made, but people and systems learn, and improve. The process with AI is different, as it will be faster and benefit even more from network effects. How it impacts people, business and society is still not determined, but it definitely will. Like many investments it is a bet on the future, and being a bet, has some range of outcomes. NVDA is a proxy for AI, but in the end may not be the real beneficiary. I have said before, whomever develops a really useful application that can be rolled out to the masses may be the real winner. That is why this investing game is fun.

3:00 a.m.: U.S. FOMC member Christopher Waller (voter) delivers opening remarks at the International Journal of Central Banking Annual Research Conference 2024, Rome; 

8:30 a.m: Fed Bank of Chicago President Austan Dean Goolsbee (non-voter) will give a live television appearance on CNBC's Squawk Box; 

2 p.m.: Fed Bank of San Francisco President Mary C. Daly (voter) speaks on monetary policy and the economy before an event in partnership with the Commonwealth Club World Affairs of California and the San Francisco Press Club (embargoed prepared remarks and audience Q&A expected. No group media interview. Livestream at https://www.frbsf.org/news-and-media/events/2024/06/mary-c- daly-remarks-commonwealth-club-2024/)

Strong rotation into energy today.

Bitcoin is -4.9% or $3,000 overnight.

Is this a precursor for risk on?

Here are select U.S. movers as of 8:48 a.m. EST

Upside:

-ALIM +77% (to be acquired by ANI Pharmaceuticals for $5.50/shr + $0.50 CVR)

-ALNY +38% (reports positive topline results from HELIOS-B phase 3 study of Vutrisiran, achieving statistical significance on primary and all secondary endpoints in both overall and monotherapy populations)

-RGLS +13% (announces Positive Topline Data from the Third Cohort of Patients in its Phase 1b Multiple-Ascending Dose (MAD) Clinical Trial of RGLS8429 for the Treatment of Autosomal Dominant Polycystic Kidney Disease (ADPKD))

-RXO +11% (to acquire UPS logistics business Coyote Logistics for $1.03B; affirms Q2 adj EBITDA guidance)

-ALT +10% (presents data on the Effect of Pemvidutide on Cardioinflammatory Lipids: Pemvidutide elicited significant weight loss and decreases in pro-inflammatory serum lipids associated with atherogenesis and cardiovascular disease risk)

-ARGX +10% (FDA approves VYVGART Hytrulo for Chronic Inflammatory Demyelinating Polyneuropathy)

-IONS +9.8% (ALNY reports positive topline results from HELIOS-B phase 3 study of Vutrisiran, achieving statistical significance on primary and all secondary endpoints in both overall and monotherapy populations)

-CLOV +9.6% (momentum)

-NTLA +9.4% (ALNY reports positive topline results from HELIOS-B phase 3 study of Vutrisiran, achieving statistical significance on primary and all secondary endpoints in both overall and monotherapy populations)

-BOF +9.1% (U.S. Army Selects BranchOut Food Products for Field Test with Aim of Revolutionizing MREs)

-DJT +6.8% (announces $69.4M in Initial Proceeds from Warrant Exercise)

-NNE +6.2% (acquires novel annular linear induction pump (ALIP) intellectual property used in small nuclear reactor cooling and heat transfer from noted physicist, research engineer and project manager Carlos O. Maidana, PhD. of Maidana Research)

-TRDA +4.4% (reports positive preliminary data in healthy volunteers from Phase 1 ENTR-601-44-101 trial for Duchenne Muscular Dystrophy)

-PUK +4.2% (commences first $700M tranche of earlier announced $2B share buyback program)

-RANI +3.6% (announces partnership with ProGen on development of Oral Obesity Treatment)

-CNK +3.5% (ROTH MKM Raised CNK to Buy from Neutral, price target: $26)

-MSA +3.1% (Vanguard Group adds to holdings)

-BUD +2.6% (UBS Raised ABI.BE to Buy from Neutral, price target: €72 from €63.50)

-VSTO +2.6% (confirms CSG Increases Purchase Price for The Kinetic Group Business by 2% to $2B)

-SLNH +2.5% (unleashes first batch of NVIDIA GPUs)

-BNTX +2.3% (BioNTech and DualityBio receive FDA Fast Track Designation for antibody-drug conjugate candidate BNT324/DB-1311 in prostate cancer)

-CARR +2.3% (CitiGroup Raised CARR to Buy from Neutral, price target: $74)

Downside:

-EFTR -73% (to wind down operations as it seeks strategic alternatives; expects to be de-listed from NASDAQ)

-GTHX -48% (announces Phase 3 PRESERVE 2 Trial Did Not Achieve Statistical Significance in the Primary Endpoint of Overall Survival (OS) in the Intent-to-Treat (ITT) Population)

-INSP -12% (weakness following LLY detailing results from Phase 3 SURMOUNT-OSA trial for obstructive sleep apnea)

-RMD -9.6% (weakness following LLY detailing results from Phase 3 SURMOUNT-OSA trial for obstructive sleep apnea)

-HUT -3.2% (announces $150M strategic investment from Coatue through a convertible note to partner in building next gen AI infrastructure platform)

-RIOT -3.1% (withdraws proposal to acquire Bitfarms fo $2.30/shr; Stands ready to engage and negotiate with a reconstituted Bitfarms Board)

-SON -2.9% (to acquire global supplier of metal packaging Eviosys at ~$3.9B)

-YTRA -1.9% (announces Independent Committee to evaluate potential corporate restructuring)

-NVDA -1.6% (continued profit-taking)

Here are the big pre-market movers, percentage-wise, as of 8:45 a.m.:

Most active pre-market exchange-traded funds as of 8:24 a.m.

* Is AI an expensive game of telephone?

* Will AI farms start to be required to pay for content?

* All the while will Nvidia NVDA insiders continue to aggressively sell shares ...?

"Jason Goepfert on X: "I mean, it's probably something. $NVDA insiders are dumping at the fastest pace in years. The other times it exceeded $150 million during a month, the stock got put in the penalty box."

Ram Ahluwalia CFA, Lumida on X: "Cathie Wood, as of now, has called the local top in semiconductors with $ARKW's purchase of $NVDA and $TSMC two days ago. Right down to the day. You really can't make this up." 

Lawrence McDonald on X: "Dear AI investors in 2024, we must recall great EV snow job of 2020-2021."

I continue my series, More Tales of Nvidia - a layperson's look at AI: Is artificial intelligence an expensive game of telephone? 

A fan of generative artificial intelligence told me over the weekend, “and the search outcomes have answers like Reddit  (RDDT) threads, some of which for health stuff are really good, other sources too.” 

I understand this point, but the issue is that a Reddit thread is content made by people (and often a lot of baloney as opposed to fact, but ignore that issue). Without the human content, the AI search has no value. It seems at best with regard to this use case, generative AI is not really AI, but a different form of search, in which a bunch of internet content can be aggregated into a single response that will almost always be replete with errors and hallucinations (MIT Technology Review "Why does AI hallucinate?"). This answer will need to be double-checked, which nets out often to no gain in productivity or a loss, if the error is not caught, for an enormous amount of expense (capital and operating costs). The cost/benefit for the entire system is not there. 

Remember, even though you might be paying, the providers still losing scads of money to produce answers to queries. Having said all of this, AI needs human content. If humans stopped producing content, what would AI do? Search for content produced by other AI machines? That content would be replete with errors, too. Then you are stuck in this infinite doom loop, where at light speed, AI is producing content that is locked in the past, does not evolve, and by definition will be replete with more and more errors. It will be akin to the mutations in a virus, where what one ends up with is not similar to what one started with. Or that old game you used to play as a kid where a bunch of people would stand in a line, whisper something into the ear of the person next to them, who is meant to repeat it to the next person. By the time you get to the end of the line, the sentence the first person started with ends up being entirely different when the person at the end of the line speaks it. I guess the game was called "Telephone." AI seems to be a very expensive game of telephone that cannot even be played without humans producing the initial content.

Asked more simply: Does AI have any value without human content? Therefore, at best, isn’t it just another form of search? If this other form of search will always be incredibly expensive, and error-prone, how much value can it have? Again, as of now the flattened end use trends as well as CIO surveys, tell you not much. Even the companies pushing the AI, know it doesn’t work well and the business model doesn’t exist because it is too expensive (cost of building and running the data centers, like power), and they want to try and push the expense to end user per the article below. Doing it this way, the cost is borne by the customer in terms of paying for the silicon and paying for the power consumption. But doing this doesn’t even work well, either, because there is still not enough processing power at the client level (compare what a single PC can do to what a data center can do), and the process of doing this is also sloppy and is a kluge where x86 instructions need to be translated into something the Qualcomm AI  (QCOM)  part can understand. But Wall Street is telling us is that these copilot PCs that don’t work are going to cause a massive upgrade cycle? 

What is Qualcomm hiding and why?

Lets start out with the why side; it is easier. The x86 emulation sucks and they know it. Since x86 compatibility is a key marketing message from both players, they want you to believe your software will just run; they have to hide this failing at all costs. Let's move on to the elephant in the room, AI PCs; we will stop using Copilot because it is getting annoying. The cooked up scenarios shown off over the last few days are perfectly doable with current PCs, just with a little more battery drain. The bunny ears you put on your boss during that endless conference call may be a little more realistic with an AI PC, but, well, refresh the corporate fleet NOW! AI PCs have little to no actual advantage over current silicon and that will be the case for a long time to come.

So, if this stuff is pretty worthless for the short- and mid-term due to lack of performance and lack of apps, why is Microsoft  (MSFT)  is so desperate to push it? Simple enough, money. Microsoft is pimping AI features hard, and in some cases it can have uses, Office 365 is said to be one. Nothing a good template library can’t do better but on occasion it has a useful and occasionally correct outcome. Search on the other hand is plagued by silent errors, so that is a long way off. Why money then? All of these AI features are done where they should be done, at the data center. It has the actual performance to do the job right, has the data on hand, memory to run the correct large models instead of far less accurate desktop version, and more. It is the right thing to do in the data center for the right reason. The big problem is that Microsoft has to pay for it. It is a cost with little to no direct payback. If they push it to the user, the user pays for those cycles. Genius! So the user ends up with a far worse version of the result, but Microsoft doesn’t foot the bill, in fact they get paid when a new PC is sold. Win/win for them, lose/lose for the user. 

If you were really cynical, you could foresee a program that says something like, “Want better AI results? For only $9.99 a month you can run your AI queries on our servers…”. <sarcasm> Never could happen. </sarcasm> So basically this whole push is nothing more than a way for Microsoft to reduce burgeoning data center costs. They know it isn’t a user benefit.

Short follow up to below, as I just noticed this article (below). Clearly, AI needs the humans more than the humans need the robots. It is useless without the human content. Maybe it is better described as an illegal web scraping game of telephone?

What happens if there is a way for publishers to effectively stop AI from doing this? I suspect they will get there. Then when the AI farms have to start paying for content, which they should, their already expensive business model will get much more expensive.

Then of course at the end of the article, once again, the issue of getting it wrong : “As for the inaccurate summaries that the tool had generated, Srinivas said: "We have never said that we have never hallucinated."

These are all complicated issues, but apparently based on what folks are paying for the equities and the startups, they have all the answers?

AI companies are reportedly still scraping websites despite protocols meant to block them

More...

Cannot think. Just regurgitates. Change the riddle so it is different than what it already out there, it cannot solve for it, and this is not even complex:

(And, more.... as Nvidia insiders cash in:)

Nvidia (NVDA) Insiders Cash In on Rally as Share Sales Top $700 Million - Bloomberg

* Money pours into Florida's legalization initiative

* Trulieve (TCNNF)  will be the largest beneficiary of passage of the ballot measure

Florida's Legalization Campaign Has Raised More Money Than Any Marijuana Ballot Measure In History - Marijuana Moment

You can't make this up (!):

And some history of Cathie Wood and Nvidia  (NVDA) .

The S&P Short Range Oscillator is still slightly oversold at -1.85% vs. -1.55%

The S&P futures have had more moves than a shortstop batting .110 in the overnight and early morning sessions.

When I went to sleep on Sunday night Spoos were -14.

When I awoke at 4 a.m.-ish they were +8. (I sold some  (SPY)  short at that time!)

Spoos are now flat.

Batter up.

A Buy Before the Close

I purchased back a small amount of Occidental Petroleum (OXY) at $60.87 near the close.

Position: Long OXY (S)

BY DOUG KASS JUN 21, 2024 4:11 PM EDT

Doomberg on "Missions Creeps."

I reestablished a short in  (SPY)  $545.25 and  (QQQ)  common at $479.80.

When the market opens I will convert to short calls.