Breadth improved from midday:

Thanks for reading my Diary today and all week.

Enjoy the weekend.

Be safe. 

Speaking of investment shorts hitting new 52-week lows.

B. Riley Financial RILY is now more than -$40 from its high and trading at $15 now.

No longer a fundamental analyst, he is now into technicals:

"The market's momentum is still strong."

We are all traders now.

New 52-week lows for investment shorts Sleep Number SNBR and Winnebago WGO today.

From Rosie:

Scott Galloway's No Mercy/No Malice... "Time to Leave." 

* Kamala moves higher...

* While Joe moves lower

2024 Presidential Predictions | 2024 Democratic Nominee? (predictit.org)

Everyone's favorite "value stocks" — financials and energy — are stinking up the joint today.

The market's advance is ever narrowing...

Housekeeping item.

I just covered my Affirm Holdings AFRM short at $28.68 for a small gain.

From mid-May:

New Short

Affirm Holdings (AFRM) at $33.44.

More in the next few days...

Position: Short AFRM (VS)

DOUG KASS MAY 14, 2024 12:05 PM EDT

Another day in which the averages are higher (led by the nations states of AAPL, GOOGL, META and AMZN) and the downside is broadening:

* SPY +0.18%

* QQQ +0.63%

* IWM -0.69%

* RSP -0.58% (equal weighted S&P)

And, market breadth is bad:

Slowly adding to Disney DIS $97.83 on a scale lower.

I added to SPY $552.12 and QQQ $492.92 shorts

As of 8:14 a.m.:

The jobs data signal more evidence that "slugflation" lies ahead.

As of 8:26 a.m.:

Upside:

-MDWD +35% (strength attributed report received $34.00/shr offer from Solventum)

-GLNG +8.6% (signs agreement for 20-year FLNG deployment in Argentina with Pan American Energy)

-M +8.4% (reportedly Arkhouse and Bridgade increase offer 3.3% from $24/shr to $24.80/shr)

-FANH +4.5% (authorized the expansion of the Company’s share repurchase program by an additional $20M)

Downside:

-MARA -6.6% (BTC weakness)

-MSTR -6.6% (BTC weakness)

-COIN -4.8% (BTC weakness)

-RIOT -4.7% (BTC weakness)

-BNGO -4.2% (files $30M registered direct offering priced at-the-market under Nasdaq rules for 17.5M common shares priced at $0.57)

* The Fed drinks the AI Kool Aid.

* Seinfeld, Meet AI. 

The U.S. stock market itself is a tale of two cities: the AI players and everybody else. 

Led by Nvidia NVDA, whose market value trebled in the last year to briefly over $3 trillion the "Magnificent 7" have accounted for approximately 62% of the S&P 500’s total return this year.

The other 493 companies lost 1.2% in market value.  

Six of the 11 sectors in the S&P index fell in the second quarter, including financials, energy and industrials. The market is imbalanced because the earnings are heavily weighted toward a limited number of names, most of which happen to be enormously profitable mega-cap technology companies. 

This is a consequence of several factors including the absence of meaningful antitrust legislation in recent years that left these companies - who are now effectively nation-sates - with either monopoly or oligopoly positions in their markets. 

But while these companies are benefiting from AI hype, they have yet (with the exception of Nvidia) to generate meaningful revenues and profits from AI. Amazon AMZN, Meta META, Microsoft MSFT and Google GOOGL (the new Nations- States) are expected to spend almost $200 billion on capital expenditures this year, much of it AI-related and most of it capitalized rather than expensed, so it won’t hurt earnings too badly. 

But, over time, they will need to see a return on these huge investments to keep making them.

Its Official - The FED Has Swallowed the AI "Kool-Aid" 

There is now official confirmation AI will not work in the manner it has been hyped. 

Straight from the Fed minutes, the Fed is now drinking the AI Kool-Aid:

"The latter prospect included the possibility of a boost to productivity associated with businesses’ deployment of artificial intelligence–related technology. Participants observed that longer-term inflation expectations had remained well anchored and viewed this anchoring as underpinning the disinflation process. Participants affirmed that additional favorable data were required to give them greater confidence that inflation was moving sustainably toward 2 percent..." 

 What have they ever been right about forecasting? Best inverse leading indicator there ever has been. Do the opposite! Seinfeld: The Opposite:

And from Goldman Sachs GS, the use case for the end users is still not there.

Not included, the expense of doing this is massive, without a use case, so how does it make sense?

Here is an interesting tweet from Elon Musk, which oddly is a self-own without realizing it. This is after many years and an enormous amount of money, and the self-driving AI still does not work well: 

A slightly more technical explanation of some of the problems they are facing: 

As complex and elegant as self-driving sounds, it is much simpler than human language. Driving is very simple. Follow the lines on the road. Green is go, red is stop. If something gets in front of you stop. Few traffic signs to understand. Very strict rules to driving. If the rules are broken by someone else, there are limited options you have as a driver for how to respond. I think I had it all figured out by the age of 6, by osmosis, with no training. The AI, with all these years of massive amounts of training (and dollar cost capital investment and ongoing operations), still cannot do it right. Also, notice, it requires human intelligence to make the training decisions.

Similar issue at McDonalds MCD, where the AI could not do something as simple as understand “hold the pickles hold the lettuce.” Or, as noted in a previous "More Tales of Nvidia", at Amazon (who are not dummies). McDonald's had to shut down their AI powered self-checkout because it couldn’t even figure out how to ring up the groceries. When I said there is an enormous amount of money being invested in an immature and unstable technology, that will be flushed right down the toilet, I was not kidding.

The worst thing you can do as an executive is to drink your own Kool-Aid!

The idea is to sucker everyone else into it. Now that the Fed has fallen for it, the shark has officially been jumped!

From The Divine Ms M:

Marijuana Companies Appeal Case Challenging Federal Prohibition Following District Court Dismissal - Marijuana Moment

Doomberg on "No, Solar Isn't Cheap."

The infatuation with homebuilders — in large measure because of low absolute and relative valuations — is endemic to the problem in today's market.

Investors skate on the surface, memorize bullet points ("housing stocks will improve with lower interest rates") and worship at the altar of momentum — without meaningful analysis.

From a talking head on CNBC, "my favorite theme for 2024." Home Depot HD (I am and have been short) and homebuilders are mentioned.

As an example of below the surface risks, Wolf Street howls about the cost of mortgage paydowns here.

I reestablished my SPY $551.93 and QQQ $492.02 common shorts.

I plan to move to large short the indices on any more strength.