As of 4:49 p.m.:

Thanks for reading my Diary today.

Enjoy the evening.

Be safe.

I am hearing that former President Trump endorsed the rescheduling of cannabis in today's press conference.

I am glad I will be off next week because the markets have grown increasingly random, unpredictable and volatile.

Today is a very good example of this.

Occidental Petroleum OXY is trading +$3.15 (or +6%) to $59.25. I am taking off all of my call options and reducing my common position.

I am adding to my Boot Barn BOOT short (at $129.84, +$14) after another guidance miss (Q3e of $0.81 to $0.87 vs. $0.93 consensus estimate). 

From our Comments Section:

gbuchholz0903

i'm looking at BOOT here. Took down estimates for next quarter. Zero same store growth. Probably benefitted last quarter by Taylor Swift and other major country music tours. Retailer with no same store growth and 26X PE ratio, with not a lot of cash.

JSR asks a very good question below.

Neither I nor anyone else on this site has a concession on the truth — though it seems everyone on FIN TV is "in the know."

To be sure a buy-and-hold strategy — over time — generates wealth.

And, also to be sure, I have had various pales of bearishness over the last several years — recognizing that short selling protects wealth.

I have adopted more of a trading strategy within the context of an ursine market outlook — it seems to have worked out fine though, ideally, buyng the Mag 7 at the 2022 lows would have been perfect.

Trading to me is a defensive endeavour to be used in times of uncertainty and volatility.

I write to a broad audience — to traders and investors.

As to JSR's question, my Best Ideas List (Watch List) is a menu for long-term investors.

Also in response to JSR — I have a number of longs and shorts in my portfolio for years:

JSR1111

Doug I have a question that is meant with the utmost respect….you often mention that you meet with corporate mgt teams in your research endeavors and I wonder why. In recent years you’re much more of a trader (and a good one) than a long term investor. Even when you take positions you initially label as an investment and not a trade, they’re rarely held for very long esp if they appreciate quickly. Unless you find mgt insights that enlightening which I doubt. 

Dougie Kass

I have had longs and shorts on for years - based in some part in my mgt meetings and meetings with competitors.

In the main I have been negative over the last several years helps to explain the lack of buy and hold

Jaw4860

The BIG money is made by investing in Business/ Stocks .I do not get that sense from Doug .Too much trading .

Dougie Kass

see my market outlook this week i discuss this.

and see above response

Dougie Kass

moreover this is an ideal environment for trading - much harder for buy and hold.

tommyPA

That can be true but conversely, TOO MUCH money is lost by NOT TRADING. Thankfully I bought and sold DIS for no gain at $97.00 (now $84.50)

richfish823

If you invested in NVDA, ANET, PANW, etc and held for 5 years you made over 400% on each position.

Dougie Kass

and if you shorted cvna, hood, fxlv, chgg, figs you would make close to 100%.

shorts protect wealth

longs generate wealth

as i noted earlier this week

Jaw4860

I have a number of 10 baggers .Trade around core positions .Your calls have been Excellent .Welcome back .

I have sold out of my SPY and QQQ long rentals at $527.15 and $443.83, respectively - for a large and quick profit.

Frankly, I didn't expect a move of this magnitude.

To think, S&P futures were -35 handles at the worse overnight -- and now +93 handles.

From this morning:

Premarket Trading

Added to longs:

* (SPY) $516.85

* (QQQ) $434.20

LONG SPY S QQQ S

Articles by Doug Kass

Articles by Doug Kass

Aug 8, 2024 6:10 AM EDT

Phew!

I sold out my NVDA near $100 (for a small gain) on cautionary remarks from an investment boutique:

NVDA READ: Rakers out with his Taiwan exports data read-through…. Taiwan Automated Data Processing Machine export data leaves him tempered on making an upside call on NVDA's F2Q25 DC Revs. The historical correlation (R2 = 0.98+) implies $23B vs WF $24.6B and vs Street’s $25B. 

From Peter Boockvar:

And ZipRecruiter said this on the labor market... 

The earnings conference call of ZipRecruiter is always enlightening on the state of the labor market. Ian Siegel, the CEO, has been talking about a slower trajectory of job listings for the past year now and here is what he said last night after reporting that revenue fell 27% y/o/y in Q2:

"As we look toward the 2nd half of 2024, we continue to navigate challenging labor market conditions. Per the Bureau of Labor Statistics, seasonally adjusted hires have declined every month on a y/o/y basis since August of 2022. The quit rate has fallen 9% below the average rate in 2019."

"The y/o/y decrease in quarterly paid employers is primarily reflective of reduced demand from SMBs (small and medium sized businesses). The slight decline q/o/q reflects the continued uncertainty and volatility of the labor market."

While employer demand for labor is weakening, people are picking up the pace of their own job searches as "Total ZipRecruiter web traffic in the US grew 22% y/o/y, which is 12 percentage points more than any of our largest competitors." 

As for guidance, "While we saw signs that we were potentially approaching a trough for much of Q2, trends in the last few weeks of June and through July make us more cautious in our expectations for Q3."

Following the mixed leisure/travel commentary we've seen so far this week, this is what Hilton said yesterday:

"In the quarter, system wide RevPAR increased 3.5% y/o/y, above the midpoint of guidance due to robust group performance, continued recovery in business transient, and easier holiday comparisons."

"Leisure transient RevPAR continued to exceed prior peaks, supported by solid summer travel demand, particularly in international markets."

"RevPAR across large corporates rose 5% in the quarter, driven by strong trends across most industries, including notable recovery in technology."

The group side strength of 10% y/o/y was "led by strong demand for corporate and social meetings and events, and booking windows continued to lengthen."

As for the outlook from here however, "We tempered the high end of our expectations vs prior guidance due to softer trends in certain international markets and normalizing leisure growth more broadly. With continued strength in group and steady recovery in business transient, we expect higher-end chain scales to continue to outperform."

Here was the macro overview from the CEO,

"Asia Pacific is sort of a tale of two cities, China and then APAC ex-China...In China, there is actually a very significant amount of travel going on...But what's going on in China is obviously they have economic issues, so their economy is slow. But really, the travel business is still quite robust. But what's happening is they've opened up a lot of corridors for inter-Asia travel that is visa-free. And Chinese travelers love to travel, and they're getting out of China and they're going around. And there's just not enough inbound travel yet into China."

"The rest of Asia-Pacific, quite strong particularly led by Korea and Japan. And we haven't seen any real signs of weakening in those markets. And I should say India, for that matter. No real signs of weakening, and those are the real APAC ex-China markets that are driving performance."

"And then coming to EMEA, again sort of a bit of a tale of two cities. The Middle East remains quite strong, pretty much across the board. Europe, I would say is still very, very strong in an absolute sense, but a touch weaker than what we had seen a quarter ago, led by some of the leisure business."

And as for the US, "group is still raging. Business transient is still grinding up, not at a rapid pace, but still grinding up. Both of those segments maintain great pricing power. And then leisure transient has been normalizing because we're getting back to a more normal life. And it was at a very elevated levels, particularly on weekends, but broadly. And so we continue to see sort of normalization there."

He also mentioned the higher income customer is traveling more than the lower income one. 

Dutch Bros, which is trading down pre-market, talked about the "macro environment noise and aggressive price promotion from many peers...And while we remain confident in our traffic driving initiatives, we will be navigating through an uncertain consumer environment in the near term."

Ralph Lauren had a good quarter but their revenue guidance was a touch light. They said their good quarter was "led by international and positive retail comps across all regions, with continued momentum across consumer metrics. Performance in our global direct to consumer businesses and Europe wholesale more than offset planned softness in North America wholesale."

"By region, growth was led by Asia, up another high single digits this quarter and consistent with our outlook. This was followed by better than expected performance once again in Europe, while North America was in line with our plan. Our China momentum continued, with sales up low double digits this quarter over an exceptionally strong compare of up more than 50% last year. While we are watching macro developments and consumer behavior closely, our teams continue to successfully grow our brand desirability with domestic Chinese consumers."

Reynolds Consumer Products, the maker of tin foil and garbage bags, among other things, and a stock we own, is benefiting from the slowdown in restaurant traffic and people more eating at home. Its stock was up 7% yesterday:

"We drove sequentially improving retail trends in the 2nd quarter and did so in an environment characterized by declines in personal savings and record levels of household debt. Our products are affordable and convenient, making eating at home even more attractive when away from home consumption is pressured."

Before I update the container shipping prices for you, this is what Maersk said yesterday:

"We saw strong market demand, which gave volume growth tailwind across all our segments, and a continuation of the situation in the Red Sea, which led to constrained vessel capacity and some port congestion." We know many have front loaded their shipping orders to avoid disruptions, especially ahead of the holidays in a few months.

"And as far as the Red Sea disruption is concerned, we are now entering the 9th month of continued threats and attacks on vessels passing through or near the Strait of Bab-el-Mandeb. The situation on the ground is not de-escalating. Rather, we believe the situation is entrenched and expect to stay at least until the end of 2024."

Also, "Market demand has so far been very strong, leading to an increase in our full-year expectation, but we are uncertain of the extent to which this strong volume we have seen thus far will hold up into Q4 adjusted for normal seasonality patterns."

The WCI Shanghai to Rotterdam trip for a 40 ft container fell $271 w/o/w to $7,929. On this recent run up it peaked at $8,267 a few weeks ago and compares with just under $1,700 at the beginning of the year. The Shanghai to LA route price dropped $239 w/o/w to $6,501, lower for a 4th week after topping at $7,512. It started the year at $2,100. 

WCI Shanghai to Rotterdam

We finally had a cooling of bullish sentiment, as it always follows price, in the weekly Investors Intelligence data. It was a rather big shift, in response to a rather big market move. Bulls fell to 46.9 from 59.4 but almost all went to the Correction side as this component rose to 34.4 from 25. Bulls were higher but just to 18.7 from 15.6. Everyone still wants to buy the dip. Today's AAII saw Bulls fall 4.4 pts to 40.5 while Bears jumped by 12.3 pts to 37.5, the most since last November.

Bottom line, this is the shift away from the uber bullishness that is needed in order to get a good tradeable bottom. And as stated here many times, the level of bullishness got extreme, clearly evident in a variety of stats in mid July and that was a contrarian backdrop for what has happened in markets since.

Overseas, Taiwan's July exports rose 3.1% y/o/y, just below the estimate of a 4.4% gain. Keeping a lid on things was a 13.5% y/o/y drop in exports to Hong Kong and mainland China but thanks to Nvidia and the overall chips business, they were up 70% y/o/y to the US. The economy ministry is also blaming Typhoon Gaemi for the export miss as it delayed things for a few days. Including the worst day in the TAIEX on Monday since 1967 (about 1/3 of the index is Taiwan Semi), it's down 3.5% week to date.

Chart as of 8:54 a.m. ET:

Chart as of 8:12 a.m. ET:

Numbers as of 7:54 a.m. ET:

Upside:

-HOOD +3% earnings

-HROW +37% earnings

-APPS +15% earnings

-CMPO +24% earnings

-KVYO +19% earnings

-FWRD +18% earnings

-FLNC +17 earnings

-AMRX +6% earnings

-ASPN +28% earnings

-LLY +10% earnings

-HUBS +6% earnings

-VSAT +7% earnings

-UA +8% earnings

-PH-7% earnings

-DDOG +4% earnings

-YETI +5% earnings

-HBI +5% earnings

-EXAI +7% acquired by Recursion

Downside:

-WBD -10% earnings

-GDRX -12% earnings

-ARHS -19% earnings

-PLUG -7% earnings

-OM -41% earnings

-SONO -18% earnings

-FSLY -18% earnings

-MCK -7% earnings

-UPWK -6% earnings

-ALNT -7% earnings

-MNST -7% earnings

-SEDG -17% earnings

-RYN -10% earnings

douglas cassel

25 minutes ago

People on CNBC are kind of like bands at football halftime. They are to fill dead time. You really aren't watching to see these people, but to follow the market and get any news in real time you don't otherwise get. The commentators are to fill time and if they actually add any value it is an unexpected bonus. That is why so many people, including me, watch with the sound off. This also explains(sorry for the sexism here) the pleasing appearance of many of the commentators.

In their defense, filling 12 hours a day with programming, and attempting to assign causality to the random, is an impossible task.

* Rising volatility and lower share prices have begun to bring out some values.

"When the time comes to buy, you won't want to."

- Wally Deemer

Out past the cornfields where the woods got heavy

Out in the back seat of my '60 Chevy

Workin' on mysteries without any clues

Workin' on our night moves

Trying' to make some front page drive-in news

Practicing our night moves in the summertime, oh

In the sweet summertime

- Bob Seger, Night Moves Bob Seger & The Silver Bullet Band - Night Moves 

The futures market had a wild evening, vacillating from -35 handles on the S&P to +10 handles (with many moves from the bottom to the top end of that range).

"Currently" - a strange word and a changing concept these days if there ever was one (!) - S&P futures are -3 and Nasdaq futures are +24

The yen carry trade unwind has been a major factor in the severity of the decline over the last week. I believe, with a large portion of the yen carry trade having been reversed (JPMorgan estimates about 75% has been closed) attracts me to stocks on a reward vs. risk basis on a near-term basis.

It has been my experience that flow-generated or position-generated, or both, market declines often are temporary and more times than not provide opportunity.

The unwind of the yen carry trade may be such an historical stock market example.

Thinking Second Level

We have moved from modestly net short to slightly net long with the expectation, for the time being, that the retest toward Monday's lows could be successful.

That said, my principal concerns - underwhelming earnings per share reports and the prospects of a sub-trend recovery in economic growth and future corporate profits -- remain intact and will likely limit the upside to equities. But from a second level standpoint, others are now beginning to accept these adverse outcomes and, to some degree, this has begun to be reflected in stock prices.

Importantly, from a bottoms-up basis, some stocks than have dropped by a third of more have grown in appeal.

Bottom Line

I am not Perma anything.

Rather I am an opportunistic (and sometimes contrarian) investor with calculator in hand (in order to determine upside reward vs. downside risk).

It may be time to begin looking up rather than looking down after the crushing decline during August.

“One of the tricks of this business is, keep your losses down and then, if you have a few good breaks, the compounding works well for you.”

- Walter Schloss

Bonus — Here are some great links:

What a Dismal Start to August Means

A Little More Noise and a Lot More Volatility 

Alpha Trends

Wolf Street howls and does a deep dive on mortgages.

I remain short Warner Bros. Discovery WBD:

From Goldman Sachs:

Warner Bros Discovery Inc. (WBD): F2Q24 review: EBITDA miss across all segments, but strong DTC subscriber trends

8 August 2024 | 12:24AM EDT

WBD’s EBITDA of $1.80 bn missed GS/consensus (Visible Alpha Consensus Data) of $2.0/$2.1 bn with a miss across all three segments. Within Networks, Distribution revenue declined 9% yoy (-5% excluding AT&T SportsNet RSN disposition), accelerating from -7% yoy in 1Q24, on accelerating cord cutting, seasonal cord cutting post the NFL season (pronounced in vMVPDs), and fee step-downs internationally on linear to support DTC. Advertising declined 10% yoy, improving from the -11% yoy realized in 1Q24. Although DTC EBITDA of -$107 mn missed, KPIs were strong with 103.3 mn subscribers (+3.6 mn qoq) with WBD guiding to accelerating net adds in 3Q24 driven in part by the Olympics and continued international expansion (GSe +6.0 mn in 3Q24). WBD reiterated its outlook for DTC EBITDA profitability in 2024 and >$1 bn of EBITDA in 2025. Although we’re encouraged by WBD’s DTC momentum as well as investments in Linear Networks sports programming (e.g., Big East, college basketball, Mountain West, CFP, French Open), the loss of the NBA and uncertainty from the litigation to pursue matching rights creates mid-term uncertainty in the outlook for Linear Networks profitability (~90% of consolidated EBITDA).

From The Credit Strategist:

Melting Ice Cube

The Credit Strategist Blog

Wed, Aug 7 at 6:39 PM

Warner Brothers Discovery (WBD) is turning into a melting ice cube. The company announced this afternoon a $9.1 billion non-cash write down of its television networks, a terrible sign of how severely the value of legacy media is deteriorating. The company will try to downplay this but the merger between Warner and Discovery is turning out worse than the one between Time-Warner and AOL. And while shareholder value is being destroyed, WBD is still paying its CEO huge amounts of compensation every year which simply isn’t deserved.

Something is seriously wrong with this company. Actually many things are wrong. For one, its board of directors is totally out-to-lunch. It rewards non-performance which is a sign that board is not independent and not serving shareholders. Second, company lacks a viable strategy to compete in today’s media world. It lacks the scale and financial strength to compete against DIS (which has its own problems), AMZN, AAPL, etc. Even though it bid to keep NBA rights, the league favored AMZN which has much deeper pockets and much broader consumer and global reach. WBD is trying to compete in today’s world with yesterday’s assets and tools. Streaming - which is in a price war squeezing profits - won’t save it.

With way too much debt & a shrinking equity market cap, WBD is looking at a credit downgrade if the credit rating agencies are paying attention. That will raise its cost of capital and make things worse. Something needs to be done quickly to reverse the downward slide.

Added to longs:

* SPY $516.85

*QQQ $434.20

LONG SPY S QQQ S

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

From JPMorgan:

US: Stocks closed lower. Despite a strong pre-market rally post BOJ’s dovish comment, equities erased all of its gain and closed 80bp lower given the weaker earnings reports, lackluster 10y auction and spike in oil prices. Macro calendar was quiet today. Tomorrow, keep an eye on the initial jobless claims as a lower claims number may ease some concerns on labor market weakness.

and...

EQUITY AND MACRO NARRATIVE: BoJ’s comments on not raising rate gave the market some comfort overnight. However, underwhelming earnings reports and the lackluster 10y auction resumed the selloff and erased all of the +1.6% pre-market gains. Given the lack of macro data catalysts this week, it may worth paying attention to tomorrow’s initial claims for further evidence on the labor market conditions.

KASMAN SEES RECESSION PROBABILITY UP FROM 25% to 35% - his full note is here

· Central bank gradualism under pressure as balance of risks shifts

· Activity data remain solid but there are hints of a private sector turn to caution

· We assess probability of 2H24 US/global recession up modestly to 35%

· Increase in US recession probability comes with easing in labor market pressures not evident elsewhere

· The interaction of these risk shifts warrants a Fed break from gradualism

· Markets have recently priced a considerably faster pace of central bank easing, partly reflecting rising concern of a US/global recession, realization of which would almost certainly produce a sharp and immediate easing. As we noted last week, important elements of our growth forecast are being challenged. The latest business surveys suggest a loss of momentum in global manufacturing and in the Euro area, weak links in the expansion that we have expected to lift this year. US news also hints at a sharper-than-expected weakening in labor demand and early signs of labor shedding. These forces warrant increased concern but are tempered by continued solid gains in overall activity led by the service sector. More fundamentally, the vulnerabilities normally associated with a recession break—sustained profit margin compression or credit market stress, and energy or financial market shocks—are notably absent. As such, we have only modestly increased our assessment of near-term recession risk, raising the probability of a US/global recession starting before year-end to 35%, up from 25% in our midyear outlook (Figure 1).