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A special thanks to our subscribers for providing me with this platform — today, this week and over the last 27 years.

I hope my Diary has been helpful.

Enjoy the weekend.

Be safe.

GO YANKEES!

There is still hope for some of us (!):

At 2:45 p.m. the S&P Index is +26 handles.

I did little trading (but when I did it was to modestly increase my short exposure).

Today was another day filled with research calls/meetings.

Today's "things":

* I shorted  (SPY) / (QQQ)  common in premarket trading, converting the position to short calls when options opened and later in the day (a push, thus far!).

* I also shorted  (AXP)  in the premarket ($292) — covered most at around $275 during the regular trading session. $s!

* Added to my ever growing  (MSOS)  long at $7.08.

* Purchased  (PG) , in the hole at around $168.75 (it is trading +$3 from my cost).

* Shorted more homebuilders, across the board.

* Added to my  (XLF)  short at $47.65.

* Bought small  (XOM)  at $119.82,  (CVX)  at $160.65 and  (SLB)  at $42.26.

From Peter Boockvar:

Positives

1)Housing starts in totality were about as expected but the multi family side continues to show deceleration as the market absorbs a huge increase in supply this year and deal numbers don’t pencil out like they did pre 2022. Single family starts rose by 27k m/o/m, a 5 month high. Multi family starts fell to 327k, a 6 month low. As for what is planned to come via permits, single family rose a touch, by 3k m/o/m to 970k. Permits for multi family construction fell to 458k from 503k. That is the 2nd lowest read since the Covid lows and 2018 before then.

2)The NAHB home builder sentiment index for October rose 2 pts m/o/m to 43 though still well below 50. The estimate was 42. The Present Situation component was up 2 pts to 47 while the Expectations side was above 50 for a 2nd month, up by 4 pts to 57 and likely optimistic with the Fed in rate cutting mode, though mortgages mostly price off the 10 yr which we know is higher. Of note still, Prospective Buyers Traffic was well under 50 again at 29, though up 2 pts m/o/m. The NAHB said “Despite the beginning of the Fed’s easing cycle, many prospective home buyers remain on the sideline waiting for lower interest rates. We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans.”

3)After last week’s jump in initial jobless claims to a revised 260k (up 2k), in part due to the hurricane, it fell back to a still elevated 241k where the estimate was 259k. This raised the 4 week average to 236k from 232k. Delayed by a week, those still receiving continuing claims numbered 1.867mm as expected, up slightly from the prior week and still hanging around the highest level since November 2021.

4)September core retail sales rose .7% m/o/m, above the estimate of .3% and after rising by .3% in the month before which was left unrevised. Not included here, auto sales were flat while building materials were up by .2% m/o/m.

5)September import prices remained benign and about as expected.

6)Container shipping rates continue to fall w/o/w with the Shanghai to Rotterdam route down by $218 to $3,373, still well above the about $1,700 level at the beginning of the year but well off its summer high above $8,000. Prices to NY and LA also fell. Air cargo rates though were little changed w/o/w but still up 20% y/o/y according to World ACD pricing.

7)The October Philly index surprised to the upside with a print of +10.3, up from +1.7 and above the estimate of +3. Of note too, the 6 month business outlook did rise to 36.7 from 15.8 and just below the 38.7 seen in July.

8)Within the NY Consumer Expectations survey there was slight improvement in the labor market answers.

9)Foreigners added to their US Treasury ownership in August (so dated) but the Cayman Islands continues to be the dominant buyer and we assume that it’s mostly hedge funds. Japan, the largest owner, added to its holdings but China sold more of its own.

10)From Taiwan Semi: "We continue to observe extremely robust AI related demand from our customers throughout the 2nd half of 2024."

11)From Steel Dynamics: "Current order activity is steady with expectations for improved volumes in 2025, as interest rates decline and the support from the US infrastructure program and onshoring are expected to positively impact demand for not only steel joist and deck products, but also for flat rolled and long product steels." A clear beneficiary of government spending and legislation and they also expect to benefit from hoped for lower interest rates and higher tariffs.

12)From Bank America: "Bank of America continued to demonstrate strength this quarter in an economy that continued to be stable, albeit with slower growth and falling inflation. So many have asked me from time to time, what do we see in our own customer base? As we talked about many times, our consumer payments is an indicator of activity. Those payments were up 4% to 5% y/o/y for the quarter...The pace of y/o/y money movement has been steady since late summer this year, after having fallen in the spring and early summer. This growth in consumer payments continues into October. This activity is consistent with how customers were spending money in the 2016 to 2019 timeframe when the economy was growing and inflation was under control."

13)From JP Morgan: "So I think what there is to say about consumer spend is a little bit boring in a sense because what's happened is that it's become normal. I mean, I think we're getting to the point where it no longer makes sense to talk about the pandemic. But maybe one last time, one of the things that you had was that heavy rotation into T&E (travel and entertainment) as people did a lot of traveling and they booked cruises that they hadn't done before and everyone was going out to dinner a lot, whatever…So you had the big spike in T&E, the big rotation into discretionary spending. And that's now normalized. And you would normally think that rotation out of discretionary into non-discretionary would be a sign of consumers battening down the hatches and getting ready for a much worse environment. But given the levels that it started from, what we see it as is actually like normalization. And inside that data, we're not seeing weakening, for example, in retail spending."

14)From Wells Fargo: "Overall, customers in our consumer businesses continued to hold up relatively well, benefiting from the strong labor market and wage growth. Consumer charge-offs declines from the second quarter, driven by lower losses in our credit card portfolio, while our other consumer portfolios continued to perform well, reflecting the benefit of prior credit tightening actions…We continue to look for changes in consumer health, but we have not seen meaningful changes in trends when looking at delinquency statistics across our consumer credit portfolios. Both credit and debit card spend were up in the third quarter from a year ago, and although the pace of growth has slowed, it is still healthy."

15)From United: "This quarter was the busiest third quarter in company history, setting the company records for the most ever passengers carried on the July 4th and Labor Day holidays and for the highest number of customers carried in a day at 552,000 in July."

16)In China, GDP grew by 4.6% y/o/y in Q3 vs the estimate of 4.5%. In September, retail sales were up by 3.2% y/o/y vs the forecast of 2.5%, industrial production rose 5.4% y/o/y vs the estimate of 4.6% while fixed asset investment was about in line. Home prices in September fell again but let's see what happens with them as the recent steps work its way through.

17)While it will still take years to work through the huge amount of housing supply, including millions of unfinished apartments, China and some local governments announced more steps to quicken the pace. China’s central government is also stepping up its focus on the excessive local government debt.

18)The ECB, BoK, BoT and the Philippines central bank all cut rates. The ECB though is doing so less gingerly.

19)Australia reported better than expected September jobs numbers.

20)UK CPI came in lighter than expected. The headline September print was up 1.7% vs the estimate of 1.9% and down from 2.2% in August. The core rate slowed to 3.2% from 3.6% and also two tenths below expectations but remaining above 3% because of 4.9% services inflation growth.

21)In the UK too was better than expected jobs data in the 3 months thru August. Employment rose by 373k vs the estimate of 240k and that is the biggest number I've ever seen and the unemployment rate ticked down by one tenth to 4%. Wage growth continued on a solid path, up 4.9% ex bonuses and as expected vs 5.1% in the month prior y/o/y.

22)UK retail sales in September ex auto fuel rose .3% m/o/m vs the estimate of down .3%.

23)The investor mood in Germany is still pretty down but got a bit better in its outlook according to the ZEW. Expectations rose to 13.1 from 3.6 and above the estimate of 10. Helping is the expectation that inflation will continue to moderate and the ECB will come to the rescue with further rate cuts. Expectations too of rising export growth helped as well, particularly with the recent China policy moves. The Current Situation though remains deeply pessimistic at -86.9 vs -84.5 in the month before and which is near the Covid bottom low.

24)Headline September inflation in Canada rose 1.6% y/o/y, two tenths under the estimate though the median core rate of 2.3% was as expected.

25)Yahya Sinwar is dead.

Negatives

1)In the NY Fed's Consumer Expectations survey, the one year expectation for inflation remained at 3%. It rose to 2.7% from 2.5% for the 3 yr view and up by one tenth to 2.9% for the 5 yr guess. The 2 tenths rise for the 3 yr view was "most pronounced for respondents with at most a high school degree." Most noteworthy within in the data was on the credit quality side. "The average perceived probability of missing a minimum debt payment over the next three months increased for the 4th consecutive month to 14.2% from 13.6% in August. This is the highest reading of the series since April 2020. The increase was most pronounced for respondents between ages 40 and 60 and those with annual household incomes above $100k."

2)Weekly mortgage applications fell sharply with the rise in the average 30 yr mortgage rate to 6.52% from 6.36% last week and 6.14% in the week before. Purchases fell 7.2% w/o/w and refi's were down by 26% y/o/y and lower for a 3rd week.

3)After surprising to the upside in September, the October NY manufacturing index is back to disappointing. The -11.9 print is down from +11.5 last month and below the estimate of +3.9. With regards to the 6 month outlook, business expectations did lift by 8 pts to 38.7.

4)The Cass Freight September index showed a 3.2% m/o/m drop in shipments and down 5.2% y/o/y reflecting the ongoing manufacturing recession. I’m not sure how distorted the figures are because of the short port strike.

5)September US industrial production was weak with a .3% m/o/m drop vs the estimate of down .2% and August was revised down by 5 tenths. Weakness was led by a drop in manufacturing.

6)Whether due to the demand for and/or supply of, loan growth is flat for the commercial banking sector.

7)On the auto sector, some earnings comments. From PPG: They mentioned that 7 of their 10 businesses saw volume growth "in several of our key technology businesses despite deterioration in automotive original equipment manufacturer (OEM) build rates during the quarter." From Alcoa: "The transportation market overall has been steady with some slowing of growth within the automotive sector.” From Steel Dynamics: One reason for softer metals demand is a weaker than anticipated automotive market, where conditions have deteriorated."

8)From Manpower: "Right now, we see a continuation of the cautious employer approach we have been talking about for some time, particularly in Europe and North America, while the situation is good in LatAm and Asia Pacific. In essence, there hasn't been a significant tone change in the conversations we have been having with employers over the past 12 months. They remain focused on managing the macroeconomic and geopolitical challenges impacting their businesses. Most are optimistic, yet cautious, about market conditions improving and they are largely maintaining their current workforce. Since the timing of any improvement is not certain, they are still hesitant to increase their spend and expand their workforce without a significant step change in the economic outlook." Also, "Looking at labor markets broadly. We continue to see resilient topline trends with unemployment holding relatively steady in many places and little indication of widespread layoffs."

9)From Discover Financial: "Discover card sales were down 3% compared to the prior year. Sales were impacted by cautious consumer behavior and credit tightening actions, which began in 2022. We expect these dynamics to persist for the remainder of the year."

10)From Synchrony: "Both new accounts and purchase volume growth continued to be impacted by a modest pullback in consumer spending, as well as the credit actions that Synchrony has taken since the middle of 2023 to reinforce the credit trajectory of our portfolio in 2024 and beyond…Customers continue to be selective in how and where they spend, particularly as they manage their spend to navigate the effects of inflation on needs like groceries, utilities and rent. Platform purchase volume growth ranged between down 3% and down 7% y/o/y, generally reflecting lower spend per account as customers moderated both bigger ticket and discretionary spend, particularly in categories like furniture, electronics, cosmetic and vision, as well as the impact of Synchrony's credit actions."

11)From Nestle: "Consumer demand has been subdued across many of our regions. In the third quarter, we saw softening demand and actions to reduce customer inventory levels. Another key factor shaping our organic growth this year (which was 2%) has been the normalization of pricing following unprecedented increases over the prior two years."

12)From Snap On: "the microenvironment is still weighing on our technician customers, with considerable uncertainty driven by the election and its perceived impact. The fears of ongoing inflation, by border pressure, and by the specter of prolonged wars. The shops are full, tech wages are up, the hours are expanding, and the demand for techs continue. They have cash, but they are still confidence poor. The bad news they get every day for breakfast is weighing on them. Right now, they're hesitant on the future, and as such, they're reluctant on big ticket items with longer paybacks."

13)From Fastenal: "the primary challenge remains sluggish end markets. The PMI has been sub 50, indicating manufacturing contraction for 22 of the last 23 months. Industrial production might be best characterized as flattish, but key components for Fastenal such as machinery and fabricated metal remain weaker than the overall index and have posted long strings of monthly declines of their own. We continue to navigate a long and grinding, albeit shallow contraction in the third quarter of 2024."

14)From Prologis: "Turning to the operating environment, conditions remain soft in many of our markets and as we've described over the last few quarters, this is despite healthy GDP and consumption growth. We ascribe the weaker relationship between economic output and industrial absorption to the availability built into the supply chain through Covid, originally earmarked for resiliency, but now available to operators as a source for cost containment."

15)From LVMH: "Overall, demand has been characterized by two opposing trends. On the one hand, demand from China clientele remained fairly dynamic in the first half of the year. However, Chinese consumers are facing growing macroeconomic headwinds, which obviously impacts their confidence and weighs on their discretionary spend. And on the other hand, demand from Western clienteles shows a sequential improvement, this being very gradual, given that inflation and interest rates remained high. So in a nutshell, the net effect of these two trends was slightly positive in the first half of the year and became slightly negative in the third quarter."

16)From Walgreens: "the consumer backdrop remains a challenge. We see this with our customer, as sales pressure in the quarter was almost entirely driven by non-essential categories."

17)From Coty: "The global beauty market has maintained solid but slightly lower global growth...While beauty growth remains resilient in many parts of the world, the US market growth has slowed in the 2nd half of Q1. For Coty, very tight order and inventory management by retailers has resulted in Coty's sell-in tracking well below sell-out in a number of markets, including in the US, as well as in Australia, China and Travel Retail Asia." Elsewhere, "Coty's revenue growth across other key markets has remained robust, growing by a mid single digit to double digit percentage."

18)From JB Hunt: "We continue to navigate a challenging freight environment while remaining focused on what we can control."

19)From ASML: "While there continues to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025, which is leading to customer cautiousness."

20)Staying above 2%+, September CPI in Japan rose 2.1% y/o/y ex food and energy and by 2.5% at the headline level.

21)Japan reported weaker than expected September trade figures as did Singapore.

I added to  (MSOS)  at $7.08.

Professor Galloway' s "No Mercy No Malice"... "Tesla WTF"

JMesh

I’ve mentioned before that I created an algorithm that aggregates and normalizes volume to find times when volume is abnormally high or low. I’ve even proven that it can be used to find winners. So, when I was on a call earlier today with Dougie Kass, I noticed that  (MSOS)  might meet my criteria.

At a high level, the indicator is calculated as [(issue volume)/(index volume)]/[(average issue volume)/(average index volume)] and low values tend to provide better opportunities than high values. But, like using volatility, it’s harder to predict the direction of the upcoming move.

That said, here’s my chart. What I’m looking for is when my 21-day Normalized Relative Volume is below 0.75 (even lower is better). If that’s met, there’s often a good chance that a stock will pop. That’s happened twice during this possible basing period for MSOS-see points A and B. This time, I don’t believe the signal is very clear, and the model may not work with MSOS or other stocks that are similarly event-driven. But I wanted to share anyway since it might add to the weight of the evidence for someone else's analysis.

Lllanes

I was reviewing the realized volatility and fourth-quarter election year statistics today. Based on that, the rally appears to have more potential. We are only slightly below the average one-year realized daily volatility for the S&P 500, which is historically bullish. Additionally, if you examine the last 24 election years, fourth-quarter returns are above both the average and median.

I have a quick meeting between 12:15 and 1:15.

Radio silence.

Volume

- NYSE volume 20% above its one-month average

- NASDAQ volume 7% below its one-month average

- VIX down 4.08% to 18.33

Breadth

% Movers

S&P 500 Sectors

Nasdaq 100 Heat Map 

Nasdaq Advance-Decline for Past 3 Intraday Moves

From The Credit Strategist:

Corporate Credit Bubble

From Peter Boockvar:

Housing starts, sowing the seeds for an eventual rise in rents

Housing starts in totality were about as expected but the multi family side continues to show deceleration as the market absorbs a huge increase in supply this year and deal numbers don’t pencil out like they did pre 2022. Single family starts rose by 27k m/o/m, a 5 month high. Multi family starts fell to 327k, a 6 month low.

As for what is planned to come via permits, single family rose a touch, by 3k m/o/m to 970k. Permits for multi family construction fell to 458k from 503k. That is the 2nd lowest read since the Covid lows and since 2018 before then.

Bottom line, builders are trying to fill the vacuum of a dearth of single family inventory but at the same time facing pricing pushback on the affordability side. On the multi family side, rents will continue to decelerate in the coming quarters but at some point, once the excess supply already about to come online is absorbed, the current sharp slowdown in new building is sowing the seeds for an eventual pick up in rent growth likely in the back half of 2025 and in 2026.

Single Family Starts

Multi Family Starts

Single Family Permits

Multi Family Permits

I added to my  (TOL)  short at $157.79.

With S&P cash +14 handles I am adding to my short Index calls.

I have converted my short Index common position to short calls.

Reason: Taking in some premium.

Dougie Kass

STAFF

20 minutes ago

added to my very small PG long at $168.74

In premarket I added (on a scale higher)

to my  (SPY)  and  (QQQ)  common shorts.

I will get my cost basis later and publish it.

I also plan to sell some Index calls if the market holds up by the opening.

Shorted  (JPM)  on the opening and shorting more  (XLF)  (as I suggested I would).

*  (SPY)  $583.94

*  (QQQ)  $494.12

From Peter Boockvar:

Good riddance/China news/See what Manpower had to say about the labor market

Good riddance Yahya Sinwar.

Gold is at another record high now above $2,700 and while it is getting more attention, I'm amazed at how little still. We remain long and positive, silver too.

Chinese stocks are rallying after their Q3 GDP figure and some September stats were above expectations. Also, Tianjin, another Chinese city (of 13mm people) relaxed home purchase restrictions. Chengdu, a city of 21mm people, eased the rules on applying for hukou which would allow non natives to get residential registration in their city with hopes in turn that they buy a home. GDP grew by 4.6% y/o/y in Q3 vs the estimate of 4.5%. In September, retail sales were up by 3.2% y/o/y vs the forecast of 2.5%, industrial production rose 5.4% y/o/y vs the estimate of 4.6% while fixed asset investment was about in line. Home prices in September fell again but let's see what happens with them as the recent steps work its way through.

Bottom line, to me the key for the Chinese economy (outside of the big picture challenges of an authoritarian government that has put a chill on the historically vibrant entrepreneurial culture) is to stabilize the housing market as once home prices stop going down, the risks and opportunities can then be quantified. I want to remind those that think sending checks in the mail to Chinese consumers is the answer, they have $20 trillion of savings already.

We still own and like the Macau casino stocks, along with Trip.com and AIA Group. AIA Group by the way survived the regime of Mao so hopefully it can with Xi.

Also of importance out of Asia is in Japan as the yen is back to trading at around 150 vs the US dollar because the BoJ continues to drag its feet on when to hike rates again. This even as September CPI rose 2.1% y/o/y ex food and energy and by 2.5% at the headline level. Not that markets expected the BoJ to hike rates this month, and instead wait until December, but a Bloomberg News story is kind of confirming it. It said, "Bank of Japan officials see little need to rush into raising interest rates this month while they remain on track to hike at a later stage with inflation staying in line with forecasts, according to people familiar with the matter." This also as the 10 yr JGB yield has drifted up close to 1.00%, along with the selloff in US Treasuries.

Yen

Container shipping rates continue to fall w/o/w with the Shanghai to Rotterdam route down by $218 to $3,373, still well above the about $1,700 level at the beginning of the year but well off its summer high above $8,000. Prices to NY and LA also fell. Air cargo rates though were little changed w/o/w but still up 20% y/o/y according to World ACD pricing.

I've argued for a while that while used car prices were falling off their spike highs, the price declines would be somewhat subdued because for 4 years now new car sales are running well below pre 2020 levels of about 17mm annualized. And thus, the used car market would see less supply. This is what Manhein said yesterday with their mid October report saying that prices rose .3% m/o/m, though still down 2.8% y/o/y for the full month. "We have maintained the belief that wholesale depreciation will be a bit muted in the future, and that's what we are seeing in the first 15 days of October. October typically brings the highest monthly depreciation rates for non-seasonally adjusted values of the year. While values have declined, they are down slightly less than we usually see at this time in the month."

After seeing the CNN Fear/Greed index touch 78 early this week in the 'Extreme Greed' and closing at 71 yesterday, it was followed up by the Wednesday Investors Intelligence survey showing that Bulls rose to 57.6 from 53.2 while Bears fell to 22 from 22.6. While not yet at the extreme spread of 40, it's getting close and a 60 read in Bulls is rare to see. In AAII, Bulls fell by 3.5 pts after rising by 3.5 pts in the week before. They stand at 45.5. Bears rose by 4.8 pts to 25.4 after dropping by 6.7 pts last week. Still a wide spread between the two.

Bottom line, the Bull boat has gotten more full but nothing off the charts yet.

To some earnings calls.

From Discover Financial:

"Discover card sales were down 3% compared to the prior year. Sales were impacted by cautious consumer behavior and credit tightening actions, which began in 2022. We expect these dynamics to persist for the remainder of the year."

"Personal loans were up 9% from the prior year. We continue to see strong support from consumers seeking debt consolidation."

From Nestle, a stock we own:

"Consumer demand has been subdued across many of our regions. In the third quarter, we saw softening demand and actions to reduce customer inventory levels. Another key factor shaping our organic growth this year (which was 2%) has been the normalization of pricing following unprecedented increases over the prior two years."

Regionally, "North America continued to see soft consumer demand and negative pricing, particularly in pet care, frozen food and coffee creamers...In Europe, consumers are becoming increasingly cautious and are prioritizing affordability...In our LATAM business, growth in the third quarter was impacted by softer consumer demand...Brazil and Mexico slowed a little but they continued to deliver solid growth...Greater China continued to deliver solid growth in the face of ongoing difficult macro conditions."

Important comments from Manpower on the labor market:

"Right now, we see a continuation of the cautious employer approach we have been talking about for some time, particularly in Europe and North America, while the situation is good in LatAm and Asia Pacific. In essence, there hasn't been a significant tone change in the conversations we have been having with employers over the past 12 months. They remain focused on managing the macroeconomic and geopolitical challenges impacting their businesses. Most are optimistic, yet cautious, about market conditions improving and they are largely maintaining their current workforce. Since the timing of any improvement is not certain, they are still hesitant to increase their spend and expand their workforce without a significant step change in the economic outlook."

Also, "Looking at labor markets broadly. We continue to see resilient topline trends with unemployment holding relatively steady in many places and little indication of widespread layoffs."

All of the above comments match up with the claims data where initial claims, though having lifted, remain historically muted as measured, while continuing claims are near 3 yr highs. It also matches up with most of the hiring happening in government and health/education.

Finally from Manpower, "Our most recent ManpowerGroup Employment Outlook Survey of 38,000 employers, published in September, found employers report cautious yet steady hiring intentions for the three months ahead with many prioritizing retaining and attracting workers with specialized, flexible skills, and an adaptable mindset to adjust to the evolving requirements."

From Snap On whose products mainly serve the auto after market and repair:

"the microenvironment is still weighing on our technician customers, with considerable uncertainty driven by the election and its perceived impact. The fears of ongoing inflation, by border pressure, and by the specter of prolonged wars. The shops are full, tech wages are up, the hours are expanding, and the demand for techs continue. They have cash, but they are still confidence poor. The bad news they get every day for breakfast is weighing on them. Right now, they're hesitant on the future, and as such, they're reluctant on big ticket items with longer paybacks."

Upside:

-TNON +36% (announces Issuance of Three U.S. Patents related to Innovation of SI Joint Stabilization Systems and Methods)

-DRUG +35% (announces $35M Non-Brokered Private Placement)

-AURA +17% (multiple Clinical Complete Responses Demonstrated Following Single Low Dose Administration of Bel-sar in Patients with Non-Muscle-Invasive Bladder Cancer (NMIBC) in Ongoing Phase 1 Trial)

-HTCR +16% (earnings)

-ICU +9.5% (enrollment in Adult Acute Kidney Injury Pivotal Trial Has Exceeded the Halfway Point toward an Interim Analysis)

-ALV +8.8% (earnings, guidance)

-LW +8.2% (Jana said to take ~5% stake and push for sale)

-AEHL +7.6% (first phase of planned energy production sold out)

-ISRG +6.4% (earnings, guidance)

-NFLX +6.3% (earnings, guidance)

-USM +5.6% (divests select spectrum assets for $1.0B in cash to Verizon)

-FBLG +4.8% (C*FBLG-CYWC628, for utilization in a diabetic foot ulcer (DFU) clinical trial, slated to begin in 2025)

-CCK +4.2% (earnings, guidance)

-IMNM +3.4% (IM-1021 INDs expected to be submitted in 1Q25; To Present Poster Highlighting Preclinical Evaluation of IM-1021, a ROR1-Targeted Antibody Drug Conjugate, at the 36th EORTC-NCI-AACR Symposium)

-KSPI +2.3% (earnings; to acquire Turkish electronics firm D-Market for $600m in cash)

-MNKD +2.3% (receives US FDA ANDA approval for Telmisartan)

-CMA +2.2% (earnings, guidance)

Downside:

-MGPI -20% (cuts guidance)

-CVS -9.6% (names new CEO; withdraws FY24 outlook)

-WAL -4.2% (earnings, guidance)

-WDFC -4.2% (earnings, guidance)

-BHC -3.2% (reportedly rejects debt proposal from bond holders; looks to sell its vision care unit)

-ALLY -3.0% (earnings, guidance)

-AXP -2.9% (earnings, guidance

Charts from 8:29 a.m.:

Chart from 8:46 a.m.:

On Wednesday I cautioned about the homebuilder space.

Since then and over the last two trading days, I have more aggressively shorted merchant builder equities.

I would note that  (TLT) (I remain short) dropped by -$1.55/share yesterday -- reflecting a growing view that the U.S. economy is growing above potential (see Wolf Street):

1. The yield on the 1 year Treasury bill rose by five basis points.

2. The yield on the 3 year Treasury note also advanced by five basis points.

3. The yield on the 10 year Treasury note increased by eight basis points. (This is the rate that mortgage rates are generally set against).

4. The yield on the long bond rose by nine basis points.

Here are my Diary comments from Oct. 16:

* Homebuilder stocks are now vulnerable to a decline...

* But for now I treat these stocks as "trading sardines and not eating sardines" — actively trading around a small core short position.

The housing recovery (in price and activity) has slowed down for all of the reasons I have recently discussed in my Diary.

As expected, the abnormally low inventory of existing homes for sale is now rising and affordability (consider the quantum price increases in home prices between 2017-2022) is dulling demand despite some pressure off of mortgage rates (which have now stabilized). Moreover, the cumulative or stacked inflation in the cost of living since 2000 has pressured consumers' general ability to afford near record home prices.

Here Wolf Street howls about the weakness and current state of the residential real estate markets.

With the average merchant builder trading at a record multiple to book value (above 2.2x), the cost of new land acquisition expected to cut into future profitability and an emerging and growing imbalance between existing home demand and supply (serving as a competitive challenge to builders of new homes), I expect (in the fullness of time) for homebuilder stocks to retreat meaningfully from current levels.

But for now it appears that investors are considering a new paradigm of non-cyclicality and uninterrupted growth for the sector. This optimism is likely misplaced. (See Bob Farrell's Rule #3 on Investing below):

Farrell Rule #3. There are no new eras—excesses are never permanent.

Translation: There will be a hot group of stocks every few years, but speculation fads do not last forever. In fact, over the last 100 years, we have seen speculative bubbles involving various stock groups. Autos, radio, and electricity powered the roaring 20s. The nifty-fifty powered the bull market in the early 70s. Biotechs bubble up every 10 years or so and there was the dot-com bubble in the late 90s. “This time it is different” is perhaps the most dangerous phrase in investing.

As Jesse Livermore puts it:

A lesson I learned early is that there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.

Until there is a break in share-price momentum I intend to treat the volatile and high beta homebuilder stocks as trading vehicles (and weigh them appropriately in size). Specifically, my strategy continues to be concentrated on trading around a very small core short position.

Yesterday I continued to do so — profitably.

By Doug Kass Oct 16, 2024 9:55 AM EDT

Jefferies on  (AXP) :

AXP First Look –

• NII beat (+$80M) vs Fee revs missed ($100M)
• NII up to over 24% of total revs.....which is interesting because Billed Biz looks a touch better (near .5pt accel) and Card Fee growth reaccel 2pts
• Investor Feedback thus far = more focused on FY rev guide VS rev mix
• The 9% vs 9-11% seems old --- mgmt has talking about not getting above 9% for 6M and cons is there
• But the mix shift to NII – despite positive BB and Card Fee trends – into rate cuts…….the implied Fee rate degradation (Discount Rev miss vs BB beat) = that’s the standout to me
• Expense side looks good - strong expense control across the board - VCE down to 40.7%
• Expenses driving the FY EPS kiss - range narrowed but higher to +.35 at low end and +.25 at high end...

NET – stock has been incredible…..bull case is tricky from here and this is not an ‘expense story’…….Negative rev mix shift in focus. Combined with cost focus/lower marking spend….

Covered more  (AXP)  and down to tagends.

I have covered half of my short term trading rental in  (AXP) (short) at $274.99.

This basket is being presented in order to take advantage of the “Best Months” of the year (November through April/June) for stocks. We will look to add these 17 stocks, in the table below, near current levels or on minor dips. Many of the positions did weaken in today’s mixed trading session and are likely to open tomorrow below their respective suggested buy limits. As a reminder, the buy limit is our suggested maximum price to pay. For tracking purposes, we will allocate a hypothetical $4000 from the cash position in the Almanac Investor Stock Portfolio to each position. When considering your own allocation, please consider these stocks to be a portion of the growth equity in your portfolio.

For each stock we have provided the ticker, name, sector, general business description, PE, price-to-sales ratio, market value, current price, a dividend yield and a suggested buy limit and stop loss. There is also a link above the table to download the table in an Excel file (.xls format). This should aid importing and researching these stocks as most trading platforms and research software have support to import a stock list.

These 17 stocks all have reasonably solid valuations as well as revenue and earnings growth. Most also exhibit positive price and volume action as well as other constructive technical and chart pattern indications. The group of 17 covers a broad array of sectors and industries. It also runs the gamut of market capitalization with a mix of large caps with more than $5 billion in market value, midcaps in the $1-5 billion range, and small caps under $1 billion. There may even be a name or two that you are already familiar with. 

To arrive at this list of 17, we first sifted through the universe of U.S. traded stocks for those with a market cap of at least $100 million and average daily volume of 100,000 shares or more on average over the past twenty trading sessions. Then we winnowed the list down to only those stocks with relatively low price-to-sales and price-to-earnings ratios with some exceptions. A special nod was given to stocks with a below average number of analysts following them. 

We then dug into numerous individual company charts before settling on these final 17 stocks. Our underlying theme was to find reasonably priced stocks that appear to be growing sales and earnings while flying somewhat under the radar with only a limited number on The Street paying close attention to them. As market valuation goes higher, this becomes increasingly challenging, and a history of earnings surprises and estimates becomes even more important. 

At the end of the screening process, we were left with a reasonably diverse basket. The computer and technology and financial sectors are well represented with four stocks each, but the remainder of the basket includes consumer discretionary, materials, construction, transportation, business services and industrial products related stocks. We did not search specifically for top-performing stocks within any specific sector, this just happens to be what remained after our process.

* Of a financials kind...

I am using a $47.65 low on  (XLF)  short - sector overbought.

From Marijuana Moment: "10 GOP Governors Tell Supreme Court That State 'Flexibility' To Legalize Marijuana Should Extend To Laws Restricting Transgender Care"

Dougie Kass

2 minutes ago

Shorted  (AXP)  $292 ahead of EPS release this morning.

I expect a bottom line "beat" (though some top line challenges) - but share rise may have discounted the expected positive results ....

(PG) beats on bottom line by three cents and has a small topline miss.

(SLB)  beats by +$0.04/share and misses on sales.

* Minding Mr. Market...

It was remarkable to me that, yesterday, the business media failed to once mention the precipitous decline and reversal from the morning highs.

But that is par for the course and I suppose I should not be surprised.

Despite that — and with the continued momentum in stock prices — the narratives have grown ever more of a "one liner" (the economy is great, buy stocks), simplifying a complex investment mosaic and reducing that equation into "first level thinking."

"Most people overestimate what they can do in one year and underestimate what they can do in ten years."

- Bill Gates

Bonus — Here are some great links:

Percolating

The Master Sentiment Chart You Have to Follow

Trade the Fastest Moving Stocks 

No Need to Fear Until They Cease

Very interesting - creation/inflows of 600k shares of  (MSOS) ... an institution positioning for rescheduling and Amendment 3 passage in Florida (recreational adult use)?:

From my friends at Miller Tabak:

Thursday, October 17, 2024

Recession Risk Has Hit a New Low

Since early 2022, when recession fears first surged, we have predicted a soft landing for the U.S. economy. Our definition of a soft landing included some pain, well short of a recession, in the form of slightly elevated unemployment and somewhat below average GDP growth. It now appears, however, that the U.S. will achieve something better, a near-perfect landing with the damage of high rates limited to specific sectors, especially housing and manufacturing. GDP growth will still slow from its current pace, but we now expect GDP growth to average just below 2.0% over the next year and unemployment to settle around 4.3%-4.4%. Furthermore, we are lowering our odds that the U.S. will enter a recession from 15% to 10%. The U.S. will not enter a recession due to high rates and our 10% estimate is entirely due to the risk of a new, unanticipated event. We do worry that major increases in tariffs or taxes could push this risk up, although this is still beyond our one-year window.

The crucial feature of recent data is that the consumption of goods is now normalizing. During, and just after the pandemic, goods consumption (blue in Figure 1) grew at an unsustainable rate due to disruptions in the services sector. Households have since responded by shifting towards services (red in figure 1) causing goods consumption to trend downwards since 2021 and retail sales, which are mostly goods, to stagnate. There is now evidence, however, that goods are normalizing in response to falling rates and lower inflation. First, September retail sales, ex-auto, rose by 0.5%, excellent even after adjusting for inflation. Second, the higher September CPI inflation reading was driven by the end of a deflation in goods that began in March. Finally, as Figure 1 shows, spending on services has almost caught up to spending on goods.

Figure 1: Real Goods (blue) versus Real Service (red) Consumption: Feb 2020=100

Like previous shifts between goods and services, this one will be mostly benign for the U.S. outlook. It will, however, distort upcoming data. We have warned readers, for example, against worrying about service inflation outpacing goods inflation over the past two years. There are, however, two caveats. First, the strong performance of the U.S economy is primarily a result of low household debt levels. This happened because fiscal policy shifted about 10% of GDP in debt from households to the public. We reiterate that while this is not an immediate concern, it will likely make the next U.S. recession, whenever it occurs, much worse. Second, as we saw in September CPI, goods inflation is likely to move up to 2% a few months before service inflation falls to 2%. This may lead to a spike in inflation readings like the one from 1Q2024, although it will again prove to be illusionary.

* Since our purchase under $150/share...

Wolf Street howls about a "no landing."

Back shorting the Indices:

* (SPY)  $583.91

*  (QQQ)  $493.85

And back short  (NVDA)  (at $138.4).