A big thanks to Sarge for filling in yesterday.

And an even bigger thanks to our subs for providing me with this platform to express my views.

Enjoy the weekend.

Be safe.

Dougie out!

* But will he score?

* Markets violently reversed from the recent strength today.

* At 2:30 p.m. the S&P Index is -91 handles.

* Political uncertainties, high valuations, an overbought market and rising rates seem to have been the culprits.

Breadth was awful but not as bad as presumed by the large decline in the DJIA, S&P and Nasdaq:

At 2:30 p.m. the S&P Index is -91 handles (!).

Here are today's "Things":

* I covered my Index shorts.

* I covered all of my NVDA short at $141.91 and most of my TSLA short at $304.02.

* I added to Boeing BA long at $138.24.

From Peter Boockvar: 

Positives

1)Core (taking out autos, building materials and gasoline) retail sales in October unexpectedly fell by one tenth m/o/m vs the estimate of up .3% BUT was completely offset by a 5 tenths upward revision to September to a gain of 1.2%.

2)There was big upside in the first November industrial figure seen from the NY Fed where its manufacturing index jumped to 31.2 from -11.9 and well above the estimate of zero. The six month outlook was still good at 33.2 but down about 6 pts m/o/m.

3)Initial jobless claims totaled 217k vs 221k last week and that was 3k below expectations. The 4 week average fell to 221k from 227k as a print of 242k dropped out of the calculation. Continuing claims fell by 11k off its highest level since November 2021 to 1.873mm.

4)With another tick up in mortgage rates with the average 30 yr at 6.86%, up 5 bps w/o/w, mortgage apps were little changed. Purchases rose 1.9% but after dropping by 5.1% in the week before.

5)The October NFIB small business optimism index rose to 93.7 from 91.5 and that matches the best level since February 2022. The bottom line from the NFIB, "With the election over, small business owners will begin to feel less uncertain about future business conditions. Although optimism is on the rise on Main Street, small business owners are still facing unprecedented economic adversity. Low sales, unfilled jobs openings, and ongoing inflationary pressures continue to challenge our Main Streets, but owners remain hopeful as they head toward the holiday season."

6)In the NY Survey of Consumer Expectations for October, inflation expectations for 1 yr, 3 yr and 5 yr all fell m/o/m. The jobs responses improved while spending growth expectations were unchanged and less people fear missing a debt payment.

7)From Disney: On their parks business, "we certainly feel like the consumer is strengthening...we obviously saw growth in domestic parks and certainly feel very positively about that. And that's our expectation going forward is a gradual strengthening in the consumer."

8)From Sphere Entertainment: "Beyond original content, strong consumer demand continues to drive concerts and events at Sphere."

9)From Live Nation: "We wrapped up our most active summer concert season ever, our show pipeline has never been bigger, and brand sponsorship’s are accelerating...As we look toward an even bigger 2025, we have a larger lineup of stadium, arena and amphitheater shows for fans to enjoy…Over 20 million tickets already sold for Live Nation concerts in 2025, pacing up double-digits...Tickets sold globally in September and October up over 20% y/o/y, reflecting continued strong demand."

10)From Beazer Homes: In response to the jump in mortgage rates, "we did lower prices and lean into incentives in our pace challenged markets. Focused on our specs and close out communities. By September, these efforts, together with a modest improvement in consumer sentiment led by substantially better sales. In October, we saw continued strength in sales momentum across both our spec and higher margin to be built homes, even as we began to withdraw the higher incentives."

11)From Cisco: "you just remove the US Federal, the rest of the world was up in the mid to high teens. So what that tells you is that we saw very balance strength around the world. Geographically, we saw good strength in Europe, good strength in Asia. Without US Fed, we saw good strength in the US. We saw really strong recovery in enterprise."

12)From CAVA: They saw an 18.1% jump in comps, "driven by a 12.9% increase from guest traffic, and a 5.2% increase from menu price and product mix." What's the key to their success? "It is clear that our value proposition, quality Mediterranean cuisine where taste and health unite, the convenience of our multi channel format and the experiences we provide across our physical and digital channels is resonating with consumers."

13)In China, there was upside to retail sales with it rising 4.8% y/o/y, above the estimate of 3.8%. Home price data also came out and for existing homes, prices fell another .50% but that is the smallest decline since September 2023. Prices fell for new homes but also the deceleration slowed.

14)Japan reported a slight upside to Q3 GDP.

Negatives

1)The October CPI data was exactly in line with expectations with .2% headline and .3% core gains m/o/m and 2.6% and 3.3% y/o/y increases. That compares with 2.4% and 3.3% in the month before. Energy prices were flat m/o/m but down 4.9% y/o/y. Food prices grew by another .2% m/o/m and up by 2.1% y/o/y. Services inflation ex energy continues to lead the inflation higher as it always does. Prices rose .3% m/o/m and 4.8% y/o/y. Core goods is still where there are no price increases as they were flat m/o/m and down 1% y/o/y.

2)PPI for October rose .2% and .3% core m/o/m. While the headline was in line with the estimate, September was revised up by one tenth. The core rate was also one tenth higher than anticipated. Versus last year, headline PPI rose 2.4% and the core rate by 3.1% vs 1.9% and 2.8% respectively. Goods prices ex food and energy were up by .3% m/o/m and 2.2% y/o/y. Service prices grew by .3% m/o/m and 3.5% y/o/y.

3)Import prices in October surprised to the upside with a .3% m/o/m gain vs the estimate of down .1%. Ex food and fuels saw prices up .4% after a .3% rise in September and now up 2.2% y/o/y which is an uptick.

4)With the rise in mortgage rates, refi's fell 1.5% and are at the lowest level since June.

5)From the Fed’s Household Debt Report: "Although household balances continue to rise in nominal terms, growth in income has outpaced debt." The growing issue though is this, "Still, elevated delinquency rates reveal stress for many households, even amid some moderation in delinquency trends this quarter." Further on delinquencies, "Credit card delinquency rates improved, with 8.8% of balances transitioning to delinquency compared to 9.1% in the previous quarter. Early delinquency transitions for auto loans and mortgages worsened slightly, rising by .2 and .3 percentage points respectively." Both though are up a lot y/o/y. Credit card delinquencies (90+ days) are now at 7.1% from 5.78% y/o/y and auto loan delinquencies are at 2.90% vs 2.53% in the year ago period.

6)From the Senior Loan Officer survey, money is still tight, loan demand soft: "Regarding loans to businesses over the third quarter, survey respondents reported, on balance, basically unchanged lending standards for commercial and industrial (C&I) loans to large and middle-market firms and tighter standards for loans to small firms. Meanwhile, banks reported weaker demand for C&I loans to firms of all sizes. Furthermore, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories…For loans to households, banks reported, on balance, basically unchanged lending standards and weaker demand across most categories of residential real estate (RRE) loans. In addition, banks reported basically unchanged lending standards and demand for home equity lines of credit (HELOCs). Moreover, standards reportedly tightened for credit card loans and remained basically unchanged for auto and other consumer loans, while demand weakened for auto and other consumer loans and remained basically unchanged for credit card loans."

7)From Home Depot: "From a geographical perspective, storms and more favorable weather throughout the quarter drove a higher degree of variability in the performance across our divisions and four of our 19 US regions delivered positive comps…As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects. But, we continue to see pressure on larger remodeling projects, driven by the higher interest rate environment and continued macroeconomic uncertainty."

8)From Advanced Auto Parts: "This quarter results came in below our expectations as the sales softness that began in early Q3 persisted throughout the quarter. Macro headwinds and economic uncertainty continue to weigh on consumer spending, while our results were also impacted by other events such as hurricanes and the Crowdstrike outage…In terms of channel performance, both Pro and DIY declined in the low single digit range, with Pro performing relatively better."

9)From Shift4 Payments: "Well, we grew incredibly quickly, but as you've heard from others, clearly there's been some consumer spending softening, especially in some of the verticals that we serve…During the quarter, we experienced the customary seasonal spending lift in the months of July and August as consumers take vacations and travel more. Although, as we noted on the Q2 call, spending in restaurants had moderated, and most customers in that vertical were experiencing a roughly 3% decline in same store sales y/o/y. While restaurants did not materially worsen, we also saw some modest softness in other verticals in September as leisure travel subsided in conjunction with back-to-school."

10)From Bloomin’ Brands: "Given the volatility the industry is seeing in traffic trends, we are updating our adjusted diluted earnings guidance...Prior guidance assumed industry trends would strengthen, but our updated view assumes no improvement."

11)From Madison Square Garden Entertainment: "Looking ahead, we have seen some slowing in our concert bookings pacing in recent weeks. That said, we are experiencing positive momentum across family shows, special events, and marquee sports, and continue to expect to grow our total number of bookings events this fiscal year." They said the concert bookings issue though was more of a supply thing rather than demand.

12)From Infineon: "Currently, there is hardly any growth momentum in our end markets except from AI, the cyclical recovery is being delayed. We are therefore preparing for a muted business trajectory in 2025."

13)In China, October industrial production and fixed asset investment were a bit light relative to expectations.

14)The UK's economy in Q3 performed slightly worse than expectations.

15)In Germany, the November ZEW investor confidence index in their economy fell to 7.4 from 13.1 and below the estimate of 13.2. The Current Situation declined as well to -91.4 from -86.9. The collapse of the German government coalition had a factor in the decline and ZEW said "more optimistic voices were heard in the last survey days, expecting economic prospects for Germany to improve with snap elections on the horizon. Overall, what we're currently observing is a very dynamic development of economic expectations."

I have moved back to market neutral just now. 

Boeing BA has acted well in a sea of red.

I added again today.

Procter & Gamble PG goes from goat to hero in three days!

As noted in my Diary I have been buying on weakness.

From Peter Boockvar:

Retail sales in line/Mfr'g upside in NY/Import prices bottoming?

Core (taking out autos, building materials and gasoline) retail sales in October unexpectedly fell by one tenth m/o/m vs the estimate of up .3% BUT was completely offset by a 5 tenths upward revision to September to a gain of 1.2% so we'll call it a push relative to overall expectations for these two months.

Vehicle sales rose 1.6% m/o/m and by 6.6% y/o/y. Building material sales were up by .5% m/o/m and by 7.1% y/o/y.

Offsetting the above were declines in furniture sales, misc stores like dollar stores, convenience, pet, flower, etc..., department stores, clothing and sporting goods. On the upside, sales rebounded in electronics by 2.3% after a few months of declines and remain down by 1.1% y/o/y. Sales were strong at bars/restaurants, up by .7% m/o/m after a 1.2% rise in September. They are up 4.6% y/o/y. Online retail sales rose by .3% after the 1.7% jump in the month before and are up 9.4% y/o/y. Lastly, on the necessity side, food/beverage sales were little changed m/o/m but up 3.9% y/o/y. Health/personal care sales fell by 1.1% m/o/m but after jumping by 2.3% last month. They are up 3.5% y/o/y.

Bottom line, as stated core sales were about as expected when including revisions. Versus last year, they are up 3.6% y/o/y which is around in line with the one year average and is about the same pace seen in 2019 of 3.7%. This said, as read here countless times, and heard from retailers themselves, we know we have a very bifurcated consumer depending on where one is on the income/wealth scale so any opinion on the state of the consumer needs to differentiate.

There was big upside in the first November industrial figure seen from the NY Fed where its manufacturing index jumped to 31.2 from -11.9 and well above the estimate of zero. They said "New orders and shipments rose substantially. Delivery times were slightly longer, while supply availability was somewhat lower. Inventories held steady. Labor market conditions pointed to steady employment levels and a longer average workweek." On pricing, "The pace of input and selling price increases remained modest and similar to last month."

The six month outlook was still good at 33.2 but down 6 pts m/o/m.

Bottom line, is the manufacturing recession ending? Let's hope but wait to see what the other regional surveys say first before declaring so and the Philly region reports next week.

Import prices in October surprised to the upside with a .3% m/o/m gain vs the estimate of down .1%. Ex food and fuels saw prices up .4% after a .3% rise in September and now up 2.2% y/o/y which is an uptick.

Bottom line, something to watch if core import prices are bottoming out. And we'll see if the mitigating factor of a stronger dollar holds.

Overall with today's data, nothing market moving notwithstanding the big upside in NY because it is so volatile month to month and some of the upside could be post election enthusiasm. 

* Is the bloom coming off of the AI rose?

Check out this from AI analyst Gary Marcus:

One more set of blurbs, similar notion. Won’t scale, won’t work: The economics are likely to be grim. Sky high valuation of companies like OpenAI and Microsoft MSFT are largely based on the notion that large language models will, with continued scaling, become artificial general intelligence. As I have always warned, that’s just a fantasy. There is no principled solution to hallucinations in systems that traffic only in the statistics of language without explicit representation of facts and explicit tools to reason over those facts.

LLMs will not disappear, even if improvements diminish, but the economics will likely never make sense: additional training is expensive, the more scaling, the more costly. And, as I have been warning, everyone is landing in more or less the same place, which leaves nobody with a moat. LLMs such as they are, will become a commodity; price wars will keep revenue low. Given the cost of chips, profits will be elusive. When everyone realizes this, the financial bubble may burst quickly; even Nvidia NVDA might take a hit, when people realize the extent to which its valuation was based on a false premise.

You can hear the rest here. 

"The machines are not creative and they are not doing any thinking," writes Denyse O'Leary in Mind Matters, which quotes expert Ben Lutkevitch:

Model collapse happens when new AI models are trained on generated or synthetic data from older models. The new models become too dependent on patterns in the generated data. Model collapse is based on the principle that generative models are replicating patterns that they have already seen, and there is only so much information that can be pulled from those patterns. In model collapse, probable events are overestimated and improbable events are underestimated. Through repeated generations, probable events poison the data set, and tails shrink. Tails are the improbable but important parts of the data set that help maintain model accuracy and output variance. Over generations, models compound errors and more drastically misinterpret data.

A few days ago, the well-known venture capitalist Marc Andreessen started to spill the beans, saying on a podcast, “we're increasing (graphics processing units) at the same rate, we're not getting the intelligent improvements at all out of it” – which is basically VC-ese for “deep learning is hitting a wall."

Just a few moments ago, Amir Efrati, editor of the industry trade journal The Information further confirmed that we have reached a period of diminishing returns, writing on X that “OpenAI's [upcoming] Orion model shows how GPT improvements are slowing down.”

CONFIRMED: LLMs have indeed reached a point of diminishing returns

I covered my NVDA short at about $141.90 (-$5 on the day).

I will reshort on a rally.

The ten year yield...

* Investors are now willing to pay to take on equity risk, instead of getting paid -- as the equity risk premium vanishes (and returns to 2002 lows)

* 'Trouble ahead, trouble behind?' (And you know that notion just crossed my mind!)

* With 'slugflation' appearing, it may be time to leave the bullish and crowded investing herd...

Investment data is available more conveniently and faster today, but the behavior of investors will not be more intelligent than in the past. How people react will not change. Their psychological makeup stays constant. You need to divorce your mind from the crowd. The herd mentality causes all these IQs to become paralyzed.

I don't think investors in the last few months are acting more intelligently, despite their intelligence. Smart doesn't always equal rational. To be a successful investor, you must divorce yourself from the fears and greed of the people around you, although it is almost impossible.

As Buffett reminds us:

"Long Term Capital Management had hundreds of millions of dollars of their own money and had all that experience. The list included Nobel Prize winners. They probably had the highest IQ of any 100 people working in the country - yet the place still blew up. It went to zero in a matter of days. How can people who are rich and no longer need money do such foolish things?"

As noted this morning (see Kuppy's and Einhorn's comments of the broken market), the market's structure (read: the dominance of passive investor strategies and products that know everything about price and nothing about value) dominate the investment landscape -- perpetuating the strength of outperforming sectors and individual securities (as well as the market as a whole).

It will end at some point, probably sooner than later...

Here is what I wrote on Wednesday; it bears repeating:

NOV 13, 2024 9:45 AM EST

The S&P Index Is Overvalued

* It's overvalued against interest rates, earnings, cash flow and sales ... and most other metrics that have stood the test of time.

* Moments like this are always good times to remind oneself: There is no upside without downside, no reward without risk.

Astonishingly (as noted by Rosie), with the recent rise in interest rates, the equity risk premium is only nine-basis points away from turning negative. This means that investors are now willing to pay to take on equity risk, instead of getting paid:

Here is a longer-term chart of the S&P earnings yield vs. the yield on the 10-year Treasury note:

As I wrote yesterday:

Bond Market Update ... And Many More Accumulating Concerns

By Doug Kass

Nov 12, 2024 12:40 PM EST

Equities continue to ignore rising rates — that ascension is conspicuous today:

* The yield on the 1-year Treasury note is +8 bps to 4.394%.

* The yield on the 5-year Treasury note is +12 bps to 4.315%.

* The yield on the 10-year Treasury note is +12 bps to 4.428%.

* The yield on the long bond is +9 bps to 4.572%.

Bottom Line

So we have an overbought on the S&P Oscillator (near 3.5%), a Woodstock-like drug festival in Tesla (TSLA) and Nvidia (NVDA) 0DTE call options, sky-high price-earnings multiples, near universal investor bullishness, evidence that the post-election breadth thrust might be over (look at today's 2-1 negative breadth), (RSP) (equal weighted S&P) -0.86% and (IWM) (Russell Index) -1.67%)... and now bond yields starting to break out to the upside.

What, me worry?

Here, I put into perspective the sharp upside movement in various asset classes since the election - only seven days ago:

As it relates to bitcoin and other crypto currencies it is always important to remember that when asset prices move parabolically, it is always a good time to remind oneself: There is no upside without downside, no reward without risk.

Valuations Appear Inflated

The S&P CAPE Ratio (the cyclically adjusted price-to-earnings ratio) has crossed above 38 for the third time in history and is now higher than 98% of all historical valuations:

Equities, to this observer, are overvalued.

***

Bottom Line

Driving that train

High on cocaine

Casey Jones you better

Watch your speed

Trouble ahead

Trouble behind

And you know that notion

Just crossed my mind

This old engine makes it on time

Leaves Central Station

'Bout a quarter to nine

Hits River Junction at seventeen to

At a quarter to ten

You know it's travelin' again

- The Grateful Dead, Casey Jones Grateful Dead - Casey Jones (Winterland 12/31/78)

Slugflation may lie ahead as the labor market weakens and, for the first time in over two years, both consumer price index and producer price index inflation are back rising -- at a time in which price earnings multiples are in the 96%-tile and interest rates are resuming their rise (the yield on the 10 year Treasury now stands at 4.43%).

As reflected in the vanishing equity risk premium, fear and doubt has left Wall Street

But as The Oracle of Omaha reminds us:

"Be fearful when others are greedy."

It may be time to leave the bullish and increasingly crowded investing herd, as:

"Train hundred and two is

On the wrong track

And headed for you."

At $137.44 I have moved to large Boeing BA long.

From Peter Boockvar:

Now a jump ball and Yellen missed a window/Earnings comments

All it took was one line in Jay Powell's prepared speech that has made a December rate cut closer to 50/50, right now at 62%. After CPI, it was 80%. "The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully." His words are carefully crafted in a prepared speech with every sentence having a purpose and if he wants to send a signal, this is how he does it. Maybe they cut, maybe they don't, but it is now a jump ball.

Something else to point out here. The peak easing this year priced in for year end 2025 was an expected fed funds rate of about 2.80%. That is now about 3.90%, so the market has taken away 110 bps of rate cuts. Janet Yellen too has front loaded Treasury issuance in bills, above the recommended level of 15-20% of total offerings by the Treasury Borrowing Advisory Committee. This, instead of issuing more longer term coupons when the 10 yr yield was back under 4%. While no one at the Treasury will admit it, they were playing the yield curve, didn't want to upset the longer end of the curve with too much supply and instead with the back up in short rates, missed an opportunity to term out US debt.

With the earnings call rundown, I'll start with Instacart from a few days ago. They are benefiting from the secular shift to online ordering and convenience. On a question about the consumer, "we are seeing very strong consumer demand. And in fact, we track that very closely and we look at a lot of data points. We haven't seen meaningful trade down, whether you look at it on a pair item, like types of item basis, whether you look at different types of retailers, with the notable exceptions of clubs being very strong. We are also not seeing different behaviors across income segments...And we think that's a testament to the fact that people really do value convenience and we are able to provide that to them."

From Disney, a stock we own and I'll hone in on the parks/experience comments for macro color on the consumer:

On a question about this, Iger said "we certainly feel like the consumer is strengthening...we obviously saw growth in domestic parks and certainly feel very positively about that. And that's our expectation going forward is a gradual strengthening in the consumer."

He mentioned that its Paris park was negatively impacted by the Olympics and the shift of attention to it and away from the park.

On its Shanghai park, "we saw some consumer softness in Shanghai. Candidly, we expect that to be temporary. And we expect that to bounce back as well. But it was nothing that should be concerning for the long term regarding the parks."

From Advance Auto Parts:

"This quarter results came in below our expectations as the sales softness that began in early Q3 persisted throughout the quarter. Macro headwinds and economic uncertainty continue to weigh on consumer spending, while our results were also impacted by other events such as hurricanes and the Crowdstrike outage."

"In terms of channel performance, both Pro and DIY declined in the low single digit range, with Pro performing relatively better."

China released its batch of October economic data and it was mixed. There was upside to retail sales with it rising 4.8% y/o/y, above the estimate of 3.8%. Home price data also came out and for existing homes, prices fell another .50% but that is the smallest decline since September 2023. Prices fell for new homes but also the deceleration slowed. These are the early stats post the housing support initiatives that were announced. Industrial production and fixed asset investment were a bit light.

While many are awaiting some consumer driven fiscal stimulus, I think that is missing the challenge China is facing economically. They are trying to put a floor under its housing market which will still take years to resolve but at least the process is multiple years in. Allowing a multitude of developer bankrupticies has quickened the debt cleansing. And, the massive amount of local government debt has begun to be dealt with in terms of buying time which they certainly need. The Chinese consumer doesn't need help with its massive pool of savings other than feeling better about the economy and gaining more confidence and home prices need to stop declining as a help to this.

Overseas but somewhat dated as we are already half way through Q4, Japan reported a slight upside to Q3 GDP while the UK's economy performed slightly worse than expectations.

Upside:

-SPPL +36% (wins $400K contract to supply autonomous cleaning robots at Singapore’s International Airport Terminal)

-FCEL +21% (announces global restructuring, expects to reduce FY25 operating costs by ~15% y/y)

-CERO +20% (receives US FDA clearance of Investigational New Drug Application to initiate Phase 1 clinical trial of lead compound CER-1236 in Acute Myelogenous Leukemia)

-ZETA +15% (bounce off recent weakness from short-seller report)

-DESP +10% (earnings, guidance)

-AA +7.6% (strength following China cancelling tax rebate on exports of select commodities)

-EVO +7.5% (Halozyme confirms proposal to combine with Evotec for €11.00/shr in €2.0B all-Cash deal)

-POOL +5.5% (new stake from Berkshire)

-DPZ +5.4% (new stake from Berkshire)

-SHOT +5.0% (earnings)

-MGRM +4.5% (earnings)

-PGR +2.5% (reports Oct net premiums written)

-BABA +2.4% (earnings, guidance)

-JD +2.4% (hearing price target raised at Tier 1 firm)

-PLTR +2.4% (announces transfer of Stock Exchange listing to Nasdaq from NYSE, effective Nov 26th)

-LCTX +2.0% (earnings)

Downside:

-TFFP -71% (to wind down operations)

-EYEN -58% (review of study data by an independent Data Review Committee found that CHAPERONE is not meeting primary three-year efficacy endpoint; To discontinue study)

-QUBT -31% (prices 16M shares at $2.50/shr for gross proceeds ~$40M)

-AKYA -23% (earnings, guidance)

-ASTS -10% (earnings)

-OKLO -9.1% (earnings)

-AMAT -9.0% (earnings, guidance)

-HALO -8.5% (Halozyme confirms proposal to combine with Evotec for €11.00/shr in €2.0B all-cash deal)

-SPB -8.4% (earnings, guidance)

-DMRC -8.0% (earnings)

-DXLG -7.3% (downside momentum)

-SOC -6.7% (earnings)

-ULTA -4.8% (Berkshire sells nearly complete stake)

-ASND -3.5% (earnings, guidance)

-GLOB -3.4% (earnings, guidance)

Fed speakers today:

8:35 a.m. ET: Fed Bank of Chicago President Goolsbee (Non-Voter) on CNBC Squawk Box; and 2:05 p.m.: Fed Bank of Chicago President Goolsbee (Non-Voter) on Bloomberg.

And today's Economic Calendar:

Charts from 8:14 a.m.:

Chart from 8:33 a.m. ET:

Speech by Chair Powell on the economic outlook

- Reiterates we are on a sustainable path to the 2% inflation target

- The labor market remains in solid condition, having cooled off from the significantly overheated conditions of a couple of years ago, and is now by many metrics back to more normal levels that are consistent with our employment mandate.

- The most recent jobs report for October reflected significant effects from hurricanes and labor strikes, making it difficult to get a clear signal.

- The labor market has cooled to the point where it is no longer a source of significant inflationary pressures.

- With labor market conditions in rough balance and inflation expectations well anchored, I expect inflation to continue to come down toward our 2 percent objective, albeit on a sometimes-bumpy path.

- We are confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2 percent.

- We know that reducing policy restraint too quickly could hinder progress on inflation. At the same time, reducing policy restraint too slowly could unduly weaken economic activity and employment.

- Path to neutral is not preset; The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.

- Our aim has been to return inflation to our objective without the kind of painful rise in unemployment that has often accompanied past efforts to bring down high inflation. 

Bonus — Here are some great links:

Metals Retreat 

The Dollar Reaches a Potential Inflection Point

Animal Spirits Are Stirring

The History and Evolution of Technical Analysis

Two interesting reads:

* Kuppy: What's Driving Stocks - Praetorian Capital

* David Einhorn ("The market is broken"): Greenlight Capital's Einhorn again argues that markets are 'broken'

Wolf Street howls about rising PPI and core services.

The S&P Short Range Oscillator still stands in overbought — at 2.65% vs. 2.35%.

* And the markets may finally be growing concerned...

Wolf Street howls about the burden of mortgage debt.

As I noted in Wednesday's opening missive, equities are materially overvalued relative to interest rates:

* Of a 4:10 a.m.-kind...

* With S&P futures -40 handles I have covered all of my Index common shorts:

1. SPY at $590.10.

2. QQQ at $504.43.

* With the shares -$21 yesterday and down another -$7 this morning I have covered about 3/4 of my TSLA short at about $303

I plan to re-short a rally.