As of 4:22 p.m.:

Dougie Kass

There will be no "Things Today" as I only sold a small amount of Index calls on Spy and QQQ.

Shorted very small UBER.

Shorted very small TSLA above $344 in premarket.

Did a bunch of trades in undisclosed stocks. (Mostly too speculative or in companies that I dont want to disclose as the mgt might find out, etc.)

Doing alot of research.

Closing Breadth

S&P 500 Indices

Nasdaq Heat Map

Back in April 2024 I mentioned a possible home run investment in Ligado Networks First Lien Bonds.

Trading at around $15 I thought they were worth par plus accrued interest — giving the investment a possible 8x upside.

I just learned that the company won their lawsuit against the government and I believe the bonds will ultimately be worth par!

Here was my brief outline from April: 

My Potential Home Run Investment

* Ligado Networks First Lien 15.5% Bonds

My potential "home run investment" is complicated.

We have invested in Ligado Networks First Lien Bonds (15.5%) - and have paid about $15.

Not only is the story complex (and not without risk), but purchase/sale falls under Rule 144A rules.

As a result, most individual investors will not be able to invest directly in this paper. You can, however, get your money managers to look at this opportunity!

I will discuss this investment fully on my return back to the office next week.

Here is a sneak preview (from Lee Cooperman)... at the five minute mark.

Position: Long Ligado Networks First Lien Bonds

By Doug Kass Apr 26, 2024 11:30 AM EDT

Lest you think I am crazy for producing almost fifty Tales From Nvidia this year — I would point out that I highlighted the source of today's Nvidia  (NVDA)  share price weakness (the potential cooling problems with the company's Blackwell chips) in the first week of September 2024 (that was 2 1/2 months ago):

More Tales From Nvidia: AI Not Working? Call the ... Plumber!

* I am short.

* An example of more "group stink."

In 2024, no other stock besides Nvidia  (NVDA)  has been more frequently mentioned in a positive vein in the business media than Uber  (UBER) .

According to the bullish cabal, UBER is a bonafide "compounder" — with the likes of Microsoft  (MSFT) , Amazon  (AMZN) , Meta  (META)  and Apple  (AAPL) .

Today UBER is trading -$5 on encouraging ride-sharing comments at Tesla  (TSLA) , which could potentially challenge the company's business model.

More Group Stink!

From Peter Boockvar:

Builder confidence lifts post election

The November NAHB home builder index rose 3 pts m/o/m to 46, better than the estimate of 42, though still below 50. The upside was mostly due to a jump in the Expectations component to 64 from 57. The Present Situation is still below 50, though barely at 49 vs 47 last month. Reflecting still the big challenge of affordability, Prospective Buyers Traffic was just 32 but up 3 pts from October.

The NAHB is pointing to the election results as reason for the lift in builder confidence. “With the elections now in the rearview mirror, builders are expressing increasing confidence that Republicans gaining all the levers of power in Washington will result in significant regulatory relief for the industry that will lead to the construction of more homes and apartments.” The supply side of the home industry certainly hopes for more home building, as does the first time home buyer but many of the regulatory levers that can enable more homebuilding is more at the local and state level in terms of zoning and permitting.

On the building side, the NAHB also said, “While builder confidence is improving, the industry still faces many headwinds such as an ongoing shortage of labor and buildable lots along with elevated building material prices.” On the demand side, we know all about the affordability challenges that first time buyers face and it’s mostly the bigger builders that can ease some of the pain via mortgage rate buydowns and other discounting, more so than smaller builders.

All this as the pace of transactions of existing homes hover around 30 year lows and all the ancillary business activity that does not take place because of this, like buying paint, flooring, appliances, etc…

NAHB

Expectations

Prospective Buyers Traffic

With S&P cash +26 handles I am back shorting Index calls.

I have a scale higher so I am hopeful of a continued rally.

- New York Stock Exchange volume is 6% below its one-month average;

- Nasdaq volume 1% below its one-month average

- The Volatility Index is down 2.73% to 15.70

* This is my 45th column on Nvidia - if nothing else, I am persistent.

* Generative Artificial Intelligence is basically like my golf swing: It is a random swing generator, sometimes good (82 last Saturday), sometimes bad (88 yesterday)...

With all the processing power in the world, nothing is changing: AI still does not work. It's not complicated, this is just one more hallucination. Nothing malicious, no intent, just the outcome of sitting on a bunch of text and predictively trying to merge it all together and spit something out. Generative AI is basically like my golf swing: It is a random swing generator. Sometimes good, sometimes bad. At the end of day, it's not nearly sufficient to be a pro and make money playing the game! 

But then AI tells us we're no good, as we learn from ZeroHedge: 'You Are Not Needed...Please Die': Google AI Tells Student He Is 'Drain On The Earth'

One more set of blurbs, a similar notion. AI still won’t scale, won’t work, according to AI expert Gary Marcus:

The economics are likely to be grim. Sky high valuation of companies like OpenAI and Microsoft are largely based on the notion that LLMs 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 might take a hit, when people realize the extent to which its valuation was based on a false premise.

- MindMatters.ai 

And here's more from MindMatters, which quotes Ben Lutkevitch of TechTarget, who tells us that because the machines are "not creative and they are not doing any thinking," that:

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.

And then we have more from Gary Marcus, who tells us that:

A few days ago, the well-known venture capitalist Marc Andreesen 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”.

And, we have this from Business Insider: "Inside Microsoft's struggles with Copilot: Customers are dissatisfied, rivals are circling, and company insiders are skeptical: a BI exclusive." 

And, finally, from The Information (and the reason why the shares of Nvidia  (NVDA)  are lower this morning):

Nvidia is grappling with new problems related to its much-anticipated Blackwell graphics processing units for artificial intelligence: how to prevent them from overheating when connected together in the customized server racks it has designed.

In recent months, Nvidia has asked its suppliers to change the design of the racks several times as it has tried to overcome the overheating problems, according to Nvidia employees who have been working on the issue, as well as several customers and suppliers with knowledge of it. Word of the repeated design changes has sparked anxiety among customers about a potential delay in when they will be able to use the racks.

Nvidia already had to delay the production and delivery of the Blackwell GPUs by at least a quarter after running into design flaws in the chips. Both episodes highlight the difficulties in its quest to meet high customer demand for its AI hardware.

What makes the new server racks significant is that they combine 72 of Nvidia’s AI chips, an extraordinarily high number. AI developers are hoping that would allow them to train larger AI models much faster.

Major customers including Microsoft, Meta Platforms and Elon Musk’s xAI enthusiastically greeted Nvidia’s announcement in March about producing a 72-chip rack.

Now, though, some big customers are concerned. While Nvidia often changes its server designs before launch, changes to the Blackwell racks have come late in the production process, according to several customers and suppliers. However, Nvidia may still be able to deliver the racks to customers by the end of the first half next year, in line with its original schedule, and it hasn’t notified customers of a delay.

I recommend reading the entire article: https://www.theinformation.com/articles/nvidia-customers-worry-about-snag-with-new-ai-chip-servers

Upside:

-SINT +38% (announces $500K stock repurchase program totaling ~20% of total outstanding shares)

-RGNX +21% (initiates pivotal phase of affinity duchenne trial of RGX-202 gene therapy and reports positive functional data)

-TWST +14% (earnings, guidance)

-ACRS +13% (Biosion announces License Agreement with Aclaris Therapeutics on two potential First-in-Class and Best-in-Class Immunology Assets)

-AUR +10% (Trump team said to want to ease rules on self-driving cars; Want to make a federal framework for fully self-driving vehicles as one of the Transportation Dep’t priorities)

-SMCI +9.3% (strength ahead of delisting plan deadline)

-TUYA +9.3% (announces anchor investment by 65 Equity Partners)

-ACET +6.7% (presents Clinical Biomarker Data for Off-the-Shelf CAR T Cell Therapy in an Oral Session at the American College of Rheumatology (ACR) Convergence 2024; First Lupus Nephritis patient dosed in Phase 1 clinical trial of ADI-001 in Autoimmune Diseases)

-FOUR +6.3% (to be added to S&P400 Index, effective Nov 20th)

-TSLA +6.3% (Trump team said to want to ease rules on self-driving cars; Want to make a federal framework for fully self-driving vehicles as one of the Transportation Dept priorities)

-EH +5.6% (earnings, guidance)

-LBRT +5.2% (President–Elect Trump selects Liberty Energy CEO Chris Wright for Energy Secretary; intends to appoint Ron Gusek as CEO, William Kimble as non-exec chairman, effective early 2025)

-CLRB +5.0% (earnings)

-SNDX +4.9% (US FDA approves revumenib for relapsed or refractory acute leukemia with a KMT2A translocation)

-WOLF +4.5% (Gregg Lowe to depart this month as President & CEO and Board Member; search process underway to identify permanent CEO)

-HLIT +4.0% (reportedly stakeholder Ancora Advisors pushing company to explore sale)

-MBI +3.5% (Keefe Bruyette Raised MBI to Outperform from Market Perform, price target: $9)

-ALAB +3.3% (CitiGroup Initiates ALAB with Buy, price target: $120)

-WBD +2.7% (settles legal fight with NBA over TV rights)

-HPE +2.3% (Raymond James Raised HPE to Strong Buy from Outperform, price target: $29)

-CVS +2.2% (reportedly hedge fund Glenview Capital amassed significant stake; CVS agrees to add 4 new board members)

Downside:

-NGNE -34% (provides update on NGN-401 Gene Therapy clinical trial for Rett Syndrome; no longer anticipates completing enrollment in 1E15 vg cohort (low-dose cohort) of NGN-401 in 4Q24 as company updates protocol to reflect discontinuation of 3E15 vg dose)

-BTBT -8.4% (earnings)

-MARA -6.8% (files to sell private offering of $700M of Convertible Senior Notes due 2030)

-SAVE -5.6% (enters into restructuring support agreement supported by a supermajority of Spirit's loyalty and convertible bondholders on the terms of a comprehensive balance sheet restructuring; received backstopped commitments for a $350M equity investment from existing bondholders and will complete a deleveraging transaction to equitize $795M of funded debt; expects to be delisted from the New York Stock Exchange in the near term)

-CAR -2.8% (Northcoast Research Cuts CAR to Neutral from Buy)

-NVDA -2.3% (customers said to have concerns about overheating servers associated with Company's new Blackwell AI chip servers)

*Note, this premarket list arrived late but we are publishing it as some might find it valuable.

From Peter Boockvar:

Euphoria/Global bond boat/Oil

I mentioned last week that market exuberance had gotten extreme post election as measured by the weekly Investors Intelligence sentiment survey. That was followed up this weekend with the updated Citi Panic/Euphoria index which jumped to .54 from .44 and is back to the highs seen in July right before the BoJ/yen driven market selloff. A read of .41 or more is considered Euphoria and we are thus well above that. Bottom line, this market ebullience was certainly a good set up for a pullback seen late last week and we'll see likely after Nvidia's numbers Wednesday night whether there is more to come.

While it may not happen in December and we might have to wait until January to see it, Governor Ueda of the BoJ does seem to be getting ready to raise rates again but with his typical caveats. On one hand, "I think that gradually adjusting the degree of accommodation in line with the improvement in economic activity and prices will support long-term economic growth and contribute to achieving the price stability target in a sustainable and stable manner." Will it be next month? "For the December meeting, for example, we will make the right policy decision at that time and adjust our outlook as needed after assessing risks and additional information that we've gathered since the October meeting." I consider that latter comment on timing typical vague, non-committal commentary.

So also on one hand, JGB yields continue to rise but on the other, the yen continues to fall. One factor for the weak yen particularly this morning was also this comment from Ueda where he seems almost indifferent if the yen weakens or strengthens because of the mixed impacts. "It's true a weak yen pushes up costs and has a big negative impact on consumers. But it's positive for exports and inbound tourism. The overall impact on Japan's economy isn't easy to assess."

I do want to say this, for the umpteenth time, US bond yields are not just moving on its own fundamentals and ones analysis of US growth, inflation and debts/deficits. They are also moving in sympathy with movements in overseas bond markets as well, particularly the JGB market. We're all in this global bond boat together, same with Europe. Below is a chart of the US 10 yr yield compared with the 10 yr JGB yield and the one below that compares the US 10 yr yield with the German 10 yr yield.

JGB 10 yr yield in orange, US 10 yr yield in white

German 10 yr bund yield in orange, US 10 yr yield in white

The Baker Hughes oil rig count for the week ended 11/15 fell by 1 to 478 rigs, the least in 4 months and is one rig away from matching the smallest since December 2021. If we take away Covid, it would be the lowest amount of oil rigs used since December 2016. Being more efficient and much more sensitive to shareholders and less on drilling for drilling sake, the US oil industry is remaining disciplined. And why we remain bullish and long energy stocks.

Crude Oil Rig Count

Charts are from 8:49 a.m. ET.

Chart is from 9:11 a.m. ET:

10:00AM: Fed Bank of Chicago President Goolsbee (Non-Voter) gives welcome remarks before the Financial Markets Group Fall Conference hosted by the Federal Reserve Bank of Chicago, Chicago, IL

11:30AM: Federal Reserve Board of Governors Meeting: Review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.

* I re-shorted NVDA at $143 Sunday night:

Jim "El Capitan" Cramer disagrees with me:

The chart blow exposes the stretched valuation of the U.S. stock market along almost every valuation metric: 

"We usually lose today, because there has been a yesterday, and tomorrow is coming."

- Johann Wolfgang von Goethe

Bonus — Here are some great links:

Stock Market and Crypto Analysis

Space Stocks Are Moonin' 

The State of Semis

A Weak Dollar Will Take Bitcoin Over $100K

* That may be the message of the bond market  —as global yields lift further...

Rising interest rates are unfriendly to equity valuations.

* As an example, biotech...