As of 4:24 p.m.:

Volume

- NYSE volume 10% above its one-month average

- NASDAQ volume 4% below its one-month average 

Closing Breadth

% Movers 

Nasdaq 100 Heat Map

Advance-Decline Intraday Graph

* To you!

* By issuing equity at a 300% premium to bitcoin.

* It is complicated, but delta trading provides random returns, though gamma trading provides steady returns.

MicroStrategy's  (MSTR)  Mike Saylor is sprouting a heavy dose of misinformation and Enron-style math in expressing the reason to own shares of MicroStrategy.

What Saylor is selling is volatility  —with an operational asset (the MicroStrategy investor).

To summarize, when volatility is trending lower, problems arise. Moreover, the company prints shares for itself (share-based compensation) — another dilutive element to the MicroStrategy story.

Without getting too complicated, there is a useful life (and a depreciated asset associate with that) to produce a salvage value. (Maybe you should listen to the discussion.)

So, if you want to understand why I write this, listen to the complicated explanation: 

MicroStrategy's real game is gamma not delta

As mentioned earlier this morning I will be leaving for the West Coast today, returning the day after Thanksgiving.

Kindness sows the seeds.

Gratitude is the harvest.

I hope everyone's Thanksgiving overflows with both.

Wishing our subscribers, contributors, editors and management a very Happy and Healthy Thanksgiving!

I am re-shorting Starbucks  (SBUX)  at $102.38.

In response to my "I Dissent on Bessent" post:

* Shorted  (APO)  at $175.15.

* Shorted  (AXP)  at $304.01.

* Shorted  (JPM)  at $250.79.

* Shorted  (QQQ)  at $508.56.

* Shorted  (TSLA)  at $361.65.

* Shorted  (SPY)  at $599.71.

* Shorted  (NVDA)  at $141.88.

There will be no "Things" today as I am travelling for the holiday and leaving early. (I will be back writing on Friday morning).

"Stocks have reached what looks like a permanently high plateau."

- Irving Fisher

What do you call a meltup layered on top of the third most extreme price bubble of the past century?

Irving Fisher was described by Joseph Schumpeter as "the greatest economist that the U.S. has ever produced — an assessment repeated by James Tobin and Milton Friedman.

Fisher was the first celebrity economist but his reputation during his lifetime was irreparably harmed by his public statement, just nine days before the Crash of 1929, that the stock market had reached "a permanently high plateau."

Something tells me Irving Fisher would be in there buying today …

Caveat emptor.

The prevailing view that today's market jump was fueled by the appointment of a new Treasury Secretary seems wrong footed.

One man cannot undo the systemic deficit and burgeoning debt load that has been accumulated over the last couple of decades.

Our country's finances are like a huge sea going ocean liner, difficult to navigate.

Moreover, the type of fiscal cuts being suggested by the new Administration are growth unfriendly.

To me this notion is simply naive.

(TSLA)  and  (NVDA)  were the first two to buck the trend and drift downward 15 minutes into the open.

* I dont want to hear from any cheerful Pollyannas.. It's all bananas! 

If you don't want to read my ursine contribution this morning — perhaps you will listen to George Gershwin:

Old Man Sunshine, listen, you,
Never tell me dreams come true,
Just try it, and I'll start a riot,
Beatrice Fairfax don't you dare,
Ever tell me she will care,
I'm certain, It's the final curtain.

Don't want to hear from any cheerful Pollyannas,
Who tell me love will find a way, it's all bananas.

- George Gershwin, But Not For Me

Better yet, listen to the great Rosemary Clooney!  

* Despite numerous concerns that we have expressed, equities continued to to surge in November.

* Many things have come together to drive the market (bubble) — AI, former President Trump's election, liquidity and market structure — all fed by social media (many of these factors may prove illusory).

* Though emotions are contagious and have no business in investing, the Panic of October 1987 stock market is now in reverse — a mass panic (back then) has morphed into a mass euphoria (today).

* In one corner (the aggressor) is standard bearer of crypto, MicroStrategy's Michael Saylor, and in the other (an increasingly risk averse) Berkshire Hathaway's Warren Buffett.

* 2024 equity returns have likely borrowed from the future.

* It is our view that the optimism and reset (higher) in valuations shall pass... as it did forty one years ago and, again at the end of the dot-com bubble.

* For now, valuation (and other fundamental) concerns are obscured by the sheer force of price (momentum).

 * But, speculation doesn't repeat itself ... it rhymes.

* Some things you don't see at the bottom — CNBC's Robert Frank making the case for paying $6.2 million for a duct-taped banana or MicroStrategy trading at 3x the underlying value of its bitcoin holdings and market participants unconcerned about high valuations.

* Meanwhile let's keep the windows sealed, as in the immortal words of President Abraham Lincoln who said that he felt "like the boy that stumped his toe, — "it hurt too bad to laugh and he was too big to cry." 

"I was lyin' in a burned-out basement 

With a full moon in my eyes     

I was hopin' for replacement
When the sun burst through the sky
There was a band playin' in my head
And I felt like getting high
I was thinkin' about what a friend had said
I was hopin' it was a lie
Thinkin' about what a friend had said
I was hopin' it was a lie"

- Neil Young, After the Gold Rush

On Friday, October 23, 1987, days after the previous Monday's fateful and dramatic (22.6%) October stock market fall, Wall Street Week's Louis Rukeyser started the program:

"It was the day the computers went wild and through the wonders of so called 'programmed trading' made a correction turn into an early Halloween.

"It is just your money, not your life. Everybody who really loved you a week ago still loves you tonight. And that's a heck of a lot more important than the numbers on a brokerage statement.

"The robins will sing, the crocuses will bloom and babies will gurgle and puppies will curl up in your lap and drift happily to sleep with you even when the stock market goes temporarily insane.. That said, let me say, ouch, eek and medic."

- Louis Rukeyser, Wall Street Week (October, 1987)

Here is the complete transcript of Wall Street Week. After the Crash - Part 1 - Wall Street Week Oct. 23, 1987 - YouTube and Part 2 - Before the Crash - Wall Street Week October 16, 1987

Before there were chat rooms and Twitter, there was Wall Street Week with Louis Rukeyser. 

I and many others religiously watched Louis Rukeyser every week and listened to his educated guests and his craftily devised puns.

Nearly forty years ago market structure, policy and deficit concerns combined to bring fear into the markets, which culminated in Black Monday. 

It is almost now as if the market and Fin TV's coverage is the movie in reverse. 

The birds are singing, the crocuses are blooming and the puppies are happy and playful.

But, like that unprecedented market decline 37 years ago, today's unprecedented market climb (to all-time levels) seems equally undeserved.

Warren Buffett famously said:

“This imaginary person out there — Mr. Market — he's kind of a drunken psycho. Some days he gets very enthused, some days he gets very depressed. And when he gets really enthused, you sell to him and if he gets depressed you buy from him. There's no moral taint attached to that... Emotions are contagious, and emotions have no business in investing.”

I detailed my market concerns in (Mike) Wilson, For Christ's Sake... Sell! a week ago.

Since then, speculation (in AI, in cryptocurrencies, in MicroStrategy  (MSTR) , etc.) has intensified.

Move over Nvidia  (NVDA) :

Arguably, Mr. Market is increasingly acting like Warren Buffett's "drunken sailor" as The Oracle of Omaha grows ever more risk averse (and the Buffett Indicator rises into a record overvalue):

Here is what Berkshire's  (BRK.A)   (BRK.B)  outsized cash reserves mean to me. 

While admittedly not a market timer, Buffett has made a statement by selling large positions in Apple  (AAPL)  and Bank of America  (BAC)  towards accumulating a cash hoard of about $325 billion. Moreover, Berkshire has halted stock buybacks for the first time since 2018.

At 28% of assets, Berkshire's cash is at the most in 35 years. In just twelve months, Berkshire's cash has doubled and is rising at the fastest pace in several decades. Note that Berkshire's cash/assets reached 24.5% in Q22005 and remained high elevated until late 2008:

MicroStrategy's Michael Saylor vs. Berkshire Hathaway's Warren Buffett

It's a heavyweight title match....

In one corner, MicroStrategy's aggressor, Michael Saylor:

Well, I dreamed I saw the silver spaceships lying
In the yellow haze of the sun
There were children crying and colors flying
All around the chosen one...

- Neil Young, After The Gold Rush

And in the other corner, a risk-averse nonagenarian, Warren Buffett:

Regrets, I've had a few
But then again, too few to mention
I did what I had to do
And saw it through without exemption
I planned each charted course
Each careful step along the byway
And more, much more than this
I did it my way...

 - Frank Sinatra, My Way 

While Berkshire's common shares have performed well, relative to speculative market components, not so much. A chorus of "Buffett has lost his touch" can now be heard and it is growing louder.

The last time criticism of bears (and of Buffett) were so emphatic was at the end of the dot-com stock boom and before a merciless drawdown in equities:

Finally, here is an updated "Berkshire Indicator," which measures the ratio of the U.S. stock market to GDP. 

Buffett Indicator = Total US Stock Market Value/Gross Domestic Product (GDP)

As of September 30, 2024 the ratio values are:

Total US Stock Market Value = $60.86T

Annualized GDP = $29.24T

Buffett Indicator =  $60.86T/$29.24T = 208%

This ratio fluctuates over time since the value of the stock market can be very volatile, but GDP tends to grow much more predictably. The current ratio of 208% is approximately 66.62% (or about 2.2 standard deviations) above the historical trend line, suggesting that the stock market is Strongly Overvalued relative to GDP: 

Things You Don't See at the Bottom

As recently noted in my Diary, most traditional valuations are, on average, in the 95%-tile: 

The current zeitgeist is that elevated price earnings ratios no longer matter:

As speculation abounds and traders/investors worship at the altar of price (just look at my daily premarket ETF movers):

As valuation (and other fundamental) concerns are obscured by the sheer force of price (momentum):

Bottom Line

In this missive I outline my description and concerns regarding market speculation and contrast it with market patience.

While many factors have come together to drive the market (bubble) — AI, former President Trump's election, liquidity and market structure — many of these factors (fed by social media) may prove illusory and should be taken in the context of sky high valuations.  

I will end by returning to two wonderful quotes: 

"What the wise man does in the beginning, the fool does in the end."

- Warren Buffett

"A bull market is like sex, it feels best just before it ends."

- Barton Biggs

Upside:

-VSTE +56% (receives $30M from Australian Renewable Energy Agency for Green Technology to Decarbonise Australia’s Grid and Power Green Fuels Production)

-RGTI +44% (successfully completes $100M At-the-Market Equity Offering; hearing price target raised at B. Riley)

-CTXR +31% (reports productive FDA Type C Meeting to Discuss Phase 3 Mino-Lok Program and pathway to approval)

-KULR +30% (awarded U.S. Navy Contract to Develop High-Temperature Internal Short Circuit Cells for Enhanced Battery Safety in Critical Applications)

-SRRK +26% (strength following BHVN study results from Taldefgrobep Alfa Development Program for Spinal Muscular Atrophy Biohaven Pharma)

-BBIO +21% (Attruby (acoramidis), a Near Complete TTR Stabilizer (=90%), approved by FDA to reduce Cardiovascular Death and Cardiovascular-related Hospitalization in ATTR-CM Patients; Will receive a $500M payment under our royalty funding agreement)

-QUBT +16% (Amazon Web Services introduces Quantum Embark, a quantum-computing advisory program for customers)

-UXIN +16% (earnings, guidance)

-BBWI +15% (earnings, guidance)

-VUZI +11% (awarded six-figure revenue production order for customized waveguides to enable a lightweight heads-up display (HUD))

-RKLB +10% (announces successful launch of two missions in <24hrs; signs $23.9M CHIPS incentives award to boost semiconductor manufacturing)

-STXS +8.3% (Genesis Robotic System achieves regulatory approval in China)

-NCNA +8.1% (earnings)

-HOOD +7.2% (Morgan Stanley Raised HOOD to Overweight from Equal Weight, price target: $55 from $24)

-IMNN +7.1% (End-of-Phase 2 Meeting with FDA for Lead IMNN-001 Clinical Program in Advanced Ovarian Cancer results in support for Phase 3 trial)

-DRRX +6.9% (sells ALZET product line to Lafayette Instrument Co. for $17.5M)

-SMCI +5.9% (momentum)

-SNCR +5.0% (ROTH MKM Raised SNCR to Buy from Neutral, price target: $13 from $11)

-ALUR +4.9% (launches in US with its first AI-Native Compounded GLP-1 Program)

-HUM +4.6% (UNH wins Medicare Advantage Stars lawsuit)

-KLC +4.6% (Morgan Stanley Raised KLC to Overweight from Equal Weight, price target: $30)

-NTLA +4.2% (US FDA Regenerative Medicine Advanced Therapy (RMAT) designation granted to Nexiguran Ziclumeran (nex-z) for treatment of Hereditary Transthyretin (ATTR) Amyloidosis with Polyneuropathy)

-PLTR +3.9% (Tier 1 firm raises price target as company is thought to be a trade on Trump Administration potentially higher levels of defense spending)

-ESTC +3.7% (hearing upgraded at Wedbush)

-ALNY +3.4% (US FDA accepts Vutrisiran sNDA for treatment of ATTR Amyloidosis with Cardiomyopathy)

- PLUR+3.3% (evaluates readiness for mass production of PLX-R18 for Acute Radiation Syndrome amid rising nuclear threat concerns)

-SNOW +3.2% (Wedbush, Inc. Raised SNOW to Outperform from Neutral, price target: $190)

-MSTR +3.0% (discloses during the period Nov 18-24th it acquired ~55,500 bitcoins for ~$5.4B in cash, at an average price of approximately $97,862 per bitcoin, inclusive of fees and expenses, using proceeds from the Convertible Notes Offering and the issuance and sale of Shares under the Sales Agreement)

-APP +2.2% (hearing price target raised at Oppenheimer)

Downside:

-SAVA -86% (Simufilam topline Phase 3, 52 week, data did not meet co-primary endpoints)

-EYEN -16% (prices $1.3M registered direct offering; Andrew D. Jones transitioned out of his position as CFO, effective Nov 22nd)

-BHVN -10% (provides update on Taldefgrobep Alfa Development Program for Spinal Muscular Atrophy and Obesity; treatment arm did not statistically separate on primary outcome at Week 48 compared to placebo+standard of care (SOC) group)

-PTN -3.8% (completes patient enrollment in Phase 2 study of orally administered Melanocortin Agonist PL8177 in Ulcerative Colitis; data expected 1Q calendar year 2025)

-DSX -2.8% (earnings)

-M -2.5% (reports prelim Q3 results; identified an issue related to delivery expenses in one of its accrual accounts which will delay release of full Q3 financial results until Dec 11th)

-REPL -2.2% (files to sell up to $125M of stock and pre-funded warrants)

-SUM -2.1% (confirms enters into Definitive Agreement to be acquired by Quikrete for $52.50/shr cash)

Chart from 8:50 a.m. ET:

From Peter Boockvar

A few notable things

While I've never made a buy or sell decision in stocks based on an appointed Treasury Secretary, outside of an emerging market, Scott Bessent certainly has a great resume. His focus and work will be four fold, 1)Get expiring tax cuts extended and add on a few more which will likely get done I believe but most of the result will just be status quo with current tax rates, 2)Get the budget deficit as a % of GDP down to 3% from the current 6% ish but will be tough as Congress inevitably will have to make the spending decisions needed for this which will have short term economic implications, 3)The dollar, which on one hand I'd think the administration wants a weak dollar but tariffs theoretically helps to boost it, and 4)The tariffs, will it be targeted or scattershot?

Assuming Robert Lighthizer is back and tariffs are again used as an economic weapon, I just hope there is some reflection on the 2018 tariff battle that resulted in a manufacturing recession and damage was done to all the downstream part of the economy impacted by higher costs. For example, steel and aluminum domestic producers were protected but all users of this raw material got stuck with a bigger input cost bill that cost more jobs than those saved at steel and aluminum producers. 

Back in December 2019 the Federal Reserve released a paper titled "Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected US Manufacturing Sector." Their conclusion, "We find that the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices. For manufacturing employment, a small boost from the import protection effect of tariffs is more than offset by larger drags from the effects of rising input costs and retaliatory tariffs. The producer prices, the effect of tariffs is mediated solely through rising input costs."

"While one may view the negative welfare effects of tariffs found by other researchers to be an acceptable cost for a more robust manufacturing sector, our results suggest that the tariffs have not boosted manufacturing employment or output, even as they increased producer prices...In addition, our results suggest that the traditional use of trade policy as a tool for the protection and promotion of domestic manufacturing is complicated by the presence of globally interconnected supply chains."

https://www.federalreserve.gov/econres/feds/files/2019086pap.pdf

The post election rally in stocks and the broad market excitement has put the Citi Panic/Euphoria index literally off the Euphoria chart as I saw over the weekend at .58. Above .41 is Euphoria and Citi believes this is statistical significant as we now have a "better than 80% probability of stock prices being lower one year later" according to them. Whether it happens or not, it's worth taking note for those with a shorter term time horizon.

The one thing of note overseas was the drop in the November German IFO business confidence index to 85.7 from 86.5 and just below the estimate of 86. It continues to bounce along the post Covid bottom with most of the November weakness in the Current Assessment. The IFO in its usual succinct way just said "The German economy is floundering." The manufacturing component fell to the lowest level since 2009 not including Covid. Services and construction were weaker too, only partly offset by a rise in trade. 

Notwithstanding the weakness, which is not a surprise, the euro is bouncing as are many currencies post the Bessent announcement and after the big weakness seen. Yields are a touch higher while stocks are slightly up too in Europe. 

German IFO

While hopium springs eternal, there are more accumulating cannabis headwinds:

Trump's New Attorney General Pick Opposed Legalizing Medical Marijuana In Florida - Marijuana Moment

"If you don't believe it or don't get it, I don't have the time to try to convince you, sorry. ”

- Satoshi Nakamoto

Bonus — Here are some links:

The Russell Is on the Verge of Breaking Out

Tesla on Top

Stock Market and Crypto Analysis 

Sixteen Years in the Making 

Warren Buffett on investing.

More on this in my opener: