Closing Volume

- NYSE volume 3% below its one-month average

- NASDAQ volume 28% below its one-month average

- VIX index -2% at 17.32 

Breadth

S&P 500 Sectors

% Movers

Nasdaq 100 Heat Map

Thanks for reading my Diary today. 

I hope the material was useful.

I have to leave early for a routine dentist appointment.

Enjoy the evening.

Be safe.

A good read... from a pen pal!

AI And Late Stage Bubbles - by Quoth the Raven

The market has had more moves than a shortstop batting .110 over the last few days.

This remains an excellent, but testy, market to trade.

Trading in this setting requires an ability to be dispassionate and to take quick losses.

I have a research call between 2:15 PM and 3:00 PM.

Oracle  (ORCL)  is the first AI domino to fall after Barclays downgrades its debt to sell. 

With S&P cash +12 handles, I have quickly moved back to medium-sized short index calls.

As noted recently, my baseline expectation is that equities trend irregularly lower (with a ton of volatility) in a sawtooth pattern over the next three to six months.

So, accordingly...

S&P cash has rallied by about +25 handles and is now even on the day.

As noted earlier, I am back shorting  (SPY)  calls on this climb from the lows: 

Index Trading Moves

With S&P cash -26 handles I have closed out my long index/short index calls (with a delta equivalent net short position).

I plan to re-short index calls on any strength.

Position: None

By Doug Kass Nov 11, 2025 11:10 AM EST

chrisideker

The discussion of the disparity between actual useful asset lives and depreciable lives fascinates me as a CPA, former auditor and forensic accountant. Frankly, I think this could be a really big deal. I always ask, where are the auditors and why aren't they catching this? Well, I have several theories and I am doing some research to explore more deeply.

1) auditors typically lack the technical expertise to challenge management's estimate of useful life. They aren't engineers or IT experts. They could employ the use of such expertise under auditing standards, but I don't think many do. 2). The way this would normally be detected would be a pattern of loss on disposal. Unfortunately, this requires auditors to expand some procedures and thinking across reporting periods- a big weakness in the audit process.

My working assumption (still being researched) is that auditors will not catch this often, unless it is a very material asset. That is scary, because the lack of detection risk creates the opportunity for accounting gimmickry.

One more little nit coming out of the CoreWeave  (CRWV)  doublespeak call. 

CoreWeave's CEO claims power is not a problem, they just can’t get power to the buildings, whatever that means?

This is of course while at the same time, the big dog over at Microsoft  (MSFT)  is telling you power is a massive problem, and they have all sorts of excess chips sitting around because they can’t get power: 

Here is an estimate of all the electricity that is needed to power the circular data-center deals that have been announced. Talk about vaporware. This does not even consider all of the issues with the grid and other ancillary stuff as well. I know, I know, the AI will build the nuclear reactors with Tesla  (TSLA)  Robots:

All of this of course is one more reason why as part of the barbell approach I have recommended (go low and go new), more effort should be focused on doing the same thing 90% as well with 10% of the resources, like the Chinese are doing, in addition to focusing on a new approach, that actually might work. Here is an interesting rumor in that regard, seems like the chief AI scientist at Meta  (META)  may be leaving to try and do just that: 

Meta chief AI scientist Yann LeCun plans to exit to launch startup, FT reports

It is kind of interesting that all at the same time, CoreWeave guides revenue down, Taiwan Semiconductor  (TSM)  shows sharp sequential slowing in revenue, "Scammy" Altman is begging for government money, the CDSs are gapping out, and SoftBank sells their Nvidia  (NVDA)  stock out of nowhere (and I would suspect they have good access to Nvidia given the size of their holdings and that guy has never been known to smartly take profits).

On a related note, as far as the depreciation debate is concerned (to be fair, it is not much of a debate; I think everyone knows and is just willing to look past it because it is not hitting the numbers, yet), one big circle needs to be squared. IF you want to argue these chips really do have a very long useful life, well then you should be selling all of your NVDA stock, because all of these projects are one and done for a long period of time then. You cannot have it both ways. 

Volume

- NYSE volume 8% below its one-month average

- NASDAQ volume 33% below its one-month average

- VIX index: up 1.48% to 17.86

Breadth

Sectors

% Movers

Nasdaq 100 Heat Map

With S&P cash -26 handles I have closed out my long index/short index calls (with a delta equivalent net short position).

I plan to re-short index calls on any strength.

Dougie Kass

STAFF

9 minutes ago

With S&P cash -5 handles, shorting more index calls..

From Peter Boockvar:

Banking conditions/The state of small business/Data centers/Protein/Overseas

Grateful for our veterans.

Yesterday the Dallas Fed released its November Banking Conditions survey and this was the summary:

“Loan volume and demand fell in November after several months of growth. Volume declines were led by consumer and commercial and industrial lending. Credit standards and terms were unchanged, while a broad-based decline was seen in loan pricing, with more than half of bankers reporting a decrease. Overall loan performance deteriorated at a faster pace than was reported in the previous survey. Bankers reported stable general business activity, and their outlooks remained mixed. Survey respondents said they expect growth in loan demand and business activity but continued deterioration in loan performance over the next six months.”

What was most noteworthy specifically was the ‘nonperforming loan’ piece. To the question with total loans, “Over the past six weeks, how have the following changed.” With this ‘indicator’, the ‘nonperforming loan’ index went to 14.3 from 1.5. Category wise, for C&I loans, it rose to 7.8 from 3.1. For CRE loans it jumped to 10.7 from -4.6. For residential loans it increased to 6.1 from 1.5 and for consumer loans it rose to 8.8 from 5.9.

Something to continue to watch. 

Also to watch is how small businesses are navigating the current environment. The October NFIB Small Business Optimism index slipped to 98.2 from 98.8 and that is the lowest since April. Plan to Hire fell 1 pt after rising by 1 pt last month. Positions Not Able To Fill were unchanged but hanging at the lowest since August 2020. With regards to compensation, it fell 5 pts for the current situation but was unchanged when looking to the future.

Positively, capital spending plans rose 2 pts to 23%, the highest print of the year and I’m guessing benefiting from the expensing possibilities from the OBBB. On the other hand, Plans to Increase Inventory fell 3 pts to -2%. Also of note, Positive Earnings Trends weakened by 9 pts to -25% and that is a 5 month low.

With regards to the outlook, those that Expect a Better Economy softened by 3 pts to 20%, the least since April. Those that Expect Higher Sales fell 2 pts to 6%, matching the lowest also since April. On the flip side, there was a 2 pt rise in those that said it was a Good Time to Expand but after falling by 3 pts last month.

While the Fed cut again as we know a few weeks ago, the average cost of loan in October was 8.7% vs 8.8%. It started 2024 at 9.8%, so about 2/3 of the Fed’s 150 bps of rate cuts have flowed through. Easing of Credit Conditions did ease by 4 pts to -3%.

Lastly category wise, Higher Selling Prices fell 3 pts after rising by 3 pts in September and plans for pricing over the next three months fell 1 pt.

The biggest small business problem remains Quality of Labor and that worry jumped by 9 pts m/o/m.

The bottom line from the NFIB, “Optimism among small businesses declined slightly in October as owners report lower sales and reduced profits. Additionally, many firms are still navigating a labor shortage and want to hire but are having difficulty doing so, with labor quality being the top issue for Main Street.”

NFIB

Expect a Better Economy

Average Interest Rate on a Loan

To two earnings calls and then will finish with some overseas data of relevance.

From CoreWeave:

“While we are experiencing relentless demand for our platform, data center developers across the industry are also enduring unprecedented pressure across supply chains. In our case, we are affected by temporary delays related to a third party data center developer who is behind schedule. This impacts fourth quarter expectations.”

On the bottle necks, “It is very frustrating for our clients. It’s very frustrating for us because of the kind of systemic challenges that exist within the supply chains that are necessary to deliver the global infrastructure that’s required for artificial intelligence.” They then went through the steps they are taking to address this.

Me here. I will argue again, the history of technology is that things get more powerful and in ever smaller sizes. That phone in your hand can do what mainframes used to do. So, building a 4mm square foot structure that is the size of about 70 football fields (on land that could fit more than 1500 of them), maybe only 2mm square feet will be needed in a few years with even greater compute power. I don’t know but why I/we will not invest in the physical real estate structures of these data centers. Some will become pickleball courts but the benefits to the users of GenAI such as us will only grow over time.

From Tyson Foods:

We know beef prices have gotten really expensive and they said “The Beef segment remains our only soft spot. Cattle supplies are at record lows due to drought, potential herd rebuilding, and the impact of New World screwworm in Mexico. These factors created market headwinds during the quarter...Looking forward, we expect cattle supplies to remain tight as we move into 2026.”

“During this period, chicken is likely to benefit most from changing consumer preferences, both at retail and in food services...Chicken is an affordable, high quality protein, and our innovative value added offerings position us uniquely to serve both retail and foodservice customers amid high beef prices.”

“While consumers remain cautious and selective with their spending, we continue to expand our market share in both volume and dollars. Protein remains a top priority for shoppers despite rising prices; beef, pork and chicken are clear favorites with consumers viewing protein as an essential purchase and continuing to buy meat.”

Just a few days after the Bank of England decided not to cut rates in a close 5-4 vote, the UK unemployment rate rose to 5% in September from 4.8% and that is the highest since January 2021. Weekly earnings ex bonus’ rose 4.6%, which is still pretty good and as expected but continues to moderate. With inflation still remaining elevated, the UK economy is going thru its own form of lite stagflation and unfortunately it seems that Rachel Reeves is about to raise taxes again.

Employment also fell in October by 32k, well more than the estimate of down 3k and jobless claims were higher by 29k.

The 2 yr gilt yield is down 7 bps in response as this figure makes it much more likely that the BoE cuts when they meet next. The pound is also weaker which in turn is helping UK stocks. We continue to find the UK stock market one of the cheapest in the world, notwithstanding the current economic challenges and we own stocks that trade there.

UK Unemployment Rate

Finally, the November ZEW investor confidence index in the Germany economy fell a touch to 38.5 from 39.3 and below the estimate of 41. The Current Situation improved very slightly to -78.7 from -80. ZEW said their index remains stable but “The overall mood is characterized by a fall in confidence in the capacity of Germany’s economic policy to tackle the pressing issues. Although the investment program is likely to provide economic stimulus, the structural problems continue to exist.”

Nothing market moving here as the IFO is more important. The euro is little changed as are bund yields and the DAX.

ZEW

Here are today's things:

* With S&P cash -5 handles I added to my short Index calls

*Added to longs -  (KMB)  $102.84 and PEP $142.93.

* I am placing KMB on my Long Buy List...

Tissue and personal care company Kimberly-Clark's  (KMB)  ($34 billion market cap) proposed acquisition of Kenvue  (KVUE)  (a dominant factor in the consumer health sector with a current market cap of $32 billion) is transformational.

Kimberly-Clark is paying $3.50/share in cash and 0.14635 of its shares per KVUE share.

While execution challenges in integrating the two companies are front and center, KMB has paid a very reasonable price (well below (-19%) the share price of six months ago and -14% from a year ago) in its desire to accelerate top- and bottom-line growth (in this strategic transaction into higher growth categories).

The sharp drop in the share price (of close to -15% at the time of the proposal's announcement) reflects investor skepticism. But I would note that the company has managed well through the difficult industry environment of the last few years — gaining market share (in both the U.S. and China) through successful innovation and with excellent results in both value and premium tiers.

I expect Kimberly-Clark will aggressively address the need to prune and reinvigorate Kenvue's expansive suite of brands.

Given the large dividend yield and the depressed pro-forma valuation of KMB (12.5x 2028 proforma), I believe there is a reasonable "margin of safety" with a most attractive reward vs. risk proposition.

Besides the protection of a low price/earnings multiple:

* Kimberly-Clark gains exposure to health/wellness, the consumer shift towards self-managed health and an aging global population.

* Kenvue's portfolio is generally seen as underutilized — the opportunity to reinvigorate the company's moribund brands is high.

* Kenvue is already in the middle of a strategic overhaul — as it reduces the bottom third of its SKUs and focuses on its core brands that drive 3/4 of its aggregate sales.

* Kenvue's geographic footprint (43% of sales from emerging markets) provides an opportunity to scale.

* The Tylenol issue may be overblown. Management has done a deep legal, medical and regulatory dive on the Tylenol litigation threat. From management, it has undertaken "incredible rigor, thoughtfulness and discipline" in assessing this risk. The company has determined that the financial and strategic benefits eclipse the risks. (We agree).

* Synergy opportunities are great. The deal should be accretive to EPS by 2028 (at least +5%) based on the company's ambitious synergy estimate (we are assuming between $1.5 billion to $1.7 billion of synergies). We (and the sell side) might be conservative. If the company's synergies are realized, earnings accretion will be far better. 

* The defensive nature of consumer packaged goods stocks (long underperformers) is compelling in an arguably overvalued stock market.

In the fullness of time I expect KMB's shares to trade between $125-$135/share (15x to 17x 2028 Pro Forma EPS).

I plan to build a large sized position in Kimberly-Clark.

Upside:

-ENGN +50% (Detalimogene Demonstrates Improved Complete Response Rate of 62% at 6 Months)

-SRDX +50% (confirms US District Court Denies Request for Preliminary Injunction to Block Proposed Acquisition by GTCR)

-QNRX +48% (achieves Topical Rapamycin Target Loadings for Two Proprietary Delivery Technologies)

-BBAI +18% (earnings, guidance)

-REAL +17% (earnings, guidance)

-VSEE +16% (enables Telehealth Expansion with FedRAMP Authorization and ICU Robot Integration)

-HNRG +15% (earnings)

-ALUR +11% (passes Critical FDA Milestones, Enters Into Transaction to Exchange All Outstanding Debt That Would Result in the Company Being Debt-Free, and Announces a $5M Private Placement Financing)

-VCIG +11% (acquires $100M in OOB tokens)

-BAK +9.8% (signs agreement with Brazilian state of Alagoas to pay BRL1.2B regarding 'geological event')

-RKLB +9.2% (earnings, guidance)

-SLNO +8.5% (enters $100M Accelerated Share Repurchase Agreement)

-DSP +7.2% (earnings, guidance)

-SE +5.5% (earnings, guidance)

-PSKY +5.4% (earnings, guidance)

-VSAT +4.0% (JPMorgan Chase and Co Raised VSAT to Overweight from Neutral, price target: $50)

-XPEV +4.0% (guidance)

-NBIS +3.8% (earnings, guidance; signs new ~$3B agreement to deliver AI infrastructure to Meta over 5 years; Targets $7-9B annual revenue by 2026)

-OUT +2.6% (TD Cowen Raised OUT to Buy from Hold, price target: $24)

-ALT +2.5% (Pemvidutide full long-term data expected 4Q25; Confirms Pemvidutide shows strong MASH resolution and anti-fibrotic effect; Lancet publication confirms 24-week data)

Downside:

-VOR -44% (prices 10M shares at $10/share)

-DAVA -19% (earnings, guidance)

-IHRT -19% (earnings, guidance)

-GEMI -8.1% (earnings)

-CRWV -8.0% (earnings, guidance)

-BYND -7.5% (earnings, guidance)

-HROW -5.0% (earnings, guidance)

-NNVC -4.5% (prices 3.57M shares at $1.68/shr in ~$6M registered direct offering)

-RGTI -4.3% (earnings, color)

-PH -2.9% (to acquire (air) Filtration Group Corp for $9.25B)

For months, in More Tales From Nvidia, I have raised concerns about the likely inability for hyperscalers and others to convert massive capital expenditures into a reasonable return on invested capital.

As JPMorgan puts it, "to drive a 10% return on our modeled AI investments through 2030 would require about $650 billion of annual revenue into perpetuity... which equates to $34.72/month from every iPhone user or $180/month from every Netflix subscriber":

* And SoftBank sells its entire Nvidia stake...

The snippet below is a classic from the CoreWeave  (CRWV)  earnings call:

They are also already lowering revenue guidance!

Apparently, they consider themselves an innovator in financing too. I guess they consider themselves a bank and should trade at book value. If this one does not speak volumes about the AI industry (the masters of circular financing and financial shenanigans re earnings before expenses and crazy depreciation schedules) I do not know what does.

As far as their lowered revenue guidance, they blamed it on a third-party data-center customer who delayed, whatever that means, and gave a doublespeak answer as to why. My guess, a fraud customer that is having a hard time wrangling up financing, for obvious reasons. This is what the action in the CDSs for even big businesses that generate income is telling you:

I guess maybe CRWV as the innovator in financing will pay the third-party customer to fund their purchases from CRWV, and NVDA will fund CRWV to do this? To infinity, and beyond!!!!

Consider:

Meanwhile, SoftBank has sold its entire stake in Nvidia: SoftBank sells its entire stake in Nvidia for $5.83 billion

Finally, this cautionary capital spending tale from Taiwan Semiconductor  (TSM) :

Post Script: This guy! 

Bonus — Here are some great links:

Home Is Where the Pain Is

When Energy?

The AI Stock Bubble is Not Another Dot-Com Bubble 

After a Record Year, The Odds of Another One Slips

Wolf Street howls about auto loans and leases.

The S&P Short Range Oscillator is at -1.34% vs. -1.87%.