As of 4:27 p.m.:

Breadth

S&P 500 Sectors

Nasdaq 100 Heat Map

* A "decision" has been made... and life will be more enjoyable.

Dougie Kass

The Death Star no longer has ANY value to me.

It represents consensus, contains little analysis and B.S. narratives.... and serves to entertain.

Even the commentators I used to value have little value to me anymore.

It's official, turned off.

No more criticizing what I don't watch.

C 'ya.

I have two research meetings — at 2:30 p.m. and 3:15 p.m.

Radio silence.

IU'm back buying MSOS at $3.66.

The Senate hearing on safe banking is going well for cannabis:

* Let's play two "Tales" today...

This thread is interesting. A pretty unbiased review of Open AI's new model:

These models continue to not get better. They are not scaling. It doesn’t work. No matter how much money is spent.

Where it gets a bit more interesting are his subtweets if you go through the thread.

He is basically saying the models work well when there is a pre-existing website that already gives the answer (and implicitly is extracting everything almost word for word from that pre-existing resource), otherwise it is useless because it makes things up and gets thing wrong.

This is the exact issue. The LLMs in many cases are a solution to a problem that doesn’t exist. And they are the most expensive and power-consumptive solutions ever, for a problem that doesn’t exist. What can be done for almost free these days (normal internet search) is done less well by a very expensive and money-losing solution.

Then the author goes on to say he cannot believe his own experience, given the over-the-top praise of the model that he had been hearing. Yup, there are an army of things on the internet that go gaga over each new release, but each new release never seems to live up to the hype, or get any better. Who these things are that are generating all the hype is beyond me. Probably some combination of fanboys, and who knows what other bots and other technology are put in place to generate said hype. 

With S&P cash unchanged I have moved to medium-sized short Index calls.

With S&P cash -6 handles, I'm adding to my short Index calls.

One of the reasons why we are long Curaleaf CURLF!

- New York Stock Exchange volume is 7% below its one-month average; 

- Nasdaq volume is 16% below its one-month average

From Peter Boockvar:

Bessent keeps the Yellen issuance cadence/Tariff fear and order pull forward influences ISM services and trade

Notwithstanding Scott Bessent’s criticism of Janet Yellen and the cadence of her Treasury issuance where she probably did skew to the shorter end in order to relieve pressure on the long end via stemming excessive supply and thus worthy of criticism, he did not change the maturity schedule in today’s quarterly refunding announcement. He was recommended to shift to more long term paper from the Treasury Borrowing Advisory Committee but seems like he wants to wait a bit before doing so. This is likely today helping the bid to longer term treasuries.

The ISM services index for January softened to 52.8 from 54 and that was below the estimate for no change. Overall business activity at 54.5 fell to a 6 month low with new orders dropping to 51.3, the lowest since June 2024. Backlogs though remained weak at 44.8 vs 44.3 in the month before and still well below 50. Inventories remained below 50 for a 3rd month at 47.5. After today’s ADP and ahead of Friday, the employment component rose 1 pt to 52.3 and compares with the 6 month average of 50.8. Supplier deliveries were 53, a 3 month high but no supply chain issues of note are really evident. Prices paid fell 4 pts to 60.4 after jumping by 5.9 pts last month.

Specifically on employment, the comments given were mixed. One respondent said “Human resources department working aggressively to fill open positions” while another said “Belt tightening due to slower consumer demand.” Six of 18 industries saw a gain in employment vs 9 in December and 5 in November.

Breadth improved from the soft December but is just back to where it was in October and November. To this, 14 of 18 industries surveyed saw growth vs 9 in December and 14 in the two months before.

The bottom line from the ISM was this, “Slower growth in the Business Activity and New Orders indexes led to the lower composite index reading. Poor weather conditions were highlighted by many respondents as impacting business levels and production. Like last month, many panelists also mentioned preparations or concerns related to potential US government tariff actions; however, there was little mention of current business impacts as a result.”

More specifically on possible buying ahead of tariffs, this was also said, “Spending by customers has increased; unclear if it’s truly a pickup in business or panic buying ahead of potential tariffs driving up price.”

So the threat of tariffs, whether they come or not has altered purchasing/procurement behavior which also implies some pull forward in ordering which could limit activity in the few months to follow depending on the complexion and size of the ultimate tariffs.

ISM Business Activity

New Orders

Prices Paid

This was also seen in the huge US trade deficit seen in December where imports jumped by 3.5% m/o/m while exports fell by 2.6% sending the trade deficit to $98.4 billion, a record high outside of one print of $101.9b in March 2022. With that import increase, the pull forward need for industrial supplies led the way with a 19% m/o/m increase.

Trade Deficit

S&P futures bounce 10 handles on the ISM print, down only 11 handles; now I am adding to short calls (indexes).

* Alphabet's earnings release and guidance was no bueno...

* As the "talking heads" confidentally bulled up the name prior to last night's report

Alphabet GOOGL shares are getting schmeissed after the disappointing earnings release (which was followed by an AMD warning)..

Alphabet's cloud business/data centers missed just like Microsoft's MSFT Azure failed to meet expectations, so two of the biggest missed on cloud revenue.

At the same time they are spending more money:

The shows,however, loved Alphabet (with the chorus) "it is the cheapest Mag 7 based on PEG ratios") over the last few days leading into the release:

* Just the day before Google's EPS release: Trade Tracker: Joe Terranova buys Alphabet and sells Microsoft

* And last Thursday, "the bull (Farmer Jim) confidentally recommends Alphabet": Final Trades: Alphabet, RTX, Baker Hughes and the IGV

But, investors hate it, driving the shares -$15.

Less growth and more expenses are not a compelling story (as META proved a few years ago).

These companies will all figure it out and roll over in short order.

Indeed, thus far and despite protestations and heavy spending, AI is just like the Metaverse for META.

The Metaverse was a waste of capital. These excessive AI investments, in a very immature technology, are not much different. ROI and capital destructive — as I have noted in my More Tales From Nvidia series..

The hyperscalers are investing for the right to lose money.

Open AI gives you a good sense of the economics of these businesses. Open AI loses so much money, they seemingly have to raise capital every few months.

Remember (again), META stock only started working and started to rip AFTER they started cutting expenses, including the Metaverse and other wasteful investments, in late 2022, and the stock went from less than $100 to the $700 and change it is now.

Public companies will get religion soon enough.

Nobody likes less growth and more expenses — it is a toxic combination.

Live Senate Banking meeting stream. hearing | Hearings | United States Committee on Banking, Housing, and Urban Affairs

With S&P cash -8 handles I am back shorting Index calls.

From Peter Boockvar:

ADP jobs data

ADP said 183k private sector jobs were created in January, above the estimate of 150k and December was revised up by a notable 54k to 176k. Helping was a rebound in the pace of hiring’s from small business after a string of sluggish hiring.

The breadth of hiring was broad except in manufacturing where another 13k jobs were lost. Construction added 3k. On the service side, trade/transportation/utilities led the way with 56k more jobs, followed by leisure/hospitality which added 54k jobs. Education/health services added 20k. Information hired a net 18k and job gains were also seen in financial activities and professional/business services.

When it comes to pay, for ‘job stayers’ wages rose by 4.7% vs 4.6% in the month before. For ‘job changers’, pay was up by 6.8% vs 7.1% in December. Still pretty good.

The bottom line from ADP was this, “We had a strong start to 2025, but it masked a dichotomy in the labor market. Consumer facing industries drove hiring, while job growth was weaker in business services and production.”

For perspective, the 3 month job gain average is now 188k vs the 6 month average of 193k and the full year 2024 average of 144k where job growth was slow in the early part of last year. Expectations for Friday’s BLS private sector gain is 150k.

I’ll add my own bottom line, as seen here, job hiring has been pretty solid I have to say over the past six months. As markets though follow the BLS report, Treasuries are still at the highs of the morning with yields at the lows with the 10 yr yield back under 4.50%. No reason still for the Fed to act again at least right now. Rate cut odds for March are at just 16%.

I just took a small trading profit in Disney DIS at $112.

From this morning ( I disagreed with Jim Cramer's analysis of the quarter) :

Less Than Meets the Eye

I shorted (DIS) in premarket at $115.35.More later.

Position: Short DIS S

By Doug Kass

Feb 5, 2025 9:03 AM ES

I have been adding to MSOS et al daily for a week and a half.

Upside:

-OGEN +76% (withdraws filing for securities offering)

-KTTA +55% (announces Positive Safety Review Committee (SRC) Recommendation from ongoing Phase 1 Clinical Trial of PAS-004 in Advanced Cancer)

-MRCY +20% (earnings)

-CRTO +17% (earnings, guidance)

-AVNW +15% (earnings, guidance)

-MAT +13% (earnings, guidance)

-INDP +12% (receives approval from Health Canada to expand clinical trial of Decoy20)

-LUMN +9.3% (earnings, guidance)

-CRUS +8.5% (earnings, guidance)

-JCI +7.9% (earnings, guidance)

-AIM +5.8% (Erasmus Medical Center Safety Committee grants approval to proceed with Phase 2 study of Ampligen and Imfinzi as a potential Combination Therapy for Late-Stage Pancreatic Cancer)

-APRE +5.3% (announces Strategic IP Portfolio Evolution in DNA Damage Response (DDR) Cancer Therapeutics)

-TECH +4.8% (earnings)

-WDAY +4.5% (to cut ~1.75K jobs (~8.5% of total) and see charges of $230-270M from restructuring plan; expects Q4 and FY25 results to meet or exceed guidance, except for GAAP operating margin due to restructuring)

-AMTM +4.3% (earnings, guidance)

-NVO +4.1% (receives US FDA BLA Supplemental 56, 58 approval for Norditropin)

-ENPH +3.6% (earnings, guidance)

-FI +3.6% (earnings, guidance)

-ANVS +3.2% (First Patients Entered into Pivotal Phase 3 Study of Buntanetap for Early Alzheimer’s Disease)

-EVR +3.2% (earnings)

-EA +2.7% (earnings, guidance)

-CDW +2.3% (earnings, guidance)

-RARE +2.3% (new data demonstrates treatment with UX111 AAV Gene Therapy significantly improved clinical function across multiple developmental domains in children with Sanfilippo Syndrome Type A (MPS IIIA) Correlated with Sustained Reductions in CSF-HS)

Downside:

-FMC -23% (earnings, guidance)

-SDA -14% (announces $50M Class A common share follow-on public offering)

-AMD -9.7% (earnings, guidance)

-MTCH -10% (earnings, guidance)

-OSCR -9.8% (earnings, guidance)

-INTA -8.0% (earnings, guidance)

-GOOGL -7.1% (earnings)

-FICO -6.7% (earnings, guidance)

-UNM -6.0% (earnings, guidance)

-VRNS -6.0% (earnings, guidance)

-UBER -5.5% (earnings, guidance)

-KLIC -5.2% (earnings, guidance)

-COLM -5.1% (earnings, guidance)

-BDN -5.0% (earnings, guidance)

-CMG -4.7% (earnings, guidance)

-DAY -4.5% (earnings, guidance)

-MDLZ -4.4% (earnings, guidance)

-SWK -4.2% (earnings, guidance)

-CVRX -3.6% (earnings, guidance)

-CPRI -3.5% (earnings, guidance)

-SR -3.2% (earnings, guidance)

-HOG -3.1% (earnings, guidance)

-REYN -2.7% (earnings, guidance)

-TKR -2.4% (earnings, guidance)

-ITW -2.2% (earnings, guidance)

-AAPL -2.0% (China said to consider probe of Apple’s App Store fees, practices)

-KMT -2.0% (earnings, guidance)

I shorted DIS in premarket at $115.35.

More later.

Most active premarket exchange-traded funds as of 8:14 a.m. ET:

Pre-market percentage movers at 8:34 a.m.:

9:00 a.m.: Fed Bank of Richmond President Barkin (Non-Voter) participates in fireside chat before the Conference Board "2025: A Year in Preview" Conference, The Plaza, NYC (Audience Q&A expected. No media Q&A. No livestream. No text);

2:30 p.m.: Fed Bank of Chicago President Goolsbee (Voter) speaks on economic perspectives before hybrid 31st Annual Automotive Insights Symposium, Chicago, IL (Livestream and embargoed text available);

3:00 p.m.: Fed Board Governor Bowman (Voter, Hawk) gives brief economic update and bank regulation remarks before the 2025 Kansas Bankers Association Harold A. Stones

Government Relations Conference, Topeka KS (Text available. No Q&A);

7:30 p.m.: Fed Vice Chair Jefferson (Voter) gives lecture, "Do Non-Inflationary Economic Expansions Promote Shared Prosperity?" at Swarthmore College, Swarthmore, PA ; Text available. Audience Q&A expected. Webcast at

https://swarthmore.hosted.panopto.com/Panopto/Pages/Sessions/List.aspx?folderID=d3b023e0-5993-43fe-a110-b27301121f69

PepsiCo (PEP) remains an investment short.

From the company's earnings release:

"In 2024, the salty and savory snack categories underperformed broader packaged food, following multiple years in which these categories had outperformed packaged food. We believe the cumulative impacts of inflationary pressures and higher borrowing costs on consumer budgets, difficult laps from above trend salty and savory category growth in previous years and continued growth in away-from-home dining and experiential spending have impacted our categories and broader packaged food.

"I think there is more awareness from consumers to the food and the drinks that they consume. I think this has been a multi year evolution of the consumer in the US, globally and obviously some parts of the world are more advanced, especially European consumers...You think about portion control, probably being the number one solution for consumers to stay in our categories is small portions of our favorites."

* I raise you one Uber (-$5) and an Alphabet (-$15) - recently and confidently recommended on Fin TV this week...

Apple AAPL is -$6/share on this news: Apple shares fall after China reportedly considers probe into App Store

We remain short this popular stock.

History is not the past but a map of the past, drawn from a particular point of view, to be useful to the modern traveller.

We are at the stage of the bull market that:

* Cathie Wood is again getting 30 minute segments on CNBC:

Cathie Wood: Elon Musk understands that we're in the midst of a massive convergence of technologies

* Palantir's PLTR shares are trading 145% above its simple 200-day moving average:

Caveat emptor.

Pennsylvania Governor Renews Push To Legalize Marijuana, Saying The State Is 'Losing Out On Revenue' To Neighbors Like Ohio And Maryland - Marijuana Moment

Bonus — Here are some great links:

Today's Number Is 2

The Ultimate Trade War Survivors

There Is Always A Reason to Sell

Technical Tuesday

Doomberg: "Undeclared."

The S&P Short Range Oscillator has slipped to almost neutral — at 1.04% vs. 1.69% 24 hours ago.

Wolf Street howls about the job market's dynamics.

* I love the premarket!

With S&P futures -40 handles (4:45 a.m.) I am buying SPY at (around) $598 and QQQ at (approximately) $519 against my short calls (in the money for March).

Now converted into a buy/write — with an immediate profit from the calls short of +$4 on each ETF (not counting the premium if I hold to maturity!).

This was my fifth profitable trade in the Indices in a bit more than a day.

From yesterday:

Exchanged My Common Shorts for Calls

"Just one more thing."

- Lt. Columbo

I forgot to mention that in the late afternoon I exchanged all my Index common shorts into short calls (taking in a premium).

Position: Short SPY calls (S), QQQ calls (S)

By Doug Kass Feb 4, 2025 4:45 PM EST