As of 4:18 p.m.:

Volume

- NYSE volume 7% above its one-month average

- NASDAQ volume 12% above its one-month average

- VIX: down 0.07% to 15.37

Closing Breadth

S&P 500 Sector ETFs

Nasdaq 100 Heat Map

There will be no "Things I Did Today" as besides adding to MSOS at $3.40 and several individual cannabis stocks (TCNNF at $4.475, AYRWF at $0.415 VRNOF at $0.97), this is all I did today:

Today's Trades

Adding to (PLTR) $122.93 and (ARKK) $68.25 shorts.

Position: Short PLTR S ARKK S/M

By Doug Kass Feb 18, 2025 9:43 AM EST

Coincidentally……and as far as Nvidia NVDA is concerned, yes at least they have been making money off it, at everyone else’s expense (one more reason they invest in many of these deals too). 

Remember the early search wars, Google, Infoseek, Lycos, Yahoo, and about 25 others? All the other guys went away except for one. As everything went away, it caused an enormous amount of disruption to the underlying supply chain as well.  Once again, like the internet, too many garbage businesses being funded, at massive valuations. And at least the internet worked well!

That said, OpenAI’s moat keeps diminishing, so price wars will continue and profits will continue to be elusive for everyone except Nvidia.

Grok 3 Hot Take

Gary Marcus

Feb 18

Elon Musk promised that Grok 3 would be the smartest AI ever.

One of his fans even predicted earlier today that it would be AGI!

Spoiler alert: it wasn’t. Musk and 3 people from his company just demo’d Grok 3 tonight, live, and to anybody who has watched these systems lately, the demo just looked like a formulaic carbon copy of many other demos: some slightly better than before results on benchmarks, a lot more training (apparently 15x the compute used for Grok 2), demos of automatic coding of a variation on Tetris that didn’t quite seem to work, and a new product called, rather derivatively, “Deep Search” which sounds just like “Deep Research”. For good measure there was a new entrant in the test-time-compute genre with o1, o3, r1 and many more. I didn’t notice anything truly original.

Elon himself acknowledged it was still a “beta”.

Is it (slightly) smarter than the full but unreleased version of o3? We don’t know. [Update 1: probably not, per an OpenAI employee who posted some previously unreleased o3 data that appeared show o3 beating Grok3 on two benchmarks]

That wasn’t tested (presumably they don’t have access), and only a handful of benchmarks were actually reported.

My hot take:

1. Sam Altman can breathe easy for now.

2. No game changers; no major leap forward, here. Hallucinations haven’t been magically solved, etc.

3. That said, OpenAI’s moat keeps diminishing, so price wars will continue and profits will continue to be elusive for everyone except Nvidia.

4. Pure pretraining scaling has clearly failed to produce AGI. 🤷‍♂️

* Updating my market outlook...

What goes up must come down

Spinning Wheel got to go 'round

Talkin' 'bout your troubles

It's a cryin' sin

Ride a painted pony

Let the Spinning Wheel spin

You got no money, you got no home

Spinning Wheel all alone

Talkin' 'bout your troubles and you

You never learn

Ride a painted pony

Let the Spinning Wheel turn

- Blood Sweat and Tears, Spinning Wheel

What follows is a short compilation of recent commentary in my Daily Diary on TheStreet Pro and comments delivered to my investors at my hedge fund, Seabreeze Partners:

I continue to be deeply skeptical of the market's advance and I am maintaining our cautious investment strategy in the belief that equities are braced for a decline this year.

We believe that we are close to 2025's high in the averages and that downside is now roughly 3x the upside.

Investors should now be fearful of the excessive market optimism.

Nine days before the 1929 stock market crash that led to the Great Depression, Dr. Irving Fisher, an economist at Yale University, famously said (at the Purchasing Agents Association Dinner in New York City):

“Stock prices have reached what looks like a permanently high plateau.”

Fisher's prediction is considered one of the most notorious stock market forecasts of all time. The market's crash cost Fisher much of his wealth as well as his academic reputation.

Coincident with two back-to-back +20% annual returns in the S&P Index, a developing and confident bullish market narrative has emerged — which is eerily reminiscent of Dr. Fisher's 1929 comments:

Despite the near universal optimism in investor sentiment (as expressed in historically low cash reserves and most classical metrics and valuations above the 95% tile) there are rarely new eras — excesses are never permanent.

As noted last month, I remain of the view that we are not in a new (and permanently high) valuation paradigm for equities and that an important top in the U.S. stock market may be close at hand:  

December marked the beginning of what we expect to be a lower-trending market accompanied by rising volatility.

We expect 2025 to look far different than 2024.

While we predominantly focus on an assessment of reward vs risk on individual stocks — if we were forced to hazard a precise forecast we would project only about a five percent upside and a ten to fifteen percent downside for the S&P 500 Index in 2025.

Today's commentary will explain why heady valuations are rarely a good launching pad for higher stock prices.

We will explore and summarize some of our fundamental near and intermediate-term concerns.

We will compare today with early 1973 (which marked the end of the Nifty Fifty era) and produced years of subpar returns for the major market averages. Then, we will highlight some longer-term existential market threats that few discuss, but that have a reasonable chance of emerging.

Finally, we will explain why the numerous uncertainties and headwinds provide a fertile basis for investors to prosper (absolutely and on a relative basis) in searching for asymmetric investment opportunities — and why a top-heavy, technology-led market (which has not broadened) has already begun to deliver some developing long opportunities with upside rewards that dwarf downside risks.  

As I also recently wrote:

Many of our fundamental concerns (growing policy (fiscal and monetary) risks, sticky inflation, slowing economic growth and rising interest (higher for longer)) are finally beginning to be accepted by investors — at a point in time in which valuations are elevated and consensus corporate profit estimates seem too optimistic. We are increasingly more confident that stocks will correct to more attractive levels than exist right now — at which time we can begin to accumulate selected stocks that meet our investing criteria and standards. 

Advancers

Decliners

Breadth

Sectors

Nasdaq 100 Heat Map

From Peter Boockvar:

NY manufacturing back above zero but 6 month outlook falls to near one yr low

The February NY manufacturing index rose to +5.7 from -12.6 and vs +2.1 in December and +20.2 in November and -11.5 in October. It's thus very volatile and the internals were mixed. New orders and backlogs rose as did inventories but employment fell back below 50. Of note, prices paid jumped by 11 pts to 40.2, the highest since March 2023 and those received rose to match the highest since May 2023 at 19.6, up 10.3 pts m/o/m.

While the headline got back above zero, the 6 month outlook fell 14.5 pts m/o/m to 22.2, the lowest since May 2024. Capital spending plans fell to a 4 month low.

Bottom line, after a 2 yr manufacturing recession, we continue to look for every sign of an improvement, whether via an eventual inventory build and/or a rise in end demand. Today's number at just above zero gives hope but then the drop in the outlook takes some of that away, with maybe the prospect of tariffs negatively impacting the manufacturing mood because of its uncertain impact and whether they even come or not. The Philly regional index will be seen on Thursday and S&P Global will release its national manufacturing index on Friday, along with services.

Adding to PLTR $122.93 and ARKK $68.25 shorts.

From Peter Boockvar:

This is no longer a one decision market, 'Times They are A-Changin’

Just a few thoughts of mine as I think about the changes possibly coming in the macro/micro influences on the market and global economies. I think the DeepSeek news was a lasting news story and not just a one time flash in the pan. I think a stock market regime change is upon us in that the Mag 7 stocks are no longer the dominant force driving returns. All will remain special (we can all debate to the extent) companies in many regards but in terms of stealing all the stock market thunder away from everything else, those days could be over. I emphasize 'could.'

In a way, the big 7 have become its own reserve currency where foreigners around the world have parked their money in and keeping a bid under the US dollar. For example, the Norges Bank, the central bank of Norway, owns 324 million shares of Nvidia and thus worth about $45 billion at its current quote. The Swiss National Bank owns 69 million shares worth almost $10 billion. What will it mean for the US dollar if these big stocks are not the same incredible market leaders they've been? This is really an important question because if a multitude of tariffs get implemented, the US will need to maintain a stronger dollar in order to mitigate its impact on US importers and thus in a way, we need stock market strength in the Mag 7 to keep these foreign holders from selling them.

Also as part of this potential shift, Europe's impressive stock market performance year to date might not be a flash in the pan either. It seems European leaders, and highlighted by a Mario Draghi editorial over the weekend in the FT titled 'Europe Has Successfully Imposed Tariffs on Itself' saying that "High internal barriers and regulatory hurdles hurt growth far more than anything the US might do", finally get the economic ineptitude they have created for themselves via excessive regulation and bureaucracy. Also, they are on the cusp of spending a huge amount of money on upgrading and adding to their defensive capabilities. Their stock market rally likely has legs.

China's economy seems to be bottoming, though real estate will still take time to recover. The DeepSeek news seems to have brought some swagger back in their economic step and now we have President Xi meeting with Jack Ma and other entrepreneurs over the weekend realizing that the only economic ticket he has to success is via the private sector, not the state. By the way, more than 80% of employment in China is with private sector companies. That is not to say his authoritarian approach will change much but he's at least understanding the error of his ways in strangling the private sector it seems. The Hang Seng by the way rose another 1.6% overnight and is up 14.5% year to date.

We also have the likely rebuild of Ukraine and Gaza and just imagine the demand for building materials that this will bring. Commodity prices are likely going higher and bond yields are going to take another leg up as well as inflationary pressures will be well bid.

What this all possibly means is that market attention is in the midst of changing I believe, economic life in depressed regions is about to come alive and it will not all be about 7 stocks anymore.

Investor confidence has picked up specifically in Germany in their economy as the February ZEW rose to 26 from 10.3 and was above the estimate of 20. The Current Situation remains tough though as this component was still deeply negative at -88.5 vs -90.4 in January. The ZEW said "This rising optimism is probably due to hopes for a new German government capable of action. Also, after a period of absent demand, private consumption can be expected to gain momentum in the next six months."

Bond yields have been creeping up again in Europe with the German 10 yr yield now up 9 bps in the past three trading days at 2.51%, a 3 week high.

The Reserve Bank of Australia cut rates by 25 bps as expected to 4.10% and this is their first rate reduction since the Covid shutdowns in 2020. But, the usually hawkish Michele Bullock doesn't seem ready to cut again anytime soon. "While today's policy decision recognizes the welcome progress on inflation, the board remains cautious on prospects for further policy easing."

Yields rose in Australia in response and I have to mention yet again, do not stop watching what is going on with Japanese bond yields as they rose again yesterday and today. The 10 yr JGB yield is up 7 bps over the past two days to 1.43%, the highest level since November 2009.

Bond yields are up too in the UK after payrolls there unexpectedly rose in January by 21k instead of falling by 30k as estimated. Also, wage growth was stronger than anticipated in the three months thru December. Their unemployment rate held at 4.4% vs the estimate of 4.5%.

This yield boost in Europe and Asia is why the US 10 yr yield is back above 4.50% again today.

I've said for many months that we need to enjoy the moderating rent growth while we can because it won't last. If you didn't see, over the weekend the WSJ ran a story titled 'We're Headed Toward a Landlord-Friendly Era. Expect Higher Rent Prices.' After talking about the flood of supply in the sunbelt states during the "construction boom in 2023 and 2024", "more people now are renting longer, as mortgage rates stay high and the costs of homeownership remain unaffordable for many Americans. Landlords say that the new construction pipeline should be mostly drained by year-end, setting the stage for rents to rise nationwide later this year." They are of course talking their book but it's been seen in the sharp drop in multi family starts. https://www.wsj.com/real-estate/rent-price-increase-landlord-friendly-market-8ec25de5?mod=itp_wsj

The one conference call of note I went through was from Treehouse Foods, the private label maker of many food products. "Private brand unit sales experienced a rather sharp deceleration during the quarter. We believe this slowdown was a result of continued macro pressure that has impacted the broader food and beverage market. We are experiencing similar trends thus far in Q1, and we have planned our 2025 business accordingly."

They are still optimistic as consumers continue to seek value. "Despite the macro trends, I am pleased to report that overall private label industry dynamics remain favorable...Despite weaker consumption, private brands maintained share. As it relates to promotion levels, we once again saw the traditional pattern of gradual increases as the calendar year progressed. Looking ahead, we believe an increase in promotional activity is likely. Given industry volume softness and overall consumption patterns, we have planned accordingly. Promotions are generally still below the historic levels seen prior to the pandemic, and we remain comfortable with the expected levels of promotions in our categories."

Upside:

-SLDB +74% (reports positive initial clinical data from Next-Generation Duchenne Gene Therapy Candidate SGT-003; Expects to dose ~20 total participants by 4Q25 and plans to request FDA meeting In mid-2025 to discuss potential accelerated approval pathway for SGT-003)

-LXRX +14% (published Data in The Lancet Diabetes & Endocrinology Highlights Unique Efficacy Benefits of Sotagliflozin to Reduce Major Adverse Cardiovascular Events (MACE))

-HEES +12% (Herc Holdings confirms superior, ~$104.89/shr proposal to acquire H&E Equipment Services)

-CANF +7.8% (disappearance of Decompensated Liver Cirrhosis Episodes after Treatment with Namodenoson)

-STZ +7.2% (Berkshire Hathaway discloses new stake in Constellation Brands)

-WSO +5.8% (earnings; raises dividend)

-GALT +5.7% (reports significant reduction in new Varices with Belapectin in U.S. Patient Population from NAVIGATE Trial)

-EXPD +5.3% (earnings)

-GLDD +4.6% (earnings)

-NXL +4.5% (announces UCSD IRB Approval for use of HALO Clarity in Clinical Trials for mTBI and PTSD Treatment)

-PRFX +4.3% (agrees to acquire DeepSolar in all-share transaction)

-NE +3.7% (earnings, guidance)

-RARE +3.6% (announces FDA Acceptance and Priority Review of UX111 AAV Gene Therapy BLA to Treat Sanfilippo Syndrome Type A (MPS IIIA))

-VMC +2.8% (earnings, guidance)

-SSTI +2.4% (secured a multi-year renewal with NYPD for ShotSpotter, valued at $21.8M)

-ETR +2.3% (earnings, guidance)

-NKE +2.1% (introduces New Brand for Women in Collaboration with SKIMS)

Downside:

-SEPN -7.3% (discontinues SEP-786 Phase 1 Clinical Trial and Plans to Advance Next-Generation Oral Small Molecule PTH1R Agonist)

-STOK -6.4% (Biogen and Stoke Therapeutics announce collaboration for the development and commercialization of Zorevunersen, a potential first-in-class disease modifying medicine in development for the treatment of Dravet syndrome, in all territories outside the United States, Canada, and Mexico)

-TPH -4.5% (earnings, guidance)

-NEO -3.3% (earnings, guidance)

-FLR -2.8% (earnings, guidance)

-MDT -2.6% (earnings, guidance)

From 8:25 a.m. ET:

Sarge

STAFF

13 minutes ago

Walmart price target raised to $118 from $93 at Piper Sandler

Coinbase price target raised to $400 from $280 at Canaccord

Robinhood price target raised to $60 from $38 at Keefe Bruyette

Reply

DK

Dougie Kass

STAFF

Just Now

These sort of sharp increases in price targets tell you more about the forecaster than the forecast.

* Softbank went from WeWork to this stuff. And from Adam Neumann to Sam Altman.

* That is all you need to know. At least the WeWork buildings are still standing, this stuff in a few years, who knows!

No bubble here?

They are all raising money at massive valuations and doing the same thing.

The only reason Google GOOGL, Microsoft MSFT, Meta META, etc. have the massive valuations is they are all basically monopolies. They are the one winner at what they do, and charge commensurately, because they can, because they have no competition. And it took them an enormous amount of time to get to that point as well.

In the Large Language Model (LLM) space, overnight, we now have Open AI, Perplexity, Anthropic, MSFT, GOOGL, Grok, all the Chinese (DeepSeek, etc.) and who knows what else, and then all sorts of other adjacent startups.

On top of it all, this is the most dis-economic business I have ever seen. The underlying technology is so expensive to build and run, and the product has a limited value proposition, so customers are not willing to pay enough for it to cover costs.

And now there is massive competition, and all the products are un-differentiated (same underlying approach that will always hallucinate), and nobody will be able to charge the monopoly prices that justify these valuations.

Net/net, I am not sure how all the investments will be able to generate any returns.

Softbank went from WeWork to this stuff. And from Adam Neumann to Sam Altman.

That is all you need to know. At least the WeWork buildings are still standing, this stuff in a few years, who knows!

By Kate Clark

(Bloomberg) -- OpenAI co-founder Ilya Sutskever is raising more than $1 billion for his startup at a valuation of over $30 billion, according to a person familiar with the matter — vaulting the nascent venture into the ranks of the world’s most valuable private technology companies.

Greenoaks Capital Partners, a San Francisco-based venture capital firm, is leading the deal for the startup, Safe Superintelligence, and plans to invest $500 million, said the person, who asked not to be identified discussing private information. Greenoaks is also an investor in AI companies Scale AI and Databricks Inc.

The round marks a significant valuation jump from the $5 billion that Sutskever’s company was worth before, according to Reuters, which earlier reported some details of the new funding.

The financing talks are ongoing and the details could still change.

The company previously raised money from investors including Sequoia Capital and Andreessen Horowitz. Greenoaks declined to comment. Representatives for Sutskever didn’t immediately respond to a request for comment.

Sutskever, a researcher who was instrumental in developing OpenAI’s technology and served as its Chief Scientist, left the company in May. One month later, he co-founded Safe Superintelligence, or SSI, with Daniel Gross, a venture capitalist who previously worked on AI efforts at Apple Inc., as well as Daniel Levy, a former OpenAI researcher.

SSI focuses on developing safe AI systems. It isn’t generating revenue yet and doesn’t intend to sell AI products in the near future.

“This company is special in that its first product will be the safe superintelligence, and it will not do anything else up until then,” Sutskever told Bloomberg in June. “It will be fully insulated from the outside pressures of having to deal with a large and complicated product and having to be stuck in a competitive rat race.”

Sutskever was a key figure in the ouster of OpenAI Chief Executive Officer Sam Altman in 2023 before he helped Altman return.

I wonder when they find the vault depleted, if they blame Auric Goldfinger or Bob Menendez?

Is the price of gold going to rip after this one?

Nobody seems to have noticed, but for about the last three months gold is materially outperforming bitcoin.

Gold is making new highs and bitcoin is off its highs and stuck and is at the same price from late November last year:

https://www.dailymail.co.uk/news/article-14403697/gold-reserve-doge-audit-fort-knox-elon-musk.html

* From my pal Macke Truck

This table is a valuable resource for momentum-based short term traders:

From JPMorgan:

US: Futs are higher, led by Tech with Mag7 names all higher ex-META and Semis bid up, led by INTC. Tariff headlines were quiet over the weekend as the market focused on a RU/UKR solution. Bond yields are higher by 1-3 bps and USD looks to break a 5-day losing streak. Cmdtys are stronger with all 3 complexes bid up and WTI finding support above $70/bbl. Today’s macro data releases lack market-moving data as part of a, relatively quiet macro week.

and...

EQUITY AND MACRO NARRATIVE: The SPX gain 1.5% last week, snapping a two week losing streak. NDX outperformed (+2.9%) while RTY was flat and SPW (+0.5%) also underperforming. In addition to Tech, Comm Srvcs, Materials, and Staples outperformed with Financials and HC as the only sector to lose money. Outside the US, Europe (SX5E +3.2%, SXXP +1.8%, DAX +5.2%) continued to outperform the SPX with China seeing strong performance (FXI +7.1%, KWEB +10.0%). Bond yields saw volatility around the CPI print but closed the week down almost 2bps as MOVE also declined on the week. Commodities had a strong week despite weakness in crude and base metals; WTI may fall below $70/bbl for the first time since December. The key stories during the week shifted from tariffs/trade policy to the potential for a RU/UKR ceasefire/end of war as well as the inflation picture and impact on central bank policy.

"Don't play what's there,

play what's not there."

- Miles Davis

Bonus - here are some great links:

New High in the Nasdaq 100 Nasdaq100 Hits New All-time High

Stock Market and Crypto Analysis https://www.youtube.com/watch?si=XOC3UWVpJ6wPhn2W&v=om3wmavqazs&feature=youtu.be

Today's Number is 22 The Daily Number 💯 Friday, February 14, 2025

Valens Trends Episode 241: Valens Trends

Europe Hits Highs Europe Hits New All-time Highs

The S&P Short Range Oscillator shifted higher - from 0.44% to 1.76%.

So, the market is more overbought than the prior day.

Doomberg on the "Missing Link."

META will trade lower today.

Given the relative strength and the magnitude/duration of the up move over the last four weeks, I suspect there is a trading short opportunity here and now.

That said, I currently have no position in this name.