Closing Volume

- NYSE volume 35% above its one-month average

- NASDAQ volume 12% above its one-month average

- VIX index: down 3.85% to 15.73

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On the rally and with S&P cash +1 handle I am adding to my short book.

Well, I am not surprised, but this is still a new one to me.

With inflation (understated) at well above targeted levels and accelerating, the Fed is cutting rates, and projecting more rate cuts. At the same time as upgrading its growth forecast, lowering its unemployment rate forecast, and increasing its inflation outlook.

Make it make sense?

-- Growth: GDP forecasts raised for 2025, 2026 and 2027.

-- Employment: Unemployment rate forecast for 2025 unch, lowered for 2026 and 2027

-Inflation: PCE forecast for 2025 unch, raised for 2026, unch for 2027, Core PCE forecast for 2025 unch, raised for 2026 and unch for 2027

But the good news is their new projections show inflation finally returning to the 2% target in 2028. This is seven straight years of inflation exceeding targeted levels, and if done on a cumulative basis (area under the curve given the amount of excess inflation), it has exceeded targeted levels by a fair bit.

If the notion was that if inflation was under target for a period of time, it should go over target by a period of time to make up the difference, shouldn’t the same apply in reverse and we should be owed the same amount of under-inflation in return? Clearly, the answer is no, which it should be, because that would be a disaster. The problem is the notion of letting inflation run above targeted levels was also equally stupid.

Lots of IQ, for the most part. No common sense to go along with it as well.

Here are today's things:

* Shorted indices: SPY at $658.71 and QQQ at $587.33

* Shorted Financials: GS at $794.33, BAC at $51.43, C at $101.66, MS at $157.13, JPM at $311.31, BX at $185.91 and KKR at $146,26.

* Added to PEP long at $140.72.

* Added to MSOS long at $4.31.

At $3.30 I have moved close to large-sized MSOS.

I will review all my trades in "Things Today" right after the close as I have shorted quite a lot into the post FOMC ramp.

I am aggressively shorting the indices with S &P cash +16 handles.

Trump's Drug Czar Pick Says Marijuana Is A 'Bipartisan Issue,' But Admin Still Exploring 'All Options' On Scheduling - Marijuana Moment

Yesterday I cautioned that the IPO market was growing ever more speculative and, as a measure of this, the WInklevoss' crypto exchange Gemini Space Station (GEMI) (what a silly name) could break its IPO price of $28 after trading as high as $45.89 the day of the IPO (last week).

Well, GEMI has broken today — down by -$2.80 (or another -10%) to $25.30/share.

The deterioration in price of this highly touted IPO (on FIN TV) has not even been mentioned, despite a -45% decline from the peak of last week.

Not to the moon, Alice. #Honeymooners Alice going to the moon

From Tuesday:

Will the Winklevoss IPO Be a Bust?

The business media is filled with the sunshine boys and girls who never met a market they didn't like — rarely reporting negative developments.

Well I have one... the highly touted Winklevoss twins' crypto exchange Gemini Space Station (GEMI) is approaching its $28 per share IPO price — down by $4 (-12%) to $28.55 today.

"Winklevoss Twins’ Crypto Exchange Gemini Is Now Valued at $4.4 Billion After Strong IPO," Reuters

The shares traded as high as $45.89 on its first day of trading.

Position: None

By Doug Kass Sep 16, 2025 3:37 PM EDT

I'm adding to PepsiCo PEP at $140.72 now after some consolidation during the day.

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Adding to MSOS at $4.35.

* If so, there are adverse ramifications for the entire market...

Large-cap tech, especially hyperscalers, are showing some weakness today. (We remain short PLTR, NVDA and QQQ)

It remains my contention that the Oracle ORCL/OPENAI contract announcement may have marked a peak in the AI Trade -- a trade that has been responsible for the lion's share of the recent market advance:

Will Oracle's 'Blowout' Mark a Peak in the AI Trade? 

Yesterday I opined that the Oracle "backlog blowout" might mark a possible peak in the AI trade. Most importantly, one must be aware that all of the quickly depreciated spending on IT infrastructure must generate sufficient revenue and profits to recover the costs. Remember that Oracle's future revenues are someone else's future capital spending. (According to the conference call three individual companies contributed to much of the company's dramatic rise in backlog.) We have contended that many of the global AI players collectively are spending much more than they might earn on those expenditures in the face of numerous uncertainties:

My Contrary Oracle View

Here's my contrary view. 

The Oracle (ORCL) backlog blowout (with Oracle future revenues ultimately still dependent on the availability of chips, companies' access to large sums of debt/capital, the need for a very large increase in power capacity, the forecasts assume no recession or price compression) "could" mark the end of the AI trade.

As well, it should be recognized that the ramp in future revenue projections by Oracle will produce dramatically lower profit margins relative to the company's currently robust margins.

Moreover, those projected ORCL sales will be taken out of the pocket of some other large tech competition.In the after hours on the shows, the exact opposite view was expressed.

(Edited at 7:33 ET) 

Position: None

By Doug Kass 

Sep 9, 2025 7:33 PM EDT

Today someone else agrees: Here Is The Batshit Insane Chart That Sent Oracle Stock Soaring 25% After Hours | ZeroHedgePosition: 

None.

By Doug Kass

Sep 10, 2025 6:20 AM EDT

* The entirety of the upside 2025 EPS expectations resides in MAG7

* Which might be short lived if the uber-bullish forecasts for AI are derailed....

Talking heads in the business media universally exult the improved earnings picture for the S&P 500 Index.

But as Apollo's Dr. Torsten Slok explains below, the entirety of the EPS upgrade were Mag7 based:

September 17, 2025

Equity Investors are Dramatically Overexposed to AI

The upward consensus revision to 2026 earnings for the S&P 500 since Liberation Day comes entirely from the Magnificent 7, see chart below.

The outlook for the rest of the economy is much more bearish: Earnings expectations for the S&P 493 have remained suppressed and are not moving higher.

The bottom line is once again that there is an extreme degree of concentration in the S&P 500, and equity investors are dramatically overexposed to AI.

For more click here.

I am shorting financials, on strength now.

Across-the-board, with emphasis on money center banks, brokerages and private equity.

From Peter Boockvar:

Hopefully single family starts is old news, multi family construction continues to slow

If mortgage rates stay down maybe the August single family housing starts data will be old news as it fell to just 890k from 957k in the month before. That’s the least since July 2024. And with permits for single family homes, they declined to 856k, the lowest since March 2023.

With respect to multi family starts, they totaled 417k vs 472k in July, 457k in June and 333k in May. Very volatile month to month. Permits slipped to 456k and that is the least amount since May 2024 and just 8k from the lowest since Covid. After massive building of apartments that came on line this year, the supply side in coming years will be slowing sharply.

Bottom line, as the average 30 yr mortgage has fallen an additional 20 bps since the end of August to one year lows, we of course watch what the demand side response will now be. We also certainly look to see if mortgage rates stay down after the expected rate cut today and guidance on what comes next. With respect to multi family, as stated, new construction is slowing in response to the flood of supply so while we will get muted rental price gains through the middle of next year, I expect a resumption higher thereafter.

Single Family Starts

Single Family Permits

Multi Family Starts

Multi Family Permits

Early winners today are consumer staples (KO, PG, et al) - we have been steadily adding to PEP (+$1.80).

Technology is mixed to lower.

From Peter Boockvar

Can Jay Powell give enough dovish love that markets have priced in?

With markets having melted up, stocks, bonds, metals, etc...as we clearly know, ahead of today in the belief that Fed rate cuts are a magic elixir for everything, the question is can Jay Powell give enough dovish love to satisfy everyone. The bar is now extremely high and with inflation still stuck around 3% and financial conditions extraordinarily easy, I just don't think he clears the bar and a sell on the news outcome is a high possibility.

Meanwhile, the drop in long rates with the average 30 yr mortgage rate falling by another 10 bps w/o/w to 6.39% drove a 58% pop in refi applications w/o/w while purchase apps were higher by a much more modest 2.9%. That mortgage rate is the lowest in a year and assume the refi wave is from those who have 7%+ mortgages and those that want to do some cash outs with the high level of equity that many have in their homes. The mortgage rate though is still double where it was pre 2022.

Average 30 yr Mortgage Rate

Refi Application Index

It's not just the Fed that is meeting this week. The BoE meets tomorrow and they will sit tight at 4% especially after today's August CPI print of 3.8% y/o/y and a core rate of 3.6%, both as expected. Services inflation continues to drive the upside as it was higher by 4.7% y/o/y, though down from 5% in the month before. I'm sure the BoE would love to respond with more rate cuts in response to a sluggish UK economy but still elevated and persistent inflation is tying their hands.

UK CPI y/o/y

The BoJ will do nothing this week too and hold its target rate at .50% but the chatter is that Governor Ueda will set the stage for an October hike and maybe one thereafter. August CPI gets reported there tonight.

Indonesia surprised with a rate cut of 25 bps to 4.75% as their economy struggles as the political baton pass to Prabowo Subianto has not gone smoothly from the very effective predecessor Joko Widodo. The Governor of their central bank said the rate cut is "all-out pro growth, while maintaining stability." We are not talking though about a very independent central bank here as the Indonesia government is looking to ramp up spending financed with cheaper money from its central bank. Not good though for keeping inflation in check which is what is the biggest worry of its populace.

The Bank of Canada is likely cutting rates by 25 bps today to 2.5%.

After seeing Nvidia now being cut off from the China market with its AI focused RTX Pro 6000D chip according to the FT after being inhibited from selling its H20, my worries for years are coming true that in the US attempt to limit Chinese access to our best technology has only encouraged China to develop its own high tech semiconductor industry, among others and now with AI, that will not just limit US companies from doing business there but we've incentivized the creation of a large, intense, skilled, and highly motivated competitor globally. This is the result of China Derangement Syndrome. As incredible, innovative, groundbreaking and highly profitable US tech companies have become, the global competitive landscape is changing big time right in front of our eyes I believe.

From the Ferguson Enterprises earnings call, a company you might not have heard of but has a $45b market cap and whose HVAC and plumbing products tap into the construction industry:

"The residential end market, which makes up about half our US revenue has remained subdued due to weakened new construction starts and permit activity, as well as soft demand in repair, maintenance, and improvement. Residential revenue was flat in the quarter."

"Non-residential end markets representing the other half of US revenue showed continued resilience with increased activity on large capital projects. We continue to grow share with non-residential revenue growth of approximately 15%. We delivered 17% and 13% growth across commercial and civil infrastructure end markets respectively, while industrial grew 5%." Some of the large capital projects include data centers, healthcare facilities, water related projects and life science.

Specifically, "And just like the rest of the world, we're seeing that activity from a data center construction perspective continuing to accelerate. We haven't seen pauses or cancellations, and that activity is stepping up, and it's stepping up in a variety of geographies across the nation. Those are great projects for us."

Upside:

-SPRC +130% (Jerusalem district court grants Automax motion staying proceedings until Sept 30th regarding merger)

-HIND +66% (twice-daily application of VT-1908 eyedrops significantly reduced the uveitis score, with efficacy of VT-1908 found to be similar to a clinically used steroid)

-SQFT +44% (momentum)

-NFE +39% (reaches agreement for long-term gas supply with Puerto Rican government)

-FGNX +33% (momentum)

-VVOS +13% (announces clinical trial results in Pediatric Obstructive Sleep Apnea Treatment)

-ROIV +10% (Brepocitinib 30 mg shows positive Phase 3 results in dermatomyositis)

-LPTH +9.5% (secured $22.1M follow-on order for advanced infrared cameras)

-WDAY +9.4% (authorizes an additional $4B in stock repurchases)

-BIDU +7.6% (secures major AI partnership, sells dim sum bonds for cheap funding)

-ELTX +5.3% (Phase 2 AMPLIFY-7P trial, 99% of patients (89/90) generated mKRAS-specific T cell responses after ELI-002 7P)

-VTEX +5.2% (Jefferies Raised VTEX to Buy from Hold, price target: $6.50)

-VANI +5.0% (announces record date for spin-off of Cortigent Neuromodulation subsidiary to shareholders)

-BABA +2.5% (reportedly China Unicom's Sanjiangyuan data center signed chip contracts with Alibaba and others)

Downside:

-PGRE -11% (to be acquired by Rithm Capital at $6.60/shr in $1.6B cash deal for NYC and SF office portfolio)

-RDW -8.9% (downside momentum)

-DEC -6.8% (prices 5.7M shares at $13.75/share for selling holder)

-INBS -5.9% (FDA requests new additional information related to Intelligent Fingerprinting Drug Screening System)

-RICK -5.9% (RCI denies New York Attorney General's charges of fraud and bribery relating to tax fraud)

-PGR -2.7% (reports Aug net premiums written; BMO Capital Markets Cuts PGR to Market Perform from Outperform, price target: $250)

-GIS -2.1% (earnings, guidance)

Knowledge@Wharton: How Subjectivity Affects Stock Prices and Firm Valuations 

Run don't walk to read this valuable article.

From JPMorgan (good scenario analysis of today's expected Fed cut below):

US: Futs are flat into the Fed with the long end of the yield curve moving lower. USD is catching a bid after losing nearly 1% the last two days. Pre-mkt, Mag7 names are mixed with NVDA down 1% on news reports of a ban on their chip sales to China. AMD -1%, AVGO flat. Cyclicals are under pressure. The cmdty complex is weaker with notable losses in silver and coffee, each down more than 2.2%. In addition to the Fed today, we also have Housing Starts / Bldg Permits ahead of tmrw’s jobless data.

and...

US MKT INTEL’S FED DAY SCENARIO ANALYSIS [REPOST]

Feroli expects a 25bps rate cut, with 2-3 potential dissenters who would be looking for at least 50bp of cuts, and then 3 consecutive cuts from Oct 2025 – Jan 2026. He thinks the DOTS will show 1x additional cut in FY25, 2x cuts in FY26, and then 1x cut in 2027 to get to 3.00%. At the Press Conference, Powell is likely to the focus on downside risks to employment, given that tariff-induced inflation is expected to be transitory, but Feroli does not expect firm forward guidance. The macro environment has changed since the easing seen in 2024, when Core PCE was falling, from 2.9% to 2.6%; whereas, now inflation is rising, with Core PCE increasing from 2.6% to 2.9%. In 2024, the Fed cut by 50bp at the Sep 18, and then by 25bp at the Nov 7 and Dec 18 meetings. From Sep 17 to Jan 14, the 10Y yield rose by 114.7bp; Jan 14 was the YTD high for the 10Y yield.

· [1.0%] FED HIKES – SPX falls 2% – 4%. The first tail risk with the probability closer to zero than 1%. Given that Core CPI MoM has increased 3 consecutive months, this will give the Fed pause but the CPI print was not hot enough to make this a credible threat. For reference, the 3-month average for Core CPI MoM is .30% or 3.64% annualized which is hot but not enough to hike given tariff policy that may inflect dovishly.

· [4.0%] FED REMAINS PAUSED – SPX falls 1% – 2%. Another tail-risk and we think that this outcome would have required both a stronger NFP print as well as a hotter CPI print. We effectively received neither and given Powell’s comments at Jackson Hole, this scenario likely does more harm than good.

· [40%] HAWKISH 25BP CUT – SPX is flat to down 50bp. The primary argument now is whether the statement / press conference skewed hawkishly or dovishly. We are in the camp that with inflation increasing at a decreasing rate, plus YoY levels that in a 2% - 3% range are fine for the Fed to cut rates and resume its data-driven approach. Fedspeak points to the labor market being the bigger concern than inflation and with data pointing to hiring inflecting higher (Small Biz survey, Indeed listing, etc.) this could lead to a more hawkish Powell than expected, nullifying some of the stock market appreciation into Fed Day.

· [47.5%] DOVISH 25BP CUT – SPX gains 50bp – 1%. Continuing with the above argument, it is possible that with a transitory view on inflation that the Fed sees the labor market as being far away from having an inflationary impact on the economy and thus has some room to cut, preferring a gradual series of 25bp cuts, as long as inflation remains contained and NFP remains weak.

· [7.5%] 50BP CUT – SPX loses 1.5% to SPX gains 1.5%. The final tail risk and we are aware that this range of outcomes is pretty wide. The negative outcome would be tied to a market expressing a view that the Fed is more concerned about the labor market than it is letting on and that new uncertainty triggers a selling event. The positive outcome is tied to a view that the Fed sees itself as needing to catch up to the economic realities of a labor market on the precipice of rolling over and printing negative NFP.

· WHAT ARE OPTIONS PRICING? These are indicative only, call the desk for live pricing.

o EQUITIES – SPX options are pricing in 88bp move for options that expire on September 17, based upon data as of Sep 12.

o FX – EUR / USD is a 10 vol equating to a 42bp breakeven. USD / JPY is a 15 vol equating to a 63bp breakeven; pricing is as of Sep 11. Tomorrow, the team will update the full list of currencies.

o RATES – The 10Y breakeven is 4.625bp; pricing is as of Sep 12. Tomorrow, the team will update the full list of major Treasuries.

· US MARKET INTELLIGENCE – We see a Dovish Cut as the most likely outcome, producing a positive gain on the day. As we look toward month-end, Fed Day may act as a “sell-the-news” event as investors take time to consider the macro environment, the Fed future reaction function, potentially stretched positioning, a temporarily weaker corporate buyback bid, waning Retail investor participation, and quarter-end rebalancing.

o If this comes to fruition, look for a 3-4% pullback with some key catalysts to support the BULL CASE: (i) PCE on Sep 26 which is already de-risked with today’s CPI print; (ii) NFP on Oct 3 where a higher MoM print will continue to support an increasingly optimistic macro outlook; (iii) CPI on Oct 15 which will guide expectations for the Oct 29 Fed similar to the set-up into Sept Fed. Based upon information we have now, we like the BULL CASE and would use any pullback to add to risk.

o WHAT WOULD WE BUY AFTER A PULLBACK? While we do like the market broadening theme we also like being OW TMT / MegaCap Tech / AI-Theme. We do not see Defensives outperforming but things like (i) Utilities will benefit from a decline in the 10Y yield esp. if it falls to / thru 3.50% and (ii) Healthcare on the combination of strong EPS generation and low positioning plus Biotech should benefit from the anticipated wave of M&A. In international space, we like EM over DM if USD continues to weaken but if US macro data continues to inflect higher there could be squeeze that strengthens the USD, likely benefitting the US, generally, and TMT, specifically.

o WHAT IF A PULLBACK DOES NOT MATERIALIZE? Given a dovish cut, it is possible that this phase of the Bull Rally continues without a pullback despite the aforementioned reasons. If so, it is likely a continuation of the short-covering led rally that we saw on CPI Day, potentially at the expense of TMT; where TMT is positive but underperforms both SPX and RTY.

Bonus — Here are some great links:

30 Days and Counting

Country ETFs, Record Year

The Greatest TSLA Buy Signal of All Time

Rocket Lab Falls, Baidu Rips

Let’s Talk About a Government Shutdown

I added to my short of Nivida NVDA yesterday:

Chicken?

"What's the matter Colonel Sandurz? Chicken?"

-Dark Helmet, "Space Balls"

I have added to my (NVDA) short today.

Position: Short NVDA (S)

By Doug Kass Sep 16, 2025 2:30 PM EDT

Wolf Street howls about falling home prices. 

The S&P Short Range Oscillator rose to 3.35% vs. 2.73%.