6. It is not just the S&P Equal Weight….Nasdaq Equal Weigh ETF QQQE +5.7% YTD
7. Speaking of Equal Weight…Transports Index Bad Chart
Dow Transports 50day thru 200day to downside….Lower Highs.
8. The US installed more solar in Q1 2024 than it did in all of 2018
Michelle Lewis-Electrek Blog In Q1 2024, the US saw the largest quarter of solar manufacturing growth in its history, bringing its total installed capacity to 200 GW. A record-setting 11.8 gigawatts (GW) of new solar panel manufacturing capacity came online in the US during Q1 2024, making up 75% of all new electricity-generating capacity added to the US grid in that period. According to the US Solar Market Insight Q2 2024 report released today by the Solar Energy Industries Association (SEIA) and Wood Mackenzie, total US solar panel manufacturing capacity increased to 26.6 GW in Q1 2024 compared to 15.6 GW in Q4 2023. Once this capacity fully ramps up, it will be enough to supply about 70% of US demand. The report also contains new data showing that the US added over 40 GW of new solar capacity in 2023 – more than initially reported. Wood Mackenzie now projects that the US solar industry will install another 40 GW in 2024. https://electrek.co/2024/06/05/us-solar-q1-2024/
Jim Chanos quit after failing to raise capital. Carson Block’s firm launched its first long-only fund. Andrew Left dubbed his kind “a dying breed.”
These are bad times to be a bear on Wall Street.
After taking hits on multiple fronts, short sellers — who borrow and then sell stocks in a bid to profit from price declines — are in retreat. Thank the gravity-defying bull market, lingering regulatory threats, a day-trading horde randomly squeezing shares like GameStop Corp. ever higher, and more.
Short interest in a typical member of the S&P 500 is hovering around the lowest levels in more than two decades, according to Goldman Sachs Group Inc. Assets in funds with a short bias have slumped to $4.6 billion from $7.8 billion in 2008, HFR data show, during a period when equity hedge funds overall nearly tripled in size. Activist campaigns like those pursued by Block and Left — where investors seek company flaws and bet against them before making their findings public — launched at the slowest pace in a decade in 2022, with only a tiny uptick last year.
Torsten Slok, Ph.D. Chief Economist Apollo Looking at P/E ratios for companies in the S&P500 ranked by market cap shows that large-cap companies are much more expensive than small-cap companies, see chart below.
Why are P/E ratios low for small-cap companies and high for large-cap companies? Because Fed hikes and higher costs of capital are weighing on highly leveraged small-cap companies with low coverage ratios.
And the AI story has boosted valuations of mega-cap names. With the Fed keeping interest rates higher for longer and the AI narrative pushing valuations and index concentration to extreme levels, the downside risks to equities are growing.
6. S&P Value ETF Fails to Make New Highs …Rolling Over.
7. Ethereum ETF by End of Summer.
8. Inflation-Auto Insurance Cost Ticks Down.
Dave Lutz Jones Trading After 3 straight years of rising prices, auto insurance is finally getting cheaper –Last month was the first decline for CPI motor vehicle insurance since 2021 (!)
10. Wealth and Money Are Two Different Things- Darius Foroux
I wanted to be rich so badly for my entire life. And I always looked at wealth and money to be the same thing. Make a lot of money, get rich, and you’ll be wealthy! Simple, right?
In high school, I watched the film, Wall Street starring Michael Douglas and Charlie Sheen. It was supposed to be a cautionary tale about greed and insider trading in the stock market. But I saw the movie as an inspiration.
I wanted to be Gordon Gecko (played by Douglas), the crazy, high-risk Wall Street trader. When I was 17, I got a job at a call center during the summer. My routine looked like this:
I’d get on the phone every day, working double shifts.
I would sell mobile phone subscriptions to people, mostly the elderly.
It was a shameful job. But I was making money. So I’d keep doing it: making one sale after another.
Think about those people who have a lot of money but they can’t do the things they truly want. I wouldn’t call them wealthy. They are rich and have lots of money. But they’re not free.
When you have freedom, you have wealth. When you’re rich but you have no freedom, you’re caged.
The ancient Stoics understood this 2000 years ago. They are famous for living stringent and hard lives. Seneca said it well:
“I do not regard a man poor, if the little which remains is enough for him.”
People talk about Stoicism like it’s a philosophy for dealing with obstacles. No. Stoicism is a way of life. One that promotes freedom over everything.
Buying stuff doesn’t make you happy
I can’t believe 20 years have gone by since I had my first job when I finally made my first paycheck.
For the next decade, I did what everyone else did. I chased that paycheck. I wanted to acquire more money.
Then, in 2015, I realized it wasn’t the way to go. I started to write and focus on solving problems. I stopped focusing on money, but I started making more money than before.
That helped me to become financially free. But I experienced what every person who is doing well financially experiences: Living an unsatisfied life even with money. That’s because I was too focused on buying things.
Buying things will not make you happy. Everyone knows this. And yet, everyone needs to figure it out on their own. That’s when you start differentiating wealth from money.
What is life? A collection of your memories
At some point, we all realize that life is just a collection of our memories. You look back, and you don’t think, “Buying that new car really changed my life.”
No, you think:
“Remember when we all had to sleep in that one hotel room because we had no choice? We were so angry but we had a good time.”
That was me in 2014. My family came to London to help me move to a new apartment. At the time, I was living with a roommate and wanted to get my own place.
My parents and brother came from The Netherlands to help me. But the new apartment that I rented fell through, and we had to get a place to stay. I was soooo angry and discouraged.
We ended up sleeping in the hotel room that my parents had booked. Everything was fully booked in that hotel and I had no energy to find another place because it was late when I found out.
Don’t ask me how we did it, and it was really uncomfortable, but we still talk about that moment. It’s a memory baked into our minds.
We all have memories like that.
Think about your memories. Do they revolve around wealth and money?
I bet you $100 it doesn’t.
You probably think about the experiences you had with your family, friends, partner, or on your own.
1. Bond Index AGG is in 4 Year Drawdown…Was Yesterday Turnaround?
Nasdaq Dorsey Wright As of Thursday (6/6), AGG is roughly 19% below its all-time high reached in August 2020. Even if we use total return data (AGG.TR), including coupon reinvestment, the fund is still about 10% below its all-time highs.
What is more punchline worthy is that, as of yesterday, AGG has been in a drawdown for 1000 trading days…that’s nearly four years in real time.
2. SHY Short-Term Treasury Bond ETF.
50week thru 200week on long-term chart
3.U.S. Retail Gas Fails to Below 2023 Highs..Downward Trend.
4. What Happens to Names Added to S&P? CRWD, GDDY, and KKR Added.
Nasdaq Dorsey Wright by Will Gibson
The S&P 500 (SPX) will rebalance at the end of this month. Notable additions to the index include CrowdStrike (CRWD), GoDaddy (GDDY), and KKR (KKR).
Theoretically, a stock’s inclusion in an index should have no impact on its performance. However, being added to a major benchmark like the S&P 500 can increase demand for a stock. Passive funds that track the index must purchase the new addition(s) and being added to an index can also increase stock awareness, especially among retail investors. Although, the performance trends for new adds have not been what you might expect.
In the table below we summarized performance of stocks that were added to the S&P 500 since 2010. We did not include stocks removed from the index due to various nuances with delisting (M&A activity as one example).
In the month prior to joining the index the upcoming additions had an average return of 4% which was about 3.5% higher than S&P 500’s average return, yet most of the alpha-generation opportunity seemed to vanish as the index reconstitution date approaches. On average, the new constituents underperformed the index after their inclusion date. S&P Global has a more detailed study that confirms our observations.
This performance asymmetry seems counterintuitive, but some hedge funds and sophisticated investors have ways to reasonably predict which companies will join the index even before an announcement is made, essentially setting up an arbitrage/front-running strategy. In other words, by the time information is widely public the market has long priced in the potential effects.
That said, all three of the upcoming additions have been high technical attribute stocks on our system since the middle of 2023. So, we would not suggest dumping these names solely based off today’s data because the technical pictures still look constructive for the soon-to-be members.
5. Oracle Breakout Similar to Apple Chart from Yesterday.
ORCL breaks out of sideways pattern
6. $6 Trillion in Money Markets But Household Stock Allocations Still at Highs.
The guy who helped construct the computer company in a garage-to-billionaire pipeline has put his money where his mouth is. Bill Gates, a proponent of competitive clean energy sources to combat climate change, broke ground on a next-gen nuclear power facility yesterday outside a small Wyoming town.
TerraPower, a company Gates co-founded in 2008 to boost private nuclear investment, is building a first-of-its-kind reactor that it thinks will usher in a new era of scalable clean energy.
What’s the big deal? TerraPower’s new reactor isn’t like old reactors—it’s smaller, cheaper, and may stand a shot at being finished…unlike new traditional reactors, whose death certificates are usually written before they even start running due to delays and cost overruns. The US has only built two reactors in the last 30 years, costing $35 billion, but TerraPower sees itself as #builtdifferent.
The TerraPower design calls for liquid sodium rather than water to cool the reactor, meaning the power station won’t need extensive (and expensive) heavy piping.
The reactor will also be able to adjust its output, making it easier to coexist with wind and solar sources and take advantage of selling energy to the grid.
Digging deep
Gates maintains that he’s not involved in the nuclear project to make more money. “I’m involved in TerraPower because we need to build a lot of these reactors,” he said in an interview.
The project still has plenty of unknowns, including whether the reactor will actually be cheaper to build (some critics say it won’t) and whether the Nuclear Regulatory Commission will approve its unorthodox engineering plan.
You need deep pockets to pull this off…but with some of the deepest pockets propping up the project, there’s a chance it can work. Gates has poured $1 billion into the project so far, raised another $830 million, and said he’s prepared to stand by it financially.—CC
Bad Nuclear
Russian Nuclear-powered Submarine Arrives In Cuba
A Russian nuclear-powered submarine and other naval vessels arrived in Cuba Wednesday for a five-day visit to the communist island off Florida’s coast in a show of force amid spiraling US-Russian tensions.
The submarine Kazan, which Cuba says is not carrying nuclear weapons, was accompanied by the frigate Admiral Gorshkov, as well as an oil tanker and a salvage tug.
The Kazan and Admiral Gorshkov, which is one of Russia’s most modern warships, could be seen just off Havana, which is about 90 miles (145 km) from the tip of Florida.
The tanker Pashin and the tug, flying the white, blue and red tricolor of Russia, entered the harbor early Wednesday morning, an AFP reporter said.
The Cuban government announced that Foreign Minister Bruno Rodriguez was meeting his Russian counterpart Sergei Lavrov in Moscow on Wednesday, as the two former Cold War allies further tighten their links.
The unusual deployment of the Russian military so close to the United States — particularly the powerful submarine — comes amid major tensions over the war in Ukraine, where the Western-backed government is fighting a Russian invasion.
Cuban President Miguel Diaz-Canel met with Russian counterpart Vladimir Putin last month for the annual May 9 military parade on Red Square outside the Kremlin.
During the Cold War, Cuba was an important client state for the Soviet Union. The deployment of Soviet nuclear missile sites on the island triggered the Cuban Missile Crisis of 1962, when Washington and Moscow came close to war.
Relations between Russia and Cuba have become closer since a 2022 meeting between Diaz-Canel and Putin.
Bespoke Investment Group For over a year now, shares of Apple (AAPL) have been stuck between the low $160s and the high $190s as the market impatiently waits for the company to outline its AI strategy. In just the last seven weeks, though, the stock has tested both ends of the range, and ahead of today’s Worldwide Developers Conference, shares of AAPL are modestly pulling back from the top end of the range. In case you missed it, in last week’s Bespoke Report, we discussed the stock’s performance leading up to, during, and after prior conferences including its performance when it rallied in the weeks leading up to the conference. If you missed that on Friday, make sure to check it out.
As the stock has rallied from its lows in the last several weeks, AAPL is on the verge of completing a golden cross formation, which technical analysts consider a bullish pattern. A golden cross occurs when a stock’s shorter-term moving average (in this the 50-DMA) crosses up through a longer-term moving average (in this case the 200-DMA) as both are rising. Conversely, the opposite of a golden cross is an iron cross which occurs when the short-term moving average crosses down through a longer-term moving average as both are falling.
As recently as May 1st, AAPL’s 50-DMA was more than 5% below its 200-DMA, but that spread has narrowed quickly in the last six weeks to less than 1% today. The gap is also continuing to narrow fast, and barring an absolute plunge in the stock, it’s likely that the 50-DMA will cross up through the 200-DMA within a week or so.
While golden crosses are a positive technical formation in theory, they don’t necessarily play out that way in practice. The table below summarizes the performance of AAPL after each prior golden cross and iron cross in the post-iPod era (since 2001).
After the four golden crosses, AAPL traded down over the next week three out of four times, and one and three months later, it was only up half the time. Six and twelve months later, AAPL’s stock was higher three out of four times with the lone exception being its performance after the golden cross in May 2008 just ahead of the financial crisis.
In the post-iPod era, AAPL has experienced five iron crosses with the most recent being in March 2024. Performance following these prior occurrences was similarly weak over the short term, but six and twelve months later, median returns were stronger than after golden crosses.
What stands out concerning performance following both golden and iron crosses, though, is the fact that the median returns for both golden and iron crosses are weaker than the average for all periods.
Wolf Street Blog Vehicles with internal combustion engines (ICE) also went through a crazy price spike during the pandemic, up by 64% in May 2022, a huge historic ridiculous price spike that was nevertheless dwarfed by what EVs went through. The Manheim index for ICE vehicles is up 34% from January 2020 (red):
PSYCHOLOGY TODAY Follow these three principles to guard your equanimity.- Seth J. Gillihan PhD
KEY POINTS
The philosophy of Stoicism offers greater flexibility in how you respond to challenging people.
It teaches that your interpretations, rather than events themselves, are the true source of upset feelings.
Peace of mind comes from redirecting your energy to the things you can actually control.
On a recent road trip with my wife and kids, I found myself being tailgated by an apparently angry and impatient driver. I was going a few miles per hour over the speed limit as I passed a semi on a long downhill stretch through the mountains; when I pulled into the right lane, the driver accelerated past me, blowing his horn for about 10 seconds. I felt my sympathetic nervous system turn on, and resisted the urge to give him the finger or to passive-aggressively honk a “friendly” beep-beep in return. For several minutes afterward, I was silently seething. It felt like he had gotten away with something, as if I had lost and he had won. Each time I replayed the prolonged honk I felt angry and humiliated. Part of me really wanted to chase down his car and pay him back somehow, but I knew nothing good would come of it. You no doubt have had similar encounters with obnoxious or pushy people, whether on the road or elsewhere. These episodes are a perfect opportunity to practice the principles of Stoicism.
1. Judgments, Not Events, Disturb People As I ruminated on what had happened, I had to wonder: What had that pushy driver actually done to me? The idea that he had “humiliated” me or “won” was based on multiple layers of interpretation. The facts were much simpler:
A driver wanted his car to go faster than mine was going.
He drove close to my bumper when my car was blocking his way, apparently angry and annoyed.
As his car passed mine, he pressed on his horn for several seconds before speeding away.
The powerlessness and sense of victimhood that I felt were not part of the events themselves. Nothing says that honking without retribution equals “winning.” article continues after advertisement As the Stoic philosopher Epictetus wrote in Enchiridion nearly two millennia ago, “It is not events that disturb people, it is their judgments concerning them.” A few pages later he adds: “Another person will not hurt you without your cooperation; you are hurt the moment you believe yourself to be.” It wasn’t the driver’s actions that upset me, it was the meaning I gave to them. When someone does something that offends you, ask yourself what is fact and what is interpretation.
2. Don’t Give Your Peace of Mind to Others The judgments you make drive your emotional reactions. If you want to “win” against others, guard your equanimity. The only way I would lose to that honking driver was by losing my peace of mind. Why give difficult people power over how you feel and what you do? Your emotional equilibrium is not to be entrusted to the actions of others. You can let people be rude or unreasonable, without acting as if your only recourse is to get upset and respond in kind. Remind yourself that no one else is responsible for your emotions. “So when we are frustrated, angry, or unhappy,” wrote Epictetus, “never hold anyone except ourselves—that is, our judgments—accountable.” When you do, you’ll discover true freedom in how you choose to respond.
3. Focus on What You Can Control The Stoics recognized that peace of mind is found by focusing on what you actually are responsible for. Epictetus advised asking yourself, “‘Is this something that is, or is not, in my control?’ And if it’s not one of the things that you control, be ready with the reaction, ‘Then it’s none of my concern.'”
The records have been coming thick and fast for AI phenomenon Nvidia recently — and on Wednesday it ticked off two more major milestones. The company crossed the $3 trillion market cap mark and simultaneously surpassed Apple to become the second most valuable company in the world.
There are a lot of ways to value a company: price-to-earnings multiples, discounted cash flow analysis, or EV-to-EBITDA multiples are all favorites of equity analysts… though each is often more of an art than a science. One really simple fundamental metric is: how much value is being ascribed for every person that it employs? For Nvidia, after this latest run-up took it north of the $3T milestone, the company is being valued at more than $100M for each of its 29,600 employees (per its filing that counted up to the end of Jan 2024).
That’s more than 5x any of its big tech peers, and hundreds of times higher than more labor-intensive companies like Walmart and Amazon. It is worth noting that Nvidia has very likely done some hiring since the end of January — the company might just be in growth mode — but even if the HR department has been working non-stop, Nvidia will still be a major outlier on this simple measure.
We are running out of ways to describe Nvidia’s recent run… but a nine-figure valuation per employee is a new one.
6. Bill Ackman Pershing Square Going IPO….Pershing Square Holdings in London PSHZF Trades at Sizable Premium to Big Money Managers
Barrons One valuation metric is market value relative to assets. Traditional asset managers likeBlackRock are valued at 1% to 3% of assets, while higher-fee alternative managers likeBlackstone, Ares Management, and Blue Owl Capital are valued at 10% to 15% of assets. Pershing Square is valued at nearly 60% of assets.
10. Russian Demographics Were Bad Before Ukraine War….Now Crisis Mode
WSJ In the midst of the economic and social upheaval that followed, growing numbers of Russians died from cardiovascular disease, suicides, traffic accidents and other causes—often related to heavy drinking—and women had fewer babies.
By 2003, Russia’s life expectancy had dropped to about 65 years from 69 in 1990, far below many Western countries at the time. A more stable economy, along with policies restricting alcohol purchases and antismoking campaigns, helped push that up to about 70 years in 2022—still below most developed countries, according to United Nations data. The U.S. had a life expectancy of about 78 years. Estonia, a former Soviet republic, had a life expectancy of 79 years.
