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Hot Tips
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Strait to Remain Closed for Months.
Piper Sandler isn't buying the talk that an Iran deal is nearing, telling clients that the Strait of Hormuz will largely stay closed and oil will hit new highs. Piper Sandler said it has very little confidence that the commercial traffic through the Strait would return to even 50% of its pre-crisis levels, either next week or next month. The U.S. has been unwilling to press the fight because the scale of Iran's retaliation could have broader implications for its neighbors and may further disrupt global supply chains.
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Zscaler Gets Skinned.
Shares tumbled 16% after the cloud security company guided for current-quarter revenue of between $875 million and $878 million, falling short of the $879 million analysts were seeking, per LSEG. However, the company’s fiscal third-quarter adjusted earnings of $1.08 per share beat forecasts of $1.01 per share, while its $850 million revenue also exceeded the $835 million consensus estimate. Shares of Palo Alto Networks and CrowdStrike both shed 2% in sympathy.
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Will Apple Continue its Historic Run?
The mega cap’s shares are up 63% since the summer. The iPhone maker’s annual Worldwide Developers Conference (WWDC) kicks off on June 8, offering another chance to impress Wall Street with its rather uneven artificial intelligence execution. The event comes during a year of change for Apple as long-time CEO Tim Cook prepares to hand over the reins in September and a big AI partnership with Alphabet’s Google gets underway. The question is: Can Apple finally deliver on a truly conversational Siri? My bet is yes.
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Starlink Raised Prices 5X During Iran War.
When U.S. kamikaze drones guided by Elon Musk’s Starlink network began to make visible gains in the war against Iran, senior SpaceX officials reached a conclusion: The Pentagon should be paying more for access to their satellite Wi-Fi network. Within weeks of the United States launching its bombing campaign, SpaceX executives met Pentagon officials and argued the military had been paying about $5,000 for a connection per terminal while effectively using a higher tier of service worth closer to $25,000.
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Bill Koch to Sell Aspen Estate for $99 Million,
up from his $26.5 million cost 20 years ago. Koch, an avid wine and art collector who has had success auctioning other assets, is now betting that the ranch will attract a bidding war that will push the final sale above the opening price. Concierge Auctions, a real estate auction house that’s sold luxury properties in 35 countries, will oversee the sale, which will take place over the course of 10 days on the firm's online marketplace. Bill Koch is the younger brother of Charles Koch and the late David Koch, who are the billionaire businessmen famous for funding conservative political causes.
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Mind-Blowing Growth Is About to Propel Anthropic Into Its First Profitable Quarter.
Anthropic’s revenue is set to more than double to $10.9 billion in the second quarter, an explosive rate of growth that will help it turn an operating profit for the first time. Anthropic generated $4.8 billion in sales in the first quarter. Its quarterly revenue is now growing faster than Zoom did during the pandemic, and Google and Facebook in the run-up to their initial public offerings. It is set to turn an operating profit of $559 million in the June quarter. It’s a great setup for the next hot AI IPO.
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IBM Lands $1 Billion Quantitative Computing Subsidy,
taking the stock up 20%. The Trump administration is awarding $2 billion in grants to nine quantitative computing companies in deals that include U.S. government equity stakes, the Commerce Department said. The move accelerates the administration’s plans to boost the nascent industry, which has attracted a wave of investment from investors and businesses in recent months.
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US Consumer Sentiment Hits New All-Time Low,
falling in May due to the Iran war. Consumers expect prices to rise an annualized 3.9% over the next five to 10 years, up from 3.5% in April. The cost of living continues to be a concern, with 57% of consumers mentioning that high prices were eroding their personal finances. Are they only asking the bottom half of the country, or students who have lost their scholarships?
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Weekly Jobless Claims Drop 3,000 to 209,000.
The broader 4-week moving average also declined to 202,500, continuing to reflect a highly stable and resilient labor market.
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FDA Deregulates Flavored Vapes.
Lung disease is about to explode. Expect at least 100,000 young people a year to die. Great idea! We have too many young people. They don’t respect old people at all!
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The Mad Hedge June Traders & Investors Summit is On!
Attend the Mad Hedge Traders & Investors Summit from June 2-5. Learn from 30 of the best professionals in the market with decades of experience and the track records to prove it. They are offering a smorgasbord of successful trading strategies. Every strategy and asset class will be covered, including stocks, bonds, foreign exchange, precious metals, commodities, energy, and real estate. Best of all, by signing up, you will automatically have a chance to win up to $100,000 in prizes. Listening to this webinar will change your life! To register, please click here.
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It Out of Hardware, into Software Now,
with ballistic moves in Palo Alto Networks (PANW) and CrowdStrike (CRWD). Shares of several U.S. software stocks gained on Tuesday, as the industry attempts a comeback after being battered for much of the year on fears of disruption from artificial intelligence. The beleaguered sector's rebound coincided with a slide in chipmakers, which began to cool off following a blistering rally that took the Philadelphia SE Semiconductor Index (SOXX).
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Goldman Sachs Gets SpaceX IPO Lead, certain to be the largest in history, with record fees. The stock jumped $32 on the news. The reusable rocket company could make its prospectus public as soon as Wednesday, after confidentially filing with the Securities and Exchange Commission last month. The offering is expected to bring in a record sum as SpaceX was most recently valued at $1.25 trillion by Musk, when he merged the company with xAI, his artificial intelligence startup, in February.
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FOMC Minutes. Fed policymakers see rising inflation risks, with a rate hike possible. The April meeting saw four dissents, most since 1992, over policy direction. Economists’ expectations shift toward no rate cuts.
Financial markets price in rate hike as Fed's next move. The minutes for each regularly scheduled meeting of the Committee are generally published three weeks after the day of the policy decision. The descriptions of economic and financial conditions contained in these minutes are based solely on the information that was available to the Committee at the time of the meeting.
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SpaceX (SPCX) and OpenAI Announce IPOs on the Same Day,
and the day after, a court ruled in favor of OpenAI CEO Sam Altman. Combined, the two new issues will take $3 trillion out of the market. (SPCX) is targeting June, while OpenAI is aiming for September. Both are rushing to raise money from the market before it crashes. This is like watching a movie, a financial thriller.
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Bonds Yields Hit 20-Year High,
threatening to crash the stock market. The yield on 30-year Treasuries was higher by two basis points in early Tuesday trading in New York at 5.14% — just shy of their highest levels in almost two decades. Two-year and 10-year yields were up three basis points to 4.08% and 4.61%, respectively. Gigantic government budget deficits are the cause.
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Commodities are the Big AI Play Here,
not AI stocks. The world is in the early stages of a commodity super cycle that may last another decade or more as the artificial intelligence buildout collides with chronic underinvestment in energy and materials capacity. The energy sector presents the biggest asymmetric trade in modern finance because oil companies are returning a 15.5% free cash flow yield while hyperscalers have none.
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Home Depot Comes in Weak,
held back by a lackluster housing market. Home Depot’s business has been hit by elevated interest rates and high housing prices, which have sparked a pullback in home purchases and upgrade projects over the past three years. Instead of extensive remodels that require financing and large amounts of tools and materials, Americans are taking on smaller projects such as painting and gardening.
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Markets are Looking at an Interest Rates Rise by July,
or so says the Fed funds futures market. That may have to be the first move by the new Fed governor, Kevin Warsh. If the government wants to take the National Debt to record highs, it is going to have to pay more for the privilege. In the meantime, America’s credit rating is sliding, thanks to the Iran War, which has scared off foreign buyers,
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Pending Home Sales Rose 3.2% YOY,
and 1.4% in April on a signed contract basis. Sales only fell in the South. The 30-year fixed-rate mortgage just hit a one-year high at 6.75%. With inflation soaring, don’t expect any interest rate cuts soon. The monthly average payment for a new home loan has risen by $167 since the start of the war.
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Kevin Warsh Becomes Fed Governor,
with a full plate. Inflation is at four-year highs and accelerating. But Warch got the job after promising Trump to cut rates. And half the Fed board is already against him, with Powell remaining on board. Better him than me.
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Global Oil Stockpiles Approaching Record Lows.
Inventories were near a decade high at just over 8 billion barrels at the end of February. By the end of April, stockpiles fell to 7.8 billion barrels. Inventories will approach record lows of 7.6 billion barrels by the end of May if demand remains the same month over month. Billions of barrels in inventory may sound like a lot, but the reality is that only about 800 million barrels are available without straining the system. The rest is needed to keep pipelines and tanks filled at minimum levels so the supply chain operates efficiently. Some 7.6 billion barrels are enough to supply global oil demand for only 76 days, and the rate of reserve decline is alarming in the extreme.
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Industrial Production Rises,
as AI spending drags the economy forward, with much of it going nowhere.
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Coal is Booming,
as countries rush to fund gas alternatives. Coal shipments normally slow down in April and May when the heating season in the northern hemisphere nears an end. But in recent months, coal was the largest cargo by volume for medium-sized vessels, with freight rates as much as 50 per cent higher on average in May than in February. Global coal imports this month are expected to be 107mn tonnes, the third-highest monthly figure for May in records that go back to 2017. For any one metric tonne of gas, you can substitute it with two tonnes of coal.
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Some $570 Billion Worth of Classic Cars are Changing Hands.
Some 12 million enthusiast vehicles will transfer to a new generation in the US over the next 15 years in estate plans or inheritances. The market for collectible cars — vehicles desirable for their heritage, performance, and design — has mushroomed over the past two decades. It encompasses more than 43 million vehicles in the US, representing an estimated $1 trillion in total insurable value. When I met the comedian Jay Leno at the Pebble Beach car show, he told me that his portfolio of classic cars has outperformed a portfolio of tech stocks for the last 35 years, and he was right.
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