A Fair Criticism Deserves a Response

Subscriber jryan (below) delivered some reasonable comments and criticism yesterday in the Comments Section. 

Basically he said he is “getting sick of reading about cannabis and Fin TV commentary” — and he wants more (long) stock suggestions, etc.  

I wanted to respond in the first column of the day. 

* Few longs have represented value to me as I have been unduly negative for a lengthy period of time. I take ownership of that.

* The stocks that I have owned have recently been Staples ($KO, $PEP, $PG and $KMB), selected cannabis names and some others. The consumer nondurable stocks have been fine recently (and I have taken profits in them). We shall see about cannabis — a speculative sector and my focus has been intermediate-term based on the improved likelihood of rescheduling and other factors clearly delineated in my Diary.

*As to the CNBC constructive criticism. I point these out not only as an advocate of the retail viewer that should see timestamps (panelists taking ownership) and observe better company interviews, but so they can evaluate the merits and process of the panelists’ recommendations and become better-informed investors through more hard-hitting interviews (that serve more than as a marketing tool of companies). 

* But the criticism directed to Fin TV also is intended to highlight investment recommendations from panelists and guests that I strongly disagree with. Choosing stocks to avoid (in that FIN TV criticism) can be as valuable or even more valuable than choosing stocks to buy. Consider my negative comments towards $BA, $BABA, $META, $UBER, $NFLX, $RDDT, $TTAN, $DIS, $CLF, $MRNA and $UNH (a few years back) etc. that were mostly confidently and strenuously recommended on CNBC. 

* My “More Tales From Nvidia” series is intended to deliver the idea that the functionality, productivity and ROIC on the enormous capital spend may disappoint the many and multitude of optimists on AI. I have felt that my contrarian and non herd-like observations were valuable in a backdrop of near-universal bullishness (that is readily and frequently available from the buy/sell sides, panelists and guests). My view was that dwelling on “More Tales” had statistical value in that over 40% of the S&P is comprised of large-cap tech.   

* As to specific AI beneficiaries, I have admitted (often) of missing $MSFT and $GOOGL. The valuation on $AAPL seems foolish to me — the shares have prospered and I have been wrong.  But the others ($META, $AMZN and even $NVDA) have not set the world on fire this year. As to memory and chip stocks, they have been “the world’s fair” up until the summer but awful since late June. Not only do I think these companies are “overearning,” but the volatility is not for me and not consistent and doesn’t conform with my appetite for risk. 

*  The financial stocks were quite strong until early summer. I repeatedly cautioned not to embrace banks, brokers and private equity shares (I successfully shorted $BX, $KKR and $APOL since then). Viewed by panelists as perhaps the best “value play,” financials have been dismal over the last four months.  We avoided this decline (in $C, $JPM, $BAC, $GS, $MS et al).

* The stocks that I have been short in the AI sphere have been terrific (to the downside) — $ORCL and $CRWV. (Avoiding them as longs has also been a valuable contribution.) My recent foray into shorting NVDA was profitable also. 

* As to my preoccupation with CNBC I suggest taking the number of words written about FIN TV and divide it by the number of words written on other subjects daily. You will find my criticism is dwarfed by my other columns. In the scheme of things my criticism is de minimis. 

* Finally, to jryan I say there are many other contributors that actively recommend longs and provide a valuable service.

All this said I am imperfect.

I take ownership of my mistakes.

The transparency of my Diary exposes my blemishes. 

I believe jryan has some good points and I will purposefully look for more long ideas in the future. 

I truly appreciate jryan’s comments and I have tried to respond to his concerns:

jryan

Just a thought. There used to be a lot of different investment ideas, stock suggestions etc., but all it seems to be now is cannabis and CNBC commentary, which I don’t watch anyway. Kind of getting sick of it, especially the cannabis info, is it ever going to pay off? Likely, but it will be quite a while from today, if ever. But at least it’s easier to scroll through the commentary and use less time.

Position: Long KO (VS), PG (VS), KMB (VS), MSOS common (VL) and calls (VS), VRNO (VS), GLAS (S), GTBIF (S), TRLV (VS), CURLF (VS); Short AAPL (S)

Staples Are UnStable Today

*  This week I warned that it was ‘too much too fast’…

I further reduced my staples exposure recently — today we are seeing a lot more pressure on consumer non-durables (($PG) -$1,  ($PEP) -$3, ($KMB) -$1 and ($KO) -$1.25 (I warned about a sell off after the guide up).

From last week:

Staples Slammed

Staples (consumer non-durables) are getting hit over the last few hours.

A reminder, I am down to VS on KMB, PG and KO.

I sold out my entire PEP holdings.

I would be a buyer of the space on weakness — but not at current prices.

Position: Long KMB (VS), PG (VS), KO (VS)

Position: LONG KMB (VS), PG (VS) KO (VS)

Those Machines and Algos

I have spoken to several institutional desks.

The buying/strength is being exacerbated by machines and algos — in a changed market structure.

And I am using them as a source of liquidity — reducing $PG, $KO and $KMB.

Position: Long PG (VS), KO (VS), KMB (VS) 

P&G and My Staples Plays

Procter & Gamble’s ($PG) beat will likely help collateral staples plays like PepsiCo ($PEP), Coca-Cola ($KO) and Kimberly-Clark ($KMB).

Position: Long PG (VS), KO (VS), KMB (VS)

Staples Slammed

Staples (consumer non-durables) are getting hit over the last few hours.

A reminder, I am down to VS on $KMB, $PG and $KO.

I sold out my entire $PEP holdings.

I would be a buyer of the space on weakness — but not at current prices.

Position: Long KMB (VS), PG (VS), KO (VS)

The Fall of 2026 Is Starting to Resemble the Spring of 2000

* But there are important differences which will likely produce more muted downside to the hyperscalers and more muted upside to consumer staples…

“History doesn’t repeat itself, but it often rhymes.”

– (Attributed to) Mark Twain  

The U.S. stock market is starting to look like the spring of 2000 when the dot-com boom came to a halt and technology began a steep slide. At the same time, consumer non-durable (staples) stocks  (as well as Berkshire Hathaway ($BRK.A $BRK.B) have began to perform well both absolutely and relatively.

There are, however, deep differences in both periods of time.

* Today’s large-cap technology stocks (as opposed to the dot-com stocks) have deep moats and though their commitment to massive AI spending has transformed some of the tech equities from capital light to capital intensive, they have maintained  strong operating and profit profiles. Unlike 26 years ago, the Mag 7 represents a large percentage of the indices — which, amid a backdrop of passive products and strategies (ETFs, quants), means that investor inflows go into and directly/steadily support/buoy the shares of Nvidia ($NVDA), Amazon ($AMZN), Microsoft ($MSFT), Alphabet (GOOGL), Micron ($MU), Sandisk (SNDK) and Meta ($META).  

* Today’s defensive consumer staples have faced the competitive threat of generic and unbranded products over the last 15 years. In more recent years, they’ve encountered the introduction of GLP-1 agonists (a new class of medications that can help manage Type 2 diabetes and obesity (by reducing appetite). Unlike 26 years ago, a combination of these two factors are pressuring consumer staples’ top and bottom lines.

As  a result of these differences, the downside to the Mag 7 constituents (and memory and semiconductors) is much more muted than 2 1/2 decades ago (vis a vis dot-com ‘ers). And the upside to the classically defensive consumer non-durables is also more limited than 2 1/2 decades ago.

Importantly, given the rise in the risk-free rate of return (using the 10-year Treasury note) to almost 5.3% suggests to me that rather than find a home in the consumer staples space, it is more likely that market participants will seek refuge in fixed income.

Tactics

Though hyperscalers and semis/memory stocks are beneficiaries of a changed market structure, we own no large-cap tech stocks (and are short some on the periphery of Mag 7) because of our AI reservations and concerns. (See our 260 issues of the  “More Tales From Nvidia” series).

We have previously taken a position in consumer staples — Kimberly-Clark ($KMB), PepsiCo ($PEP), Coca-Cola ($KO) and Procter & Gamble ($PG). But, given the profit threats, we have treated the space more as “trading sardines” and have recently trimmed all four on strength. (Earlier in the week we got lucky and sold the sharp ramp in PEP shares and sold out of the very small balance yesterday on news that KFC has ditched PepsiCo for Coca- Cola.)

Position: Long KMB (VS), KO (VS), PG (VS)

Midday Musings

Consumer non-durables (staples) leading the pack today:  $PG, $PEP, $KMB and $KO.

Position: Long PG (VS), PEP (M), KMB (S), KO (VS)

Dogs With Fleas… And Some to Take Home?

* We have previously sold all four of these consumer-based stocks at much higher levels

* What to do now?

Walt Disney ($DIS) continues to disappoint (-$3 today) — fundamentally and in the stock market. For the numerous reasons I have mentioned in the past, I would not own the stock until the low $90s.  

Procter & Gamble ($PG), Kimberly-Clark ($KMB) and PepsiCo ($PEP) are also stinking up the joint as suites of high-priced branded consumer products suffer from weakness in the low and middle classes.

Look for, as noted previously, PEP to likely miss this quarter. It will be interesting to see the market’s response.

It is probably the same for KMB and PG.

But all three of these companies (PEP, KMB, PG) may have discounted upcoming disappointments relative to consensus expectations. 

I am ready to buy all three at some point…

Position: Long PEP (VS), PG (VS), KMB (VS)

Covering, Adding and Bidding

I covered some $JOET at $44.97 and $GRNY at $27.32. 

I’m also adding to $MSOS long and bidding for consumer staples (under the market) — $PEP, $PG, $KMB.  

Position: Long MSOS common (VL) and calls (S), PEP (S), PG (S), KMB (S); Short JOET (VS), GRNY (VS).