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** Look At Album Art ** - So bad

 Warm-Up
- More pausing floated
- We have a CHYNA deal -  kind of
- Saying goodbye to Brian Wilson
- Tesla - back in buy mode

Markets
- War! Middle East again (US seems to be helping ?)
- Within 2% if ATH and then...
- Oracle blows the roof off
- UK economy shrinks - bigly

***A NEW Closest to the Pin!

Middle East Again
- Israel launched a series of airstrikes against Iran early Friday morning local time, targeting locations it said were related to Iran’s nuclear program, sparking market fears of a wider conflict.
- Mohammad Hossein Bagheri, chief of the Iranian Armed Forces and the country’s most senior military official, was killed during the strikes, alongside the commander-in-chief of Iran’s Islamic Revolutionary Guard Corps, Hossein Salami, Iranian state media reported.
- The Israeli airstrikes also targeted and killed two of Iran’s leading nuclear scientists, Fereydoun Abbasi-Davani and Mohammad Mehdi Tehranchi, according to Iranian news outlets.
- Odd timing?
- Markets initially took it better than expected - until Iran stuck back

Valuations
- As of the most recent update on June 5, 2025, the forward P/E ratio of the S&P 500 is 21.70. This reflects a decline from 22.44 in the previous quarter and 25.20 one year ago, 10 -year average is about 19

PE Forward Chart

Something we discussed on TDI 
- Presidential Cycles
- The U.S. stock market tends to follow a four-year cycle aligned with presidential terms. Historically, the first year of a president’s second term (4 years apart in this case) often mirrors the first year of a new presidency in terms of market behavior—marked by uncertainty, policy re-calibration, and sometimes muted performance
- While the first half of the first year can be choppy due to post-election adjustments and early policy moves, the second half—especially Q4—has historically shown stronger performance. This is often attributed to:

• Stabilizing policy direction after early-year volatility
• Investor optimism around fiscal planning and budget cycles

Seasonal tailwinds like the holiday rally and year-end portfolio rebalancing

Presidential Cycle

UK Economy- This is why we need to dig further than the headline (more beneath the surface)
- The U.K. economy shrank sharply in April as global trade tariffs and domestic tax rises kicked in, data showed Thursday.
- The latest monthly growth figures from the Office for National Statistics showed the U.K. economy contracted 0.3% month on month in April, following growth of 0.2% in March.
- It was also more than the 0.1% fall economists were expecting.
- “After increasing for each of the four preceding months, April saw the largest monthly fall on record in goods exports to the United States with decreases seen across most types of goods, following the recent introduction of tariffs,”
--- The real culprit:
----- Domestic tax rises have also been blamed for the steep decline in economic activity. British businesses have been confronted with an increase in national insurance contributions and rise in the minimum age from the start of April, while a temporary tax break on property purchases also came to an end in March.
- ----The change in the Stamp Duty Land Tax (paid when buying property or land) in April meant there was a decrease of 63.5% in U.K. residential property transactions from the previous month, the ONS noted, with buyers rushing to complete purchases before the tax break ended.

US Economy
- U.S. consumer prices increased less than expected in May as cheaper gasoline partially offset higher rents, but inflation is expected to accelerate in the coming months on the back of the Trump administration's import tariffs.
- Consumer price index increases 0.1% in May
- Foods prices rise 0.3%; but eggs a bit cheaper (eggs discussion)
- CPI advances 2.4% year-on-year
- Core CPI gains 0.1%; increases 2.8% year-on-year

CPI Chart

Oracle Earnings
- Stock goes vertical
- Shares rose about 13% Thursday after the software maker reported results that exceeded Wall Street estimates and signaled that cloud growth will accelerate.
Here’s how the company did in comparison with LSEG consensus:
- Earnings per share: $1.70 adjusted vs. $1.64 expected
- Revenue: $15.9 billion vs. $15.59 billion expected
- Revenue increased 11% year over year during the fiscal fourth quarter, which ended on May 31, according to a statement.
- Net income rose to $3.43 billion, or $1.19 per share, from $3.14 billion, or $1.11 per share, in the same quarter last year.
- Cloud infrastructure revenue should increase more than 70% in the 2026 fiscal year, up from growth of 52% in the quarter, CEO Safra Catz said on a conference call with analysts.
- She called for more than $67 billion in fiscal 2026 revenue, compared with the LSEG consensus of $65.18 billion.

Tesla
- Stock back in buy mode
- After the "fight" Elon back in the CEO Chair
- RoboTaxi carrot being used
- Austin - 2 Robotaxi's been spottted
- Will use their own ride hailing service (Uber, Lyft repercussions?)
- ELON: "These are unmodified Tesla cars coming straight from the factory, meaning that every Tesla coming out of our factories is capable of unsupervised self-driving!"

Amazon
- Amazon is now restructuring its health business, stating that Amazon Health Services will be divided into six new units, with a goal of creating a simpler structure.|
Amazon Clinic: (now Amazon One Medical Pay-per-visit): A virtual care service for common conditions, allowing patients to consult with doctors online.
One Medical: A concierge primary care clinic, offering membership-based access to virtual and in-person care, including same and next-day appointments.
Amazon Pharmacy: An online pharmacy that delivers prescription medications and offers access to a wide range of medications.
Amazon Care: A hybrid, in-person, and virtual healthcare service primarily for Amazon employees and other employers, offering telehealth and in-person visits.
Amazon Health Benefits Connector: A service that connects customers with digital health programs and benefits offered by their employer or insurance plan.
Amazon Web Services (AWS) Health Services: AWS provides various cloud-based solutions for healthcare providers, including services for data analytics, AI, and secure data storage.

- Spaceballs
- Bill Pullman and Rick Moranis are set to reprise their respective roles as Lone Starr and Dark Helmet in the new Spaceballs movie from Amazon MGM Studios, with Keke Palmer (One of Them Days) joining the cast, sources tell Deadline.
- Year of original?
---- More Movie news - 50th anniversary of Jaws! June 20, 1975

CHY-NA "Deal" - LOLOLOLOLOL
- We got magnets and rare earths
- 55% Tariffs on China imports (select) and 10% on US to China
- China began restricting exports of rare earth elements and magnets to the U.S. on April 4, 2025, in retaliation for new U.S. tariffs introduced under the so-called “Liberation Day” policy.
- Initially, the restrictions targeted seven types of rare earths and were expanded five days later to include 12 more U.S. firms
- China paused these export restrictions on May 14, 2025, following a breakthrough trade agreement with the U.S. The deal included a 90-day suspension of the export curbs and a major rollback of reciprocal tariffs.
- "We made a great deal with China. We're very happy with it," Trump told reporters before a performance at Washington's Kennedy Center on Wednesday evening. "We have everything we need, and we're going to do very well with it. And hopefully they are too."

Shadow Fed
- Talking about this again
- The White House might consider using a shadow chair to accelerate the influence it can exert on the Fed and to avoid the more drastic step of removing the current chair
- Bessent says he is not interested in the position
- Would have to be a DOVE
- Trump, who made that statement last Friday while speaking with reporters, also said he has a “pretty good idea” of who he’s considering for the post, though he didn’t reveal any names.
- “Bottom line, this would be a high-risk move for the administration in a bid to provide dovish forward guidance and support the U.S. economy, because the undermining of the Fed could have serious consequences for foundational assets like the dollar and U.S. Treasuries,”
U.S Steel
- Official - The Merger of US Steel and Nippon Steel is approved by the US
- President Donald Trump issued an executive order on Friday approving U.S. Steel’s merger with Japan’s Nippon Steel, after the companies signed a national security agreement with the U.S. government. (?Why was EO needed?)
- U.S. Steel and Nippon said the national security agreement will give the U.S. government a “golden share” and makes certain commitments related to governance, domestic production, and trade. The companies did not elaborate on what powers the U.S. government will wield with its golden share.
- Trump said Thursday that the golden share gives the president “total control” without elaborating.

>US Credit Not So Hot
- Sweden: S&P 'AAA/A-1+' Ratings Affirmed; Outlook Stable
- Germany: S&P 'AAA/A-1+' Ratings Affirmed; Outlook Stable
- Recall that the US was already lower by S&P and knocked down by Moody's last month.
- USA AA+ Rating: This rating indicates that S&P considers the US to have a very strong capacity to meet its financial obligations. It is one notch below the highest possible rating of AAA

Cape Ratio and Valuations
- As of the latest update, the forward price-to-earnings (P/E) ratio of the S&P 500 stands at ~21.50. This marks a decline from 22.44 in the previous quarter and a more notable drop from 25.20 a year ago.
- While still elevated relative to the 10-year average of approximately 19, the recent moderation suggests a slight cooling in valuation expectations, possibly reflecting a more cautious outlook on earnings growth or a recalibration of risk premiums.
- In other words, valuations have cooled, but they’re still running a bit warm.
- Historically, a high CAPE ratio has been associated with lower future returns, while lower CAPE levels have often preceded stronger long-term performance.

CAPE RATIO

 

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