Breaking-out of the current S&P range is what I'd look for into Summer, whether or not short-term influences retreat on a rolling-basis this month and next. The credit-crunch issue may be ignored with respect to the big-cap leadership, but the broad market has not ignored the excesses in leaders and unjustified low levels in a lot of smaller, disruptive and innovative stocks. And of course it's not yet possible to divine what's likely from Tuesday's White House debt talk.

Freepik

That takes me to AI. Between proponents and many antagonists disregarding the promise of tremendous good that AI will bring to a broad range of sectors, not just in computing, software engineering and so on there are influences in industry, economics, education, science, agriculture, medicine and research .. some of these expectations may be favorable contributors to underlying lack of new pressures, although most relates to most stocks crashing 'last year' of course, and not this year. (Hard to crashed what's already crashed.)

Hence the permabears will get shakeouts now and then, but generally they're fighting last year's war, with lack of realization of the new era's prospects.

Almost all media, financial or otherwise, increasingly dwell on sounding alarm over the unintended consequences of this burgeoning disruptive technology.. far more than they do over the 'intended' consequences. And then there's the so-called 'Metaverse', which Zuck blundered into, and is (I think) total failure in its present form, so 'perhaps' he can salvage that by incorporating AI (that is to say some ideas are excellent but it should have been 'beta' as Facebook should still be the name of Meta, as it still is Facebook, Instagram (META) etc.).

Yes, there are areas of concern with AI. One area is emergent independent AI behavior, which might be defined as a series of unanticipated, unprogrammed interactions within a system stemming from simpler programmed behaviors by individual elements of the system. Ask a software engineer about jerry-rigging an SOC, versus what really comprises a true SOC (System on a Chip), such as I was forewarned personally by (now CEO) Anon Christiano of Qualcomm about 5 years ago (regarding waiting for the SOC version of 5G not ubiquitous and more integrated. A similar next-gen version now for computers might tend to be AMD's embedded AI within a forthcoming SOC processor for Microsoft.

The TAM (total addressable market) is incredible and not overstated about AI as we're using it for years, and not it expands almost exponentially. Financial media thinks it's hard to distinguish winners & losers in AI and that's true sort of. I say sort of because whether it's BigBear.ai (or Palantir who is a partner, stronger now, but doesn't have as good leverage for investors as BBAI and is a partner with BBAI in at least one 'team' for the Defense Department). It and SoundHound (SOUN), hold some special attributes compared to others. (The former in military and a few other focus areas already, and the latter in just emerging generative voice such as Mercedes is going to adopt.. more adept than what's seen so far.. as well as the improved order-flow for restaurants... sort of what McDonald's has done for ordering, but more refined and on steroids.)

These are all speculative stocks (with risk), but with above-average potential in terms of 'leverage' if one or more take-off. Eventually same could be said or argued about Terran Orbital, but LLAP has to sort-out their large shareholder from a company they acquired (which is how they got the Irvine facility). But of course I suspect that despite favorable terms on satellites, Lockheed-Martin would not have invested nearly $150 Million in Terran without due-diligence of significance. (Effectively LMT owns about 37% of LLAP at the present time. It is a reason I've covered Lockheed more with graphics as indirectly several of their programs involve Terran Orbital.. actually 11 projects last I had heard. I would like the company to get past the dilution and overhead-supply issues.)

One more thing on this 'emergent' ability of AI on its own. In a paper posted by Stanford researchers explaining abilities of large language models, it was clear they're measured by determining the percentage of correct predictions.

Statistical analyses may be represented in numerous ways. The researchers at Stanford contend that if results are reported in non-linear, discontinuous, metrics, they appear to show sharp, unpredictable changes that later-on are erroneously interpreted as indicators of emergent behavior. However, an alternate means of measuring the identical data using linear metrics shows "smooth, continuous" changes that, contrary to the former measure, reveal predictable—non-emergent—behavior.

I don't know. When Palantir (that we haven't bought but mention occasionally, mostly because of competing and partnering with BigBear.ai) reported strong guidance today, its CEO spoke to compelling 'human oversight' of AI .. given unprecedented demand 'for' AI. Well not all 'players' will have integrity, so that is why I think the Stanford Univ. work is important, 'if' they deduce correctly...

And... I say 'if', as, after reading part of the report I noted a footnote saying that while they while methodology in past research likely yielded misleading conclusions, "nothing in this paper should be interpreted as claiming that large language models cannot display emergent abilities". Well that suggests fear of what they said not to worry about, as proper methodology may well reveal such capacities. In other words, 'they don't know'. Nor do any of us certainly, as far as when the machines construct programs and well.. 'terminator' fears.

On the other hand, proper 'battlespace management' could confront machines on steroids, and that's when you have the likes of BearBear.ai confront the 'bad algos' (just having a bid of fun versus 'bad hombres').

In-sum:

Monday was a neutral session ahead of Treasury Sec'y. Janet Yellen appearing on CNBC shortly, intending to scare everyone about Debt Ceiling challenges and ramifications, if not promptly resolved. (See above tight Commercial Real Estate Loans, and below in a bit general loan info.)

Well I suppose presumably she should 'worry everyone', but I think the market is tired of this requisite last minute dance either Party will perform when these things are taken down to the wire, rather than reforming the entire approach. 

The only reason the S&P is at this level, is because the market crashed 'last' year, must navigate the 'credit crunch' of this year, and might get worse soon. But that could be a 'hook' to get people negative just in time for new rallies.

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