employment reports and more +3

10:57 10-Mar-23

To follow up and add color... the drop in American stock markets this morning seems to have more to do with further crypto troubles than actual economics.  Bitcoin is now well below $20K and Ethereum is bouncing on either side of $14K.  However, real currencies have pushed further toward €/$1.07 which is positive for American stocks, and especially BGCP.  I reiterate my opinion that crypto simply isn't big enough to cause more than pockets of temporary trouble for the overall market.

That's not to say that all is completely well.  I also reiterate that the risk of higher for longer Fed rates is real, and still possibly underestimated.  Witness the latest refinancing from PPL in Kentucky, which is being done by selling mortgage backed securities at 5.45%.  Presumably, the mortgages are on its generation facilities, and they essentially represent a bet that rates will be lower a decade from now.  I'm not saying PPL bears this risk; utilities would certainly be bailed out in some way.  However, significant short-term movement and inversion in treasuries (3-month: 4.98%, 2-year: 4.62%, 10-year: 3.82%) indicates uncertainty.  That should lead to separation of correct from incorrect speculation and realization of the debt problems I'm referring to below, probably in the latter half of this decade.

My picks remain the same, with TU now more amenable to those with longer-term focus since it is post-dividend, but still pre-raise.  CWEN.A & CHPT starts to enter interesting territory again as the battery shortage concerns that I've long warned about come to the fore of investor consciousness.  It might get worse before it gets better for the latter stock, but the situation is ultimately driven by the outsized EV demand that I've also anticipated.  That's ultimately good for ChargePoint, whose management is appropriately conservative.  Look for further public blog entries on my first extended road trip with the Polestar early next month.  PSNY stock is also approaching more interesting lows, but I'm inclined to keep waiting at least until the media gets bored with the mass supply problems.  By then, Polestar's very rational luxury niche positioning could be more ripe for a nice contrast with the stock price.

As further evidence of prevalent bad stock analysis, I note the 18.5% YoY decline in January chip sales that INTC investors should have been paying attention to.  This information was actually available a week ago, but it just hitting mainstream news sites in recent days.  Market angst is likely to continue through Monday, ahead of CPI the next morning, but there could be a strong bounce if that data is similarly benign.  As ever, I will be more interested in PPI on Wednesday morning.

The Employment Situation reports for February are well ahead of projections in the low 200s at +311K, but the rate rebounded two tenths to 3.6% whereas it was expected to remain steady.  Hourly earning rose two tenths of a percent, which misses by a tenth or two.  More importantly to me, the Participation Rate edged up a tenth of a percent, though the Employment Population ratio remained steady.  The market is likely view this with some relief after belatedly taking prior number seriously in the wake of Powell's testimony and the move back toward €/$1.063 supports that view.

For the record, I've also looked at eMagin's report and call.  The company is now EBITDA positive, but getting new production fully installed is not expected until 2H24.  I also expect less than nothing from Intel's data center and AI presentation, which is scheduled for March 29th and already admits that nothing will change.  Its latest privacy initiative in the area is a little more interesting, but also certainly shouldn't be impactful to INTC, even though they seem to have been.  If, unlike me, you believe this morning's economic data is representative of a trend, then a broad market capitulation may not be needed; I think that would only leave us in a stock picker's market, in the face of stagflation and an eventual debt problem.