This is a weekly market update (I post daily to TikTok). I publish these once a week (beta phase), as well as single stock pieces (1-3x a month) and macro deep-dives. I also publish on TikTok, Youtube, and Twitter!
Lots of movement in the market this week! Janet Yellen caused some turmoil, Doge is headed towards the moon, and growth stocks are still getting pummeled.
Here is the YouTube version (will be posted Sunday).
First off, Hank Green, one of my heroes, tweeted at me.
This was very cool.
The Stock Market
The market ended the week green, with most of the growth stocks trading relatively flat to negative. Saw a lot of strength in industrials and banks as people continue to contemplate the rotation from growth to value.
Roku had an incredible beat, +79% revenue and +132% gross profit. Their streaming hours were much higher - it will be interesting to see how reopening impacts them.
Beyond Meat had a terrible quarter - they are still unprofitable, and competitors are closing in. They are trading at a pretty high premium, so it will be interesting to see how public tastebuds evolve as we reopen (#grilltwitter is definitely a thing)
Equinox is going public via SPAC with Chamath.
Gamestop was upgraded to B from B-. This is fascinating - shows the power of the crowds and the value of collective belief in an asset.
Policy: Janet’s Rebellion
Yellen spoke this week.
She said the interest rates might need to increase if the economy overheats.
Yellen stated:
“I don't believe that inflation will be an issue but if it becomes an issue, we have tools to address it. These are historic investments that we need to make our economy productive and fair."
The stock market didn’t like that.
And she quickly retraced.
There are a few things here:
Yellen overstepped - she is supposed to stay in her fiscal policy lane, and the Federal Reserve is meant to manage monetary policy.
But she wasn’t wrong- the Fed is being very easy, and Robert Kaplan, Dallas Fed President is also looking for the Fed to ease up on easing, notably on their $120bn/month asset purchases.
Also, the market doesn’t need to be so dramatic - but it shows how far we might have to go in the tapering process.
Key takeaway? The Fed is being very patient - more patient than most of its peers. There is a balance - Yellen shouldn’t have weighed in, but she has a point (although, the most recent jobs report does give weight to the Fed’s easy stance).
The Jobs Report
This was not great - with > 900k jobs expected and only 266k actually added, it was a huge miss. So then the question becomes - should the Fed tap the brakes? Should they try to slow things down?
There are a few things behind the jobs report miss (as highlighted by Yellen)
Childcare issues - people can’t find care for their kids, so they can’t go back to work
The ongoing pandemic / generous unemployment benefits - it isn’t over yet
Supply chain bottlenecks - with factory shutdowns and slower rollouts because of input pressure, some jobs are put on hold
But people are definitely working - the below gives validation to the labor shortage thesis. Not enough people to do these truly essential jobs.
"As shops & restaurants re-opened it looks as if a lot of delivery and temporary help services jobs vanished. The small rise in the unemployment rate, along with the downward revisions to job gains in March," show how far we are from full employment:
Also, businesses are looking to pay low wages - and a lot of people seriously don’t want to do that. Base effects drove wage growth to 0.3% y/y which is incredibly low in the light of recent price increases due to supply chain shortages.
Core unemployment is still pretty high:
There is still a lot of labor market recovery to wade through. Businesses want to pay lower wages, workers want higher pay, there are risks and bottlenecks and worries - and all of that is showing up in the data.
There is a pretty long road ahead to full recovery.
Commodities: The Global Chip Shortage
The commodities shortage keeps on popping up - it will be interesting to see what happens with markets moving forward. Is it structural or transient? I have written quite a bit about this previously - if these shortages begin to show up in prices, I think we do have a serious inflation problem on our hands.
Urgent demand has flipped about half of major commodity markets tracked by the Bloomberg Commodity Index including oil, natural gas, copper, soybeans into backwardation
Lots of bottleneck pressures - ISM prices paid index is at the highest level since June 2008
Container shipping rates are headed higher too
As always, things boil down to a misbalance between supply and demand:
And of course, lumber is still on the moon.
Dogecoin and Crypto
Ah, dogecoin.
The Crypto crowdout - The boom in altcoins like doge means Bitcoin's share of the total crypto market has fallen more than 70% at beginning of 2021 to just 46% now.
My main question: is doge good for crypto? Does having more eyes on the space make everything better?
Doge is a signal, more than anything. It shows that things are really valued on the basis of supply and demand.
Also, the IRS is sniffing around
And there is quite a bit to look at for them:
The Crypto-lumber crossover
Lumbercoin is coming.
Next Week
All eyes on Elon. Let’s see how Doge moves!
Have some big earnings this next week (Roblox!!!)
And a pretty dovish week ahead
Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.