State of the Union & Market Uncertainty
162: What comes next for America
Morning psychos.
Lots of major market updates and sentiment shifts as well as accelerating macro concerns, primarily the Spy Balloon fallout and ongoing battles in Ukraine.
The economy in the US is strong from an employment perspective, but layoffs are starting to ramp up even more, consumer prices are still elevated, and political division is at an all time high - as was evidenced by some of the interruptions during last night’s State of the Union address.
We’re dropping the Arbitrage Andy Top Commuter Shoe Picks of 2023 on Thursday and next week we will be dropping the Top Driving Loafers for Spring for paid subs and for those that are interested. They will be comprehensive lists similar to our Watch Review last year and our popular Deal Sled Reviews.
We’ve got some bigger announcements coming in the next several weeks for Arbitrage Andy and Arb Letter so stay tuned.
And remember, your Tuesday can’t possibly be as bad as Cramer’s recent calls.
This guy just can’t catch a break lmao.
Markets
Markets are off to a volatile start this week on the heels of upsetting tech earnings for Amazon, Google, and Apple.
Federal Reserve Chair Jerome Powell commented on Friday’s strong jobs report, stating that interest rates may need to move higher than initially expected if that sort of economic strength continues to threaten the Fed's progress towards lowering inflation.
It’s a bit backwards but there needs to be progress made in employment numbers (meaning people lose jobs) for the Fed to feel satisfied that inflation is making a concerted retreat.
Jerome Powell spoke in a question-and-answer style session at the Economic Club of Washington, D.C. this week, with Carlyle Group co-founder David Rubenstein. Remember that Powell is a former partner at the firm.
Powell stated "We didn't expect it to be this strong but it shows why we think this will be a process that takes quite a bit of time."
At the same conference, Powell also commented on his relationship with different Presidents stating "I think it's a matter of public record that President Trump did used to call me from time to time." Fed Chair Powell told David Rubenstein in an interview that he had received calls from former President Trump, but has not received any from Biden.
Short term we remain bullish despite some pretty large bearish sentiment on Twitter and other social media sites. We think the most painful move at the moment isn’t to continue dumping, which many are anticipating, but to pump violently before a fizzle out that takes into account continued steady hikes and potentially an escalation in unemployment aligned with what the Fed wants to see.
Remember all of those tech workers and others that were laid off received pretty generous severance packages that span anywhere from 1 month to 6 months depending on their tenure at the company and what the details ofAny seperations were. This means two things if you are looking for opportunities in the market caused by consumer patterns and liquidity issues:
- Real Estate dump(s) likely won’t occur for another 5-6 months as people have severance to pay off mortgages and continue looking for other jobs/sources of income
- Market corrections spurred by liquidity issues for people personally (i.e. selling crypto/stocks to live) likely will follow the same lag.
If you’re looking for some serious deals or for the moment that panic starts to set in, it will likely be during summer/early fall.
The unemployment rate in the US is at 3.4%, which is a 50-year low.
Chinese tech stocks have pumped this year with Alibaba ripping 19%, Tencent jumping 18%, Baidu gaining 26% and NetEase up over 21%, as of this Monday's close (CNBC)
U.S. credit card debt has hit a record $930.6 billion (Unusual Whales)
SuperBowl LVII banned cryptocurrency television commercials citing the FTX scam as the reason why
Chipotle missed quarterly sales estimates
Saudi Arabia Digital Government Authority and the Sandbox agree to Collaborate on Metaverse Projects. “We look forward to exploring, advising and supporting mutually each other in activations of the Metaverse!” said Sandbox co-founder and COO Sebastien Borget(The Block)
Binance market share has increased to 55% of the world's spot crypto trading volume in January according to various sources
BBBY - Bed Bath and Beyond rose 92% on Monday shocking traders. Yesterday the stock sank 48% - Shares of the retailer are heavily shorted, with short interest standing at about 53% of the float, according to data compiled by S3 Partners (Yahoo Finance)
Zoom announced intention’s to lay off 1,300 employees which is about 15% of its workforce. The covid effect seems to be wearing off
Dell announced plans to lay off 5% of its workforce on Monday or about 6,650 employees, according to a released SEC filing.
David Rubenstein asked Federal Reserve Chair Jerome Powell what the salary of a Fed board member is. Powell responded that he “believes” it is $190,000 and that he thinks it’s a “fair” salary (CNBC)
Turkey’s primary stock exchange suspended trading for the first time in 24 years on the heels of the devastating earthquake the country just faced, after a selloff that erased nearly $35 billion from equities
Revolut launches Ethereum & Cardano staking to its over 25 million users - Revolut says users can earn up to 11.65% return in crypto rewards on certain tokens, though this varies and is subject to change depending on the token staked (Decrypt)
JPMorgan, J 0.00%↑ PM, has noted that retail trading volume is at an all time high in January of 2023 (Unusual Whales/JPM report)
Sentiment seems torn on which way the markets are ultimately going to move. Last week was a strong finish with Friday giving some gains back. Monday and Tuesday were more volatile but slightly up.
Big Short legend and former fund manager Michael Burry tweeted out last week ahead of the Fed meeting to “sell”. Once the market ripped he deleted his account, something he does fairly frequently but intermittently. He is now back on Twitter and has tweeted “This time is different”.
If you missed our note last week - Is A God Pump Coming - go check it out. We detail some of our plays in the market right now for equities and crypto and talk through different options plays to take advantage of volatility and momentum on days when we pump fast.
We’re mostly sitting on our hands at the moment aside from acquiring some opportunistic shares of super beaten down tech (AMZN, MSFT, META) and quality crypto like BTC/ETH for the long term.
According to Bloomberg Morgan Stanley now sees quarter-point hikes in March and May, bringing the Fed’s peak rate up to a range of 5% to 5.25%.
“We continue to see the first 25 basis-point rate cut in December this year, followed by 200 basis points of additional easing through end-2024, to 2.75% to 3.00%.”
Layoffs are continuing with Zoom and Dell adding to the chaos. One interesting tid bit to pop up out of Salesforce is Marc Benioff’s comments on who is driving the revenue. He claimed that roughly half the sales team is closing 96% of all revenue. Our favorite Sales Pro
posted the article on twitter if you want to take a quick look.Lesson here is - producers are going to be safe from lay offs AND get the lion’s share of accounts as companies downsize and become more streamlined in the face of uncertain economic conditions this year.
BE A TOP PRODUCER or START A SIDE BUSINESS.
Global News
President Biden gave his State of the Union address last night.
After introductions he referenced January 6th and the Covid Pandemic, stating that our lives are now no longer run by Covid and though our democracy was “beaten” it is now resilient. Biden defends shooting down the Chinese balloon, a move that the Chinese Foreign Ministry has called an "overreaction."
There were several instances where Biden was almost arguing with Republicans in the crowd over different bills and proposals including Medicare and Social Security. All in all he seemed unusually peppy and gave a long thorough speech covering a range of topics from China, to inflation to the Fentanyl crisis, and more.
Top quotes include:
“Autocracies have grown weaker, not stronger. Name me a world leader who changed places with Xi Jinping. NAME ME ONE! NAME ME ONE!"
“Two years ago, COVID had shut down our businesses, closed our schools, and robbed us of so much. Today, COVID no longer controls our lives.”
“No billionaire should pay a lower tax rate than a school teacher or a firefighter”
Most are focused on the upcoming 2024 Presidential Election and who will run for the Democrats. Polling for Biden isn’t great at the moment amid a range of macro and domestic issues in the US including high inflation, costs, crime, border issues, and economy fears despite high unemployment.
Four in 10 Americans say they've gotten worse off financially since Joe Biden became president, the most in ABC News/Washington Post polls dating back 37 years.
Recovery efforts are still in progress off the coast of South Carolina as the US Navy scrambles to recover the wreckage of the Chinese Spy Balloon that was downed this weekend off Myrtle Beach
Zelensky will meet King Charles III during his UK visit - the Ukrainian Zelenskyy addressed UK Parliament at Westminster Hall this morning stating: "Freedom will win, Russia will lose." Zelensky thanked the UK for support and a recent comittment to jet fighters. He also stated: "I propose to create a special mechanism for compensation, consisting of the transfer of frozen Russian assets to Ukraine as compensation”
The Turkey-Syria earthquake death toll has risen to about 7,562 with over 35,852 injured (Faytuks News) Updates as of this morning put the death toll more towards 11,000. Our thoughts and prayers are with the people of Turkey as they deal with this horrific series of disasters.
Turkey has received overwhelming support from other countries who have sent forth their emergency and rescue teams to help in efforts.
Russia has apparently handed the US embassy in Moscow a note demanding it stop interfering in Russia's various internal affairs — RIA
Former Peru president Alberto Fujimori was admitted to a hospital after suffering from an irregular heartbeat yesterday
China reportedly said no to US requests for a phone call between the Sec. of Defense Austin and China's own defense minister, according to the Pentagon
NYC is finally Ending COVID-19 Vaccine Mandate For City Workers
A new Russian offensive could include the Kharkiv region, the head of Ukraine's national security and defence council told Reuters this week
At least 585 sea lions have died of H5N1 bird flu in Peru, the environment ministry says
Moderna CEO Stéphane Bancel admitted that the Company Produced 100,000 COVID-19 Vaccine Doses In 2019 before the pandemic started
Police said Wednesday they had seized enough cocaine to supply all of New Zealand for 30 years, after capturing a massive bundle of drugs floating in the Pacific Ocean. New Zealand police commissioner Andrew Coster told reporters the haul — containing 81 bales of cocaine — weighed 3.2 tonnes and had a street value of around $316 million (Insider Paper)
China says they will 'firmly defend' interests after Biden's State of the Union according to the AFP. In the wake of the spy balloon incident Chinese American relations have grown more tense, especially considering Blinken canceled his trip to Beijing.
If you missed it we put out a quick analysis of the Chinese Spy Balloon incident along with some of the backlash coming out from China and some of the softer warfare the CCP has been waging on the US for some time now.
Per request we will likely do a deep dive on Taiwan soon.
See yall Thursday morning.
Disclaimer - I am a 30 year online business owner, former trader and salesmen, and financial meme account brand. None of this should be considered formal financial or life advice — all views are my own opinion.
You should thoroughly research financial decisions you make and know the risks involved.
We strive to synthesize and distill the best information on various topics out there combined with our no nonsense commentary on markets, politics, and life. With the modern noise of legacy media and sources, we opt to cut through it and deliver unfiltered commentary and fact.
We’re still learning as well so make sure to drop a comment, add some feedback, or share our two cents so the community can become that much better.
Burry deleted the embedded tweet so can't zoom in on the chart. Anyone care to share what point he was trying to make showing SP500 and FED lines in '01 & '02? I think he's implying no soft landing but can't really tell.
On the Moderna CEO comments, I’m not sure his comments actually support that claim. Saying “Moderna made 100,000 doses in 2019 … for the whole year” sounds pretty clearly like Moderna’s total manufacturing capacity across all products in 2019 was 100,000 doses. The follow on comment re “making a billion doses next year, there’s going to be a pandemic” he said was in a conversation following Davos (which must have been 2020), at which time it wasn’t that far out of the box to think that the emerging epidemic in China could go global and that vaccines would need to be made as soon as possible, ie., 2021 (the next year, following January 2020). Feel like anyone is drawing a long bow to say that Moderna had 100,000 doses of a Covid vaccine manufactured in 2019 from that snippet.