Skittles and Red Wine | The Daily Peel | 2/6/23

• While JPow chills out, the ECB is still going hard with a 50 bps rate hike while their ex-compatriot, the BoE, does the same
• In case you missed that weird Chinese spy / "weather" balloon flying over your backyard, follow its entire journey here
• Like rats in a nuclear apocalypse, 2022 became annuities' time to shine. Something always survives…
• Turns out chimpanzees know more about our world than humans do. But how do we apes stack up?

Sourcing a deal that is quick to diligence and easy to integrate may feel like searching for a four-leaf clover. Ready to become your company's M&A good luck charm? Join us for the M&A Science Spring Summit on March 8! Come and learn new M&A tips and techniques that will leave you feeling like you just found a pot of gold at the end of a rainbow.

During the summit, hear from experts in internal diligence, career building in corporate development, M&A landscapes, M&A law, and private equity trends. Registration is free. See you there!

Interested in our event sponsorship opportunities? Contact [email protected] to learn more.

Oprah's Job Market Continues

Headline: "Stocks fall on US economy performing better than expected." That pretty much sums up Friday's decline.

What's old is new again. For a minute there (more like for the month of January), it seemed that bad news was bad news again, and good news was good news.

This was not the case following Friday's jobs report, which showed that nearly 3x more Americans started a new job than expected.

Guesstimates for the month pegged non-farm payroll additions at 187k. Turns out that January actually gave us roughly 517k more jobs, bringing the unemployment rate to 3.4%, a low not seen since a few months before the moon landing (May 1969).

Now, the unemployment rate posting a low not seen since your grandparents were tripping on acid at Woodstock sounds like a good thing, right? Well, apparently not, at least according to Mr. Market.

It's the same old story we've been hearing for months. Higher non-farm payroll additions indicate that the job market isn't nearly as tight as JPow wants it to be, suggesting demand for labor still far outstrips supply. In theory, this imbalance leads to wage-push inflation, necessitating further rate hikes.

The new problem, however, is this is a sharp reversal of the trend we thought was occurring. Look at the chart below. From February to December, monthly payroll additions were pretty much chilling on a steady downtrend, with a few obvious exceptions.

That's not supposed to happen. Job growth and falling inflation pair about as nicely as Skittles and red wine. Both are great, but you're not supposed to have them together.

Whether this is a fluke or an early sign of inflation following in the footsteps of Big Sean by deciding to Bounce Back, we can't know for sure until the next CPI report, dropping on Feb 14th. Yes, that also happens to be Valentine's Day, meaning you'll have the chance to ruin both your love and financial life on the very same day!

January's report also showed an increase in the labor participation rate to 62.4%, something the Fed has been waiting on for a while. On the other hand, wages continued to storm higher, gaining 4.4% for the year (beating expectations) and 0.3% for the month (in-line).

One piece or set of data isn't gonna tell you anything on its own, but this jobs report does suggest a reversal in the recent disinflation narrative, hence stocks throwing up on Friday. Still, the yield curve is pricing in rate cuts in the latter half of 2023, while CME gives a rate increase in late March with about 83% likelihood.

One last thing to point out: Look at the above chart again. All of those trend reversals in job additions occurred in months when the market was starting to rebound (July, October, and now January). Despite all those tech layoffs, it seems like employers said, "yo, our stock is higher," or "yo, my portfolio is higher, can we hire more people?"

As usual, I don't have any answers for you. I'm just here to point sh*t out. The only thing that's clear is that while in physics, a "theory" is something like gravity or evolution, in economics, it's more like the Tooth Fairy and Santa Claus.

Nordstrom ($JWN) ↑ 24.79% ↑

• After leading successful turnarounds in now-massively successful companies like GameStop and Bed, Bath, and Bankrupt, Ryan Cohen has lasered in on a new victim: Nordstrom.
• The 37-year-old "activist investor" without a college degree or a lick of experience before stumbling into the pot of gold that was the online pet store he founded has decided to take a massive position in the struggling retailer.
• Now one of the 5 largest non-family shareholders, Cohen has amassed this stake despite not speaking with the board in "several years," according to one Nordstrom board member.
• Once again, Cohen is going after his presumed arched nemesis, Mark Tritton, who was the former CEO of Bed, Bath, and Bankrupt (fired last year). Cohen's beef appears to be that Tritton is a scumbag who just hops from company to company hoping to pay himself as much as he can. I have no clue if that's true (gut says it probably is), but let's hope Cohen doesn't bankrupt an army of retail traders yet again.

Clorox ($CLX) ↑ 9.77% ↑

• If Cohen really wanted to clean the above mess, he should invest in some Clorox. Oh wait, everyone else already did, and as a result, shares popped nearly 10% on Friday.
• The very clean party started after the conglomerate reported stellar earnings figures, beating on both sales and EPS. The company's bottom line beat by over 50% while sales crushed estimates as well, raking in almost 10% more than anticipated.
• This is one of those companies that saw a huge benefit from the pandemic, as panicked people everywhere flocked to scrub everything in sight or inject cleaning products into their veins, as one former US President creatively suggested.
• Still, despite coming off a few already-strong years, Clorox continues to kill the investing game like it kills germs and bacteria.