Strong Jobs Numbers, Room for Rate Hikes | The Daily Peel | 8/8/22


Silver Banana goes to...


Market Snapshot

Markets ended the week mixed. WTI Crude is way down from previous highs, finishing the week around $88. The yield curve remains inverted as investors are now predicting another 75 bps rate hike at the Fed's next FOMC meeting.

80% of the S&P 500 have reported their earnings, and in general, results have been better than expected. The doom-and-gloom associated with high inflation and supply chain risks has been replaced with a new doom-and-gloom: recession risk.

On Friday, the Dow was up 0.23%. The Nasdaq and the S&P both retreated, losing 0.50% and 0.16%, respectively.

Most investors this year aren't expecting to generate even a positive real-return after accounting for inflation and taxes. But some alternative investments are continuing to see record growth.

While the S&P declined 20% in the first half of the year alone, the art market grew 25%.

Obviously, demand for this asset class is through the roof–492,000 investors have already piled in, so there's a long waitlist.

Now, 6-figure portfolio investors can skip the waitlist

Let's get into it.

Banana Bits

  • Unlocking new asset classes is a way to generate outsized returns; avoid the crowds
  • The home price-pocalypse has begun, with prices cooling at a record pace
  • The economy took 2.5 years to recoup all the jobs lost during the C-19 pandemic
  • Once considered only a luxury, WaPo considers air conditioning a matter of life and death
  • Even on the heels of another fat rate hike, mortgage rates briefly dipped below 5%

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Macro Monkey Says

Jobs for All My Friends - Well, Apes, it's time for some good news and some bad news.

I'm generally an optimist, so I'll give you the good news first. The jobs report at the end of last week was solid. Adding more than 500k jobs was more than expected.

It shows that the economy is chugging along and that the labor market is still pretty hot. Unemployment is hovering at half-century lows, around 3.5%. In any other economy, this would be fabulous news.

Now for the bad news: these job numbers might just be too good.

What do I mean by that? Well, a super tight labor market and a strong jobs market can indeed at times be inflationary, meaning that all of the hard pills to swallow that Daddy JPow has been trying to get us to swallow, so to speak, might not be working as we thought.

After all, the tools that the Fed has available to it are just blunt instruments. There's no guarantee that markets work "perfectly" as we all learned in Macroeconomics 101.

What could these "too good" gainz mean? Well, further rate hikes, and in a hurry.

Leading into the jobs report, the consensus estimate for September's FOMC was a 50 bps rate hike. Given my monologue, you probably already know what I'm going to write next.

After the jobs numbers hit the print, the Street now expects a 75 bps rate hike.

We have seen layoffs from Walmart to Wall Street. Hiring freezes are all over the place as managers batten down the hatches and prep for a slowing economy.

We just might be teetering on the edge of a strong labor market overlooking a precipice where there is an ultra-slow, slam-on-the-f*cking brakes job market below.

What do you think, Apes? Shoot us an email or post on our website to let us know.

Attention Whales: Consider Yourselves Warned

Amidst stormy waters and high inflation, we have an opportunity for qualified "whales"

With public markets three-sheets-to-the-wind, most investors this year aren't expecting to generate even a positive real return after accounting for inflation and taxes. But some alternative investments are continuing to see record growth.

While the S&P declined 20% in the first half of the year alone, the art market grew 25%.

Obviously, demand for this asset class is through the roof–492,000 investors have already piled in, so there's a long waitlist.

6-figure portfolio investors can skip the waitlist


Join 80,000+ Wise Primates

Subscribe to get the most critical market moves each morning, Monday through Friday.

What's Ripe

Lyft Inc ($LYFT) - Shares of the other rideshare company ripped on Friday, closing up 16.62%.

After reporting earnings on the 4th, investors bought the news on Friday. Lyft had revenue increases that were notable, but they really smashed EPS estimates.

The real kicker is that both riders and drivers on the platform are back at pandemic highs. This is good for business, as it shows that they are approaching peak profitability.

AMC ($AMC) - Friday was a great day for one of the OG meme stonks. Shares of $AMC climbed higher, finishing up 18.86%.

Primates, this is a stock for you: the new ticker for AMC's preferred shares will be "APE," which, in my opinion, is f*cking sick.

This is all part of the movie chain's equity plan, which is frankly not as important as us Apes pumping the stock up after the new ticker was announced.

What's Rotten

Tesla Inc ($TSLA) - Tesla's shares lost 6.63% as the EV maker was accused of false advertising. Critics argue that "self-driving" and "auto-pilot" don't mean what Elon thinks they mean.

Of course, the company quipped back that this is defamatory and that the advertising is indeed accurate.

As we approach $TSLA's 3-for-1 split by the end of this month, we will be on the edge of our seats to see where the stock moves.

Warner Brothers Discovery ($WBD) - Friday wasn't a good day for the content conglomerate. As the company reported earnings for the first time after the WB and Discovery merger, the Street did not like the numbers.

In all fairness, this was their first report since uprooting two struggling brands/platforms into a marriage of convenience. But, it turns out that they're having trouble in the steaming market making the kind of money that their peers are making, and overall, they lost more money than an equivalent quarter from a year ago.

Not good, not good. Bears schwacked the stock, sending it lower by 16.53%.

Thought Banana

Collapsing China? - Haven't you been hearing about China in the news a lot lately? From peacocking over "Crazy Nancy's" visit to Taiwan to news about its economy, we can't get enough China news.

Their ongoing show of force over the Taiwan visit might seem like a heavy-handed response to an octogenarian's visit to the island, but it's a little more complicated than that.

In February, Vladimir Putin thought that he could invade Ukraine and achieve strategic and tactical victory in days.

The biggest assumption in this line of thinking was that the West would not intervene: there wouldn't be a unified backlash against the autocratic dictator, nor would the West provide literally billions in aid to the Ukrainians in what amounts to a Vietnam-era proxy war.

Sure, the Chinese are going bananas, firing missiles, flying fighter jets, and flexing their military muscles in the straits of Taiwan and the South China Sea right now, but this is all for show.

Integrated or strategic deterrence in this scenario really means that the US's policy aim is to convince Xi that if the PRC attempts to "reunite" China, the US military will intervene both diplomatically and militarily. That is the game.

Conflict with China is not an improbable event, and a credible set of threats enable this kind of deterrence.

Speaking of credibility, much of the economic data that comes out of China is beyond inaccurate. "Farcical" is the word that I would use.

Considering that their economy was allegedly the strongest in the world after the pandemic, it's hard to believe the data given that the Chinese economy is struggling to keep the wheels on right now.

Manufacturing has long been a pillar of Chinese strength, but after a staunch commitment to zero-C19 policy and weakening demand, the industry is sputtering.

The Chinese housing market is also in rough shape. Rumor has it that the good communists in many dwellings throughout China are revolting against the man, refusing to pay their mortgages over concerns that developers are struggling so much that they won't be able to deliver.

Chinese economic growth is slowing, and it looks like they're not going to hit the party's goals this year. This might be a bad sign for Xi going into this fall's National Congress of the CCP.

This might get worse; it would appear that the West is waking up to its reliance on Chinese goods, whose export is critical in the production of the stuff that makes our economies go 'round.

Overseas orders for Chinese goods are on the decline, and Western economies are starting to shift their spending towards services as opposed to made-in-China imported products.

The Chinese consumer is also struggling. After months of lockdowns, some of the largest cities in the PRC and their residents are holding on to their hard-earned cash, fearful of subsequent lockdowns with no sign of reprieve from the zero-C19 policy. This will have implications for many multinationals who do business in China.

There's a lot of off-putting content here, but by no means is China going to collapse. That being said, reliance upon the Chinese consumer or Chinese intermediate goods is something that should be at the forefront of your stream of consciousness as you attempt to navigate the rough seas of today's financial markets.

Wise Investor Says

"If investing is entertaining, if you're having fun, you're probably not making any money. Good investing is boring." - George Soros

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