Too Many Jobs | The Daily Peel | 10/10/22

Market Snapshot

The September jobs report was too good, sending the market lower to end the week. As long as JPow continues to see decent job gains, expect him to stay aggressive.

Major indices finally closed a week in the green. Barely.

Oil rocketed higher to end the week, adding more reason for the Fed to stay hawkish.

At the close, the Dow sank 2.10%, the Nasdaq dropped 3.8%, and the S&P fell 2.8%.

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Let’s get into it.

Banana Bits

TikTok owner ByteDance somehow lost $7 billion last year, despite owning the attention of teens worldwide for multiple hours per day
Credit Suisse tried to prove its legitimacy to investors by paying down $3 billion worth of debt
Fed officials are reassuring the market that the September jobs report strengthened their conviction to keep hiking rates
Juul is warning employees that it’s in a fight for its life as it falters under regulatory scrutiny

Banana Brain Teaser

Friday — A detective who was mere days from cracking an international smuggling ring has suddenly gone missing. While inspecting his last-known location, you find a note: 710 57735 34 5508 51 7718. Currently, there are three suspects: Bill, John, and Todd. Can you break the detective’s code and find the criminal’s name?

The criminal is Bill. If you look at the note upside down, you’ll notice that the numbers resemble letters and that those letters form legible sentences. The message is “Bill is boss. He sells oil.”

Today — It’s 100 bananas off our PE Master Package for the first 15 correct respondents. LFG!

I have two legs, but they only touch the ground while I'm at rest. What am I?

Shoot us your guesses at [email protected] with the subject line “Banana Brain Teaser” or simply click here to reply!

Macro Monkey Says

Untangling Labor Stats — The statistics that explain the labor market are confusing as sh*t.

For example, the unemployment rate ticked down to 3.5% in August, but the takeaway was that the “labor market is cooling”
Doesn’t lower unemployment mean… more people are employed, and the labor market is tighter?
It depends on the underlying cause. In this case, fewer people looking for jobs was the main driver of unemployment sinking, not more people getting hired
American companies still added over 200k jobs in September, but that’s much less than the ~440k run rate for 2022

The bottom line is the labor market is cooling, even if it’s hard to tell from the stats.

The labor force participation rate is a number that companies, the White House, and JPow all have their eyes on. Getting that rate up would be good for all of them.

Ahead of the holiday season, companies are going to have a crush of demand that’ll require a lot more workers
In order for wage growth to slow and inflation to come down, more workers need to be competing for jobs
GDP growth will be constrained if companies can’t meet demand due to labor challenges

The good news for current employees is that companies will be hesitant to initiate layoffs after a few bad quarters because the cost of acquiring new workers is so high.

On the other hand, it could make the battle against inflation a lot more painful.

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What's Ripe

Credit Suisse ($CS) — The downtrodden Swiss bank flexed its muscles Friday when it bought back $3 billion worth of bonds, proving to the market that it’s just fine.

Despite hoopla on r/wallstreetbets and elsewhere about a $CS blowup around the corner, investors believe it will survive.

It’s down big for the year, but it’s still kicking.

$CS was up 13.19% by the end of the day.

Madison Square Garden ($MSGS) — The home of the woeful Knicks and Rangers had an early Christmas present for investors in the form of a one-time $7/share dividend.

Shares soared on the news. MSG looks to be capitalizing on its relatively low share price compared to the lofty valuations of the pro teams it owns.

Unfortunately, the dividend won’t help the Knicks on the court.

$MSGS was up 8.21% by the end of the day.

What's Rotten

Roblox ($RBLX) — Roblox went public in a red-hot market, and it has struggled to maintain its valuation since.

Kids being home all the time during lockdowns helped the game spread, but fads fade quickly with that age group.

Analysts are skeptical about recently-announced feature updates, as well as the company’s ability to fend off increasing competition.

$RBLX ended the day down 11.06%.

Coinbase ($COIN) — $COIN’s YTD returns are awful, but it’s actually been on a slight uptrend since May.

Shopify’s CEO is one of several high-profile buyers recently, but the stock plummeted Friday after a report showed slowing retail user participation.

It’s fun to trade magic internet money when sh*tcoins are going to the moon, but it’s not the same when the party ends.

By the end of the day, $COIN was down 9.35%.

Thought Banana

Protecting the Chips — Semiconductors have been a flashpoint in the economic rivalry between the U.S. and China.

The world heavily depends on Taiwan for these chips and ensuring a secure supply has been a focus for recent American presidents.

Joey B upped the ante Friday when he announced limits on chip technology sales to China for the public purpose of slowing its military programs.

Experts are calling the rules “the broadest export controls issued in a decade”
Graphic processing units (GPUs) are a focus of the restrictions, as they are central to AI programs
China is expected to retaliate by imposing its own restrictions, the extent of which is unclear

It should be expected that the two world superpowers would compete on technology, but the worry is that this could ignite a broader conflict.

The Taiwan issue has been bubbling below the surface since the start of the Russo-Ukrainian war, and diplomats are worried that restrictions like these could be a catalyst for escalation.

The two countries have a wide-ranging economic relationship that benefits them both, so fingers crossed that the semiconductor issue remains merely an economic competition.

Wise Investor Says

“Do not buy the hype from wall street and the press that stocks always go up. There are long periods when stocks do nothing and other investments are better.” — Jim Rogers

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