At first glance, Monday's market action seemed rather dull, similar to just about every other April day that had come before it. On the one hand, breadth was poor across equity markets, the Nasdaq market site in particular, while aggregate trading volumes remained excruciatingly thin. This time, however, there was a difference.
While market participants have seemingly lost interest in meme stocks, or in SPAC-mania, a chasm had been created as attention spans waned. (Just an FYI, the Russell 2000 closed below but has not yet lost its 50-day simple moving average.)
Attention turned on Monday to President Biden's meetings with a smallish, but bipartisan group of legislators to discuss moving the ball forward on his plans for fiscal policy. He did this as the U.S. Treasury went to market with $58 billion worth of 3-Year Notes in the morning and even more importantly, $38 billion worth of 10-Year Notes just a bit later.
Interestingly, demand for that 10-year paper would have to be referred to as "good enough" in my amateurish opinion. While bid to cover edged slightly lower than recent, or 2021 trend of something closer to 2.4 to 2.36, this was still just a smidge better than late 2020 trend. In addition, an awarded high yield of 1.68% was more or less in line with where the 10-Year Note was trading in secondary markets just ahead of the auction, with decent demand shown by foreign accounts.
Indirect bidders took down 59.6% of the issuance, which is notably better than the 56.8% share taken at last month's similar auction. That 10-Year, in fact everything from 1-Year paper on out to the 30-Year, has weakened just a bit overnight, ahead of Tuesday's data on consumer-level inflation for March, not to mention $24 billion worth of 30-Year Bonds that come to market this afternoon.
They're Over Here
If you're looking for the meme traders, we found them. They're trading cryptocurrencies ahead of the Coinbase (COIN) direct listing at the Nasdaq Market Site, which is expected on Wednesday (tomorrow). As I try to work through this (pre) morning column, the man in the blackened window keeps interrupting my work to inform me that both bitcoin ($62.5K+) and ethereum ($2.2K+) keep trading at record highs in dollar terms.
Clearly there is excitement at the retail level that the publicity generated by the Coinbase listing will provoke wider acceptance of cryptocurrencies in general by that part of the public that has remained skeptical. This may sound funny, but less than six months ago, I had a very experienced trader ask me in anguish how he had been so "dumb" as to get caught up in a "fad" and pay ($17K to $18K) for bitcoin. My guess is that he no longer feels so "dumb," though we have not spoken in a little while.
Futures trading in Germany, which imply an opening price for Coinbase, traded 9% higher on Monday, in theory valuing the company at close to $147 billion. The firm's latest S-1 filing with the SEC shows an expectation that as many as 114.85 million Class A shares would be offered to the public Wednesday. Private sales of Class A shares have traded at an average price of $343+ in early 2021, suggesting a corporate valuation of $68 billion-ish. What I am saying is that Coinbase is coming in red hot, perhaps perfect for traders, but too hot for investors. I should clarify -- too hot for this investor, though as I said, I certainly can imagine myself attempting to take advantage of the volatility.
I have long expected monetary authorities to at some point ambush the world of cryptocurrencies once that world had become too large, too powerful, too far outside both the control of the planet's central banks but also the ability of national treasury departments to track or tax income (not to mention organized crime). I still expect that day to come -- when I do not know -- but it is clear that plenty of money is being won and lost here.
I still think the "safest" way to play cryptos is to play the miners or at least those creating the necessary equipment for mining that also have enough going on elsewhere, such as Nvidia (NVDA) , a name we will discuss in a minute or two.
Remember, it's not just the central banks and the treasury departments that will look upon cryptocurrencies as competitors, but they are not even close to being environmentally friendly at that, which has become ever more important to the investment community, unless this "green" posture has really just been all for show. Things that make you go hmmm.
Negotiations Begin
The president hosted eight legislators at the White House on Monday -- four Democrats and four Republicans. The opening shots went the way that the early rounds of any large negotiation seem to always go. Friendly overtures. The president has expressed an openness to breaking his $2.25 trillion infrastructure proposal into several pieces if it gets something done more quickly. Republicans have obviously been open about opposing corporate tax hikes, as well as significantly increasing taxes on foreign profits.
I found interesting the results of a Business Roundtable survey that I saw in the Wall Street Journal that shows 98% of U.S. CEOs (of large firms) oppose a corporate tax hike, as this would place a negative impact on the ability of U.S. companies to compete globally. No kidding. That's kind of like the silly polls that several media outlets were touting earlier this year that showed a majority of Americans in favor of receiving helicopter payments of $1,400 a piece. The media must really think we are morons.
Just imagine how these questions are asked: "Mr. & Mrs. Smith, as the parents of two children, are you in favor of being on the receiving end of a $5,600 payout?" "CEO Jones, as the chief executive of a large multinational corporation, are you in favor of seeing your federal base tax rate increase significantly while we also significantly tax your overseas businesses?" Golly, gee, can't imagine that most people want to get paid, or that most corporations don't want to give up what they currently have. Who thinks of asking these questions, and why are they in that position?
Polls also show most Americans in favor of a large infrastructure package. Well, duh. Anyone try to drive around Brooklyn or Queens lately? Hard to believe that these streets have not been shelled by naval artillery. Has anyone asked the folks if they are in favor of a large infrastructure package that "should" boost employment, but that in order to pay for it taxes on your employer are going higher and even if you keep your job (some of you may not), you probably have seen your last bonus or raise for a number of years? Let's see how that one goes over?
By the Way
Analysts at Goldman Sachs (GS) have stated that as they make forward-looking projections, they are indeed trying to price legislative passage of almost all of the hard infrastructure rebuild as well as most of the requested manufacturing and "green" or "quasi" infrastructure requested. Between the president's already revealed American Jobs Plan, and the still-to-be-revealed American Families Plan, Goldman expects what finally passses to reach $3.3 trillion over 10 years. Goldman is also pricing in a corporate tax rate of 25%, up from 21%, but less than the 28% requested by the president.
Semiconductor Wars
The news just poured out of Nvidia's annual Investor Day. That Jensen Huang. Wow.
Nvidia announced the company's first data center CPU, which will apparently deliver 10 times the performance of the fastest server available today. The "Grace" CPUs will not be available until early 2023, and will be built on Arm Holding's architecture. How's that for confidence? Basically, on Monday, Nvidia declared open warfare against both Intel (INTC) and Advanced Micro Devices (AMD) .
The company also announced a new Bluefield-3 DPU, a new DGX SuperPOD cloud-native, multi-tenant, artificially intelligent supercomputer, the new Omniverse Enterprise tech platform, allowing global designers to collaborate in a real-time 3D environment (think Star Trek), and Morpheus, which is a cloud-native cybersecurity framework that will not only detect and prevent threats but will be built with accelerating AI skill sets.
Most importantly, to kids like us, Nvidia says that first-quarter total revenue is now tracking above prior guidance of $5.3 billion. The company tripled guidance for cryptocurrency processors to $150 million from $50 million, because it was obvious that you wanted to ask.
NVDA tacked on more than 5.6% for the session, while INTC gave up 4.2% and AMD surrendered more than 5% on the session. Intel made its own news, revealing that the firm was in talks to manufacture (act as a foundry) automotive chips to help alleviate the severe global shortage impacting that industry.
I remain long NVDA, AMD, and INTC. INTC is by far the smallest of these three positions. I left that one alone.
NVDA, after Monday's run, now has the second highest weighting on my book at roughly 4.5%. I have not taken any recent profits just yet as my price target remains $645. I did, however, add to AMD on weakness yesterday. This remains a significant position for me though still less than 2% of my book, so I can add more if I need to, or want to, which I might. The next move belongs to Lisa Su. From one kid from Queens to another, I can't wait.
Economics (All Times Eastern)
06:00 - NFIB Small Business Optimism Index (Mar): Expecting 98.7, Last 95.8.
08:55 - Redbook (Weekly): Last 10.6% y/y.
08:30 - CPI (Mar): Expecting 2.5% y/y, Last 1.7% y/y.
08:30 - Core CPI (Mar): Expecting 1.6% y/y, Last 1.3% y/y.
13:00 - Thirty Year Bond Auction: $24B.
16:30 - API Oil Inventories (Weekly): Last -2.618M.
The Fed (All Times Eastern)
12:00 - Speaker: Philadelphia Fed Pres. Patrick Harker.
12:00 - Speaker: Kansas City Fed Pres. Esther George.
12:00 - Speaker: San Francisco Fed Pres. Mary Daly.
15:15 - Speaker: Atlanta Fed Pres. Raphael Bostic.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (FAST) (0.37)
After the Close: (WAFD) (0.48)
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