This factbox from Reuters via investing.com tells you all you need to know about the US economy. Along with Elon's now famous email last night having added the latest touches to a canvas of Big Tech slow-walking. If everyone is telling you the economy is in a recession... isn't it in a recession? Yep. That is exactly how macroeconomics works.
I just wasted 10 minutes of my time reading the BLS non-farm payrolls report. Survey-based employment figures offer very little value-add, especially compared to real world management actions. Apparently, though, news of my impending return to the US (I arrived in NYC this morning) was leaked to America's publicans, as food and beverage industry job growth jumped in May, with "eating and drinking places" having added 41,00 jobs in the month.
The BLS data also shows that wage growth is continuing to accelerate, as:
Average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3 percent, to $31.95 in May. Over the past 12 months, average hourly earnings have increased by 5.2 percent. In May, average hourly earnings of private-sector production and nonsupervisory employees rose by 15 cents, or 0.6 percent, to $27.33.
But, back to the old reliable John Butters at FactSet, we see that S&P 500 profit margins are forecast to increase in 2H22.
For Q3 2022, analysts are projecting earnings growth of 10.2% and revenue growth of 9.1%. For Q4 2022, analysts are projecting earnings growth of 9.9% and revenue growth of 7.0%.
How? If labor costs are jumping, energy costs are skyrocketing and supply chain delays slowing fixed cost absorption, how could margins possibly increase?
This market is living in La-La Land. From a macro perspective I have never seen the analyst community so out of touch with reality. So, when Elon sends an all-hands email, I care much more about that than the response from the dope-a-rama that claims to "follow" Tesla (TSLA) stock. Cheerleading will get you everywhere on Wall Street these days, apparently, but Elon can't do that. He's too damn busy running Tesla, SpaceX, and the others, buying Twitter (TWTR) , opining on the Amber/Johnny situation, and just generally acting as America's conscience.
Elon not only called for a hiring freeze, but a 10% cut in TSLA's workforce, as well. Is that maybe, just maybe, more impactful for the state of the US economy than a few open jobs at Applebee's? Of course it is. Tech jobs are high-paying and require higher-skilled workers than hospitality jobs. So as those jobs melt away, consumer incomes do, too, first on the micro level then on the macro level.
I have seven alternative ways to invest your funds these days:
- PREFS. If you are afraid of the stock market, and you should be, just avoid it altogether with the fixed-income names in my PREFS model portfolio
- HOAX. I talked to a client last week with a HOAX portfolio and some other hydrocarbon holdings in his broader portfolio, as well. I said "(name redacted) your portfolio is extremely aggressive and not diversified...and I LOVE IT!!!" We are winning, and dammit, this ride is not going to end until Putin is removed (sadly, a longshot) ESG is removed from investors' collective psyche (not gonna happen) or there is demand destruction for oil and natural gas, which takes years to manifest itself.
- HOAX 2.0 Unlike HOAX's extraordinary 46.19% gain (and 101% stagger versus its benchmark, Cathie Wood's leaky (ARKK) ) HOAX 2.0 has really shined only from a relative perspective. HOAX 2.0 has fallen 2.7% since inception on April 5th, but has crushed its benchmark, the (QQQ) s, which have fallen 14% in the same time period. Similarly, DFNCE has fallen 7.8% since inception on 4/25, but it has so roundly outperformed its benchmark, TSLA (the stagger is just under 20%,) that I am trumpeting its relative performance.
- SHORT and FKBGT are producing reinvested returns in the double digits and the short-only performance of FKBGT (+27.88%, i.e. the shorts have declined that much, in aggregate ) and SHORT (5.7%) has been truly gratifying.
- DEATH has been the laggard among my model portfolios, as its short-only names have actually increased 12.7% since inception at midday May 11th. Carvana (CVNA) has plotzed, but the other nine names have risen, some substantially. Which begs the question, who is buying fundamentally-challenged names into a recession? Until DEATH reverses its signs of life, we are nowhere near a bottom in the US stock market.
So stay tuned for more "hiring freeze" articles from Reuters and more stagflationary signals boosting bond yields and blasting Big Tech. It will be a fun summer.
