Kids and Jobs

By Jeff Kelly on March 8, 2024

“In America, anyone can become President. That’s the problem”

– George Carlin

One of the great joys of my job is meeting the children of clients. Since I’ve been doing this for a while now, many of these folks aren’t children anymore. I had the pleasure of spending a couple hours with the daughter of a long-time client last night. I first met her when she was in her teens and in high school. Her grandfather was one of my first clients in this business. We reminisced a bit about her grandfather and his life. I’m sure if her grandfather was still alive, he’d be incredibly proud of her and what she’s already accomplished.

We enjoy all our clients, well most of them anyway. But the younger ones tend to have a better outlook on the future. They are less concerned about how things were and more concerned with how they will be.

They see the world as full of opportunity. Those with children of course want better for their families. No calls for civil war. No America bashing. No looking back on the good old days.

They are more concerned with how to make things better and less about who’s to blame. What can they do to improve, to have more freedom, and a chance at the best life possible for their kids.

They also see the opportunity presenting itself in America. It’s out there every day. We have younger clients starting businesses, making new technologies, helping create jobs and making things better. They have neither the time or inclination to live in the past. They are too busy building their future. And yes, I think we all need a whole lot more of that.

The market has enjoyed more upside over the past week. Early on Friday the already extended “AI” companies got even more extended causing a sell off in those most loved equities. Corrections in uptrends are what keeps those uptrends in place. A bit of fear is a good thing. Many of the best stocks can use some rest. It would be completely normal to see a period of sideways to lower action to set up a better entry point in the spring.

The jobs report produced more fuel for the markets. There was a decrease in average hourly earnings. That’s seen as less inflationary. There was also a huge revision to last month’s jobs report. The original report showed gains of 377,000 new jobs (which set off a big market rally), was revised down to 177,000. Do we have to give the rally back? Nah.

Next week is filled with economic data and Fed speak. It’s somewhat quiet on the earnings front. We are quickly closing in on the end of the first quarter. I’ll have a few thoughts on what to look for as we move into the 2^nd quarter next week.

CHARTS FROM THE WEEK PAST

Measures of GDP Wtd PMI Employment and U6-unemployment usually move together.

There has been a large divergence since 2021.

Technology typically has a period of underperformance from now until the end of April.

Buybacks have cooled a bit lately.

Still historically high.

Goldman forecasts a 13% growth in buybacks this year and 16% growth in 2025.

Interesting chart of the total Japan Market Capitalization vs. the U.S.

Automakers supply is very high.

Chinese stocks are historically cheap.

Opec is keeping production cuts through June.

Looking at the chart below it’s easy to see when we started another round of QE (quantitative easing).

Starting after the Silicon Valley Bank collapse in March of 2023.

Folks hate bonds, they are likely to rally.

Commodity Trading Advisors (CTAs) exposure to equities is historically high.

Extreme greed is very evident in the markets.

Manheim Used car price Index at the lowest level since May of 2021.

January wholesale sales (blue) -1.7% month/month vs. +0.3% est. & +0.3% prior (rev down from +0.7%); inventories (orange) -0.3% vs. +0.4% in prior month.

Since 1990, there have only been six other periods when the number of S&P 500 stocks hitting 52 week highs outnumbered the number hitting 52 week lows on every trading day for at least four months … longest streak was almost most recent (after COVID).

Traders are swapping the new Bitcoin ETFs like there is no tomorrow.

The total number of trades are triple the S&P 500 ETF, SPY.

Equities with a low crowding score that are aligned with the longer-term capital cycle are the best structural investment opportunities.

Eurozone Retail sales volume down 1% year-over-year.

Job openings ticked down -26k in January, from a -137k downwardly revised Dec figure.

They’re now 3.3m below their March 2022 record high, with both headline and private tallies below their long-run trend lines.

The JOLTS piece with the most relevant economic signal is the headline quit rate, which ticked down to 2.1% m/m – back to its 2017 pace.

This series leads wage growth (Employment Cost Index) by about 6 months, and points to cooling pay pressure ahead. The private quit rate was steady at 2.4% — below pre-Covid.

Gasoline prices are up about 15% in 6 weeks.

This week, Aggregate Store Visits slightly decelerated with the 5Wk Avg slightly improving from -3.8% to -3.6%, now 5 weeks in a row of accelerations.

2Yr and 3Yr Avgs both decelerated, showing that underlying visits decelerated on easier compares. Overall, visits remain in an improving trend, with some easier compares in the coming months.

Tax refunds continue to accelerate YY after a very negative start due to an extra refund week last year.

This week, the average amount refunded continued to accelerate from +2% to +4% YY, hitting $3,213. Increasing YY tax refunds could have a material impact on consumer spending (and traffic) as it frees up more discretionary spending power.

10-year yields (inverted) with equity market breadth.

Part of my more optimistic market views in 2024 is due to the view that we will see soft enough macro data to allow yields to grind lower over the year, and lead to improved breadth. I’d want to see it come from earnings, but I think investors would welcome lower yields with open arms.

Tennessee House passes bill to deny state courts oversight of their actions.

German government loves TikTok!

The AfD far right party is making inroads in German society. I’m pretty sure a Tik-Tok account won’t be the answer.

German Government Needs TikTok, Scholz Says, as AfD Surges in Polls

WEEKEND HOMEWORK

We are nominating people who wouldn’t have been eligible to be a candidate 10 years ago. Holocaust denier Mark Robinson has won the Republican primary for governor in North Carolina.

Hitler-quoting candidate wins North Carolina Republican gubernatorial primary

The U.S. has spent millions on high-tech scanners to spot fentanyl crossing the border, but many sit in warehouses unused since Congress hasn’t provided funds to use them. Speaker Johnson is incompetent.

Scanners that spot smuggled fentanyl at the border sit unused because Congress hasn’t provided the cash to install them

California has witnessed particularly vitriolic anti-Semitism since Hamas’s Oct. 7 attacks. Anti-Israel protesters shut down the State Assembly in January and forced the state Democratic Party to cancel some of its convention events in November. Gov. Gavin Newsom (D.), meanwhile canceled the state capitol’s traditional live Christmas tree lighting ceremony to avoid planned protests in December.

Berkeley Administrators Have Offered No Apology to Israeli Speaker Accosted by Anti-Semitic Mob

An interesting book about people and families who want to go to America.

Everyone who makes the journey faces an impossible choice. Hundreds of thousands of people who arrive every year at the US-Mexico border travel far from their homes. An overwhelming share of them come from El Salvador, Guatemala, and Honduras, although many migrants come from farther away. Some are fleeing persecution, others crime or hunger. Very often it will not be their first attempt to cross. They may have already been deported from the United States, but it remains their only hope for safety and prosperity. Their homes have become uninhabitable. They will take their chances.

This vast and unremitting crisis did not spring up overnight. Indeed, as Blitzer dramatizes with forensic, unprecedented reporting, it is the result of decades of misguided policy and sweeping corruption. Brilliantly weaving the stories of Central Americans whose lives have been devastated by chronic political conflict and violence with those of American activists, government officials, and the politicians responsible for the country’s tragically tangled immigration policy, Blitzer reveals the full, layered picture for the first time.

Excellent podcast from 20vc. Frank Quattrone on the current market and lessons from bringing Amazon, Cisco, Intuit, and Netscape public.

20VC: Are IPO Windows Shut? Has Regulation Killed the M&A Market? M&A OG Frank Quattrone on Lessons from 650 M&A Deals Worth Over $1TRN and Taking Amazon, Cisco and Netscape Public

Time to reflect, relax, and get outside. I am going to get some serious exercise this weekend. Although at my age many would term it an unserious exercise. Whatever. Walk, run, lift or swim. Just get it done. Call a friend and hug a loved one. Tomorrow isn’t promised to any of us. Have a great weekend.