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Transcript

Felix Prehn - US Jobs Data *Just* Out // Stock Rally at Risk + Stock Market News 2 Aug 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: stream from Seoul, korea.
• 0:02
  Speaker 1: I'm on holiday.
• 0:03
  Speaker 1: I wasn't going to do a live stream today, but given what the markets are doing an absolute catastrophe I thought A I'm going to have a check on my trades and my positions, and B I think you might appreciate a bit of explanation and guidance of what the heck is actually going on here.
• 0:22
  Speaker 1: So the market looks like and I'm on a laptop screen here, so I'll show my screen with you in a moment but a little bit less than usual.
• 0:30
  Speaker 1: Let's give you some flair here.
• 0:32
  Speaker 1: Amazon is down 9.8%.
• 0:34
  Speaker 1: Pre-market Tesla is down 3%.
• 0:36
  Speaker 1: Nvidia is down 5%.
• 0:38
  Speaker 1: Apple is down a percent, microsoft down 2%, google down 2.2%, meta down 2.4% Pretty dramatic stuff.
• 0:46
  Speaker 1: Big banks are down over 2%, and this all got kicked off yesterday with disappointing ISM manufacturing data, which is sort of indicating we might actually get a recession.
• 1:01
  Speaker 1: Now, this is not doom and gloom.
• 1:03
  Speaker 1: I think this is actually a glorious opportunity we've been waiting for.
• 1:06
  Speaker 1: But let me walk you through the causation and then what's going to happen here next and smash the like button while we're at it.
• 1:14
  Speaker 1: Now, the manufacturing data got worse than expected, so there was this initial sort of flight safety.
• 1:24
  Speaker 1: Asia followed through with some pretty horrendous losses.
• 1:28
  Speaker 1: We have Japan, with the worst stock market day since 1987 today, which is pretty horrific.
• 1:37
  Speaker 1: I'm not that far away from Japan, I'm actually quite close to it, and that is largely because, well, the Bank of Japan did an idiotic thing they raised interest rates just as the economy is softening and it's sort of this weird policy thing that they've got going on there which is going to crush the economy even farther.
• 1:57
  Speaker 1: We then had, well, amazon reporting, which people didn't love.
• 2:03
  Speaker 1: I mean, it's a bit idiotic really, because they brought in $105 billion, which is a 20% growth, which is pretty staggering.
• 2:16
  Speaker 1: And well, people didn't love it because, well, they said, ai business was a couple of billion in cloud, which is particularly bad, I thought.
• 2:26
  Speaker 1: But they were looking at e-commerce margins getting a bit lower because the economy is slowing and just now we've had out unemployment number which is staggeringly higher than expected.
• 2:39
  Speaker 1: So we've suddenly moved in the space of three days from we want more unemployment, the Fed cuts rates and we're going to get a magical soft landing to a place where we're like, oh no, the recession's here, it's all over, the Fed is too late and it's a disaster.
• 2:56
  Speaker 1: Everything is going to crash and you know, go and shoot yourself, and that's a little bit the way the market works, right.
• 3:02
  Speaker 1: It's particularly weird and overreactive.
• 3:06
  Speaker 1: Now let me share my screen with you and I'll show you the economic data here and then we'll dive a little bit deeper into the rest of today's data.
• 3:15
  Speaker 1: Because it's important, let me just share my screen with you here.
• 3:18
  Speaker 1: You see this sort of looks like what you do on just one screen.
• 3:21
  Speaker 1: Usually we have a couple just on screen.
• 3:23
  Speaker 1: Usually we have a couple Non-farm payroll.
• 3:28
  Speaker 1: We only generated 114,000 jobs compared to the 170,000, 190,000 we were predicting.
• 3:31
  Speaker 1: That's Max, the biggest slowdown in hiring we've seen, I'd say, since COVID.
• 3:39
  Speaker 1: The unemployment rate has unexpectedly jumped up to 4.3%.
• 3:43
  Speaker 1: We were expecting it to stay flat at 4.1%.
• 3:46
  Speaker 1: That again says the economy is going down the tube, average hourly earnings also slowing down, which again says that there is unemployment and that employees don't have the bargaining power we were expecting.
• 4:02
  Speaker 1: And well, why is the data so bad?
• 4:04
  Speaker 1: Normally the government hires a bunch of people to make this data look better.
• 4:08
  Speaker 1: They didn't do that.
• 4:10
  Speaker 1: Maybe they were too busy, I don't know, shooting each other or something.
• 4:14
  Speaker 1: But private non-farm payrolls are 50,000 lower than expected.
• 4:20
  Speaker 1: That is 33% miss.
• 4:22
  Speaker 1: That's massive.
• 4:26
  Speaker 1: So that makes us now scream the Fed is cutting too late.
• 4:29
  Speaker 1: The Fed was too late raising rates.
• 4:32
  Speaker 1: The Fed is too late cutting rates.
• 4:34
  Speaker 1: Is that a surprise?
• 4:35
  Speaker 1: No, and there is some silver lining in that, because we are now expecting three rate cuts.
• 4:44
  Speaker 1: Half the market now expects a half percentage point rate cut in September, which should be good news, right for small caps and non-profitable tech and so on.
• 4:54
  Speaker 1: So why the heck is everything collapsing?
• 4:56
  Speaker 1: Because the market is a stupid emotional beast.
• 5:01
  Speaker 1: In the short term, 4% down on small caps.
• 5:04
  Speaker 1: Is that rational?
• 5:05
  Speaker 1: Probably not.
• 5:07
  Speaker 1: What's the fear here?
• 5:08
  Speaker 1: That a recession is bad for small companies.
• 5:11
  Speaker 1: That's basically the fear here.
• 5:13
  Speaker 1: So we've gone from profits on IWM to probably losses on IWM, and I had actually, funnily enough, recorded a video on IWM which I'll put up a little bit later today.
• 5:23
  Speaker 1: Yesterday, looking at pretty much this scenario here.
• 5:27
  Speaker 1: So there's a lot of stuff here.
• 5:28
  Speaker 1: If you look at Bloomberg, what are you doing?
• 5:31
  Speaker 1: What are you doing Bloomberg?
• 5:32
  Speaker 1: What do we need to do here?
• 5:35
  Speaker 1: Your choice around cookies.
• 5:36
  Speaker 1: We don't want any of your bloody cookies.
• 5:38
  Speaker 1: This is what happens when you are in different countries.
• 5:42
  Speaker 1: Do I have to click all of these?
• 5:44
  Speaker 1: Seriously, there isn't one button.
• 5:45
  Speaker 1: I agree to my past information being stored by Bloomberg.
• 5:50
  Speaker 1: The unfriendly no, thank you.
• 5:52
  Speaker 1: Can we now?
• 5:53
  Speaker 1: Yes, thank you.
• 5:54
  Speaker 1: Weak jobs, data shifts, rate cut, debate from when to how many?
• 5:58
  Speaker 1: So the market freaking out here, very, very nicely.
• 6:02
  Speaker 1: There is more, there is more, and let me walk you through that as well, as I'll depress you slightly with this.
• 6:11
  Speaker 1: You see that you can see that, right, I'm my fat head blocking some of this, aren't I?
• 6:16
  Speaker 1: Let me move myself to the other corner.
• 6:19
  Speaker 1: There we go, so you can see the undiluted misery that is happening here this morning.
• 6:26
  Speaker 1: So you can see some serious impacts there.
• 6:28
  Speaker 1: Now, okay, a few more words on Amazon and then we'll talk about the Middle East and a bit more in Japan and so on.
• 6:35
  Speaker 1: So the macro environment, the economy slowing it won't last forever.
• 6:42
  Speaker 1: And why not?
• 6:42
  Speaker 1: Because we're going to get bigger rate cuts faster and we're going to get the US government handing out money right, left and center and the money printing will start again.
• 6:50
  Speaker 1: Right, and that's actually a good thing for the market overall.
• 6:53
  Speaker 1: So for me, the Amazon results were actually good.
• 6:58
  Speaker 1: I completely disagree with this massive overreaction.
• 7:01
  Speaker 1: Now, probably, once this has calmed down a little bit and that's what I tweeted this morning is wait for the market bottom to come in and then buy the fricking dip.
• 7:10
  Speaker 1: That's the way I'm looking at it.
• 7:11
  Speaker 1: You have to decide what you want to do yourself.
• 7:13
  Speaker 1: But the AWS basically delivered, and that's really the key thing.
• 7:19
  Speaker 1: And then they're saying you know, they're building their own chips and so on.
• 7:21
  Speaker 1: That will rather lower their costs.
• 7:23
  Speaker 1: Might be bad for Nvidia down the road, maybe, which is also why it's down 5%.
• 7:28
  Speaker 1: Now let's touch upon Intel, because that's also important.
• 7:31
  Speaker 1: Now Intel is taking a nosedive.
• 7:34
  Speaker 1: It's down like 20% or something.
• 7:37
  Speaker 1: Intc it's down 24%.
• 7:42
  Speaker 1: It's the lowest it's been since what?
• 7:46
  Speaker 1: Quite a long time.
• 7:49
  Speaker 1: Yeah, we're trading at 2022 multiple valuations there.
• 7:54
  Speaker 1: We're trading also at 2016 valuations, which is kind of staggering.
• 7:59
  Speaker 1: But what's that all about?
• 8:01
  Speaker 1: Well, as a rule of thumb, when a company tells you three days before they're going to put earnings results up that they're going to lay off like 10,000 people plus turns out it's going to be 15,000 people that's, generally speaking, them going it sounds terrible, horrible, but we're going to cut lots of costs and we'll hope that all these heads we're chopping off will somehow convince the market that it's going to be all right.
• 8:25
  Speaker 1: It hasn't.
• 8:27
  Speaker 1: And it also shows you that when the government hands out $10 billion in subsidies to a company, it doesn't necessarily make them better or stronger.
• 8:35
  Speaker 1: It's usually a pretty bad idea.
• 8:37
  Speaker 1: So I think, to an extent, this was very foreseeable.
• 8:41
  Speaker 1: Maybe not quite to this extent, but yeah, they're suspending dividends and they're cutting 15,000 jobs.
• 8:46
  Speaker 1: This is a business that's seriously struggling.
• 8:48
  Speaker 1: Snapchat's also down 18%.
• 8:51
  Speaker 1: That's just business as usual for Snapchat.
• 8:53
  Speaker 1: But overall, I think we've got slightly lackluster earnings in here this week from Microsoft and from Amazon and they were good, but they were not amazing and the market at the moment needs amazing.
• 9:07
  Speaker 1: And then you've got the slowdown.
• 9:08
  Speaker 1: You've got the jobs data now much, much worse than we were expecting it to be at 4.3% unemployment rate, 2% to 0.2 points higher than expected.
• 9:19
  Speaker 1: People are even working less.
• 9:22
  Speaker 1: You know there's really like just big, big, big alarm bells going off that there isn't enough labor I mean demand out there.
• 9:32
  Speaker 1: Unemployment rate, youth I mean youth six unemployment up to 7.8%.
• 9:36
  Speaker 1: So a lot of indicators there that we've got bad news for the economy and that bad news is now actually bad news and that is not something that we've been used to for some time.
• 9:49
  Speaker 1: So everything is basically taking a complete nosedive.
• 9:52
  Speaker 1: That'll just be today, in my opinion, it'll just be.
• 9:56
  Speaker 1: Everything will just damp, palantir down 5 percentage points here.
• 10:00
  Speaker 1: Sofi down, it doesn't really matter whether the stocks are affected by this down 4.3%, it's just.
• 10:07
  Speaker 1: Everything is just down, and that's just what happens when the market sort of panics.
• 10:13
  Speaker 1: But really you've got the Japanese central bank to thank for Look at that candle here.
• 10:20
  Speaker 1: That's pretty significant.
• 10:22
  Speaker 1: That's 6.1% down today after 3.2% down yesterday.
• 10:27
  Speaker 1: So it might be worth setting up some bearish trades here.
• 10:31
  Speaker 1: Those of you who are trading the VIX, you made a lot of money.
• 10:34
  Speaker 1: The VIX is over 20.
• 10:36
  Speaker 1: Now that's sort of the beginning of fear territory.
• 10:40
  Speaker 1: We were there in April, we were there in October.
• 10:45
  Speaker 1: So it's not that.
• 10:46
  Speaker 1: That's something that never happens.
• 10:48
  Speaker 1: And I think one thing I would say to you today is zoom the F out, because we started in October with a $344 QQQ and we're right now up 34 percentage points.
• 11:06
  Speaker 1: So this little dip here is just nothing particularly unusual.
• 11:12
  Speaker 1: It's just part of being an investor.
• 11:15
  Speaker 1: And look at how this chart has gone up right In October 2022, we're at 250 points.
• 11:21
  Speaker 1: So we've done very, very, very nicely and I don't think this is the end of the world.
• 11:27
  Speaker 1: I would just say wait out the panic, wait out the dip, you don't need to trade the latest thing that's usually a fairly bad idea and chill out, and then I think it'll be a great opportunity and maybe that'll be come Monday or come Tuesday or however long it takes for the sort of dip to kind of come in here to pick up some good stocks at a really really, really nice valuation.
• 11:51
  Speaker 1: So smash the like button.
• 11:53
  Speaker 1: The market will probably go up.