Non-Farm Friday – How Can We Have a Recession with Record Job Creation?

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U.S. Job Openings Hit Record High 10.9 Million in July - Bloomberg11.2 Million.

That’s how many unfilled jobs are open in the US as of last month.  Not only that, but Productivity for the 165M existing workers is down 4.1% from last year and Wages are 6.1% higher so that’s a 10.2% increase in Unit Labor Costs for our Corporate Masters – and they don’t like that one bit.  

It’s hard to grow the economy when there are no workers to fill the new jobs.  This is an issue that can clearly be traced back to 2017, when President Trump went to war against immigrants and now, 5 years later, we have the same 37.7M immigrants with jobs vs 39M at the peak in 2018 and we should have more over 40M, if growth had been normal and probably a lot more if we allowed people to simply come to where the jobs are.  

This is also a severe undercount because farms don’t tend to report job opening to the BLS – they simply can’t find workers and they weren’t big on documenting the workers they did find but their absence is sharply felt when fruit is left rotting on the vine and vast fields remain untended.  

In the Great Depression of the 1930s, the Dust Bowl began because of drought conditions and not enough workers to tend the fields and that led to a decade of low crop yields.  We’re heading that way now in the US and it’s not just farming but fishing is also down considerably over climate change and labor issues:

annual-aqua-prod-usa-2022.jpg

There aren’t less people so this is why things are getting more expensive – there is simply less food available.  

8:30 Update:  Non-Farm Payrolls came in at 315,000 – in-line with expectations and down from 526,000 last month, which is what the Fed wants to see.  Now there are 11.5M unfilled jobs but it’s better than 11.7M, right?  Also good for the Fed, Unemployment is us to 3.7% from 3.5% and I know you think the Fed is supposed to work towards maximum employment but that’s just BS they say so they can find excuses to give all our money to the Top 1% (but maybe those jobs will “trickle down” any day).  

One big issue we have is the KIND of jobs that are available are not the kind of jobs people have the skills for and, so far, we have done nothing to address training the next generation of workers – even after having our kids miss much of their last two years of schooling.

Jobs vs Skills

Nothing will ever be fixed if the Government never does anything about it.  Clearly we need 1M more Business/Professional people than we currently have – wouldn’t it make sense to start training people now?  

Absolutely Brilliant GIFs - Get the best GIF on GIPHYNo, instead we’re hoping the Fed can crash the economy so we don’t need that many people to work – BRILLIANT!

We brilliantly did a lot of shopping yesterday, adding AVGO, CROX, TROX, NFLX, BIG and IMAX from our Watch List as the market bottomed (we hope).

We expected at least a 600-point bounce off the 12,000 line on the Nasdaq 100 so we’ll be looking for 12,600 as the Weak Bounce.  If we can get over that, we’ll look for the Strong Bounce at 13,200 next week.

Have a great weekend, 

– Phil

 

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Phil / AVGO 

  •  Broadcom  Q3 Non-GAAP EPS of $9.73 beats by .18
  • Revenue of $8.46B (+24.8% Y/Y) beats by 50M
  • Adjusted EBITDA of $5,378 million for the third quarter
  • Repurchased and eliminated 3.2 million shares for $1,792 million
  • Q4 Guidance: Revenue expected to be ~$8.9 billion vs. consensus of $8.72 billion; and
  • Fourth quarter Adjusted EBITDA guidance of approximately 63 percent of projected revenue. 

Rev 8.46B , YTD 24.3 B 
EPS 9.76,  YTD 27.19 

My Q4 Projections 
Rev 9.1B,  EPS 10.25
FY22  EPS of 37.44 Tack on a 16.0 Multiple 
Share Price 600 / SH 

Operating Margins grew to 61% overall, Semi 72%, and SW at 90%
All businesses ( except SW ) will grow in the 20 to 30 % range next Quarter

Next year at a conservative 12% growth get to a 40 ish EPS 
16 multiple gets you to 630….   Does this look reasonable to you?

I have the following that I’m contemplating uncovering But am struggling since there are no ’25 out yet….  Was looking at closing out 20 to 30  of the 660 callers and waiting for a pop to recover with more 640 at 35 ish….   Any other thoughts on this one…..??

 I’ve made money on selling 25 to 30  Quarterly short puts and calls to cover most of the paper losses on the spread ie the spread is a only about 30K in hole… 

Long 100x Jan ’24 500 Calls ( 161) 
Short 55 x Jan ’24 640 Calls ( 60) 
Short 60 X Jan ’24 660 Calls (108) 
Short 12X Jan ’24 500 Put (66)
Short 4X Jan ’24 450 Puts (55)

thanks,

hi phil,
so after ” they ” finish screwing all the impatient early longs in futures at the open are we basically long over es 4000 or is there a better horse.

Good Morning.

Phil/Gild: I put in my separate orders with various legs,

Sell 10 X 60 puts @ 6.6 Executed
Sell 10 X 70 Calls @ 5 Executed
Buy 10 X 60 calls @ 8 Not executed yet

So as you can see I’m short the calls with no cover…. Curious what advice you would give to mitigate the risk, buy 5 or 10 and write another 5 calls @ 70 or Wait?

Thank you-Makes sense. I put them in separately, and that’s what filled. I’m bullish on the name… The train left the station, and I didn’t get on…. Now i’m running after it, but as you said it’s not that big of a deal. Great to know for future trades.

Phil,
Good morning!
I have not enough SQQQ for my portfolio. I have 2024 30/80 spread doing well at the moment. If we expect the market to go up or stabilize, does it make sense to sell more 80’s now and buy some 30’s later? or is that too risky?
Thanks

Tully, I know Phil likes to set up plays in single orders, but that can bring you in to the danger of landing up with naked calls. I always enter a vertical or BCS so one can be sure both sides of the play are set up.

Thank you Yodi!

AVGO – most analysts are happy here

Broadcom shares rose on Friday after the Hock Tan-led semiconductor company posted third-quarter results and guidance that topped estimates, resulting in the praise of several Wall Street analysts.

Mizuho analyst Vijay Rakesh reiterated the firm’s buy rating on Broadcom shares, calling out the guidance and data center demand as two key positives for the company and the semiconductor industry at large. 
“[Broadcom] noted demand remains strong across all end markets as customers continue to invest in data center upgrade/refresh and broadband with the Wireless ramp at iPhone ahead,” Rakesh wrote in a note to clients.
The analyst added that in the upcoming quarter, Broadcom sees networking up 30% year-over-year, server and storage up 45% year-over-year, wireless up roughly 20% sequentially and 10% year-over-year, aided by the launch of Apple’s new iPhone 14. 

Broadcom shares rose more than 2% to $503.84 in premarket trading.

Deutsche Bank analyst Ross Seymore also reiterated his buy rating, noting that despite rising macro and cyclical fears, Broadcom delivered strong results.
“While we do not expect [Broadcom] to remain totally immune from rising macro headwinds, we believe they can weather the situation better than most due to a consistent scrubbing of backlog to ensure shipments are only matching ‘true demand’, long lead-times on non-cancellable orders, and heavy infrastructure exposure (~80% of revs),” Seymore wrote.
The analyst added that these “defensive” attributes will only become more appealing if the economy weakens further.

SMBC Nikko analyst Reddy Pajjuri raised his estimates on Broadcom (AVGO), while noting that the risk-reward profile is still “particularly attractive.”
“The company continues to benefit from secular growth in Cloud/Enterprise/Storage markets as well as iPhone 14 builds in the near term,” Pajjuri wrote in a note, adding that multiple product cycles, a stable software business and upside from synergies related to its pending VMware acquisition are added benefits.

Phil / AVGO –

thanks for the feedback…. started the roll today…. ON the callers I’ve been selling these as we’ll sold the last ones were the Sept 550 and 570 for about 20K closed those out yesterday when it hit 480 ish…. So now I’m selling the Jan 560 callers at 22 to 25 only three so far but will look at selling 15 ish… then next resistance seems to be at 570 a little more conservative.

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