Friday Four Play: The “Jobs! Jobs! Jobs!” Edition
Welcome to Friday, Great Ones! This is no ordinary Friday, though. Today is jobs day!
That’s right: The Labor Department said this morning that the U.S. economy added a better-than-expected 850,000 jobs in June … and economists are both excited and scared.
On one hand, economists praised the strong jobs growth as proof that the economy is continuing to rebound strongly from the COVID-19 pandemic.
“Things are picking up,” said Indeed Economist Nick Bunker. “While labor supply may not be as responsive as some employers might like, they are adding jobs at an increasing rate.”
On the other hand, economists worry that a stronger-than-expected economic rebound could force the Fed to raise interest rates sooner rather than later.
This is an odd predicament because we all know that rates need to rise, especially amid strong economic growth. Planned and careful interest rate increases are part of a healthy and nutritious economy, after all.
If rate hikes come before Wall Street expects, you can bet stock prices will fall as money is repositioned to take advantage of higher rates.
But there was an interesting twist in today’s jobs data that blunted interest rate worries: The unemployment rate rose from 5.8% in May to 5.9% in June.
Now, typically when the economy adds so many jobs at once, the unemployment rate falls. So, what gives?
Well, it seems that employees are increasingly leaving their jobs in search of better pay, better benefits and more enjoyable work. Looks like Johnny Paycheck is making a comeback in a big way…
Remember all those times I talked about the “New Normal” that Wall Street wasn’t ready for? This is it. And this movement will give economists and Wall Street talking heads fits for quite some time.
The bottom line: The U.S. economy is still recovering at a healthy pace. This is good. But this recovery is laced with a degree of uncertainty that will likely limit Wall Street’s appetite for risk. This isn’t bad, per se, but it does mean that you, Great Ones, need to maintain diligence in your investments.
According to one expert, stocks will go up more in the next 10 years than they have over the last 100, and more stock market millionaires will be made during this time than any other time in history.
But this prediction comes with a major warning. Click here for the must-see details.
And now for something completely different! Here’s your Friday Four Play:
No. 1: Chips Go Muuuu
Great Ones, I’ve been following Micron Technology (Nasdaq: MU) for more than a decade … and I have to say, today’s earnings reaction is par for the course.
The flash-memory maker reported blowout third-quarter results, with revenue jumping 36% to $7.42 billion and earnings rising to $1.88 per share.
Micron also lifted its fourth-quarter guidance to revenue of $8.2 billion and earnings of $2.30 per share.
All of these numbers trounced Wall Street’s expectations. And yet, MU stock fell more than 1% on the news.
Even bullish commentary from CEO Sanjay Mehrotra on strong growth and soaring DRAM and NAND pricing wasn’t enough to change Wall Street’s opinion of MU.
The “why?” is the same as it has always been with Micron: Analysts just don’t see DRAM and NAND memory prices holding at current levels.
“While we believe DRAM and NAND contract pricing will continue to improve sequentially into the August quarter, we believe pricing is nearing a near-term peak,” said Summit Insights Group Analyst Kinnagi Chan, who cut MU from buy to hold.
The thing is, DRAM and NAND memory demand hardly ever declines. The last dip in demand was due to a decline in smartphone sales back in 2018. But now, literally everything uses these chips. Cars, planes, watches, refrigerators and even toasters. Yes, toasters.
So, if Chan forecasts a drop in prices, it can’t be due to a lack of demand. It has to be due to an overabundance of supply. And if Micron and its competitors are dumb enough to flood the market, well … they will bring that on themselves.
As such, today’s decline on rather impressive financial results should be a buying opportunity … if you are so inclined.
No. 2: Me First & The Gimme Gimmes
OK, this whole space race ego thing is getting out of hand now. Shares in space (but not-quite-space) tourism company Virgin Galactic (NYSE: SPCE) rocketed more than 22% higher today.
No, the company didn’t magically report a profit. No, there weren’t any new investments or partnerships or contracts … or anything, really.
The reason SPCE stock surged was because Virgin is now launching founder Sir Richard Branson into space on July 11.
That puts Branson in space nine days before Blue Origin sends Jeff Bezos into the final frontier. So, apparently, that means that Virgin wins. Game over. We can all pack it up and go home now.
I swear, I have not seen a bigger $*@#-swinging contest outside of middle school.
Branson will fly on Virgin’s VSS Unity — which is honestly a better name than Blue Origin’s New Shepard. Did no one else watch Raised by Wolves?
Notably, Virgin won’t auction off any seats on the VSS Unity. Accompanying Branson will be two pilots and three Virgin Galactic employees. You know, I bet that guy who paid $28 million to fly with Bezos is feeling like he overpaid at this point.
So, SPCE jumped more than 20% on news that Branson would beat Bezos into space. No, sir, I don’t like it.
Meanwhile, SpaceX continues to mind its own business and hammer away at NASA contracts and Starlink satellites. It’s just a shame SpaceX isn’t publicly traded.
No. 3: Men In Tights
Robinhood, oh Robinhood. Where do we start with this hot mess?
What about the entire GameStop short selling scandal? Where Robinhood, the so-called equalizer bringing balance and free trading to the brokerage force, blocked its users from purchasing certain stocks?
And how this caused meme stock prices to crater into oblivion since traders could do nothing but sell their positions?
Or how about the point when we realized: “Hey, Robinhood may not be that malicious when it blocked users’ trades … it’s just stupid at capitalizing itself to handle retail trading demand!”
And we laughed and laughed … and cried a little when all this resulted in a $70 million fine for “outages and misleading customers.” That’s not even a slap on the wrist — it’s a head pat for how well it screwed over many Robinhood users.
Throw in a few unconfirmed conspiracy theories that are floating around Reddit — that I’m not discussing here since they’re, well, still unsubstantiated claims — and I don’t see how Robinhood’s IPO goes smoothly. Like … at all.
The company announced its plans to list on the Nasdaq under the ticker HOOD, with the IPO possibly coming as early as this month. And already, the ire against Robinhood across social media is apparent.
Suffice it to say … Robinhood helped create (or at least facilitate) the meme stock Armageddon. And there’s no way that Robinhood’s stock doesn’t also reach meme stock status — for better or worse —once its sour reputation and financials are pushed further into the public market limelight.
According to Robinhood, it’s been “improving platform stability, enhancing our educational resources, and building out our customer support and legal and compliance teams.” And for the firm’s sake … I surely hope so.
When your customer support is a voicemail telling me to go pound sand and your legal compliance team can’t tell risk management from market manipulation in plain sight … yeah, literally anything you do is an improvement.
No. 4: Dunking DNUTs
I don’t care what diet anyone claims they’re on … no one stays away from Krispy Kreme (Nasdaq: DNUT) forever.
All the same … Krispy Kreme can’t stay away from the public markets forever, either. And I bet you the second that Dunkin’ Brands went private last year … Krispy Kreme started to plot its return. There’s only room for one donut don ‘round here, Dunkin.
OK, it’s not that dramatic. Krispy Kreme went private back in 2016 and relisted on the Nasdaq earlier this week because, obviously, people just couldn’t get enough of DNUT or that sweet, sweet glaze.
CEO Michael Tattersfield had such poetic words of wisdom on Krispy Kreme’s courageous comeback: “We’ve been a public company once before and we are now again, we’re able to do that.”
That’s … that’s kinda how stock markets work, Tattersfield. Initially, DNUT dropped on the market at around $17 per share, quickly rose to $21 and then settled around $19.50 today.
Let’s be honest: Krispy Kreme was always the real deal compared to Dunkin’s downhill slide since back in the day … but that doesn’t mean Dunkin’s no less of a threat now.
In fact, I think Krispy Kreme is facing some tough competition ahead — not just from Dunkin but also from Starbucks, McDonald’s (to a certain extent) and the hordes of boutique donut shops opening up.
Krispy Kreme won’t sell you a Fruity Pebble-speckled red velvet monstrosity … but we will.
Then you throw in the ebb and flow of low-carb, low-sugar, low-fun diet trends … and it’s easy to see these are rough times in the sugary dough biz. Krispy Kreme’s management has their work cut out for them — it’s time to make the donuts.
If you’re looking to grab DNUT, wait for the sugar rush to die down. Right now, investors are glazing over Krispy’s competition amid the excitement of “ooh, donuts!” just like at every office birthday party.
Ladies & Gentlemen … The Weekend!
First off, sorry for getting the donut munchies on your mind … grab me a few of those OG glazed Krispy Kremes while you’re out, will ya?
I’ll be out here researching a little something-something that you might just find in your inbox early tomorrow morning. So, keep an eye out for some extra special weekend Greatness, you hear?
And, while you’re waiting ‘round your inbox on pins and needles … why not drop us a line? Market-related or not, I know you’ve got a rant brewing or some new stock ideas you’re stewing on. Let us know what’s on your mind!
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Until next time, stay Great!
Joseph Hargett
Editor, Great Stuff
