May 5, 2023

Monetizing Events

Total nonfarm payroll employment rose by 253,000 in April

February was revised down by 78,000, from +326,000 to +248,000 (-24%)

March was revised down by 71,000, from +236,000 to +165,000 (-30%)

 The broad indexes showed welcome relief this past week and while much can be attributed to the Fed increase in interest rates it was the stronger than expected unemployment data that triggered a rebound in stock prices at the end of the week. This outcome for the week was not because of the strong growth in payrolls, but rather the revisions made to the previous two months, signaling that job growth isn’t as strong as it appears. The suggestion that the Fed needs to continue to raise rates is also, in my opinion, not without merit. Last week I drew attention to my opinion that the markets are too efficient to be predictable, and that’s simply because most predictions are built in hindsight, always obvious after the fact, as opposed to unpredictive before that fact. That’s why I choose to state, in my opinion, because unlike a casual belief, it’s my opinion, therefore, I own it. So, I’ve looked at hindsight, not without some skepticism, and concluded that whatever the future holds for employment payroll growth, I prefer to focus less on what hindsight tells me and more on what the present is telling me, I focus on events. What are events?

 There’s been plentiful discussion on AI, a little less, but still ample, on robotics, electric vehicles, have I missed anything that aren’t real events? Does the demand of markets provide predictable consideration or is it more of taking advantage of an event in process? Sometimes tracking an event leads to an outcome that is challenging. For example, AI is a worthwhile investment from the software to the hardware, but what about the applications? Healthcare companies are using AI to accompany vascular related blood tests with a second diagnostic opinion. In the realm of electric vehicles, AI is being used to introduce the efficient management needed for autonomous driving. Robotics, currently filling positions in warehouses, all the way to hospital operating rooms. These are some of the applications that in my opinion have future potential, and present application supports that.

Other events, right or wrong, I’ve been favoring the energy sector. Not just renewables, we have plenty of exposure to that, through energy storage and more commercial renewables such as Hydrogen fuels. But the importance of companies engaged in production and distribution of fossil fuels is also in my focus. Not because of the current platform, but where that platform is going, what event has been triggered. The revival of liquid natural gas (LNG) has met the demand of the global market, has been cleaned up to produce less than half the carbon of oil, all easily captured and stored for other industrial uses.  Oil companies have been pandering to an overly idealistic vision, in my opinion, suggesting their commitment to a future of safe energy, but are actually doing little in response. Except a few that are investing in the future of nuclear energy, such as Chevron (CVX), thanks to the introduction of nuclear fusion, a new technology, not to be confused with historically unclean nuclear fission, to fully meet unlimited renewable demands. Still too early to go all in, since most of the companies perfecting the process are private. But definitely an event space I’ll be watching.

 My ambition is to keep looking at technology, keep following the claims of change, and keep focused on interpreting the outcome of currently proven innovations as opposed to predicting the future of old ideas. Especially in this day and age, when the politization of the debt ceiling brews, the threats of nuclear war, the fear mongering over claims of a coming banking crisis.  By the way, I’ll cover the finance sector at another time, definitely a lot of potential events there, but for now too much from unpredictable distractions such as those external events just mentioned.   

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