Dow Jones: 33,614 (-0.53%)
S&P 500: 4,328 (-0.79%)
Nasdaq: 13,313 (-1.66%)
Russell 2000: 2,000 (-1.55%)
Bitcoin: $39,275 (-6.70%)
Ethereum: $2,606 (-7.35%)
Four L’s… That’s how many weeks of losses the Dow has taken, even though today’s jobs report was actually pretty strong.
Economy: The U.S. added 678,000 jobs last month, but the best part of this report was deeper than the headline numbers… More on that later.
Stocks: Financial stocks continued their decline as the market anticipates less-aggressive rate hikes. Amex falling 3.8% and JPMorgan Chase dropping 2.8%.
Ukraine: Today reports emerged of smoke visible from a nuclear power plant in Ukraine (the largest one in Europe). Reports show that Russian forces seized the plant in Zaporizhzhya, in what the U.S. embassy in Kyiv calls a war crime.
Crypto: The crypto rally over the past few days just officially gave up its gains, and fell below $40K. BTC has gone from $38K to $45K, and back down again, all within the week.
Now, for the top stories of the day…
Source: Heat Map & Sector Performance — Finviz.com
This LA Mega-Mansion Just Sold For $141 Million
Wow. Just hearing that number next to anything related to the word “house” is wild.
Known as “The One,” the 105,000-square-foot Los Angeles megamansion (aka modern-day castle) just sold for the price of 14.1 million chicken burritos at Chipotle… with guac.
And it may be a shocker to hear this, but the buyer actually got a hefty discount. The massive property fit for 1,000 episodes of MTV Cribs was listed for $295 million before finally selling at a bankruptcy auction.
Development and Debt: Hollywood producer turned real estate developer Nile Niami began building some of the most lavish mansions in Beverly Hills and Bel Air many years ago, and committed to building The One as his “life mission” one decade ago.
- Niami wanted this to be “the biggest, most expensive home in the urban world,” and had plans to sell it for $500 million.
- But building costs and development problems surged during construction, leaving Niami over $190 million into the project. Safe to say, he had little choice but to cash out whatever he could for himself and the many lenders involved.
When you hear the amenities that this property comes with, you’ll know exactly why they fell into so much debt:
- 3.8 acres of land
- 21 bedrooms, 42 bathrooms (because everyone knows you need a 2:1 bath to bed ratio)
- View of the Pacific Ocean, downtown LA, and the San Gabriel mountains
- Seven water features (including a moat that surrounds the property, because #whynot?)
- A nightclub, full-service beauty salon, wellness spa, home theater, bowling alley, 10,000-bottle wine cellar, 30-car garage, and a 400-foot outdoor track… all on the property.
Bitcoin Active Supply Hit a Fresh 52-Week High
BTC has fallen down hard from its rise to $44K. Now, the world’s largest crypto is trading below the $40K level again — likely correcting the strong market reaction to the upside sparked by surging trade volumes in Russia and Ukraine.
Activity is hitting a one-year high: The supply of “active” Bitcoin (the amount of BTC moving between addresses in a 24-hour period) soared to 565,000 BTC on March 1, 2022, representing 2.69% of all BTC.
- “This is the highest level seen in over a year. In fact, only 2 events have seen higher activity: Black Thursday in March 2020 and in May 2020” Delphi analysts said in a note.
- Smaller addresses (holding 0.001 – 10 BTC) saw the steepest uptick, which could be due to capital ditching the collapsing Russian ruble.
But Bitcoin’s price is giving up the gains that we saw earlier this week as volatility remains an influential part of the market.
Some analysts, however, see BTC rising as high as $50K by the end of this month.
- Nigel Green, CEO of financial services firm deVere Group, told his clients that the Ukraine-Russia situation has sparked a huge shift in global financial markets — and claims that investors around the world “are looking for alternatives to traditional systems.”
- “Alternatives, such as crypto, prove to be credible and workable … savvy investors know this and will be further increasing their exposure to cryptocurrencies before prices rise further,” he added.
The Terra Safe-Haven: Interestingly, while BTC, ETH, and much of the crypto market has taken a big hit over the past two days, Terra (LUNA) is holding up very strong. Compared to BTC’s near-7% decline today, LUNA is down just 0.83% at the time of writing.
How the Russian Sanctions Can Throw Off Global Markets
A Russian stock analyst went viral yesterday, taking a drink on live television with the toast, “Rest in peace dear comrade,” symbolizing the death of the Russian stock market.
Russia is the world’s 11th largest economy… so naturally, removing it from the global financial system is bound to have some consequences.
Since Russia invaded Ukraine, the U.S. and European allies have been moving fast to introduce some of the harshest economic sanctions we’ve seen ever imposed.
Collateral Damage: Oil and gas prices are already skyrocketing even though President Biden made it clear that energy markets would be spared from sanctions against Russia (at least, for now).
- In the words of Aaron Klein, a senior fellow in economic studies at Brookings, “War has unintended casualties. Economic war is the same.”
- Even the most precisely targeted airstrike can hit a bystander…
While the sanctions put in place by the West were specifically targeted, it’s important to note that once sanctions are put into place, it’s very hard to get back to a time when things operate as normal.
In this case, Russia will have no choice but to adapt to the severe penalties.
The weaponization of payments: This is a term that’s been thrown around lately as several Russian banks have been barred from SWIFT, the main international payment system.
- For Russia’s economy to continue to operate, they will have to use alternative systems — which means that economic war will be that much harder to wage the next time around, if things come to that.
Quotes and Comments
- “The fallout for global trade and finance is enormous.” — Justine Walker, global head of sanctions, compliance, and risk at ACAMS
- “One thing I’ve learned is you don’t know what you don’t know.” — Aaron Klein
- “Dear stock market, you were close to us, you were interesting, rest in peace dear comrade.” — Alexander Butanov
Nobody Cares About the Metaverse Anymore…
Just kidding, a lot of people do.
But the surging interest and hype we saw heading into the end of 2021 has certainly dropped off as bigger things have started to impact the market. Ever heard of Ukraine? Yeah… that’s probably a bit more pressing of a matter than digital real estate.
Google Trends: Keyword searches for “metaverse” and “NFT” boomed in Q4 2021 to record highs, but started falling off hard at the start of 2022. In December, “NFT” actually surpassed “crypto” in global search interest for the first time.
- Since then, searches globally have dropped off, along with trading volumes in the NFT marketplace.
The Metaverse Wild West: Despite global search interest decline in the metaverse, the world’s biggest trade show was all about it. The Mobile World Congress event this week featured tons of metaverse/VR tech.
Here are some things that were featured at various companies’ booths:
- South Korean firm SK Telecom had a “4D Metaverse” ride that lifted riders through a digital representation of space.
- Taiwanese company HTC gave visitors the opportunity to wear their Vive headsets and walk around a virtual museum — others could explore a virtual desert landscape.
- Qualcomm’s booth featured virtual cooking lessons.
- Orange gave people the virtual opportunity to climb the Notre-Dame Cathedral in VR with the Meta Oculus Quest 2 headset.
“The metaverse is the buzzword of the moment,” CCS Insight Chief Analyst Ben Wood told CNBC at the show.
Looking ahead of the hype… What will it take for the “metaverse,” whatever it actually is, to come into fruition?
- Telecom: Zuck has said that telecoms infrastructure needs to improve drastically. Spain’s Telefonica is working on meta-fying cellular networks, but is still in the “baby steps” phase.
Dipping into Chips: Qualcomm says that chips for the metaverse will have to get smaller, faster, and less power-hungry. “Pretty much everyone who is making a metaverse device at this point is using our chip,” Akash Palkhiwala, Qualcomm’s chief financial officer — Meta included.
Finally, Some Great News for the Stock Market
Today’s February jobs report showed that nonfarm payrolls rose by 678,000 last month as the unemployment rate fell to 3.8%.
These numbers were certainly surprising, as Wall Street only expected 440,000 jobs added and a 3.9% unemployment rate. The February report brought the U.S. closer to employment levels seen before the Covid crisis — but we’re still off by about 1.4 million.
- One thing that the report shows is that the omicron variant that spread rapidly throughout the winter had little impact on employment.
But, there’s something else under the surface of the headline numbers… And that thing is actually great news.
Meet Kevin, in a YouTube video this morning, pointed out that the February jobs report showed downward revision in numbers — not in jobs, in wage increases.
- In January, the original report showed that average wages increased by $0.23 to $31.63, an annualized wage increase of 8.8%.
- Not good at all: Of course, we all like making more money… But what does that do for us if companies have to raise prices even more? In the same month, the annual rate of inflation came in at 7.5%, meaning faster-rising wages could lead us down the path of a wage-price spiral.
The True Numbers: In January, wages were revised down to $31.57 (from $31.63), indicating that the wage-price spiral wasn’t actually a threat. At the new numbers, annualized wage growth came in at 6.6% in January, less than inflation.
- In February, wages rose just a penny to $31.58.
This is amazing news… At least for those worried about the Fed going full “rug pull” on the economy and forcing a recession. With the economy in the clear of a wage-price spiral (at least, for now), there’s no reason for the Fed to blow up the market with a huge rate hike.
Kevin now expects things to stay relatively normal as far as rate increases go, with the Fed doing multiple 25-basis point hikes this year.
Dutch Bros (BROS) +7.85% – Dutch Bros increased sales growth 54% and opened 98 new stores last year, plans to open 125 shops this year.
Kroger (KR) +6.97% – up 28% in the past week, Kroger stock continues to rip higher after beating Wall Street’s estimates and crushing earnings.
First Solar (FSLR) +6.65% – First Solar made a slight bounce today after falling roughly 10% following disappointing earnings yesterday.
UpStart (UPST) -14.52% – UpStart fell today alongside the markets and with the news chairman David Girouard had sold 133,038 shares.
DoorDash (DASH) -11.56% – DoorDash is down on no news today, but bearish sentiment on social media was strong as the stock broke support.
Virgin Orbit (VORB) -5.06% – Virgin Orbit was crushed today alongside the Nasdaq as tech and speculation sold off.
Best Buy (BBY) – Raymond James downgrades Best Buy from outperform to market perform saying the next few quarters look “challenging.” “In addition, while we left the investor event encouraged about the multiyear opportunity for Best Buy, we do find the setup for the next few quarters very challenging as the majority of Best Buy’s product categories face very tough comparisons lapping work-from-home trends and multi-rounds of government stimulus.”
Tilray (TLRY) – Conaccord upgraded shares of Tilray from hold to buy being bullish on the company’s strategic alliance with cannabis company HEXO.“On Thursday, Tilray Brands and HEXO Corp. announced a proposed agreement that includes both a financial and commercial partnership between the two LPs. We are upgrading TLRY and HEXO to a BUY and SPECULATIVE BUY, respectively (both from Hold), largely on valuation given the sizable share price declines as of late.”
Take-Two (TTWO) – MKM upgrades Take-Two from hold to buy seeing a “very compelling growth story.” “The prospects of double-digit EPS accretion from the Zynga acquisition combined with Take-Two’s sizable pipeline of internally developed IP creates what we view as the most attractive growth outlook among the publicly traded video games companies.”
Quote of the Day: “Your most unhappy customers are your greatest source of learning.”
Fun Fact: The US consumes more oil than any other country — 20.6 million barrels per day.
- ‘The Batman’ tallies $21.6 million from Thursday night previews, expecting $100 million weekend
- Panasonic planning massive battery plant in U.S. to supply Tesla
- Kroger, Impossible Foods partner to create meat substitutes; Beyond Meat shares fall
- Google suspends all advertising in Russia… Twitter & Facebook blocked
- Mickey Mantle baseball card NFT sells for $471K