Market Briefing For Monday, April 8

Projects beginning to bite - from the Infrastructure (mostly union), as jobs reflect. Notably minority jobs did not proportionately gain; but revisions might change that. Not being cynical; just the fact the last few reports got revised.

Many of the jobs are part-time; and many shortages are in skilled labor where there are insufficient journeymen and experienced workers with knowledge of how things work; ie: how they were constructed or designed (even pre-CAD). Real estate values are down 60-70% or more in major U.S. cities; and some will come back; but structural changes will inhibit secondary level recovery.

A lot of building can't be repurposed so will end up demolished. Or hybrid and it's not easy, not affordable, otherwise big players would be more interested. I think most are stuck with lots of property, so reticent to be more encumbered. Plus you have anti-business environments, like Los Angeles or New York (LA is trying; but the Mayor hasn't overcome the City Council 'wokeism' as of yet). The New York earthquake was a 'burp' by California standards, but there is a NY fault there nobody thinks about; and governmental mentality fault in Cali.

Of course the argument for the 'real' (non-subsidized) economic sluggishness is both lower interest rates, and cleaning-up crime as nobody wants to work in an expensive, gridlocked, or crime-ridden place (several places fit that note).

By the way, Elon Musk refuted the Reuter's and media report of scratching all plays for an upcoming lower-price-range fulfilling, known as Model 2 Tesla. It is unclear if that's just going to be a vehicle for 'robot taxis' or still coming; but of course Tesla has competitive pressures in all the price and range levels.

Speaking of 'billionaires'; the level of action in Miami / Miami Beach property is insane; and the guys doing it are full of hubris (rivaling their bank accounts). Of course they domiciled in Florida to avoid personal state income taxes; but this period of real estate growth almost certainly is going to be doomed soon.

How so? Aside desperate ways to extend the high-end real estate cycle that's a bit comical (getting Instagram influencers to buy pricey condos, for instance) nobody is talking about the 'weather'. Except me maybe. Ken Griffin built on 'Star Island' (I know it pretty well, last party there at a neighor's I noted 3' above high tide, at the most). Over on Indian Creek (the area opposite Fountainbleu I love) is where Jeff Bezos is buying multiple properties; slightly sheltered by the direct-ocean sand barrier where the hotels are built; but still vulnerable.

I spent many winters at the Fountainbleau in the 1950's / early '60's; another era of course (actually the best family time, when Ed Sullivan was playing 'gin' with my Dad in a cabana, and I first explored the University of Miami, where I was admitted on the spot without the Admissions Director bothered by details ..hah, or the fabulous Embers steaks, and Wolfies or Pumpernicks for more ..lest I digress I'll stop). The point is I mentioned last month hurricanes in this upcoming season are set to be 'huge'; even Trump can relate to the word.

Now the Univ. of Colorado is talking about the strong el Nino (warm waters) in the Atlanta, diminished el Nina (would assist wind shear) so lots of big storms. It will take one to radically alter the landscape of what were barrier islands as well as 'not intended' to be built upon for permanent housing.

P.S. Moody's Friday reports more 'cracks' in Commercial Real Estate, not just the 'salty-sand-constructed' building along Miami's coastline. Office Space is not the opportunity to 'buy' that some say; because it's mostly 'Class B' space; whereas 'true' Class A property is not going for the throwaway prices for now.

Market X-ray: I digressed from the market a bit.

A turbulent week is behind; including the 'stumble' we looked for. The report of great jobs is more a reflection of infrastructure spending, than real Goldilocks economic conditions. Fed rate cuts are still likely down the road a bit (June as always the earliest in our view); while high Oil prices persist with 'war' realities that could either ease slightly with a ceasefire, or expand precariously too; or for that matter both (if there was a pause vs. Hamas but not with Iran proxies aside Gaza, or Iran itself).

The U.S. wants to stay out of this; but can't 'if' there is a major Iranian assault on Israel, such as not just missiles, but from the 12,000 IRGC troops gathered in Jordan, with more possibly on the way. Hard to say if this is saber-rattling or more ominous; but Oil prices remain high suspecting this is not close to over.

As to the Fed and the economy; things are not ripping as some economists of course say; but it's stronger in some aspects, and that's bolstered by Federal spending, and hence why there are more jobs for skilled workers; and fewer for unskilled, including most recent migrants. It's a tough spin; but bifurcated.

Treasury Secretary Yellen made some strong comments about EV's traveling 'to' China, so that's supportive of the trade dynamic including tariffs and some sort of try by China to reroute through Mexico; but then tariffs might block that too. We've seen these efforts before (steel, aluminum, electronics); and from a long drought of regulatory protection for American workers; it periodically is resurfacing. This is likely one of those times, and please labor unions too.. of course it's an Election Year, and maybe that's not an irrelevant aspect of this.

As to the power-plants themselves, it's very competitive. But we favor hybrids since consumers seems to want those most. Here in Florida construction will begin on the 'first ever in the U.S.' wireless-charging 'highway' connecting to the Beltway around Orlando. This will take decades, but ultimately that's one way to help 'range anxiety' with most EV's. In the interim; hybrids solve it.

Last week, before this week's 'stumble', I emphasized lightening-up a bit on a few big-cap core holdings if you hadn't earlier; and/or writing some near-term Calls at strikes above the market with short duration's; if inclined, and if one's premium made it worthwhile. I think the optimal time for that is past; but hard to say how much risk there is in this market near-term.

'If' we get through this weekend without a wider war or incredible threats from Tehran or Moscow, we might get another intraweek rally in the coming week, but with limited punch. If there really is any punch, it might be because hedge funds had shorted last week heavily, and get nervous on upward days. The market is stretched or tired so at best can be range-bound.

Bottom line: we got an expected stumble; a stutter-step rebound; and an important 'outside-down' S&P day, which was partially recovered on Friday. I won't read too much into the rebound Friday; because that's normal efforts in the wake of a 'key reversal' session.

Much might depend on geopolitics for the moment, as we've discussed and of course you all understand. Meanwhile Russia is trying to take advantage of a focus on the Middle East, by increasing pressure on Ukraine. And congrats to the crew of USS Gravely, for shooting down yet-another Houthi missile.

Enjoy the weekend and recognize that April showers will off-and-on continue to rain on the S&P's parade, which was considerably long and exhausted. So erratic behavior and ongoing sensitivity to geopolitics or especially Oil prices.

More By This Author:

Market Briefing For Tuesday, April 2
Market Briefing For Monday, April 1
Market Briefing for Thursday, March 28

This is an excerpt from Gene Inger's Daily Briefing, which typically includes one or two videos as well as more charts and analyses. You can follow Gene on Twitter  more

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