Market Briefing For Monday, Oct. 4
'Rocktober' started with a solid S&P rebound; following a re-balancing fade at the very end of Thursday's session. That implies pension funds wanted lots more cash, not stocks, for the start of the 4th Quarter. And all the rebound did on Friday was recover that lost; plus a sort of 'hail Mary' from a technical spot just below the prior low. Odds of a sustained uptrend here are low for now.
Of course the real 'rock & roll' was in all the Covid plays; which are similar to fight for market share (without life & death consequences) in semiconductors, years ago. How so? Well it took a few years to sort-out who would dominate; and to this day you have conflicts between different semiconductor chips and likewise software, as to what performs best for a myriad of purposes.
We take a more aggressive stance now; noting the Silicon Carbide wafers will not exactly compete, but complement and enter the new markets of this era. It will often be associated with Ai, AR, Lidar, Laser and other new applications. I suspect Intel will get back 'in the game' with their new 'fab', and that's going to help whoever gets the contracts to 'test' the production; as the cost of poorly managed yields can be incredible when it comes to Silicon Carbide. We have one play in the field, AEHR Test Systems.
'The problem with technology IS technology. I mentioned that frequently over 30 years or so. It's rarely corporate dysfunction; but rather competitors. It is why the late Chairman of Intel (who I was honored to once breakfast with at the Intel Connectivity Conference).. Andy Grove.. wrote a book to his primary philosophy in the chip industry: 'Only The Paranoid Survive'.
Sure Intel's subsequent leadership wasn't paranoid enough; so let others get a jump on thin wafer (more powerful and less power-consuming) architecture of course. And yes back then AMD and N'vidia weren't exactly two kids in some parent's garage; got close to it. (Now Intel is playing catch-up and just may be successful with an expensive new 'fab' in Arizona and new design chips over the next several years, not months. But they lost Apple to its own variation of ARM designs; and also lost Apple iPhone modem to Qualcomm... both are of course serious impediments in the last couple years, and continue for now. 'For now'; wouldn't it be interesting if the defections from Apple brought Intel and Apple closer together, not now, but say in 3-5 years. Just pondering.
Friday was an up day as typically the start of new Quarters tend to be; but for sure it was a combination of two factors, Merck and Congressional 'deals,' so likely to be pressed. When President Biden drove (or was driven actually) to the Capitol, the S&P surged a bit more on the idea that we'll get free of what's been one of those incredibly hostile negotiations in Washington. Didn't get it; and the idea of day or weeks of negotiations means he couldn't swap them.
It matters as they go forward negotiating Debt; only a short-term CR deadline got resolved for now; without the calamity that they trotted Janet Yellen into a Congressional Hearing to extol dangers (not a wise use of Treasury Sec'y.)
There's growing importance of stock markets to average American families. I get that; but am not entirely comfortable with the statistics. Certainly it's not all millennials or low or eliminated commissions; but rather exposure increased a bit in response to low returns elsewhere. This clearly puts the Fed in a box so if there's concern about (say China threatening to liquidate Treasuries if we'd back Taiwan.. just a for-instance); well that's an existential sort of black swan.
The Fed and Treasury are aware of this; and one can presume that inhibits a decision-making approach that would normally have had tapering by now. So it can't be known what they 'really' are thinking; but I just thought I'd mention it because 'if' the market suffers a calamity; so would the Nation more broadly.
Expectations by most analysts and technicians were increasingly negative; so it was an invitation for the prior pullback. And it may well resume after this; or more specifically 'if' there's a deal by Congress and the market likes it; some relief and then renewed selling. Overall part of evolving Sept./Oct. chop.
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 subscribe for more
Silico Carbide is primarily for fast power electronics, and it will be in addition instead of a replacement. And the shortages are because the demand was not anticipated and so the new billion dollar fab lines were not built up. Building the production lines for each new generation of Integrated Circuit technology is very expensive and quite slow, and because all of those automotive modules were designed using the latest technology they would be built with parts not yet available. Using one generation older technology and the stock to build them would be on the shelf for imediate delivery.
Thanks for enhancing my knowledge of SiC; in the case of AEHR i'm presuming the burn-in test gear is intended for the large wafers before being cut-up; but I'm not so deeply in the weeds on it, at least not yet. Thanks for the thoughts! Gene
The cost for each new generation of "fab" systems is far more than just the "burn in and test" systems. Each generation with the much narrower lines and smaller features requires better hardware to keep all of those sequentially printed layers perfectly aligned, and that is both complex and expensive to create, assemble, and then get running with adequate production yield. The production process is a bit like screen printing T-shirts, except with a set of a hundred individual lines being altogether much narrower than a human hair. The line witdths being just a few nanometers wide. So the process takes effort to get running smoothly.
As forthe general public being "bit more exposed" to the stock market, who is to blame but the federal reserve clowns who have reduced the interest on savings? While clowning is supposed to entertain, the fed is supposed to act in the best interest of the country. That means the bottom 85%, economically, by the way.
Of course share prices are driven quite a bit by the emotions of those involved, both fear and greed, the two least rational emotions. Thus there are assorted wanderings based on???? and???, with the results being sometimes misleading.