Weekend Bite, a Seeking Alpha Original Series: In this episode, we’re joined by Jeremy Kokemor, Founder of Right Tail Capital, who pitches two stocks he believes are great additions to any long-term portfolio. Plus, Jerry Kronenberg discusses this week’s Catalyst Watch, and a recap of last week’s Twitter poll.
The nuclear rhetoric is getting louder as Ukraine continues to make serious battlefield advances. The country’s forces have regained control of thousands of square miles of territory since the beginning of September, especially in the areas recently “annexed” by Russia. The developments are pushing Vladimir Putin into a difficult corner, where he must decide how to paint the war as a victory and means for negotiation, or double down on a strategy of increasingly dark destruction.
Quote: “For the first time since the Cuban Missile Crisis, we have a direct threat to the use of nuclear weapons, if in fact things continue down the path they’ve been going,” President Biden declared. “I don’t think there’s any such thing as the ability to easily (use) a tactical nuclear weapon and not end up with Armageddon.” When ordering a partial mobilization on Sept. 21, Putin pledged to defend Russia’s territorial integrity with “all the means [of destruction] at our disposal,” adding that the threat was “not a bluff.”
“I’m trying to figure out: what is Putin’s off-ramp? Where does he find a way out?” Biden continued. “Where does he find himself in a position that he does not only lose face, but lose significant power within Russia?”
Nuke risk: As the threats and warnings increase, the U.S. Department of Health and Human Services shelled out $290M on Amgen’s (NASDAQ:AMGN) new drug called Nplate, which is used to treat acute radiation sickness in the event of a nuclear emergency. The HHS said it wasn’t in “response to the situation in Ukraine,” but was rather part of “ongoing work for radiological security,” and adds to its stockpile of Leukine which has been in place since 2013. Closer to the front, Ukraine’s capital of Kyiv is stocking evacuation centers with potassium iodine pills, which can help prevent radiation absorption.
FOMC policymakers and investors will be closely watching the September jobs report this morning – released at 8:30 a.m. ET – for clues on how much the economy is slowing. Nonfarm payrolls are expected to slip to 250K in September from 315K in August, while economists expect the unemployment rate to hold at 3.7%. Meanwhile, average hourly earnings are expected to increase 5.1% from a year ago, little changed from the 5.2% Y/Y jump seen in August, though any deviation could signal that the Fed needs to get even more aggressive on inflation.
Quote: “I want Americans to earn more money. I want families to have more money to put food on the table. But it’s got to be consistent with a stable economy, an economy of 2% growth” in inflation, Minneapolis Fed President Neel Kashkari said during a Q&A session on Thursday. “Wage growth is higher than you would expect for an economy delivering 2% inflation. So that gives me some concern.”
Many will also be eyeing how tighter monetary policy is affecting the “unsustainably” strong labor market, and if easing there could help relieve inflationary pressures. Even if the number comes in weaker than expected, the central bank isn’t likely to change its policy based on one month’s data, as it will be two more months before the Department of Labor finalizes September’s figures. On Wednesday, Atlanta Fed President Raphael Bostic additionally warned that reversing policy too early can make matters worse and lead to entrenched elevated inflation expectations.
Watching employment: While there have been some announcements of layoffs, especially in tech, it hasn’t been significant. On Tuesday, San Francisco Fed President, whose district includes Silicon Valley, said the bank is only hearing about a “smattering” of layoffs and companies are rather slowing hiring. While the Challenger Job Cuts Report showed a 68% Y/Y jump in job cuts in September to almost 30K, with the most coming from retail (9,273) and technology (4,212), for the YTD figures, job cuts of 209,495 declined 21% from the same period a year ago. The gap between labor supply and demand also remains significant, as there were 1.7 jobs available for each unemployed worker in August. (7 comments)
Major cannabis companies all closed markedly higher on Thursday as they appeared to be beneficiaries of comments made by President Biden in regards to a review of marijuana as a Schedule I substance. 38 U.S. states have already legalized pot either medically or recreationally, but it is still illegal in some states and at the federal level. Biden’s comments come just a month before the midterm election, and as the Senate contends with the significant marijuana reform measure – the Cannabis Administration and Opportunity Act.
Market movement: Tilray Brands (TLRY), which will report FQ1 results before the opening bell, rose 31% during the session, while Canopy Growth (CGC) added 22% on the day. The ascent of Canadian producers was joined by U.S. multi-state operators like Curaleaf (OTCPK:CURLF) and Trulieve Cannabis (OTCQX:TCNNF), but keep in mind that the sector can see outsized losses just as fast as it tacked on gains.
President Biden also pardoned 6,500 individuals convicted of “simple marijuana possession,” which will apply to federal offenders and those charged in the District of Columbia. “We classify marijuana at the same level as heroin – and more serious than fentanyl. It makes no sense,” he said in a statement. “Too many lives have been upended because of our failed approach to marijuana. It’s time that we right these wrongs.”
Outlook: 1 in 6 Americans are smoking marijuana these days, according to a Gallup poll from the summer, which highlights how the times are rapidly changing. However, annual arrests for marijuana possession still reportedly account for around half of all drug arrests in the U.S. According to cannabis market research firm BDSA, legal weed sales nationwide are expected to increase 7% Y/Y to $27B in 2022, despite an inflationary environment and recession concerns that have dampened consumer spending. (36 comments)
Twitter’s (TWTR) trial to force Elon Musk to go through with a $44B buyout has been paused until the end of the month to allow both sides to wrap up the deal. Media reports and filings now suggest that the issues in contention are “debt financing conditions,” as well as “existing litigation,” “contractual obligations” and fears of further “mischief and delay.” Shares of Twitter closed the session on Thursday back at the $48-level, factoring in a risk discount to the original $54.20/share agreement.
Quote: “This action is stayed until 5 p.m. on Oct. 28, 2022, to permit the parties to close on the transaction,” wrote Chancellor Kathaleen McCormick of Delaware’s Court of Chancery. “If the transaction does not close by 5 p.m. on Oct. 28, 2022, the parties are instructed to contact me by email that evening to obtain November 2022 trial dates.”
Concerns over Elon Musk’s Twitter distraction are prompting fears that he may need to allocate less time to Tesla (TSLA). The stock has plunged 25% to $236 over the past two weeks on the concerns, as well as a reality check that Musk (who’s personally on the hook for $33.5B) could be forced into another selldown of his TSLA shares. The haters are calling it a typical PR distraction, but Musk took to Twitter overnight to overlay the recent downturn with a new product announcement (in a similar fashion conducted in August). “Excited to announce start of production of Tesla Semi Truck with deliveries to @Pepsi on Dec 1st!” he wrote in a tweet. “500 mile range & super fun to drive.”
Go deeper: PepsiCo (PEP) ordered 100 Tesla Semis in 2017, with the aim of cutting its fuel costs and emissions. At the time, production was expected to commence in 2019, with the 500-mile-range version starting at $180K. While the price tag is likely a lot higher today, as an all-electric Class 8 truck, it would qualify for a tax break of up to $40K under the Inflation Reduction Act. Should the Tesla Semi be everything the company says it is, the vehicle could revolutionize the freight transport industry, with its cost savings and smaller carbon footprint. (21 comments)
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