"Just one more thing."

-- Lt. Columbo

Must view YouTube and homework for this weekend.

The Gospel According to Stanley Druckenmiller! 

* I am outta here like Heidi Fleiss

Thanks for reading my Diary today and all week.

TGIF!

Enjoy the weekend.

Be safe.

It's Friday, so its time for Professor Galloway's weekly No Mercy, No Malice.

This week's commentary is "Overhauling Twitter". 

A few days ago Walmart (WMT) broke $140. I reloaded in the name after selling above $150/share. 

I have been steadily adding - and super sized it on Tuesday.  

The stock has begun to act better - and was trading up another +$2/share to almost $144.50. 

It ain't a SPAC or even GameStop  (GME) - but the stock looks like it has begun to turn around.

* With nearly everyone bullish...

A worrisome sign is the percentage of stocks outperforming the S&P 500 index over the last 12 months. The breadth of that outperformance has gotten extremely narrow. It is worth noting the previous dates of the lows in this indicator.

As Bob Farrell once noted:

"Markets are strongest when broad and weakest when narrow."

Lance Roberts does his best work on Fridays!

It looks like the averages, after some really bad weakness in the futures on Sunday evening, are on their way to five consecutive daily wins. 

Market breadth remains solid.

Charlie's Five Chart Friday! 

Payrolls in January grew by 49k, about half the estimate of 105k, with the private sector contributing just 6k vs. the forecast of 163k. Also of note, the two prior months were revised down by a combined 159k. Keeping the headline number above zero was the hiring in public education. The unemployment rate though dropped to just 6.3% as the household survey said 201k jobs were added while the size of the labor force fell by 406k. The more comprehensive U6 rate dropped by six tenths to 11.1%. The participation rate fell one tick to 61.4% while the employment to population ratio rose one tick to 57.5%. The diffusion index, which nets out the number of industries adding jobs relative to those shedding, fell below 50 at 48.1 from 61.9 in December. 

Of note was the jump in average hours worked to 35 from 34.7 which then mitigates the need to hire if your existing work force is handling more load. Combine this with a +0.2% rise in average hourly earnings and out comes a +1.1% month over month increase in average weekly earnings and a +7.5% year over year  jump. Helping too is the mix as the lower paying leisure/hospitality space is not as relevant with so many businesses in that industry closed or barely open. 

Negatively, there was another rise in the long term unemployed, those still looking more than 27 weeks which now is above 4mm. Positively, there was a decline in those working part time due to economic reasons like not enough work to do or they can't find full time spots. 

Manufacturing shed 10k after a gain of 31k in December. Construction also lost jobs, by 3k after a 42k person increase in the month prior. Jobs were lost in retail and leisure/hospitality for obvious reasons. Temp jobs improved by 81k after a 64k gain in December. Transportation/warehouse lost 28k jobs after declining by 24k in the month prior but after seeing a rise of 124k in the month before that. 

There was a lot of cross currents in this report with the weak establishment but good household survey. Wages are jumping as are hours worked for those working but it's still tough for those longer term unemployed. Covid restrictions obviously impacted the leisure/hospitality and retail sectors while manufacturing and construction hiring took a breather. The only way to really get a clean look at the state of the labor market will have to come this summer when we have some form of herd immunity, if we do. Until then, the data will remain patchy but still pointing to an improvement overall. 

On the headline miss, Treasury yields backed off their highs. The 10 year was at 1.17% just before the release and now is at 1.15%. The 30 year was 1.97% vs 1.94-.95%. The dollar is at the low of the day. 

Here is a five year chart on U3 unemployment rate: 

A trillion here, a trillion there... soon its real money: 

With the Democrats seemingly wanting to go at it alone on spending almost another $2 Trillion after the $900b bill passed a bit more than a month ago and the $3 Trillion spent last year, interest rates continue higher with the 10 yr now at 1.15-.16% and the 30 yr at 1.95%. As no lunch is free when spending this extraordinary amount of money, it seems hard to avoid higher inflation and interest rates. As for the stock market and again to the question of when higher rates matter, it's impossible to know but here is a chart of the valuation of the S&P 500 from which it would matter at some point. It's a chart of the Enterprise Value to Sales as it includes debt and avoids the games played with earnings. While Fed members stated their comfort with market valuations and market stability this week, when looking at this chart (and the margin debt one yesterday) one has to wonder how the Federal Reserve can EVER taper and raise rates again without causing a market hissy fit. Also a frame of reference, with the dividend yield on the S&P 500 at 1.5%, the 10 yr is now not that far behind.

The dollar is also weaker after yesterday's strength on the spending blowout while commodities are benefiting, particular oil which is up another 1%. The CRB raw industrials index yesterday closed at the highest level since June 2014 and is approaching levels last seen in early 2012.

EV/SALES ratio for S&P 500



CRB Raw Industrials Index

We're also seeing selling in European bonds. After jumping 7 bps yesterday on the belief that the Bank of England was not going negative, the 10 yr gilt yield is up another 4 bps to .48%, the highest since March 2020. The German 10 yr yield, up by 1.5 bps, is the least negative since September.

10 yr GILT yield

The only thing of note overseas was the December German factory orders figure which missed the mark with its 1.9% m/o/m drop vs the estimate of down 1%. This follows a 2.7% gain in November (revised up by 4 tenths). We know there was a new round of covid restrictions in December which impacted business. Orders though were still up 6.4% y/o/y as we know the manufacturing side has been a particular bright spot and Germany is benefiting from the recovery in China.

Adding to Twitter (TWTR) , Peloton (PTON) , Carvana (CVNA) , and Facebook FB shorts.

* The heavier the Super Bowl advertising by a company/industry, the more likely its stock or sector will underperform. And vice versa.* This year My Super Bowl Indicator says to short beer and food stocks and to buy auto stocks!

"2020 was a great year... Not! It really sucked donkey. We just wanted to say we will see you soon for the game. We will see you on the Big Bowl..."

- Wayne's World 2021 Super Bowl commercial 

On Sunday, one of the grand sporting events of the year will take place: Super Bowl (LV) Fifty Five .

Back in January 2000, I created a brand new stock market Super Bowl indicator as a contrary indicator, very similar to the cover of Time.

My indicator dictates that the more intense the Super Bowl TV advertising by a group of companies, particularly in a specific industry, the more likely the stocks of those companies will perform poorly in the year ahead. Conversely, a reduction in an industry's Super Bowl commercials augurs well for the stocks in that sector.

Barron's' Alan Abelson was kind enough to include and highlight my newly minted indicator in his "Up and Down Wall Street" during the weekend of the 2000 Super Bowl. As it happens, My Stock Market Super Bowl Indicator gave a clear warning alarm to the end of the Dot.com bubble.

As the late Sir Alan wrote:

"As it happens, last week's tech wreck was accurately forecast by a remarkable new stock-market indicator, one we're proud to print for the first time anywhere, the Stock Market Super Bowl Indicator.

Before you start yapping about it being old hat -- or old helmet -- we respectfully suggest you cool it. Pure and simple, our new indicator has nothing to do with the old Super Bowl indicator. Unlike the latter, its predictive power doesn't depend on the outcome of the Super Bowl or, more specifically, whether the winner represents the National Football League's American Conference or the National Conference.

Our brand-new Stock Market Super Bowl Indicator is a contrary indicator, kind of like the cover of Time. Its critical components are the commercials carried on television coverage of the event and the identity of the companies doing the advertising. Its virtue is not as a forecaster for the market as a whole, but for individual sectors of the market.

The indicator is the handiwork of Doug Kass, a kindly hedge-fund operator who, despite a propensity to short quantum leapers, wound up last year with an improbable performance matching Nasdaq's improbable performance.

Simply put, the more intense the Super Bowl TV advertising by a group of companies, the more likely the stocks of those companies -- and others of a kindred ilk -- will do poorly in the year ahead. For 2000, we're sorry to report, the indicator is flashing red for the Internet crew.

By Doug's count, roughly 12 of the 30 companies shelling out an average of $2 million for 30-second spots are dot.coms. That's four times the number of 'Net outfits that made their pitch on Super Bowl TV last year and compares with only one in each of the prior two years.

What's more, for the first time, an Internet company, E*Trade, is sponsoring the half-time show. That's known in locker-room lingo as piling on.

If nothing else, the greater the number of look-alike or sound-alike companies doing the shilling, the less the impact of the individual shills. And in fact, there seems to be more than a modicum of evidence that for the viewer, the link between the commercial and the sponsoring Web company barely registers.

Making the auguries all the darker for those dozen dotcoms is the sad history of the sole 'Net TV advertiser during Super Bowls XXXI and XXXII, autobytel.com. A '99 IPO, the stock peaked at $48 and, last we looked, was a hair under 17.

Without Wall Street, Silicon Valley would not have been able to remove the burden of salaries from its operating statements and substitute stock options for cash compensation. Without the lovely boost to earnings afforded by the incredible lightness of labor costs, earnings growth would be considerably less, and so the multiples awarded that growth would be merely ridiculous instead of absurd. There would be only a quarter as many West Coast billionaires and half as many millionaires.

In like manner, since the vast bulk of Internet companies are bereft of even a hint of cash flow, Wall Street has, via stock offerings, endowed them with the means of promoting their wares, not only on TV during the Super Bowl breaks but also in newspapers and magazines, on billboards and in subway cars and every other space known to advertising man.

If, indeed, we are rapidly reaching the point of cognitive congestion where the consumer is under such assault from so many dot.coms that they have begun to merge in his psyche into one big indivisible glob, that spells trouble in capital letters. And not only for the 'Net companies, but also for the media on which that vast flow of lucre has been lavished."

-- Alan Abelson, Barron's (January 2000)

Of course, the rest was history, as one of the largest stock market declines (especially of a technology and Internet kind) occurred during the subsequent few years.

Previous Super Bowl Advertisers (2013-15)

I haven't updated my Indicator in a number of years - last time I looked:

There was a total of 15 new advertisers in 2015's Super Bowl. Most of those additional advertisers are in the digital commerce and technology space. That, according to my indicator, was a negative "tell" for technology shares.

In total, there was 30 advertisers (some with multiple product ads) consisting of seven food companies, (only) six auto manufacturers, one travel company, four financials, four consumer product entities and eight technology companies in advertisements this year

PepsiCo not only advertised in the 2015 Super Bowl, was the official sponsor of the halftime show featuring Katy Perry and Lenny Kravitz (as it will be this year).

Interestingly, the biggest player over Super Bowl history -- the automobile industry -- was a lesser profile than in recent years. (Over the last decade, car makers have spent more than $500 million on Super Bowl commercials, representing nearly one quarter of all the advertisements).

According to The Detroit News, 11 automakers aired commercials during the 2014 Super Bowl. In 2015 , only a handful will be paying the big bucks, as Ford , Lincoln, Hyundai, Acura, General Motors , Honda and Volkswagen did not advertise during the game.

In 2014 there was a preponderance of consumer products companies that had anted up for 30- and 60-second advertisements during the Super Bowl! Auto advertisers were close behind. Combined, they represented the lion's share of last year's Super Bowl ads.

Of the 30 2014 Super Bowl advertisers, 12 were consumer-products related, accounting for 11.5 minutes of advertising (or 40% of the total number of advertisers) -- and that did not include Pepsi, the beverage and snack company that sponsored the halftime show. Eleven advertisers were automobile-related, accounting for 8.5 minutes of advertising (or 27% of the total). Between consumer product and auto companies, the two sectors accounted for 23 out of 30 advertisers, representing 20 minutes of all Super Bowl commercials (or 67% of the total).

Auto manufacturers stocks faltered last year, but consumer products were among the market leaders.

In 2013, the food and beverage sectors were responsible for an outsized 41% of all Super Bowl advertisements and, on cue, this defensive group was an underperformer in that year's sharp U.S. stock market advance.

$5.5 Million for 30 Seconds of Your Time

The cost of a half minute commercial in 2021 Super Bowl is $5.5 million - down about $100k from 2020 but up $200k from 2019. (It reportedly took CBS about two months extra to sell out the advertisements this year).

Reviewing This Year's Super Bowl Advertisers

Although nothing will top last year's Super Bowl Halftime show featuring Shakira's tongue, 2021 will mark another year of unique and weird ads (e.g. Tide focusing on a Jason Alexander's sweatshirt, and Cheetos dropping Ashton Kutcher's first single - a total pissa of an ad #Itwasn'tme!

Much like literally everything else, Super Blow LV advertising was affected by the coronavirus - with huge names like Coke (KO) and Pepsi (PEP) sitting this one out, although Pepsi is sponsoring the Half Time show.

In total, there will be about 38 advertisers (some with multiple product ads) this year consisting of only three auto companies, 12 food, eight beer companies, four technology companies, four in financial services, nine consumer product companies - and of course... drum roll... Robinhood!

For the tenth time, Pepsi will be the sponsor for the half time Super Bowl ceremonies this year.

We can conclude that the proliferation of beer and food companies this year compared to previous years - could produce pressure those sectors over the balance of 2021 On the other, auto stocks are underrepresented vis a vis prior Super Bowls.

Here is a full list of the 2021 Super Bowl advertisers. 

The Greatest Super Bowl Ads of All Time

For fun, here are some of the best Super Bowl advertisements ever aired!

Enjoy the game!

* I recently made a successful short trade in Facebook - covering for a profit 

* I am back shorting again 

Ahead of a future IOS upgrade, Apple's (AAPL) new privacy policy will likely have a meaningful impact on Facebook FB by requiring users to give their permission for apps to collect data about them.

Specifically, Apple will be adopting an "app tracking transparency" initiative which will allow the consumer to block companies and apps like Facebook to track their digital activity across other companies apps and websites. (See prompt above that will be seen by Apple users when an app asks permission to track your data.)

 In support of this policy Apple made the following statement: 

"We believe that this is a simple matter of standing up for our users. Users should know when their data is being collected and shared across other apps and websites - and they should have the choice to allow that or not. App Tracking Transparency in iOS 14 does not require Facebook to change its approach to tracking users and creating targeted advertising, it simply requires they give users a choice."

Obviously this has the potential for adversely impacting Facebook's advertising business. 

Indeed, Facebook has take out full-page newspaper ads attacking Apple, claiming that the changes will "limit businesses" ability to run personalized ads and reach their customers effectively":

This fundamental change in privacy is a potential threat to Facebook's business and share price. 

The recent share price rise in FB has provided short sellers another opportunity to reload on the short side - which I have.

* PTON shares fell by -$12 in the after hours, erasing the +$11 gain the regular session

PTON's shares have risen 10 fold since the spread of Covid increased demand for its products. 

I am not a believer in this software as a service subscription exercise company. Rather, I see Peloton as a company that likely has a narrow high-end target market - far smaller an addressable market than the consensus expects. 

During the conference call the company discussed its problems in delivering bikes to customers that have resulted in a sizeable (+$100 million) rise in additional bottleneck costs, in part associated with delays at West coast ports. 

I am not convinced that when the impact of Covid leaves us, the enthusiasts that a secular change in exercising lies ahead. And even if it does, I am not convinced that Peloton will have the market to itself as Apple (Fitness +) and others have announced market entrance. 

Jim "El Capitan" Cramer chimed in this morning on Peloton. 

I couldn't agree more with Jim "El Capitan" Cramer below. 

As I wrote earlier in the week, slapping on a brief description of a SPAC with a chart (moving from the lower left to the upper right) is not how I approach individual stock selection. Though many are supportive of this I will not stray from my fundamental approach to security analysis - seeking a favorable reward vs. risk and a "margin of safety."

Danielle DiMartino Booth on mounting job cuts in the retail sector:

• January saw 1,359 Retail job cuts announcements, per Challenger, Gray, & Christmas, a mere fraction of the 10,444 in January 2020; by last year's end Retail was running on fumes, seeing 184,884 cuts in all which was triple the annual average of 65,036 going back to 1993
• The 78,193 ex-retail job cuts last month were the highest since October, with "Demand Downturn" cited as the chief reason; in a sign of labor market scarring, January also was the first post-pandemic month that Leisure and Transportation did not top the layoffs list
• Burning Glass Job Postings have been in the green in two of the last three weeks after being down vis-à-vis January 2020 for 28 straight weeks; temps are also promising, with ASA's Staffing Index falling for the first time since June signaling full-time hires' rising prospects

(Rick sits back in the car a second, then hurriedly jumps out and reaches for the gas pump. Kramer pops up from behind the pump and scares him)

Rick: "Ahh!"

Kramer: "No, man! Not the gas!"

Rick: "But it needs it, Kramer! It needs it bad!"

Kramer: "Do you think that this'll make you happy? 'Cause it won't!"

Rick: (Walking away) "Ah, you can just go on without me."

(Kramer grabs him by the collar)

Kramer: "Listen to me. When that car rolls into that dealership, and that tank is bone dry, I want you to be there with me when everyone says, 'Kramer and that other guy, oh, they went further to the left of the slash than anyone ever dreamed!'"

By now, long time readers may have noted we've never kicked off your trading day with a Seinfeld reference. We're amazed ourselves. Maybe kismet required we wait until yesterday's release of Challenger, Gray & Christmas data on job cut announcements. January being the busiest month of every year for layoffs, we thought nothing of the year-over-year (YoY) increase over 2020. Last January was, after all, a pre-pandemic month in U.S. economic history.

And then we saw the fine print. At 1,359, Retail jobs cut announcements were a fraction of 2020's tally of 10,444 and a tenth of the long-term average (red bars). The first thing that came to mind was, "Inconceivable!" Retail loads up on extra hands in the fall and jettisons them in January. "That's how it's always worked," our thought process continued, "unless...the gas tank was already on empty, just like that Seinfeld episode!" (Scary to see how we think.)

As things turned out, Retail was already running on fumes as 2020 turned to 2021. Job cut announcements last year totaled 184,886, dwarfing 2019's 77,475, which we thought back then to have been as bad as it could get. Peering all the way back to 1993, Retail cuts averaged 65,036 a year, a third of last year's slaughter.

That said, we know U.S. consumption was not a third of its long-term average, not with all of that stimulus money pumping through the economy's veins. That took us to the next stop, Challenger's last sector entry - Warehousing, which includes distribution centers. As it were, this January's layoffs in the sector more than tripled to 6,601 from last year's 2,180. While one year's break in seasonality does not make for a trend, this initial shift does posit online shopping will be with us for some time. We won't know for years but it's conceivable that distribution center holiday hiring will be the new seasonal swing factor to kick off the year.

As for the broader economy, it's with good reason that Andrew Challenger said January's increase in nationwide job cut announcements appeared, "to be a new wave of layoffs hitting deeper than the initial blow." Indeed, ex-retail, the balance of 78,193 was the highest since October and well north of last January's 57,291. The chief reason for layoffs - "Demand Downturn" - coupled with the first post-pandemic month in which Leisure & Hospitality and Transportation (think airlines) did not top the layoffs list does suggest the economy has an element of permanent labor market damage.

Last January's nonfarm payrolls (NFP) seasonal adjustment for Retail and Leisure & Hospitality were 580,000 and 320,000 jobs respectively. But we know Retail hired a pittance this past fall compared to prior holiday seasons such that they didn't have to reverse that headcount in January. Ditto for Leisure & Hospitality. To the extent the seasonal add-backs cannot capture the effect of the pandemic, we could see upside in this morning's NFP.

With a hat tip to QI amiga Philippa Dunne, the Census Bureau's Household Pulse Survey did clock a loss of 1.7 million jobs between mid-December and mid-January. Consider that a good real-time check against the expected noise in today's jobs data.

That said, the one element we are, and should continue to see, given the potential for the vaccine to unleash services spending and the increased recent stimulus we've every reason to believe will continue indefinitely, is stability. After a 28-week stretch of negative prints versus the January 2020 baseline, job openings via Burning Glass data have been in the green in two of the last three weeks (green line).

Moreover, temporary employment is flashing its own stability signal. We've been schooled to think of a rise in temporary employment is a precursor to increased full-time employment gains. In a post-pandemic world, however, temps represented employers' reticence to grow their businesses given the murkiness of the outlook. Perhaps the first decline in the American Staffing Association's Staffing Index in seven months (yellow bars) is thus a promising sign as well.

Geeks that we are, what we're really excited to see in tomorrow morning's report is the annual benchmark revision that covers the year through March 2021. C19 shell-shocked though we may be, we haven't forgotten that world trade contracted in full year 2019, a phenomenon that's always triggered a U.S. recession. Last year's benchmark revision was significantly negative. We'll now get to see the true state of the pre-pandemic U.S. economy that's so fragile we have to assign the term "indefinitely" to our expectations for continued unemployment benefits and other sources of stimulus spending. It's entirely possible that the economy was running on fumes before COVID-19 washed ashore.