June 3, 2023 | Jobs Report, JOLT’s Report, T-Bills, Nvidia (NVDA) and Tax Differences of Interest and Dividends

Jobs Report 
Overall, I'd say the jobs report showed some good numbers. The headline number was strong with an addition of 339,000 new hires, easily topping the estimate of 190,000. The prior two months were also revised upwards by a total of 93,000. Payrolls were particularly strong in health care and social assistance (+74,600), professional and business services (+64,000), and government (+56,000). I generally don't like to see government being a major contributor to the jobs report, but it is important to note that government employment is still 0.9% or 209,000 jobs below the pre covid level in February 2020. On the negative side, the household survey showed the number of unemployed persons climbed to 440,000 and the unemployment rate increased from 3.4% to 3.7% with no change in the participation rate. While I do like to look at both reports, I will say I give more credence to the establishment survey as it is based on a sample of businesses rather than a survey of households. I do think the report does not provide evidence for the Fed to hike and June and I still believe a skip, or a pause makes the most sense. 

 

JOLT’s Report
Good news/bad news in the JOLTs report. The good news is that the labor market remains extremely strong. The number of job openings climbed from 9.7 million in March to 10.1 million in April. This means that there were 1.8 job openings for each unemployed worker in the month of April. Layoffs also fell by 264,000 in the report to 1.6 million. It's important to remember in 2019, layoffs averaged 1.8 million per month. The bad news is that this does not give the Fed evidence that the economy is slowing and may give them another data point to argue for another rate increase in June. 

 

T-Bills 
I was in the restaurant last week and could overhear a conversation of two gentlemen next to us and they were talking about T-bills. It seems everybody is talking about T-bills these days and the yield and what a great investment they are. I agree with that statement if you’re looking for short term returns, but if you’re putting long term money into T-bills, you are making a big mistake. No one seems to be listening to this advice though. In January 2022, only $1.6 billion of T-bills were purchased by individual investors. In April 2023, that number has climbed nearly tenfold to $13.4 billion. Again, I encourage people not to invest your long-term money in short term instruments, even when they sound attractive around 5%. 

 

Nvidia (NVDA)
Nvidia (NVDA) has now hit the $1 Trillion market cap club. I have said I am impressed by the company and the way it's been able to pivot into different businesses, but this valuation is just crazy. If we look at combining the market caps for Broadcom, AMD, Texas Instruments, Qualcomm, and Intel they would total $964 B. Last year's total sales for all of these chip companies combined would be over $180 B. For comparison, in 2023 Nvidia is estimated to have a little over $30 B in sales. Also, if we look at their sales compared to the other companies in the $1 Trillion market cap club, they need a lot of growth to catch up. The 2023 estimated sales for those companies: Apple $384.8 B, Microsoft $211.4 B, Alphabet $299.8 B, Amazon $559.7 B. It is likely Nvidia will continue to grow sales and earnings at a nice rate over the next few years, but at these valuations the company appears to be priced for perfection.