The Week in Charts (3/11/24)

By Charlie Bilello

11 Mar 2024


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The most important charts and themes in markets and investing

1) Here Comes the FOMO

The fear of missing out (FOMO) is in the air again.

What brough it back?

Parabolic advances that have become too extreme to ignore.

Nvidia ($NVDA) is at the top of that list, gaining an astounding 87% in a little over 2 months.

That already exceeds its projected revenue growth for the entire year (81%).

Which means that its forward 1-year Price to Sales Ratio has been rising, moving up to 17.7x from 5.1x a year ago.

After blowing past both Google and Amazon, Nvidia’s market cap of $2.3 trillion is now within $300 billion of Apple (the #2 US company after Microsoft). The expectations embedded in this valuation are extremely high. One way to illustrate this: Apple has over 6.3x the revenue and 3.3x the net income of Nvidia, but its market cap is now only 1.1x higher.

Nvidia’s fundamental growth has been nothing short of incredible, with a 5,680% increase in net income and 1,320% increase in revenues over the last decade. But the increase in its share price has exceeded these gains by an enormous margin, with the stock advancing nearly 20,000%. Which means that investors are betting on much more fundamental growth to come.

2) Semiconductor Surge

Led by Nvidia, Semiconductors ($SOXX ETF) have trounced every other industry group in the last 10 years, rising 10x. The Nasdaq 100 ($QQQ), which has had an amazing run as well, is up 4.3x. Meanwhile, Gold ($GLD) and Energy ($XLE) are up only 1.5x.

The outperformance of Semiconductors relative to the broad market has gone parabolic, with the ratio at its highest level since 2000.

3) March 2009 Low: 15-Year Anniversary

15 years ago, the S&P 500 bottomed, ending the worst bear market since the Great Depression. Since then, it’s increased over 10x, generating a 16.7% annualized total return.

What if you bought in at the peak in October 2007 before the financial crisis? Incredibly, you’re still up 355%, or 9.7% annualized.

4) Digital and Physical Gold Rush

It’s a gold rush, both digitally and physically.

Bitcoin rallied 346% from its low in November 2022 to hit a new all-time high last week, its first new high in 846 days.

It crossed above $69,000 and $70,000 for the first time.

The total assets in the 11 spot Bitcoin ETFs have increased from $28.7 billion on the first day of trading in January to $55.3 billion today. They are now only $1.6 billion below the AUM of the largest Gold ETF ($GLD).

It took just 7 weeks for the iShares Bitcoin ETF ($IBIT) to cross above $10 billion in assets, the fastest for an ETF ever. The prior record was held by the first Gold ETF which took over 2 years to hit that mark after launching in November 2004.

Speaking of Gold, it’s back at an all-time high as well, up 19% over the last year.

Both gold and bonds peaked in 2020 when interest rates were near historic lows. The rise in rates from there caused problems for both asset classes, but Gold ($GLD ETF) has now fully recovered while bonds ($AGG ETF) remain 11% below their prior high.

5) Spending Like Drunken Sailors

Both Bitcoin and Gold are assets driven by stories, and the best story supporting their advances of late is the runaway spending by the government.

From 2000 to 2023, the US Federal Government increased their annual spending by 243% versus an 83% increase in overall inflation (CPI). That’s an annualized increase in spending of 5.3% per year, more than double the 2.5% annualized increase in CPI.

Where is the money for these huge spending increases coming from?

We’re borrowing it. The US National Debt was $6 trillion in 2000 and is over $34 trillion today. In the 9 months that have passed since the debt ceiling was suspended last June, we’ve seen a $3 trillion increase.

While government debt is spiraling higher, so is the interest rates we’re paying on that debt.

The result?

The interest payments on US Federal Government Debt have surpassed a $1 trillion annual rate, increasing 98% over the past 3 years.

Interest Payments on Federal Government Debt were 3.7% of GDP in the 4th quarter, the highest % since Q2 1999. The 120 bps increase in this % over the past 2 years (from 2.5% to 3.7%) is the biggest 2-year increase on record and is expected to continue to rise over the next decade.

6) Non-Mortgage Debt Surge

The government isn’t alone in making higher payments on their debt.

US household interest payments on non-mortgage debt hit a record $573 billion over the past year and is close to surpassing interest payments on mortgage debt ($578 billion) for the first time ever.

What’s driving this? The effective rate that households are paying on their mortgages remains very low (3.8%) as many locked in low rates during 2020-21 and aren’t moving. Contrast that with floating-rate credit card debt which has spiked to a record 21.5%.

At 4.9%, the US Household Debt Burden (Interest Payments as % of Household Income) is the highest we’ve seen since 2011, but still well below the level that preceded the 2008 financial crisis (7.4% in December 2007).

7) More Jobs Growth

275,000 US jobs were added in February (vs. 190k consensus estimate), the 38th consecutive month of jobs growth.

The top 3 sectors adding jobs: Healthcare (+91k), Leisure/Hospitality (+58k), and Government (+52k).

US Average Hourly Earnings increased 4.3% over the last year, the 32nd consecutive month above 4%.

The US Unemployment Rate moved up to 3.9% in February (vs. 3.7% consensus), tied for the highest level since January 2022.

This was the 25th consecutive month with an Unemployment Rate below 4%, the longest streak since the late 1960s.

The US labor force participation rate among 25-54 year olds (prime working age) moved up to 83.5% in February, tied for the highest level since May 2002.

Why is the overall participation rate still below pre-covid levels?

Early retirements from older workers, with 55 and older seeing a decline in labor force participation from 40.3% to 38.5%.

Why are they retiring early?

They’ve seen a huge increase in wealth over the past few years, even after adjusting for higher inflation.

8) Labor Market Loosening

In addition to the rising Unemployment Rate, two other signs of a loosening labor market:

  • The percentage of US workers quitting their jobs has moved down to 2.1%, the lowest since August 2020.
  • Total jobs in the US increased 1.8% over the last year, the lowest YoY growth rate since March 2021.

9) A Few Interesting Stats…

a) Only 24% of S&P 500 members outperformed the index over the last year, the lowest % on record w/ data going back to 1994.

b) Total US Consumer Credit increased 2.5% over the past year, the slowest growth rate since April 2021.

c) The share of US Credit Card borrowers who were delinquent rose to 3.1% in the 4th quarter, the highest since 2011.

d) Manufacturing Construction Spending in the US continues to hit new record highs, increasing 130% over the last 2 years.

e) Apple’s iPhone sales in China were down 24% YoY in the first six weeks of 2024 and Apple has moved down to 4th in China’s smartphone market share from 2nd last year (19% share in 2023 -> 15.7% share in 2024).


And that’s all for this week. Have a great week!

-Charlie

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