Morning Reads

Morning Reads





Greener pastures?

Upstate New York has long been a destination for the crypto mining industry due to the region's abundance of hydroelectric power, favorable climate for cooling rigs and the cheapest electricity prices in the Northeast. In recent years, many shuttered power plants with unused electric infrastructure have been converted into mining centers, even before the exodus from China in 2021. However, the industry's foothold in New York could be coming to an end following a bill that passed early Friday in the New York State Senate.

What happened? While the new legislation is still waiting for the signature of Governor Kathy Hochul, it calls for a two-year moratorium on proof-of-work mining that utilizes energy from carbon-based sources. Proof-of-work is used for validating transactions and mining new tokens, but requires sophisticated gear and a whole lot of electricity. The law would exempt operations that have already secured permits, though new entrants would be barred from coming online and existing licenses wouldn't be renewed unless the facilities use renewable power.

At issue is New York's Climate Leadership and Community Protection Act, which requires steep emissions reductions over the next decade. As a result, lawmakers set their sights on energy intensive proof-of-work mining, which has become synonymous with Bitcoin (BTC-USD), though Ethereum (ETH-USD) has also used this method (and will continue to do so for at least another few months). "If it passes, it would make New York the first state in the country to ban blockchain technology infrastructure," said Perianne Boring, founder and president of the Digital Chamber of Commerce.

Outlook: The latest development could have a domino effect across the U.S., which is at the forefront of the global crypto mining industry. The country accounts for 38% of the world's miners, and companies may seek to relocate their operations to the less-greener pastures of Kentucky, Georgia and Texas. At the federal level, the Biden administration is formulating its own policy on crypto mining, with recommendations on how to mitigate the sector's energy consumption due out in September. (9 comments)

Oil drama

Crude prices weren't helped out from a decision by OPEC+ to turn on the taps, with a barrel of WTI climbing another $5 to the $117 level on Thursday. The oil group agreed to raise production by 648K barrels a day in both July and August, compared with 432K bpd each month per an earlier pledge. That's only a drop in the bucket (648K barrels is equivalent to 0.7% of daily global demand) and most OPEC members (except Saudi Arabia and the UAE) are already pumping at capacity. Russia's output has also fallen by about 1M bpd following Western sanctions over its invasion of Ukraine, and that could drop further to as much as 2M-3M.

Commentary: "It's like the group is firing rubber bullets at the oil market," explained Christyan Malek, head of oil and gas equity research at J.P. Morgan. "It's a cosmetic increase."

"The U.S. will continue to use all tools at our disposal to address energy prices pressures," White House Press Secretary Karine Jean-Pierre said in somewhat of a contrast, recognizing OPEC+ chair Saudi Arabia in "achieving this consensus." The Saudis had previously rebuffed all requests by the U.S. to increase production as the Biden administration approached the royal family at an arm's length amid strained relations over the war in Yemen and the killing of U.S.-based journalist Jamal Khashoggi. Attempts have been made in recent weeks to repair the longstanding tensions as U.S. gasoline prices hit record highs and President Biden seeks to visit the Kingdom during a trip to the region later this month.

Elsewhere: National Economic Council Deputy Director Bharat Ramamurti revealed that the White House was considering a "windfall" profits tax for U.S. oil and gas producers, following a similar tax announcement in the U.K. and a proposal in the U.S. Senate. However, some strategists caution against taxing "windfall" profits in good times as it could discourage investment in the cyclical energy cycle and intensify prices at the pump. Since Monday, the national average for a gallon of regular gasoline has increased by $0.14 to $4.76, according to motoring group AAA. (128 comments)

Jobs report

The number of U.S. jobs added in May is expected to moderate from recent months as the Federal Reserve hikes rates to cool the economy. It's on a mission to bring down price pressures that are being felt almost everywhere, with Vice Chair Lael Brainard seeing the tightening campaign continuing through the summer. As for today's print (released at 8:30 a.m. ET), economists estimate that 325,000 non-farm payrolls were added in May, down from the 428,000 increase in April. The unemployment rate is forecast to improve slightly to 3.5%, from 3.6% last month, which was already near 50-year lows.

Quote: "We've enjoyed 12 consecutive months of payroll growth north of 400,000, but that streak is close to an end," said Bankrate Chief Financial Analyst Greg McBride. "Job growth will continue but at a more modest pace in the months ahead as the Federal Reserve works to slow the economy and corral inflation."

Keep in mind that the strong jobs growth over the past couple of years was digging out of the hole caused by the pandemic in March and April 2020, when 22M people lost their jobs. Those positions have largely come back. According to the U.S. Bureau of Labor Statistics, the number of long-term unemployed people was 1.5M in April, little changed from March, but 362,000 higher than February 2020. Wage growth will be another area where investors can track inflation, with average hourly earnings reaching $31.85 in April, up 0.3% from the previous month and up 5.5% Y/Y.

Go deeper: Economists will also be keeping an eye on the labor participation rate, which has stayed below pre-COVID numbers. April's 62.2% is 1.2 percentage points lower than the figure seen in February 2020, but the future trajectory will depend on whether workers come off the sidelines. "With almost two open jobs for every unemployed worker, seeing the labor force participation rate get closer to pre-pandemic levels would be a welcome sight," McBride added in a note. (1 comment)

Robotaxi revolution

General Motors' (NYSE:GM) Cruise has become the "first and only company to operate a commercial, driverless ride-hail service in a major U.S. city" after inking the appropriate permits in San Francisco. The green light was granted by the California Public Utilities Commission, allowing the GM subsidiary to charge a fare for its driverless rides. Cruise's cars are also fully electric and battery-powered, a big win for reducing emissions in the climate conscious San Francisco.

Bigger picture: "Crossing the threshold into commercial operations isn’t just big news for Cruise alone. It is a major milestone for the shared mission of the AV industry to improve life in our cities," the company wrote in a blog post. "And it's a giant leap for our mission here at Cruise to save lives, help save the planet, and save people time and money."

Cruise has defended its safety track record by noting that its vehicles understand complex social dynamics and take safety actions as a default. Even San Francisco officials have conceded that the driverless Cruise AV appears to generally operate as a "cautious and compliant defensive driver." According to a tally by Reuters, Cruise AVs suffered 34 accidents involving bodily harm or over $1,000 in damage across nearly 3M miles of driving during a four-year span.

The competition: Alphabet's (GOOGL) Waymo began offering free autonomous rides to a limited number of SF natives last August and recently ditched the safety drivers on board. It has also completed "tens of thousands" of rides without a driver behind the wheel in the East Valley of Phoenix, Arizona. Meanwhile, Tesla's (TSLA) Elon Musk has often touted ambitious timeframes for the company's much-vaunted robotaxi (most recently promised for 2024), but the vehicle technology has yet to be fully delivered. (2 comments)

Today's Markets

In Asia, Japan +1.3%. Hong Kong closed. China closed. India -0.1%.
In Europe, at midday, London closed. Paris +0.3%. Frankfurt +0.4%.
Futures at 6:20, Dow -0.2%. S&P -0.3%. Nasdaq -0.6%. Crude -0.9% to $115.88. Gold -0.2% to $1868.20. Bitcoin -0.1% to $29,898.
Ten-year Treasury Yield unchanged at 2.92%

Today's Economic Calendar

8:30 Non-farm payrolls
9:45 PMI Composite Final
10:00 ISM Service Index
10:30 Fed's Brainard Speech
1:00 PM Baker-Hughes Rig Cou

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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