Dear Reader,
Last Friday, the latest nonfarm payroll employment numbers report was released. And it just doesn’t make sense.
I like to think of myself as a rational optimist. I’m always happy to see good news. But as an analyst, when I see something that contradicts underlying data, I have to raise an eyebrow and tilt my head.
The numbers for January proclaimed a “stronger than ever” economy with 517,000 new jobs added. But there’s a lot more to the headlines that isn’t being talked about.
Every January, the U.S. Bureau of Labor Statistics makes a population adjustment to the jobs numbers. It basically assumes that all the estimated increases in population will be fully employed. Presto! New jobs added with the snap of the wrist… At best, it’s a wet-fingered assumption. We don’t actually know how many are employed.
Setting the impact of these magical adjustments aside, manufacturing doesn’t look good at all right now. The Empire State Manufacturing Survey is currently reflecting business conditions that are on par with the recession that we experienced during the Global Financial Crisis.
Empire State Manufacturing Survey
The ISM Manufacturing Purchasing Managers Index is also ugly, coming in at 47.4. Anything less than 50 signals economic contraction. The index has been in steep decline since the spring of last year, dropping below 50 in November 2022.
Small businesses are suffering, corporations laying off chunks of employees left and right, and inflation is not only persistent, but the prices of some things are at record highs. (Eggs anyone?) And there’s no sign of a top anytime soon. Gasoline prices are back on the rise as well, along with other petroleum byproducts.
The other interesting dynamic is that labor force participation rates remain at lows not seen since the 1970’s. Labor force participation had been on a sharp rise since 2016, but the pandemic halted that, and it hasn’t recovered since. There is simply a large part of the workforce that has chosen not to return to work, which is compounding labor shortages.
Continuing unemployment claims have also been on the rise since October. And probably the most concerning number is that part-time employment – for economic reasons – has been on a sharp rise and is close to hitting 4.1 million people now. Many have lost full time employment and are backstopping with less desirable part-time jobs, often more than one. This is never a good sign.
As much as I’d like to believe the headline numbers, the data tells us a different story.
Wages remain higher because of economic and monetary policy decisions that cause inflation and the fact that a smaller percentage of people are in the workforce. And the jobs growth numbers are not at all what they seem. Desirable full time employment is being swapped for part-time jobs, and the numbers are being influenced by statistical adjustments.
We have a bumpy road ahead over the next few months. “They” can disguise what’s really happening for only so long.
Watching Twitter reshape itself under Elon Musk’s leadership have been incredible to watch. This will be a remarkable case study in a year or two…
There were all kinds of backlash when Musk’s intention to acquire Twitter first became known. Many people said that such a move would lead to even more hate speech on the platform, and that Twitter would fail as a result.
The exact opposite has happened.
Musk reduced what we now know was a very bloated workforce by about 75%. And the product is now functioning better than I’ve ever experienced. What’s more, it’s measured a dramatic decline in hate speech. And not only did “everyone” not leave Twitter, but the platform has also been growing dramatically in popularity.
And thanks to its new management, incredible truths have been revealed through “The Twitter Files.” We now understand, in black and white, the censorship regime that took place at Twitter and other tech companies like Google, Facebook, and Microsoft, in deep and systematic coordination with various government agencies to push desired narratives and censor individuals and scientific research.
Musk’s efforts have already paid off in a big way. The company is on the cusp of profitability. And now Twitter is taking concrete steps to build new infrastructure that will open a world of opportunity for Twitter as an application.
To accomplish this, Musk is getting back to his roots.
Recently, Twitter registered as a payments processor with the U.S. Treasury. The company has also been filing for licenses to enable payments on the Twitter platform in states across the U.S.
I haven’t seen this discussed widely yet. But it’s very clear that Musk’s master plan for Twitter is coming into view.
We’ve talked before about Musk’s vision of creating an “everything” app. He even registered the domain X.com as a placeholder for what might come.
Bringing payments to Twitter is a big step towards making that vision a reality.
It will start with peer-to-peer U.S. dollar-based payments. The functionality will work a lot like popular payment apps Venmo and Block’s (formerly Square) Cash App.
From there, Twitter will be able to offer checking accounts, digital wallets, and other financial services. Eventually, I’d expect Musk to bring cryptocurrency payments to the platform as well.
This might sound like a far-fetched idea. But it would open the door to a wide range of products and services that would dramatically expand Twitter’s sources of revenue and increase the functionality of the app for its users. Implementing payment rails will be the foundation for Twitter becoming far more successful than it ever was under previous management.
If we look at the peer-to-peer payments app Venmo, it now has over 70 million users on the platform. And Block’s Cash App now boasts over 80 million users.
Now think about this – Twitter has 250 million daily active users on its platform. That means it has the potential to become a larger payment processor than Venmo and the Cash App combined. And it could do so virtually overnight.
And we should remember, payments is where Musk got his start. He was one of PayPal’s original founders. And PayPal turned into a massive business worth well over $100 billion.
So this is going to be one of the most exciting product launches of the year. When Twitter turns on payments, it’s going to be an absolute game changer. For both the company and the social media industry at large.
We’ve talked a lot about nuclear fusion technology over the last few years. This is by far the most promising work happening in the clean energy sector right now.
For the sake of new readers, nuclear fusion is essentially the power of the Sun. It involves taking two separate nuclei and combining them to form a new nucleus. This process, which happens under incredible heat and pressure, creates immense amounts of clean energy as a byproduct of the reaction.
And unlike nuclear fission, forms of nuclear fusion produce no radioactive waste.
So far we’ve talked the most about companies developing what are called compact nuclear fusion reactors. Commonwealth Fusion Systems and Tae Technologies are two of the prominent players here.
Compact fusion reactors are dramatically smaller than traditional power plants. But they are still pretty big. They take up roughly the size of a tennis court.
On the completely opposite end of the spectrum is a company called Avalanche Energy. It’s working on a nuclear fusion reactor roughly the size of microwave. This is something that could power a single home, vehicle, or perhaps even a plane.
Well, today we have to highlight a company that’s working on a middle-ground. It’s called NT-Tao.
NT-Tao is based out of Israel. And it just raised $22 million in its Series A funding round. It will use the capital to build a prototype of what I think of as a sub-compact fusion reactor. It’s smaller than a compact reactor like what Commonwealth or TAE are building, but larger than the design Avalanche Energy is working on.
Here’s an artist’s rendering of what the prototype will look like:
Source: NT-Tao
NT-Tao expects these reactors to produce about twenty megawatts (mw) of power. That’s enough to power about 1,000 homes. Alternatively, one of these reactors could power a single industrial facility such as a manufacturing plant.
What we’re talking about here is something that could completely change the landscape of how power is produced and transmitted.
Imagine dropping one of these reactors into a large neighborhood or an individual factory. Suddenly all the power would be produced on site. That would eliminate the need for a utility company. Micro-grids would finally become a reality.
The benefit here is that on-site power production also cuts out all waste. I don’t think this is well known, but right now we lose 7–15% of all electricity transmitted through power lines. Said another way, power generation companies need to burn an excess to fossil fuels to account for electricity transmission loss.
So NT-Tao is an exciting new player in the nuclear fusion space. And with its Series A round in the books, the company has everything it needs to get its prototype up and running.
We’re starting to get a picture of what next-generation clean energy architecture will look like. Certain kinds of nuclear fusion plants will be massive and feed an entire major metropolitan area. The footprint and costs will be on par with what we experience today.
Then there will be compact fusion reactors capable of fueling smaller cities or towns in a distributed grid. Technology like NT-Tao could be used for even smaller populations or industrial applications as a source of clean electricity. And then Avalanche Energy’s vision for fusion technology could literally be used to power a small number of homes, a large farm, or even a vehicle, aircraft, or marine vessel.
The industry is thriving right now, and 2023 will be another year of record investment and breakthroughs in fusion technology.
We haven’t talked about fifth-generation (5G) wireless in quite a while. That’s largely because we’re in this “boring” period where the wireless operators have their heads down building out their wireless networks – the physical infrastructure that makes it all work.
As a reminder, 5G is a lot more nuanced than many realize.
At the high-end, 5G can provide lightning-fast speeds greater than 1 gigabit per second (Gbps). That’s more than ten times as fast as what we typically see with average 4G connections.
However, at the low-end, 5G speeds are largely on par with 4G. We talked about this dynamic last year.
It all comes down to spectrum.
High-end 5G must be deployed in millimeter wave (mmWave) bands at very high frequencies and using small cell architectures in the wireless network. That’s the only way we can get 1 Gbps+ speeds.
But there’s a tradeoff.
Deploying 5G over mmWave bands requires small cell towers to be much closer together. That, in turn, means mmWave 5G requires a lot more cell towers to work. Which makes it considerably more expensive to build.
As we’ve discussed before, the sweet spot is in the middle. It’s called C-band.
5G deployed over C-bands can provide speeds between 400 and 800 megabits per second (Mbps). That’s faster than 4G and 5G deployed in the UHF band… but it’s not quite as fast as mmWave 5G.
The benefit of operating a wireless network in the C-band is that the network can support larger geographic footprints. The cell towers don’t have to be so close together… so we don’t need as many of them.
This is why nationwide 5G networks are so focused on building out the core of their 5G wireless networks over C-band spectrum. We’ll see mmWave 5G in major population centers. But the bulk of 5G networks will be in C-band.
And this brings us to an interesting report from a company called Crown Castle.
Crown Castle manages cell tower sites for AT&T, T-Mobile, and Verizon Wireless. And in its report, Crown Castle said that only half the cell tower sites they manage for these three carriers have been upgraded to support 5G over C-band.
This is a great reference point. It tells us that we’re about halfway through the 5G build-out. I prefer the glass is half full analogy. Great progress, and yet still more work to be done.
That may sound crazy. We’ve been talking about 5G for years now. But the fact is, it takes a lot of time and investment to build out a complete wireless network.
So we’re going to see heightened investment in 5G infrastructure for at least another two or three years. That means our 5G plays still have plenty of room to run.
Much of the investing world has forgotten about 5G. Many have even assumed that 5G “never lived up to the hype.”
This type of sentiment happens like clockwork…
As a technology executive, I have been working with and investing in wireless technology since the 2G era. And the reaction is always the same.
First, there is a lot of excitement at the prospect of the new wireless technology. But as time passes, people become impatient. They assume the technology just never delivered.
And then we start seeing headlines like this:
Source: https://phys.orgs
What few people understand is that 4G was instrumental in some of the greatest technology success stories of the past decade. Uber, Lyft, Amazon, Spotify, Facebook – all these companies have 4G to thank for their success. And popular games like Pokémon Go wouldn’t have been possible without 4G.
Without 4G, many companies wouldn’t exist, or else they’d be a fraction of the size they are today. And it will be the same story with 5G, but the opportunity is much larger.
Much of the world has lost sight of 5G. And that means most investors have “taken their eye off the ball.” Yet within the next couple of years, the vast majority of the population will have very high speed, low latency connections to C-band 5G wireless and we won’t know how we lived without it.
Here at Brownstone Research, we won’t lose sight of what’s coming… and we’ll be well positioned when it does.
Regards,
Jeff Brown
Editor, The Bleeding Edge
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
