Micron: “Glut”of Chips

December 22, 2022

The market is having a negative reaction to the news yesterday, that a major chip manufacturer, Micron, MU reported weaker then expected earnings and blamed the results on a “glut” of memory chips in inventory which is likely to last through part of 2023.

Another piece of bad news for those hoping the economy can have a “soft landing” is the report from Federal Express FDX that although reporting above forecasted earnings, they were cutting staff by 10% going into 2023.

One final piece of bad economic news is that Congress will pass a $1.6 Trillion Spending Bill in the final days before taking off the Christmas Holidays. Without significant off setting tax increases, and signficant cuts to spending, that means the Country’s deficit with continue to grow past the current $31 Trillion Dollar level. That combined with rising interest rates, means that the interest on debt will become a significant burden for future budgets.

The politicians have put the Federal Reserve in an impossible situation. As the Fed raises interest rates in an effort to head off inflationary pressures, they are slowing the economy which will reduce business activity, and also reduce payrolls That will reduce tax revenues and lead to an ever increasing amount of money printing to fill the gaps.

Not a positive business outlook for 2023.

Although not investment advice, I continue to feel the downside risks in both the stock and bond markets excede the upside potential for those asset classes. Although I have never appreciated the advantages of the crypto world, I would think the risks in that sector remain greatly elevated.