Gas compression, jobs, dispersion and vol, nuclear, and Hormuzing
Five Idea Friday: 20 some-odd charts to carry you through the weekend
compression to the moon
‘soft’ jobs data, lol
investors are smart some times (and/or it’s a stockpicker’s delight)
going nuclear, slowly and more expensively
straight in the Hormuz
👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. 👋👋👋Random Walk has been piloting some other initiatives and now would like to hear from broader universe of you:
(1) 🛎️ Schedule a time to chat with me. I want to know what would be valuable to you.
(2) 💡 Find out more about Random Walk Idea Dinners. High-Signal Serendipity.5 Idea Friday
Some quick-ish hitters for your weekend reading pleasure.
1. Compression to the moon
I don’t normally do this, and given other commitments, have less bandwidth for it, but I’m pretty pleased with how some of my themes and single-names have played out.
This is a bit of a grab bag, with a somewhat arbitrary starting point, but behold:1
$TASE the Tel Aviv Stock Exchange—a Sohn Conference idea—has crushed it, so much so that I should have plotted it separately.
ArchRock AROC 0.00%↑, the little nat gas compressor that could, has also crushed it; and finally,
On the “state and local governments are under-penetrated tech buyers” theme, Liquidity Services LQDT 0.00%↑, the little auction market that could, has also crushed it. TYL 0.00%↑ is a much more recent addition to that thesis, so the longer-term performance it pulled down by the SaaSAttack, but it’s been about flat for my purposes.
Do your own homework, of course, and rely on nothing that I say, but it’s nice to be right for the right reasons.
ICYMI
2. Jobs day blues
Random Walk isn’t going to spend too much time on the “gloomy,” jobs report.
It’s just one month of survey data, and it’s directionally in-line with what anyone who’s been paying attention would expect, so it doesn’t make sense to read much more into it, besides that.
It’s a slow-growing job world out there, which we’ve known for a long while now.
If you’re inclined to peak under the hood, one thing to note, is that this is largely a change in the public sector, whereas private sector job growth is still positive (albeit, slowing):
Private sector (which includes healthcare) is still growing.
There hasn’t been much job-loss, but the most acute job-loss has been in the federal government, which has impacted black women, in particular, more so than other groups.
Again, mostly, it’s a mistake to read too much into a single month of noisy survey data, one way or another.
If you want to be optimistic, with some non-survey data, BofA has a slightly rosier picture than most:
Internal data at BofA points to an uplift in hiring, not captured by the surveys.
Likewise, the broader universe of alternative jobs data likewise shows something of a positive trend:
A composite of the various alternative labor data sources has been drifting back into positive territory, but isn’t quite there yet.
Make of that what you will, but I continue to think that “some good months, some bad months” is going to be the story for an awfully long time (unless we open the border again).
This is just the new normal now, so it makes little sense to lose one’s cool over “soft” jobs data.
3. Investors are smart sometimes
D.E. Shaw published some research demonstrating the unwind or really evolution of the Mag[whatever] trade.
Or more specifically, demonstrating that rather than concentration, diffusion and volatility is now the name of the game.
The top 10 stocks in the index are now far more volatile relative to the index, and are also remarkably low-beta:
Volatility and beta for the the Top 10 companies began to run away from the index in ‘23, tapered recently, and appears to be taking off again.
Since, by definition, the index has a Beta of 1.0—that’s what “Beta” means, i.e. market returns—the fact that the largest companies in the index (which comprise ~1/3rd of the index) are increasingly uncorrelated with the index is pretty remarkable.
Here’s another way of visualizing the shift, in comparison to a decade ago:
In 2015, companies in the index (by weight and count) clustered around a Beta of 1, while in 2025, there are spikes all over the place.
Unsurprisingly, single-stock volatility is near the cycle high:
Single-stock implied volatility continues to trade at a historically wide premium to index volatility, reflecting structurally lower implied correlation and persistent demand for idiosyncratic protection.
Investors appear less concerned about macro shocks and more focused on widening dispersion between winners and losers in an increasingly concentrated equity market grappling with the implications of AI.
“Widening dispersion” is more stressful than just going with the flow.
Anyways, that’s interesting so far as it goes. It’s a stock-picker’s delight (or nightmare) out there.
But this is really the chart that caught my eye:
The market weight of the Top 10 led the earnings weight of the Top 10 by 3-5 years.
In other words, while it took some time for Top 10 earnings to run away from the field, investors appear to have been out in front of it by a few years, at least.
Lucky or good, who knows? But market prices led the fundamentals, in all events.
4. Going nuclear (slowly, and expensively)
In terms of fixable problems worth solving, this is surely one:
The East is building nuclear plants far more quickly and cheaply than the West.
Unlike some areas of Eastern manufacturing dominance, building nuclear power better, faster, cheaper is probably not explained by a know-how and capacity gap. In fact, it seems like China “borrowed” most of its know-how for building nukes from the West.
In this case, the inability to build is almost certainly a regulatory one. I’m pretty pessimistic that the regulatory barriers are coming down anytime soon, but maybe. Or maybe SMRs will find some way to wiggle into the regulatory breach. In all events, (nearly) everyone seems to agree that we need more power, so we probably don’t hate regulators enough.
More broadly though, the electricity renaissance is very much on:
After 15 years of flat generation, we’re breaking records again.
Rather than nuclear, it’s LNG on a tear.
We’ve got more of it than we can use, so we’re exporting it all over the place (except to the Northeast, where we’d prefer to burn coal instead because of the environment):
LNG exports inflected upwards in ‘24, and show no signs of slowing down.
In 2025, SPA contracts for US LNG developers skyrocketed after the prior admin’s pause on export permit reviews was lifted by Trump’s DOE.
We live in a land of plenty. It’s good not to forget.
5. Strait in the Hormuz
Staying on the energy theme . . .
As expected, the war with Iran have led to the closing of one of the more important shipping lanes in the world:
Traffic through the Strait of Hormuz has ground to a virtual halt.
It’s a lot of oil, but perhaps more importantly, a lot of fertilizer that passes within drone-range of Iran and its Houthi proxies.
A good day for the fertilizers:
CF 0.00%↑ jumped 5% on the hope that everyone is going to be starved for ammonia and urea, and the other stuff that you find in your pee.
Truth is, CF has been on a run for a while, so investors likely got out in front of this one too. They’re smart, sometimes.
While the geopolitical good times send the oil markets into a tizzy (for now, at least), it’s good to remember that the Straits of Hormuz matter a lot less than they used to:
The US is a net-exporter of oil these days.
OPEC surely matters to the global markets—and Iran’s oil surely matters to China, it’s #1 buyer—but not so much to the US, certainly in comparison to the 70s, when OPEC brought President Carter to heel.
We can cope with a little run on crude. But, you know what does really matter, though?
Taiwan, and to a lesser extent, Vietnam:
Taiwan is doing double-digit percentages of exporting to both the US and world, mostly on the back of the AI frenzy.
Vietnam (largely a Chinese proxy) is also experiencing an “AI-related” export boom, both to the US and the world.2
Other stuff aside, it’s a good time to be Taiwan:
Taiwanese GDP is growing 12+% on the AI Capex supercycle.
Anyways, TSMC is a helluva drug. Let’s hope everything stays peaceful over there.
Previously, on Random Walk
Private Credit and Insurance, two peas in a pod (reprise), and a chart dump on default rates
five charts on the rise of private credit in life insurance
Energy in 1776
It’s July 4th, so Happy Birthday America, and we’re going to keep it light and only semi-topical.
Random Walk is an idea company dedicated to the discovery of idea alpha. Find differentiated data, perspectives and people, and keep your information mix lively. A foolish consistency is the hobgoblin of small minds. Fight the Great Idea Stagnation. Join Random Walk. Follow me on twitter. Follow me on substack:
I chose June 1, 2025 as the start date to net out the Liberation Day selloff, but my actual entry points were more varied.
Mexico, however, has only one end-market: the US. Mexico’s “AI-related” exports to the US are about ~5% of GDP, but have barely budged to the rest of the world. Apparently Mexico’s recent skills uptake in making cars and washing machines (at China’s “expense”) hasn’t translated to much demand anywhere else in the world.