The city of Austin, Texas seemed like the perfect hideout at first... The tax laws there are a lot more favorable than California's policies. And the cost of living is lower as well.
This Failure in Texas Is a Power Gauge Lesson
By Vic Lederman, editorial director, Chaikin Analytics
The city of Austin, Texas seemed like the perfect hideout at first...
The tax laws there are a lot more favorable than California's policies. And the cost of living is lower as well.
So in the work-from-anywhere world of the COVID-19 era, tech workers flocked there. The mainstream media even leaned into the idea that Austin could be the "next Silicon Valley."
But unfortunately for Austin, the sudden influx of tech money broke the local economy. Housing prices soared nearly 75% in just a few years. And congestion choked the city.
Beyond that, a bigger problem came to light. The money was never really there.
I'll show you what I mean today. And as you'll see, the Power Gauge can guide us...
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It all comes down to venture capital ("VC").
You see, VC runs the tech world. It's all about making big bets on new ideas. And it's the reason that the San Francisco Bay Area looks like a "Looney Tune Land" to outsiders.
Austin never even got close to San Francisco's level. It was never really going to be the next Silicon Valley. And today, VC-related funding in the city is down roughly 46%.
Startups in Austin pulled in just a few billion dollars in the first three quarters of 2023. That's a drop in the bucket compared with the roughly $50 billion from the Bay Area so far this year.
And it's getting worse for Austin...
Techstars is a major startup investor in the city – well, was. Reports surfaced within the past few days that the company is "pausing" its Austin startup accelerator.
In other words, it's packing up and leaving town.
Now, it might surprise you, but this situation relates to a valuable Power Gauge lesson...
After all, the funding trend was always clear in Austin. Following a big burst of excitement, the money just didn't grow. It was never about a sustained shift to a new Silicon Valley.
Here's the thing...
This type of stuff happens all the time in the markets.
That's why industry groups, sectors, and subsectors play a huge role in the Power Gauge...
The Power Gauge is specifically looking to tell us where the money is flowing at any given time. In fact, on the individual stock-ratings level, industry group matters a lot.
Each factor begins with a raw value, which is made consistent across various stock types. Then, based on how the factor ranks within either the Russell 3000 Index or the stock's industry group, it gets assigned a score from 1 to 100.
The measure of an industry group's relative strength also comes into play.
By combining these factors, we can see how an industry group is doing compared with the broad market. And beyond that, we can see how the specific stock is doing inside the group.
In the end, we can view a lot of the world through the lens of the Power Gauge. And in the case of the Austin example we've talked about today, it's easy to connect the dots...
Austin plays a role in the VC industry. And the Power Gauge tells us that the entire industry group is contracting right now. So the exodus from Austin's VC scene makes sense.
Now, I can't say for sure if it's all over for VC in Austin. But from an investor's perspective, I'd look elsewhere today...
With just a little bit of effort, we can find opportunities in the strongest stocks within the strongest industry groups. And with the Power Gauge's help, that's exactly what we do.
Good investing,
Vic Lederman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.430%
10
17
3
S&P 500
+0.390%
161
265
71
Nasdaq
+0.850%
42
48
9
Small Caps
+0.190%
640
948
336
Bonds
-0.210%
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Information Technology
+2.68%
Discretionary
+1.87%
Communication
+1.05%
Industrials
+0.99%
Utilities
+0.85%
Health Care
+0.84%
Financial
+0.61%
Materials
+0.16%
Staples
-0.37%
Real Estate
-0.50%
Energy
-2.72%
* * * *
Industry Focus
Capital Markets Services
35
27
1
Over the past 6 months, the Capital Markets subsector (KCE) has outperformed the S&P 500 by +5.21%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #7 of 21 subsectors.
Top Stocks
SNEX
StoneX Group Inc.
VIRT
Virtu Financial, Inc
PWP
Perella Weinberg Par
* * * *
Top Movers
Gainers
CI
+16.68%
AVGO
+8.99%
ETSY
+5.76%
MGM
+5.12%
AMAT
+5.02%
Losers
PARA
-3.62%
CCL
-2.65%
LLY
-2.34%
META
-2.22%
NVDA
-1.85%
* * * *
Earnings Report
Reporting Today
Rating
Before Open
After Close
JCI
No earnings reporting today.
Earnings Surprises
ORCL Oracle Corporation
Q2
$1.34
Beat by $0.01
CASY Casey's General Stores, Inc.
Q2
$4.24
Beat by $0.48
* * * *
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