| American optimism, claims data, and the chips are down. On the move President Joe Biden said the U.S. has turned a corner on the pandemic in his speech to a joint session of Congress last night. "America is on the move again" he declared, as he outlined plans to increase taxes on the wealthy. Earlier in the day Fed Chair Jerome Powell gave a similar assessment of the economy, saying it was "beginning to move ahead with real momentum" in his comments to the press after the central bank's decision to hold policy unchanged. Check The pace of that recovery will get another check-up at 8:30 a.m. Eastern Time this morning with the release of weekly jobless claims and first-quarter GDP. The number of people signing on for unemployment benefits is expected to continue its trend lower towards 500,000. On the growth front, the two rounds of fiscal stimulus and business reopenings are expected to push the expansion to an annualized 6.6%. Chip shortageApple Inc. became the latest company to signal that the global semiconductor shortage was leading to production curbs. Executives warned that lost sales of iPads and Macs would knock $3 billion to $4 billion off third quarter revenue. The situation seems to be only getting worse for automakers, with Honda Motor Co. and BMW AG saying they would be pausing production at some plants and Ford Motor Co. reduced its full-year earnings forecast on the component shortage. Markets riseComments from the Federal Reserve Chair and President Biden along with blow-out tech earnings are helping to bolster confidence in the economic recovery. Overnight the MSCI Asia Pacific Index added 0.3% while Japan's Topix index closed 0.3% higher. In Europe the Stoxx 600 Index had gained 0.4% by 5:50 a.m. with banks the best performers. S&P 500 futures pointed to plenty of green at the open, the 10-year Treasury yield was at 1.657%, oil rose and gold was lower. Coming up... Other than the 8:30 a.m. data drop and March pending home sales at 10:00 a.m., today will be mostly dominated by earnings. Economic bellwether Caterpillar Inc. and McDonald's Corp. report before the bell, with tech companies including Amazon.com Inc. and Twitter Inc. announcing earnings after markets close. Kraft Heinz Co., Mastercard Inc., Comcast Corp. and Royal Caribbean Cruises Ltd. are also among the many companies reporting today. What we've been readingHere's what caught our eye over the last 24 hours. And finally, here's what Joe's interested in this morningIf you say "short squeeze" in 2021, the first thing everyone's going to think about is GameStop. But that was kind of a weird fluke. For one thing, there isn't that much shorting going on in stocks these days.
But where we are seeing squeezes all over the place is in the real economy. In our recent podcast about the surging price of lumber, our guest Stinson Dean described a key driver of the boom in that lumber dealers make commitments to deliver more lumber than they keep on hand:
"It's a short squeeze. It's from the dynamic of the sales model that lumber dealers... they'll commit to deliver lumber, 60 to 90 days out sometimes.... they commit to these sales. Let's just say 90 days worth of sales, the most inventory these folks can hold is 45 days because of cash constraints and kind of how they manage their inventory. When they're bullish they'll go 45 to 55 days. When they're bearish, they'll work their inventory down to 30 days. And if you think about that, you're 50% covered and you got 90 days worth of commitments and 45 days worth of inventory. So they're buying on the open market. You know, they have their average costs of 45 days worth of inventory, but then they've got to cover the next 90 days or excuse me, the next 45 days." It's a short squeeze of real assets, as opposed to a short squeeze of financial ones, but the effect is the same.
And we're seeing it all over the place right now. As Bloomberg's Peter Vercoe points out, over just 12 hours we saw fresh production warnings from Honda, BMW, and Ford over their inability to acquire semiconductors and maintain full production. They're caught short and thus unable to deliver on demand for cars.
You can probably describe some of the labor issues that small businesses are experiencing right now as having short-squeeze dynamics. And it would probably be fair to use the analogy with the Texas power crisis from earlier this year, when numerous providers found themselves unable to deliver on their commitments, causing massive blackouts and a historic price spike. Of course all of these stories about lumber and labor and chips is why there's so much inflation talk these days. And when there's talk of inflation there's talk about the Fed and raising rates. So it was interesting yesterday during his press conference, when Fed Chairman Powell said this about the housing market: "My hope would be that over time housing builders can react to this demand and come up with more supply." In other words, instead of addressing high prices and bottlenecks and short squeezes through a slowdown in the macro economy, Powell wants to go the other route: With companies investing more and ramping up production, so supply can level up to demand, rather than the other way around. Joe Weisenthal is an editor at Bloomberg Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. | 
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