Author Archive

• Morning News: May 21, 2025
  Eddy Elfenbein, May 21st, 2025 at 7:03 am

  US – China Metals Fight Finds New Home in Congo’s Cobalt Mines

  US Needs Level Playing Field With China, Says Mnuchin

  ECB’s Guindos Sees Price Target Hit Sooner Rather Than Later

  Julius Baer Books Loan Loss Charge as New Management Pushes for Turnaround

  Canada Pension Fund Piles Into US Despite ‘Buy Canada’ Pressure

  Canadian Banks Brace for Trade Uncertainty With More Loan Loss Provisions in Second Quarter

  Tariffs Threaten Double Blow to Small US Banks

  Trump’s Tax Policy Collides with Market Reality

  Why the ‘Big, Beautiful’ Tax Bill Is Worrying Bond Investors

  Johnson Says Agreement Reached on $40,000 SALT Cap Increase

  What Market Signals Can Teach the National Debt Alarmists

  To Gen Z, Everything Is a Recession Indicator

  America’s Debt Problem Is Also a Retirement Problem

  Dudley: The Fed Should Prepare Markets for the Unexpected

  JPMorgan Opens Geopolitics Arm as Dimon Warns of ‘Hinge Point’

  Trump Scolded Companies for Raising Prices. Do They Have a Choice?

  Nvidia CEO Urges US to Ease AI Curbs After ‘Failure’ With China

  Google Unveils A.I. Chatbot, Signaling a New Era for Search

  Will Writing Survive A.I.? This Media Company Is Betting on It.

  Fortnite Returns to Apple’s App Store After Scoring a Legal Victory

  Elon Musk’s Pullback from Politics Comes After His Last Big Investment Was a Flop

  Medtronic to Split Off Diabetes Unit as Tariffs Hit Earnings

  UnitedHealth Plunge Stunned Wall Street. One Analyst Saw It Coming

  CVS Offers Bonuses and Pizza Parties as Perks to Boost Vaccine Sales

  Lowe’s Sticks by Full-Year Forecast as Sales from Home Professionals Boost Business

  Target Cuts Outlook On Shopper Pullback, Hit to Retailer’s Sales

  Canada Goose Profit Up But Withholds Guidance, Cites Tariff Uncertainty

  Real Estate Agent Commissions Too High? Flat-Fee Brokers Offer an Alternative

  ‘Lilo & Stitch’: How a Fuzzy Blue Alien Became a Disney Cash Cow

  What if Making Cartoons Becomes 90% Cheaper?

  A Perrier Clash Has People Asking: Is ‘Natural’ Water Even Possible Anymore?

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• CWS Market Review – May 20, 2025
  Eddy Elfenbein, May 20th, 2025 at 5:19 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  Moody’s Downgrades America

  On Friday, one of our Buy List stocks made international news. Moody’s cut its rating on the United States of America’s debt by one notch. The USofA is now rated Aa1. Prior to the cut, Moody’s had given the U.S.A. the biggest prize in finance, the coveted AAA rating. Moody’s had rated America’s debt AAA since 1917.

  

  The other two big debt raters, Fitch and S&P, had already cut their ratings on America’s debt. Moody’s was the lone holdout.

  Is this something to worry about? Eh, not really. Personally, I don’t get too worked up about these kinds of things. These events generate headlines more than they tell you about finance. For one, S&P cut its rating in 2013. Fitch joined in two years ago. I doubt that many people even noticed.

  Also, I think it’s a little silly. Having a rating on America’s debt is like having an opinion on the sun. What is there to say?

  It’s true that America’s debt has reached a staggering level. According to the “Debt to the Penny” website, our public debt stands at $36,215,714,628,553.09. In Washington, both parties are busy blaming each other for the mess. That’s hardly a surprise. The immediate cause for the debt downgrade is President Trump’s “One Big Beautiful Bill Act,” which he’s been pushing Congress to pass.

  Moody’s said “the decision to downgrade debt was influenced by ‘the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.’” If that’s true, then a downgrade could have come at any time in the last several years. I don’t know why they’re choosing now.

  When Ronald Reagan was asked if he was worried about the budget deficit, he said no, it’s “big enough to take care of itself.”

  One upshot is that Moody’s doesn’t appear to be interested in cutting its rating again. The company rates America’s debt as stable. Well, that’s good to know.

  In a sense, America’s debt is judged every day—in fact, every minute of every hour of every day—by the global bond and currency markets.

  It’s true that our government has been remarkably irresponsible with our finances, and there’s plenty of blame to go around. However, there’s an inescapable fact that investors all over the world want to own our debt, and they’re willing to pay for it. That tells me a lot more than what Moody’s has to say. Bear in mind that the S&P 500 just ran off 17 up days in the last 20 trading sessions. If it were truly a big deal, then markets would reflect it.

  To be honest, I have been concerned by the recent rise in Treasury yields. The yield on the 30-year Treasury recently spiked above 5%, and the yield on the 10-year Treasury is close to 4.5%.

  

  I also like to watch the TIPs yields which are adjusted-for-inflation bonds. The yield on the 30-year TIPs is now about 2.6% which is close to as high as these bonds have ever traded, with data going back more than 20 years. As recently as three years ago, the yield on the 30-year TIPs was negative. In a sense, we’re returning to normal.

  The stock market tends to perform worse when TIPs yields are high, and that makes perfect sense. I suspect that the higher yield on TIPs reflects a change in risk tolerance.

  Overall, I’m concerned about America’s fiscal standing, but I’m watching the market’s reaction rather than a ratings agency.

  I Missed Out With Costco

  I’m going to engage in a bit of self-criticism, and I hope to convey some important lessons about investing. I’m a big fan of Costco, and I completely screwed up with it.

  I studied the company intently. I even wandered up and down the aisles and took notes. (It’s a wonder I was never kicked out!) Gradually, I became a huge Costco fan.

  It’s a very well-run company and its earnings have grown consistently for many years. Costco has a renewal rate of 93%. The company has all the qualities I look for in a stock, except one: Costco has a very high valuation. Very high.

  This fact had led me to decline from adding it to the portfolio. No matter how many times I ran the numbers, it always looked to me that Costco was way too pricey, and I can say that with full confidence, I was dead wrong.

  The stock kept moving higher. Just because it was overpriced was apparently no barrier to it becoming even more overpriced.

  Check out this chart. In 16 years, Costco is up 35-fold. I don’t know if there ever was a bad time to buy it.

  

  Let me go into more detail why I’m such a Costco fan. For one, I love Costco’s business model, and its customer base is very loyal. Some might say cult-like. Importantly, the company generates recurring revenue from its membership fees, and the cash flow is stable. As investors, we love recurring revenue.

  The idea is simple. There’s a lot of savings in buying in bulk. If you need to buy a 17-pound tub of mayonnaise, Costco is the place to go. In addition to bulk-buying, Costco is obsessed with efficiency.

  The company runs about 800 warehouses, and the average location generates about $275 million in revenue per year. The margins are very thin, meaning the markups are quite small.

  For the last fiscal year which ended in August, Costco generated a profit of $7.4 billion off sales of $250 billion. That works out to about 3%. I don’t think people realize how tiny that is.

  At its core, Costco is really a business dedicated to turnover and efficiency. As soon as a product is on their shelf, they want to get rid of it as soon as possible. Costco runs a very tight ship. Walmart carries about 10 times the number of items. Costco keeps it simple.

  From Fast Graphs, this is Costco’s stock (in black) along with 30 times its earnings (in blue) and dividends (in tan).

  

  The blue line is a P/E Ratio of 30, which isn’t cheap, and you can see how the black has quickly run past that.

  Costco also runs its own private label Kirkland brand which makes up for about one-quarter of Costco’s overall sales. That by itself is a major business. Costco is also very good at using popular items as loss leaders like rotisserie chickens or their famous $1.50 hotdogs.

  Costco knows that if you get people in the store, and feed them, they’ll probably stick around and buy something. In fact, people seem to enjoy the price-hunting experience. Costco, of course, has no plans to change the price of its hotdogs.

  I also like that Costco tends to be countercyclical. In plain English, that means Costco does well when the economy runs off the road. That’s when people are looking for discounts. They have a helpful and knowledgeable staff. Costco employees are generally paid more than their competitors.

  Have you ever seen an ad for Costco? Now that I think of it, I don’t believe I ever have. They do advertise, but not very much. Instead, they rely on word-of-mouth.

  The membership model also encourages shoppers to go to a store. It’s a sunk cost. That’s because they already bought a membership so they figure they might as well use it.

  Costco was also a point of contention between Warren Buffett and Charlie Munger. Charlie loved the stock, but Buffett was skeptical, and he never liked retail. Charlie was able to convince Warren to buy Costco and it became a huge winner for them. Costco even added Munger to its board.

  After Munger passed away, Buffett decided to sell Costco, yet the stock continued to rally. Buffett conceded that his friend had been right all along.

  In March, Costco posted a rare earnings miss. For its fiscal Q2, Costco earned $4.02 per share. That was nine cents below expectations. In six days, the stock fell 15%. The sale didn’t last long, and Costco has made back nearly everything it lost.

  For this fiscal year, Costco is expected to make $18.12 per share. That means the stock is trading at 57 times earnings. Sorry, but that still seems way too expensive. (But I’ve been wrong before!)

  In retrospect, my mistake was placing too much attention on the share price when I should have been focusing on what makes Costco so different.

  Later this week, we’ll get reports on new and existing home sales. Next week, the Fed will release the minutes of its most recent meeting. Also, the government will update its report on Q1 GDP growth. The initial report said that the U.S. economy grew at a meager 0.3% for the first three months of this year.

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

• Morning News: May 20, 2025
  Eddy Elfenbein, May 20th, 2025 at 7:05 am

  Trump Hands Putin Win With Retreat From Ukraine Peace Talks

  A Spendthrift Saudi Arabia Can’t Finance the World Anymore

  Qatar Wealth Fund Chief Endorses $500 Billion US Push

  China’s Economy Feels the Sting From Trade War

  China Cuts Benchmark Lending Rates

  Bank of England Should Slow Interest-Rate Cuts, Pill Says

  Citi Sees Weaker Dollar After G-7 Meeting as US Softens Tariffs

  U.S. Economy Is Experiencing ‘Death by a Thousand Cuts’, Says Deutsche Bank, as Confidence in National Debt Management Erodes

  This Morgan Stanley Investor Warns of Three Big Disconnects with Stocks on the Verge of a Bull Market

  SALT Agreement Remains Elusive for House GOP on Trump Tax Bill

  Trump’s Pick to Lead I.R.S. Promoted a Nonexistent Tax Credit

  What to Know About Capital One’s $35 Billion Takeover of Discover Financial

  JPMorgan Expects Dealmaking Fees to Drop, Keeps CEO Succession Plans Steady

  Low Birthrates Are a Market Signal of a Rich, Rich Future

  UBS Shares Drop 3% After Report that It Faces Swiss Capital Setback

  Gulf Deal-Making Spree Also Benefited Elon Musk and His Family

  Trump Berates Companies for Warning About Tariff Price Increases

  Walmart Responds to Trump Comment that Retailer Should ‘Eat the Tariffs’

  A Feared Tsunami of Cargo From China Looks More Like a Swell

  Tesla Supplier CATL Soars After Biggest Listing of 2025

  Musk’s AI ‘Colossus’ in Memphis Is Everyone’s Problem

  Europe’s Wind Drought Curbs Power Generated by Offshore Turbines

  Home Depot Plans to Keep Prices Steady Despite Tariffs

  Why Is Nvidia the King of AI Chips, and Can It Last?

  Nvidia CEO’s Growing Presence Transcends Technology

  ‘Big, Beautiful’ Auctioning of Unused Spectrum

  Vodafone Launces Buyback After Revenue Rises

  To Modernize Railroads, Remove the Barriers to Their Modernization

  23andMe to Be Bought by Biotech Company for $256 Million

  The Potential Cancer, Health Risks Lurking in One Popular OTC Drug

  ‘Sesame Street,’ Facing Crisis, Signs New Deal With Netflix

  Florida’s Real Estate Strength Is Turning Into a Weakness

  Be sure to follow me on Twitter.

• Morning News: May 19, 2025
  Eddy Elfenbein, May 19th, 2025 at 7:05 am

  China’s Economy Feels the Sting From Trade War

  EU’s €150 Billion Defense Fund Receives Preliminary Approval

  EU Lowers Growth Forecast as U.S. Tariffs Expected to Hit Exports

  Republicans Like Europe — Whether They Know It or Not

  Markets Rattled on Concerns About U.S. Debt

  The ‘Triple A’ Sovereign Bond Club Has Shrunk

  Moody’s Blues Come for US Sentiment

  Treasuries, Dollar Fall as Moody’s Sharpens Focus on US Debt

  The ‘Sell America’ Trade Makes a Comeback

  Traders Ride the Trump Show’s ‘Good Volatility’

  Cathie Wood Says Trump’s Tariff War May Free Up Markets

  This Veteran Investor Crunches the Numbers and Sees the Risk of a Full-Blown Bear Market

  How President Trump is Sparking a Crypto Revolution in America

  JPMorgan Executives Take Center Stage with Succession, Tariffs in Focus

  JPMorgan Says Charge-Offs in Card Portfolio Could Be Higher in 2026

  The Miners Who Lost Their Jobs, but Not Their Faith in Trump’s Tariffs

  Will Anyone Take the Factory Jobs Trump Wants to Bring Back to America?

  Canadians Fear Trump’s Tariffs Will Create a ‘Ghost Town’ in Ontario

  Porsche Tried to Be Both Ferrari and Mercedes. With the Trade War, It Struggles to Be Either.

  The Unlucky Business Owners Who Named Their Companies ‘DEI’ Before It Was a Thing

  Trump Warns America’s Businesses: Eat My Tariffs, or Pay the Price

  El-Erian Says the Era of U.S. Exceptionalism is on Pause

  The U.S. Under Trump: Alone in Its Climate Denial

  Blackstone Infrastructure to Buy TXNM Energy for $5.7 Billion

  Gas Power Is Cheaper to Buy Than Build in the US

  Saudi Arabia, UAE See AI Buildup as Key to Post-Oil Power

  Why Apple Still Hasn’t Cracked AI

  Qualcomm to Make Data Center Processors that Connect to Nvidia Chips

  SNAP Is a Lifeline: Congress Can Make It More Efficient

  A Most Favored National Policy for Pharma Drugs Makes Sense

  A Pickled Pepper Maker Knows Exactly How Hard It Is to Switch to Natural Food Dyes

  Be sure to follow me on Twitter.

• Morning News: May 16, 2025
  Eddy Elfenbein, May 16th, 2025 at 7:03 am

  Japan’s Economy Shrinks for First Time in a Year

  ‘It’s All About Trump’s Tariffs’: Asia Flocks to U.S. Trade Official

  EU Exports to U.S. Surge Ahead of Trump Tariffs

  China Solar Firms to Speed Up Global Push Amid Tariff Truce

  What’s the De Minimis Tariff Loophole That Trump Closed?

  There’s No Denying It Now: Tariffs Are Raising Prices

  Is the Age of American Exceptionalism Nearing an End?

  The Tax Code Gets a MAGA Makeover

  Who Would Benefit from the GOP’s Tax Bill? HENRYs

  House’s Latest Budget Is a Fiscal Time Bomb

  Bessent Sees New Financial Forces Strengthening Economy, Dollar

  A Tax on Harvard and Harvard Professors Is a Tax on You

  There’s a Darker Reason Trump Is Going After Those Law Firms

  ‘Make America Great Again’ Perilously Embraces Antitrust

  Oil Market’s Missing Barrels Have Gone Up in Smoke

  China Loosens Grip on Magnet Exports, Relieving Carmakers

  EU Seeks Feedback on Microsoft’s Offer to End Teams Antitrust Investigation

  Microsoft’s CEO on How AI Will Remake Every Company, Including His

  Trump and Abu Dhabi Ink Partnership to Build Massive AI Data Center Complex in UAE

  Pharmaceutical Tariffs Will Cost Consumers In Terms of Price, Reliability

  Novo Nordisk CEO to Step Down Amid Market Challenges

  Why UnitedHealth’s Terrible Year is Dragging Down the Dow

  9 Federally Funded Scientific Breakthroughs That Changed Everything

  Can She Keep PBS on the Air?

  The Old Model of Billionaire Philanthropy Is Ending

  Citi to Cut Up to 200 Tech Contractor Roles in China

  Charter Communications to Merge With Rival Cox in $21.9 Billion Deal

  Former Burger King Boss Picked to Oversee Panera, Pret a Manger

  Movie Tariffs Could Open a Pandora’s Box

  With the Switch 2, Nintendo’s Goal Is a Console for Every Member of the Family

  Be sure to follow me on Twitter.

• Morning News: May 15, 2025
  Eddy Elfenbein, May 15th, 2025 at 7:05 am

  South Korea Goes Small in Bid for Nuclear Power Ascendance

  Eurozone Grew More Weakly Than Thought at Start of 2025, Despite Output Boost Ahead of Tariffs

  Rebound Leaves Asset Prices out of Line With Geopolitical Risks, Says ECB’s De Guindos

  U.K. Economy Raced at Start of Year But Slowdown Looms

  U.S. Ranchers Can Sell Britons More Beef. Will They Buy It?

  Trump’s Tariffs Won’t Bring Manufacturing Back to America

  Is It Too Late to Save the US Economy?

  Bond Traders Enter the Budget Fight

  ‘Beautiful’ Is In the Eye of the Bond Vigilantes

  GOP Tax Bill Seen Masking More Than $1 Trillion Hit to US Debt

  Preserving the 21% Corporate Tax Rate Redounds to Workers

  No, You Don’t Actually Have a Right to a Bank Account

  The Retail Buy-the-Dip Move Paid Off. What That Crowd of Investors is Doing Now, According to JPMorgan

  JPMorgan Investors Look for Clarity on Tariff Impact, Succession Plan

  Commerzbank CEO and Workers Rally to Fend Off UniCredit as Investors Meet

  A Less-Generous Warren Buffett Would Be $67 Billion Richer Than Elon Musk

  First-Time Home Buyers Are Struggling. That’s Bad News for Builders.

  Walmart Weathers Trade War Storm With Strong Sales

  Walmart Warns About Ability to ‘Absorb’ Tariff Costs Without Raising Prices

  A Trade War Winner? The Booming Business of Returned Products.

  What an Nvidia-Humain Deal Does for Saudi Arabia in the Global AI Race

  Trump Asks Apple to Stop Moving iPhone Production to India

  Meta Sees a Future Where AI Fills Your Social Needs

  NetEase Profit Jumps as Chinese Videogame Industry Bounces Back

  Deere Adjusts FY25 View Amid Tariff Whiplash as 2Q Results Weaken

  Dick’s Sporting Goods to Buy Foot Locker for $2.4 Billion

  Sandal-Maker Birkenstock Lifts Earnings View After Strong Sales

  RFK Jr.’s Quest to Make Americans Eat Healthier Will Be Costly

  Profits Are Stagnant. But the Funeral Industry Is Not Dead Yet.

  Be sure to follow me on Twitter.

• Morning News: May 14, 2025
  Eddy Elfenbein, May 14th, 2025 at 7:04 am

  ECB’s Nagel Says Stronger U.S. Dollar is Still Needed

  EU Cuts Agriculture Red Tape in Bid to Quell Farmers’ Protests

  Germany’s New Finance Chief Highlights Need for Belt Tightening

  South Korean Think Tank Halves 2025 Growth Forecast

  US-Korea Currency Talks Fuel Bets Trump Is Open to Weaker Dollar

  The China Trade Deal Doesn’t Solve the Fed’s Problems

  Trump’s Pause on China Tariffs Is Still a ‘Huge Nightmare’ for Small Businesses

  Buying the Dip Still Works — Even in This New World

  How the SALT Fight Threatens to Derail the Republican Tax Bill

  Tax Cuts Aren’t Worth Throwing Away a Livable Future

  Harvard Expands Lawsuit Against US as Funding Feud Deepens

  A Buffett-Backed College Faces GOP Tax Threats After Investment Success

  The World Is Wooing U.S. Researchers Shunned by Trump

  185% Tariffs: How the Trade War Hit One Shipment of T-Shirts

  Hapag-Lloyd Sees Bookings Jump After US-China Tariff Truce

  Trump’s Freebie Qatar Jet Is the Stuff of Nightmares in Spyworld

  US Data Center to Add Batteries Without Lithium Mined Overseas

  DeepSeek’s ‘Tech Madman’ Founder Is Threatening US Dominance in AI Race

  Tencent Posts Solid Results as AI Investments Start to Pay Off

  Your A.I. Radiologist Will Not Be With You Soon

  Trump’s Drug Price Controls Could Ground Innovation To a Halt

  Novo Nordisk, Septerna Agree $2.2 Billion Obesity Pill Deal

  Telefonica Swings to Net Loss After Sale of Latin America Operations

  Is the Answer to Expensive Cars a Pickup Truck Without Power Windows?

  Xiaomi’s New EV Orders Slump in China as Consumer Backlash Grows

  Tesla’s Board Chair Made $198 Million Selling Stock as Profit Fell

  Burberry to Cut Nearly 20% of Jobs as Luxury Sales Sag

  Be sure to follow me on Twitter.

• CWS Market Review – May 13, 2025
  Eddy Elfenbein, May 13th, 2025 at 7:25 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  I have great news! The stock market is now flat for the year!

  OK, I realize that may not sound that great, but it would have completely shocked, dumbfounded and flabbergasted any investor from three weeks ago. Since April 8, the stock market is up 18%. The S&P 500 is now above its 50- and 200-day moving averages.

  

  Remember how the Great Trade War of 2025 was going to crash the economy and the stock market? Well, it seems those predictions were just a wee bit premature.

  Yesterday, the White House and China agreed to defuse a trade war that was getting uglier by the day. President Trump said, “We’re not looking to hurt China.” From the New York Times:

  The move by the United States, after President Trump had repeatedly declared that he would not lower tariffs without concessions from China, represented an acknowledgment of the costs of an all-out trade war with China. Despite the White House’s bluster, the Trump administration ultimately backed off, for now, from the steepest tariffs, and agreed to hold more formal talks with Beijing after companies and consumers started showing signs of economic strain.

  The stock market took the hint and prices soared.

  Yesterday the stock market had its second-best day in the last 2-1/2 years. For the day, the S&P 500 soared 3.26%.

  The best market’s best day in the last 2-1/2 years—in fact, one of its best days in decades—came one month ago, on April 9th. It’s still early, but that day may go down as the start of a new bull market.

  Here’s where it gets interesting, because both days (yesterday and April 9th) were surprisingly similar. In both cases, the markets rallied on news that the trade war tensions were easing. The S&P 500 is only about 4% from a new all-time high.

  It’s as if yesterday’s gain was about one-third that of April 9th’s gain, even by category. Yesterday, the Nasdaq gained 4.35%. The S&P 500 High Beta index gained 5.46% while the S&P 500 Low Volatility Index gained a measly 0.15%. That’s very similar to the kind of action we saw on April 9th, just not as severe.

  Many of the high-risk, fast-growth stocks did very well on Monday. For example, the Mag 7 ETF (MAGS) gained 5.8%. On the other hand, many high-yielding stocks like Altria (MO) and Duke Energy (DUK), lost ground. The lesson here is that investors were leaving safe havens and chasing risk.

  It’s as if investors had been itching to do this for several week but were just waiting for official permission. Thanks to the president’s decision, they finally got it.

  This was also reflected in the bond market where yields rose. The two-year Treasury, which is usually the most sensitive to the Federal Reserve, saw its yield rise ten basis points to 3.98%.

  In the futures pits, traders altered their bets as to what the Fed will do. Now it looks like a June rate cut is off the table. In fact, traders don’t see the Fed cutting rates until September. This happened even as we got favorable inflation news today.

  Much of the trading action we saw on Monday continued into Tuesday. The S&P 500 gained 0.72% on Tuesday. Again, it was a divided market. For example, the Nasdaq gained 1.61% while the Dow was down 270 points, or -0.64%. The S&P 500 Growth ETF gained 1.67% while the S&P 500 Value ETF lost 0.44%. This shows that investors are rotating out of safer areas in search of bigger returns. I don’t expect this trend to last long.

  Inflation Falls to Four-Year Low

  This morning, the government said that inflation rose by 0.2% last month. That was in line with Wall Street’s forecast. The inflation report brings the 12-month rate to 2.3% which is a four-year low. I should add that these numbers don’t fully reflect the effects of the trade war.

  The core rate also increased by 0.2%. That was 0.1% below expectations. Over the last 12 months, core inflation has increased by 2.8%. The core rate excludes food and energy prices which can be very volatile.

  After posting a 2.4% slide in March, energy prices rebounded, with a 0.7% gain. Food saw a 0.1% decline.

  Used vehicle prices saw their second straight drop, down 0.5%, while new vehicles were flat. Apparel costs also were off 0.2% though medical care services increased 0.5%. Health insurance increased 0.4% while motor vehicle insurance was up 0.6%.

  Interestingly, egg prices fell by 12.7% last month but are still up nearly 50% in the last year. While the inflation numbers are good, the tariff issue could still be a problem for prices. The stock market is clearly pleased that President Trump is willing to back away from his most aggressive stand on tariffs.

  Here’s a look at “real” interest rates, meaning after adjusting for inflation. I used the core rate rather than the headline inflation, which I think presents a more accurate picture.

  

  Many of the trends we saw in Monday’s market continued into today. Tech stocks, for example, did very well. Also, growth stocks outpaced value. This is what to expect if investors see interest rates staying higher for longer.

  We recently completed a very good earnings season for our Buy List. Fifteen of our Buy List stocks beat earnings, one missed, and another reported inline.

  We’re nearly done with Q1 earnings season so let’s look at where we stand. According to the latest data, 90% of the companies in the S&P 500 have reported results so far. Of those, 78% have beaten on earnings. That’s a little bit better than the long-run average. Companies are reporting earnings that are 8.5% better than expected. That’s also a little better than the long-term average.

  Earnings growth is currently tracking an increase of 13.4% over last year’s Q1. That’s pretty good. At the end of March, Wall Street had expected growth of just 7.1%. If that number holds, and I think it will, then Q1 will be the seventh quarter in a row of positive growth and the second in a row of double-digit growth.

  For revenues, 62% of companies in the S&P 500 have beaten on sales. That’s not so hot, and it’s below the long-term average. Companies are beating sales by only 0.7%. Revenue growth is currently tracking at 4.8%. If it holds up, then Q1 will be the 18th quarter in a row of revenue growth.

  For Q2, Wall Street expects earnings growth of 5.2%, and 9.3% growth for the whole year. The much-predicted recession still hasn’t come.

  Amphenol Jumps to New High

  One of our Buy List stocks that’s done especially well for us lately is Amphenol (APH). We added the stock to our Buy List last year and it’s up 86% for us in a little over 16 months.

  If you’re not familiar with Amphenol, it’s one of the world’s largest makers of fiber optic connectors, antennas, sensors and high-speed cables. Amphenol’s products are used in several different industries such as automotive, broadband communications, commercial aerospace, industrial, IT, data communications, military, mobile devices and mobile networks.

  Three weeks ago, Amphenol reported outstanding results for its Q1. The company earned 63 cents per share, which easily topped Wall Street’s estimate of 52 cents per share. Sales were up 48% in U.S. dollars, and up 33% organically.

  

  Amphenol’s operating margin improved to 23.5% and free-cash flow was $580 million. During the quarter, Amphenol bought back 2.7 million shares for $180.9 million and paid out $200 million in dividends. That means that $380 million was returned to shareholders.

  For Q2, APH expects sales between $4.9 and $5 billion. That represents sales growth of 36% to 39%. Amphenol also sees Q2 earnings ranging between 64 and 66 cents per share. That represents growth of 45% to 50% over last year’s Q2.

  Traders loved the report, as did I. In three days, APH gained 20%. I’m expecting more gains in the months ahead.

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

• Morning News: May 13, 2025
  Eddy Elfenbein, May 13th, 2025 at 7:05 am

  US Trade Policy is a Humanitarian and Geopolitical Disaster

  Trump’s Disruptive Trade Agenda Is Giving Way to Scaled-Back Deals

  Trump Slashes ‘De Minimis’ Tariffs on Small Shipments From China

  Trump’s China Deal Makes Sense. How He Got Here Doesn’t.

  These Are the Tariffs That Dreams Are Made Of

  There Are Two Chinas, and America Must Understand Both

  Trade Chaos Raises Big Question: Why Does China Eat So Many American Pistachios?

  JD.com Profit Beats as Chinese Consumer Sentiment Brightens

  German Financial Optimism Gets Boost from Tariff Retreat, Merz Government

  Germany Has a Long History of U.S. Investment. That May Be Changing.

  Adnoc’s $13 Billion Bid for Germany’s Covestro Approved by EU

  A Toxic Pit Could Be a Gold Mine for Rare-Earth Elements

  Re-set, Surge and Hold

  Even If Trump Gets Them to ‘Zero,’ Americans Will Be Worse Off

  Trump Has Already Ruined Christmas

  Three Faces of American Capitalism: Buffett, Musk, and Trump

  GOP Tax Plan Tilts to Trump Populism But Still Aids the Rich

  Rather Than Raise Tax Rates, Close the Tax Loopholes

  Citadel’s Griffin Says Going to Cash May Have Been Best in Tariff Turmoil

  Robinhood Woos Canadian Crypto Users with Nearly $180 Million WonderFi Purchase

  BNP Shareholders Approve Age Limit Increase for CEO Bonnafe

  Worried About the Economy, America’s Small Businesses Are Reducing Investment and Hiring, Survey Shows

  US Prepares to Ease Saudi Arabia’s Access to AI Chips

  How to Cut US Drug Prices Without Hurting Innovation

  Honda, Nissan Expect to Be Hit Hard by U.S. Tariffs

  China Removes Ban on Boeing Deliveries After US Trade Truce

  Why the US Air Traffic Controller Shortage Is Reaching a Crisis Point

  United Adds Caviar Service and Luxe Jammies in Race for Superpremium Travelers

  As Foreign Tourists Stay Away, U.S. Could Lose $12.5 Billion This Year, Tourism Group Says

  Hollywood Groups Call for Tax Changes After Trump’s Tariff Threat

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• Morning News: May 12, 2025
  Eddy Elfenbein, May 12th, 2025 at 7:03 am

  Trump and Xi Tone Down a Senseless Trade War

  Surprise U.S.-China Trade Deal Gives Global Economy a Big Reprieve

  What the U.S.-China Trade Agreement Means for Markets

  Global Stocks Jump After U.S. and China Cut Tariffs

  George W. Bush Lit The Dollar Fire On Which Trump Throws A Match

  U.S. Trade Agreements Mark Progress, Despite Lingering Uncertainty, BOE’s Lombardelli Says

  Japanese Foreign Equity Purchases in April Hit 20-Year High on Global Market Volatility

  Trump Truce Leaves India Furious, Pakistan Elated as Risks Loom

  Germany’s Solar Power Generation Surges to a Fresh Record

  After Driving Down Oil, Saudi Arabia’s MBS Looks for Trump Dividend

  For Trump, It’s a New Era of Deal-Making With Tech’s Most-Coveted Commodity

  Americans Embrace Road Trips as Economic Fears Discourage Flying

  California Drivers Are Paying Up as Refineries Disappear

  A Shipping Change Might Help Small Businesses if Not for Trump’s Trade Wars

  How Tariffs Are Crushing Small Businesses: ‘Nobody in Power Seems to Care’

  The Spring Home Sales Season Is Shaping Up to Be a Dud

  The FTC’s Andrew Ferguson Sounds Eerily Like Lina Khan

  Price Controls on Credit Cards Will Hit Community Banks, Customers

  Note to Feds: Don’t Destroy Google

  The iPhone Is a Nicer Place With Fewer Restrictions After Ruling

  SoftBank Stargate Venture With OpenAI Hits Snags on Tariff Fears

  The Tech Guys Are Fighting. Literally.

  Can More Military Spending Revive an Economy? This British Town Hopes So.

  Trump’s Vow to Cut US Drug Prices Drags Pharma Stocks Lower

  Why Moderna Merged Its Tech and HR Departments

  Elizabeth Holmes’s Partner Has a New Blood-Testing Start-Up

  Why Patients Are Being Forced to Switch to a 2nd-Choice Obesity Drug

  TikTokers Are Self-Diagnosing. That’s Good and Bad.

  Danone Acquires U.S. Plant-Based Organic Formula Maker Kate Farms

  Crafters Mourn the Demise of Their ‘Little Happy Safe Place’

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