Morning News: October 17, 2022
Posted by Eddy Elfenbein on October 17th, 2022 at 7:00 am

In Xi’s China, the Business of Business Is State-Controlled

China Delays Indefinitely the Release of G.D.P. and Other Economic Statistics

China’s Economy Needs to Double in Size to Meet Xi’s Ambitious Plans

New U.K. Finance Minister Drops Almost All of Tax-Cut Plan

How Russian Ships Are Laundering Grain Stolen From Occupied Ukraine

Saudi Arabia’s Super Fund Leans on Influence of BCG Power Broker

Big Coal Uses This Playbook to Avoid Cleaning Up its Messes

New England Risks Winter Blackouts as Gas Supplies Tighten

Democrats Spent $2 Trillion to Save the Economy. They Don’t Want to Talk About It.

Despite What the Experts Told You, This Was Never ‘Inflation’

The Rent Revolution Is Coming

What the $24.6 Billion Kroger-Albertsons Merger Could Mean for Groceries

Goldman Shakes Up Leadership Ranks in Yet Another Overhaul

Bank of America Profit Drops on Loan-Loss Reserve Build

Procter & Gamble Bets Inflation Won’t Push Shoppers to Trade Down

Families Still Struggle to Find Baby Formula Nearly One Year After Shortages Began

Sports TV Rights Are Costlier Than Ever — But They’re Cable’s Last Lifeline

Ye to Buy Controversial Social Networking App Parler

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Morning News: October 14, 2022
Posted by Eddy Elfenbein on October 14th, 2022 at 7:02 am

War Colliding With Recession Risks Leave Energy Markets on Uncertain Path

The UK’s Crisis Is Threatening the Global Inflation Fight

Kwasi Kwarteng Out as UK Chancellor

Inflation Is Unrelenting, Bad News for the Fed and White House

Inflation Report Seals Case for 0.75-Point Fed Rate Rise in November

Why Social Security’s Inflation Protection Is Priceless

Retirees Catch a Break With the Social Security COLA

Private Bets Shield World’s Largest Investors From Market Mayhem

BofA Strategists See More Pain in Store Before Stocks Reach Low

Investing for Your Values, but Betting on Growth

Computer Buyers Curtail Purchases After Pandemic Splurge

Kroger, Albertsons Forge $24.6 Billion Grocery Giant Combination

Chinese Drone Billionaire’s Dominance Threatened by US Blacklists

It Shouldn’t Matter So Much Whether Elon Musk Buys Twitter

Want to Get Ahead? Pick the Right Company

Netflix to Get Nielsen Ratings as Streaming Giant Rolls Out Ad-Supported Plan

A Pair of Levi’s That Sold for $76K Reflects Anti-Chinese Sentiment of 19th Century

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Morning News: October 13, 2022
Posted by Eddy Elfenbein on October 13th, 2022 at 7:02 am

IMF Urges Governments Restrain Spending to Fight Inflation

OPEC+ Supply Cut Could Tip Global Economy Into Recession, IEA Says

Bad Policies Are Greasing the Wheels for a Global Recession

A Weed Gummy Theory for the Fed’s High-Stakes Interest Rate Gamble

America’s 6 Biggest Banks Are Expected To Set Aside $4.5 Billion In Q3 To Cover Future Loan Losses — Why That’s A Clear Bad Sign For The Global Economy

Volatility Is Only Certainty for Stocks With Inflation Data Due

Bitcoin Becoming Less Volatile Than Stocks Raises Warning Flag

As Bond Investors’ Bets Blow Up, They Might Usher In Era of Higher Rates

TSMC to the World: We Have No Good News for You

Battle Over Wage Rules for Tipped Workers Is Heating Up

BlackRock Profit Beats as ETF Demand Holds Up Against Market Rout

Exxon’s Exodus: Employees Have Finally Had Enough of Its Toxic Culture

Walgreens Beats Sales Expectations, As It Expands its Health-Care Business

TikTok Parent ByteDance Sets Sights on Spotify With Music-Streaming Expansion

TikTok Wants to Open Warehouses in Amazon’s Backyard to Expand e-Retail Business

Delta Reports Profit and Projects Strong Travel Demand in Coming Months

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Morning News: October 12, 2022
Posted by Eddy Elfenbein on October 12th, 2022 at 7:07 am

A Warning for the World Economy: ‘The Worst Is Yet to Come’

Bailey Pressed to Extend Gilt Purchases Amid Deadline Confusion

US Core Inflation Seen Returning to 40-Year High as Rents Rise

U.S. Mortgage Interest Rates Rise to Highest Level Since 2006

Hedge Fund Managers Paid for Stockpicking Genius Aren’t Showing Much of It

Wall Street Braces for an Earnings Season of Mixed Signals

Credit Suisse Shares Drop on US Tax Probe Over Accounts

Biden Proposal Could Lead to Employee Status for Gig Workers

Companies Hoarding Workers Could Be Good News for the Economy

Amazon Labor Union, With Renewed Momentum, Faces Next Test

Twitter Faces Only Bad Outcomes If the $44 Billion Musk Deal Closes

Philips to Take $1.3 Billion Write-Down on Sleep-Apnea Business

PepsiCo Raises Guidance Again as Higher Prices Lift Sales

Nissan Sells Russian Business for Less Than $1, Takes $687 Million Loss

Toyota Starts Plant in Junta-Led Myanmar Making 1 to 2 Cars a Day

Federal Officials Trade Stock in Companies Their Agencies Oversee

A Nobel Prize for the Economics of Panic

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CWS Market Review – October 11, 2022
Posted by Eddy Elfenbein on October 11th, 2022 at 8:11 pm

The Nasdaq Falls to a Two-Year Low

In last week’s issue, I included a picture of Lucy holding the ball in place for Charlie Brown to kick. The reference is to how bear-market rallies tempt us into thinking the coast is clear, only to punish us again.

In this week’s issue, I’m including this update:

Once again, Lucy pulled the ball away and poor Charlie Brown went flying head over heels. That’s pretty much what happened on Wall Street over the last week.

Last week, the market gave us a brief but strong rally on Monday and Tuesday, and it’s taken it all back since then. The Nasdaq Composite closed today at its lowest level since July 28, 2020 (see chart below). Today’s intra-day low for the S&P 500 was its lowest since November 23, 2020. The index closed the day a hair above its recent low from September 30, which itself was a two-year low.

It’s a mess out there. Meta Platforms (formerly Facebook) is lower than where it was six years ago. We’re still seeing the trend I’ve talked about many times: risky stocks are getting hammered while conservative stocks are holding up relatively well. In today’s trading, the S&P 500 Low Vol Index rose 0.57% while the S&P 500 High Beta Index fell by 1.85%. It’s all about the Fed, the Fed and the Fed.

The recent selling was spurred in part by last Friday’s jobs report. To be fair, the report was a combination of good and bad news.

According to the report, the U.S. economy created 263,000 new jobs last month. That was below Wall Street’s expectations of 275,000. It also tied for the smallest monthly increase since April 2021. The unemployment rate ticked down to 3.5%.

Even though the jobs number was short of estimates, the futures market increased its odds that the Fed was going to raise interest rates by 0.75% at its November meeting. The odds are now up to 83% and the meeting is only three weeks away. I think it’s clear that the Fed intends to hike by 75 basis points in November.

More important than my opinion is the bond market’s. The one-year Treasury got to 4.28% today. That’s a 15-year high.

Also in the jobs report, the government said that the labor force participation rate fell to 62.3%. The U-6 unemployment rate, which is a broader measure, fell to 6.7% from 7% in August.

From a sector view, leisure and hospitality led the gains with an increase of 83,000, a rise that still left the industry 1.1 million jobs short of its February 2020 pre-pandemic levels.

Elsewhere, health care added 60,000, professional and business services rose 46,000 and manufacturing contributed 22,000. Construction was up 19,000 and wholesale trade climbed 11,000.

A drop of 25,000 in government jobs was a big contributor to the report missing expectations. Hiring at the state and local level is highly seasonal, so the decline points to a report that otherwise was largely in line with expectations and that shows a resilient jobs market.

Also on the negative side, financial activities and transportation and warehousing both saw losses of 8,000 jobs.

Another weak spot continues to be wages. For September, wages rose by 0.3%, which matched estimates. Over the past year, wages are up by 5%. While that sounds good, it’s less than the rate of inflation. In real terms, many Americans are seeing their wages getting cut. Inflation hurts so many folks who are already struggling. There are now 1.7 jobs per every unemployed person.

The next big test for the market will come on Thursday when the government releases the inflation report for September. The last report shocked Wall Street as it showed that inflation is still not under control.

Over the last 12 months, inflation is running at 8.26%. For Thursday, Wall Street expects to see consumer prices increase by 0.2% for September, and it expects the 12-month rate to fall to 8.1%.

The price for oil plays a major role in the inflation stats. While the price for gasoline had been dropping for several weeks, that seems to have ended about a month ago, and gasoline has been steadily increasing since then.

In last month’s report, the core rate of inflation came in at 0.6% which doubled expectations. That was a shocker. For September, Wall Street expects the core rate to rise by 0.4%. For the last 12 months, economists expect the core inflation rate to be 6.5%.

The equation is simple. Once inflation is under control, then the Fed won’t have to raised rates as aggressively. That’s good for the economy and earnings. It also takes some pressure off the dollar which has jumped higher against so many currencies. In the U.K., the Bank of England has been buying bonds in an effort to protect pension funds. The bond market there has has crumbled.

Inflation impacts so many different sectors at the same time. It’s so important that the Fed puts inflation back in its bottle.

Giving Another Look at Ansys

I’ve been a big fan of the company Ansys (ANSS) for some time. Unfortunately, I’ve not been such a big fan of the stock. The shares have often been very expensive. Very, very expensive.

Ansys makes simulation software for engineers. Whenever you see a designer working with a 3-D model on a computer screen, there’s a good chance that he or she is using Ansys software. Before building a bridge, a skyscraper or an airplane, the designer wants to make sure that it can withstand the pressure it will experience in real life.

Ansys is a classic “wide moat” company. Once a customer starts using their software, there’s a good chance he or she will become a long-term buyer. Ansys maintains an operating profit margin in excess of 35%, and their gross margin runs around 90%. That’s very attractive.

As you might guess, Ansys is not exactly a value stock, but I think there are occasions when it’s worth it to pay extra for an outstanding company. I saw a good opportunity for us to add Ansys to the Buy List. That was at the beginning of 2020 and the stock did very well for us. In 2020, Ansys gained more than 41% for us. I kept ANSS on in 2021, and it gained another 10% for us.

I loved the profits but again, I was concerned about the valuation. After some careful consideration, I decided to not include it on our Buy List for 2022. That’s a tough move to sell your winners. You can’t help but feel attached to them, but investing is about business, and loyalty to a stock is not important. The simple fact was that Ansys had become way too expensive.

As it turned out, our decision was almost perfectly timed. Shares of Ansys are down more than 50% this year. The business has been holding up well and Ansys has continued to beat expectations. In August, Ansys reported very good Q2 earnings. The company made $1.77 per share which beat estimates by 17 cents per share.

For Q3, Ansys expects earnings to range between $1.56 and $1.70 per share. For the entire year, Ansys expects earnings to range between $7.50 and $7.88 per share. For next year, Wall Street expects $8.49 per share.

That means that Ansys is going for less than 24 times next year’s earnings. That’s pricey, but it’s not bad for Ansys. It’s funny how a good stock can drop in half and suddenly, everyone’s afraid to own it. I can tell you that I’m seriously considering adding Ansys back onto our Buy List. I won’t make our final decision until late December.

Before I go, I have a quick story to share with you. In last week’s issue, I discussed how Elon Musk finally agreed to buy Twitter. I thought I’d ingratiate myself so I tweeted:

Elon Musk is the kindest, bravest, warmest, most wonderful human being I've ever known in my life.

— Eddy Elfenbein (@EddyElfenbein) October 4, 2022

Most people recognized the line from the movie, The Manchurian Candidate. One outfit that did not was the newspaper, The Independent. My tweet is quoted at the end of their story. Apparently, old Sinatra movies don’t hold the shared cultural value I thought.

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

– Eddy

P.S. If you want to learn more about the stocks on our Buy List, please sign up for our premium service. It’s $20 per month, or $200 per an entire year.

Morning News: October 11, 2022
Posted by Eddy Elfenbein on October 11th, 2022 at 7:01 am

Can This Man Solve Europe’s Energy Conundrum?

U.K. Government Plans an Update to Its Tax and Spending Agenda

Bank of England Further Expands Bond-Market Rescue

China’s Shot at Overtaking the US Economy Is at Stake in Xi’s Next Term

World’s Emergency-Lending Capacity Is Getting Stretched

Fed’s Vice Chair Nods to Global Risks but Stays Focused on Inflation

Credit Suisse May Face $8 Billion Capital Shortfall in 2024

Chipmaker Rout Engulfs TSMC, Samsung With $240 Billion Wiped Out

GM Looks to Parlay Battery Work Into New Energy Business

Cathie Wood Buys Adobe as Stock Tumbles After $20 Billion Deal

The Great Post-Covid Online Shopping Bet Was a Costly Delusion

A Prime Day Warning: Some Discounts May Be Price Hikes, Study Shows

Delta to Invest in Flying-Taxi Maker to Offer Rides to Airports

Ben Bernanke Led the Fed During the Worst Financial Crisis in Generations

Douglas Diamond and Philip Dybvig Created an Influential Model About Bank Runs

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Nasdaq Falls to Two-Year Low
Posted by Eddy Elfenbein on October 10th, 2022 at 11:50 am

The stock market is open today, but the bond market is closed in honor of Columbus Day. It’s another rough day for stocks. The Nasdaq Composite fell to a two-year low. The index is now down over 32% this year.

As I write this, the S&P 500 is down 0.68% but the S&P 500 Hi Beta Index is down by 2.23%. It’s another day when risky stocks are getting punished.

This Nobel Prize for economics was awarded to three economists including Ben Bernanke.

The Nobel committee said their work in the early 1980s had “significantly improved our understanding of the role of banks in the economy, particularly during financial crises,” and in showing why it is vital to avoid bank collapses. They added this was “invaluable” during the 2008-09 financial crisis and the coronavirus pandemic.

Bernanke’s analysis of the Great Depression in the 1930s showed how and why bank runs were a major reason the crisis was so long and severe. Diamond and Dybvig’s work, meanwhile, looked at the societally important role banks play in smoothing the potential conflict between savers wanting short-term access to their money and the economy needing savings to be put into long-term investments; and how governments can help prevent bank runs by providing deposit insurance and acting as a lender of last resort.

Morning News: October 10, 2022
Posted by Eddy Elfenbein on October 10th, 2022 at 7:00 am

Bernanke and Two Colleagues Win Nobel Prize in Economics

World’s Emergency-Lending Capacity Is Getting Stretched as Crises Deepen

As Europe Caps Energy Bills, the Merits of Price Controls Get Another Look

Bank of England Offers Further Support for Pension Funds Amid Crisis

What Is the Social Security Cost-of-Living Increase, and How Do People Receive It?

Allianz Chief Economic Adviser El-Erian Believes Core Inflation ‘Is Still Going Up’

‘No Possibility of Reconciliation’ as US Slams China Chips

Strong Dollar Pressures U.S. Manufacturing Rebound

Here’s How Weird Things Are Getting in the Housing Market

Cathie Wood Warns of ‘Serious Losses’ in Automobile Debt

Electric-Vehicle Makers and Suppliers Drive Into a Stormy IPO Market

Not Ready to Go Full EV? Some Car Companies Bet Bigger on Hybrids

A 27-Year-Old Is Taking On Big Banks to Lure Mega-Rich Families

Under Pressure, Goldman CEO Ditches Dream of Consumer Domination

As Warehouses Multiply, Some Cities Say: Enough

That Reusable Trader Joe’s Bag? It’s Rescuing an Indian Industry.

Ye Poses a Test for a Post-Musk Twitter

How a Scottish Moral Philosopher Got Elon Musk’s Number

Burger King’s New U.S. CEO Seeks to Restore Chain’s Luster

Streaming Services Want to Fill the Family Movie Void

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Morning News: October 7, 2022
Posted by Eddy Elfenbein on October 7th, 2022 at 7:02 am

China Is the Wild Card in the Energy War With Russia

Biden Says the U.S. Is Eyeing ‘Alternatives’ to OPEC Oil

Biden’s Choice After OPEC Cuts: Woo Saudi Arabia, or Retaliate?

Global Outflows Continue from Bond and Equity Funds for a Seventh Week

Global Fallout From Rate Moves Won’t Stop the Fed

Tracking the Coming Economic Storm

The Job Market Has Been Like Musical Chairs. Will the Music Stop?

Credit Suisse Offers $3 Billion Debt Buyback to Calm Nerves

Chipmakers See ‘Breathtaking’ Drop in Demand as Recession Looms

Biden Visits IBM to Promote Investments in U.S. Semiconductor Production

New Cars Are Finally Back in Stock — But Americans Might Not Be Able to Afford Them

A $568 Million Hack of Binance Coin Roils Crypto Sector Anew

Hackers Target Eager Homebuyers With a Dumb Scam That Keeps Working

Elon’s Hidden Motives + A Meetup in the Metaverse

TikTok Parent ByteDance Sees Losses Swell in Push for Growth

Bank of America to Pay Ambac Financial $1.84 Billion in Lawsuit Settlement

Teenagers Keep Vaping Despite Crackdowns on E-Cigarettes

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Morning News: October 6, 2022
Posted by Eddy Elfenbein on October 6th, 2022 at 7:01 am

WTO Sees Sharp Slowdown in Global Trade, Pointing to Possible Recession

Serbia’s Central Bank Raises Benchmark Rate to 4%

In Global Slowdown, China Holds Sway Over Countries’ Fates

In Rebuke to West, OPEC and Russia Aim to Raise Oil Prices With Big Supply Cut

OPEC Move Shows the Limits of Biden’s Fist-Bump Diplomacy With the Saudis

U.S. Gasoline Prices Are Climbing Again and May Get Worse

U.S. Looks to Ease Venezuela Sanctions, Enabling Chevron to Pump Oil

A Strong Dollar Is Wreaking Havoc on Emerging Markets. A Debt Crisis Could Be Next.

Credit Suisse Weighs Outside Investor for Investment Bank Spinoff

Elon Musk’s Renewed Twitter Bid Puts Pressure on Wall St. Banks Backing Him

Ford Races to Win Over Pickup Fans With Electrified F-150

Hello, Fellow Car. We’ve Got a Problem. Let’s Talk.

Even After $100 Billion, Self-Driving Cars Are Going Nowhere

Peloton to Cut 500 More Jobs in Effort to Save the Company

How Macy’s Has Avoided—So Far—the Inventory Pileup Plaguing Other Apparel Chains

Secretive Chip Startup May Help Huawei Circumvent US Sanctions

How YouTube Created the Attention Economy

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