ADP Shows Jobs Gain of 568,000 Last Month
Posted by Eddy Elfenbein on October 6th, 2021 at 3:06 pm

The stock market opened lower today but has recovered nicely, and we may make a small gain today. This, we’re told, is due to promising talks regarding the debt ceiling. Hmm…we’ll see.

This is also jobs week and the big labor report will come out on Friday. Today we got the ADP report, and it showed a gain of 568,000 jobs in September. Wall Street had been expecting 430,000. I should caution you that the ADP report is not always a good indicator of the government’s official report.

Shares of Intercontinental Exchange (ICE) are close to a new high. The stock’s most recent high is from July. ICE got as high as $121.55 today. The 52-week high is $122.42.

The White House said that Covid home test sales are ready to soar. This is good news for Abbott Labs (ABT):

The White House will announce Wednesday that the nation’s supply of at-home Covid-19 tests is on track to triple by early November, driven by recent government investments and the FDA’s emergency authorization of a test from ACON Laboratories.

The Biden administration projects that even more tests should be available by the end of the year. A White House official told POLITICO the administration is purchasing another $1 billion of at-home tests that will contribute to a quadrupling of the market to 200 million tests per month in December.

Morning News: October 6, 2021
Posted by Eddy Elfenbein on October 6th, 2021 at 7:03 am

Futures Tumble as Soaring Energy Prices Fuel Inflation Worries

New Zealand Raises Rates for First Time in Seven Years, More to Come

A Shock Default in China Has Investors Scanning Repayment Dates

Chinese Golden Week Travel Suggests Sluggish Holiday Spending

Why Wall Street Cheers China, Despite Growing Business Unease

As the Debt Default Looms, the White House Warns of Financial Crisis

Biden Team Seeks to Pare Back Economic Agenda in Strategy Shift

Federal Reserve Chair Jerome Powell Faces Reappointment Amid Tumult

Bank Groups Unite Against Biden’s Pick for Key Regulatory Post

Airlines Warn Erratic Global COVID-19 Rules Could Delay Recovery

Airbus Exec Says Wary Engine Makers Will Meet Demand for New Jets

Zuckerberg Says Claims That Facebook Prioritizes Profit ‘Just Not True’

Home Depot Hires Walmart Delivery Drivers to Drop Off Paint and More to Customers’ Doors

Why Texas Embodies Economic Future of America

Single People Make Less Money Than Those With Partners, Research Finds

The Forbes 400: The Definitive Ranking of The Wealthiest Americans In 2021

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CWS Market Review – October 5, 2021
Posted by Eddy Elfenbein on October 5th, 2021 at 8:11 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.”)

The stock market bounced back today after another difficult Monday. Daily volatility has increased markedly recently. Consider that in all of June, July and August, the S&P 500 had seven days when it moved up or down by more than 1%. Today it happened for the fourth day in a row and for the seventh time in the last 12 sessions.

So what’s got everyone so jumpy? We can round up the usual suspects. For example, this is the historically tough time of year for stocks. September is the worst month and October is the most volatile. We also have another debt ceiling debate. Of course, there are worries about the Fed tapering soon. On top of that, the Q3 earnings will begin in a few weeks. There are also increased tensions between China and Taiwan. China has been repeatedly violating Taiwanese airspace.

If you had a rough day, consider that Mark Zuckerberg lost about $6 billion yesterday. Don’t feel too bad for him. The Zuck made back about $2 billion of that today.

To be honest, volatility has returned to normal. The unusual period isn’t now. Instead, it was the extremely calm market we had this summer. Through September, the S&P 500 hit 54 new highs this year. That trails only 1995.

Dividends Are Back

Another sign of the market returning to normal is the growth of dividends. I’ve been very happy to see this. We just got the Q3 numbers, and the companies in the S&P 500 paid out $15.36 per share in dividends. (I should explain that that’s the index-adjusted number. Roughly, every one point in the S&P 500 is worth about $8.5 billion.)

The good news about that $15.36 per share number is that it’s a 10% increase over last year’s Q3. That comes after three quarters of dividends being cut and two more quarters of very slight increases to dividends. Very close to being flat. The S&P 500 finally eclipsed its previous dividend record of $15.32 per share from the first quarter of 2020.

Here’s a chart showing the growth of dividends per share of the S&P 500:

Once the pandemic started, many companies slashed their dividends. They wanted to make sure they had enough cash to ride out the lockdowns. Disney (DIS), for example, stopped paying its semi-annual dividend. We’d better get used to it. The CEO recently said the dividend won’t be coming back anytime soon.

But many companies are paying dividends again. Ross Stores (ROST) is a good example. The deep-discounter stopped paying its 21.5-cent dividend in March 2020. It restored it a year later. The company has gone on to pay more dividends in June and September. This is a good sign of confidence from the company.

This is also a good reason why it can be dangerous to follow a single indicator like dividend yields. In unusual circumstances, the dividend can give you a false reading. This is a subject I talk about a lot. The stock market’s overall dividend yield has plunged due to fewer dividends. This has happened as the market has rallied. That means that if you viewed lower yields as a signal of a pricey market, you would have missed out on some very nice gains. The overreliance on numbers can lead you astray.

Chistine Benz has a smart piece at Morningstar on what she calls the tyranny of what can be quantified. This is so true. Just because we can measure something, we deem it important. That’s not always the case. Oftentimes, it’s things we can’t so easily measure that are the most important. With investing, that can mean things like reputation or management’s effectiveness.

There’s a story that during the Vietnam War, Robert McNamara devised a massive system for measuring the success of the war based on data. McNamara’s team collected mountains of data. One of his aides remarked that it lacked one crucial data point, the feelings of the Vietnamese people.

I like dividends a lot, and it’s important to find companies that pay out solid dividends. One reason is that dividends don’t lie. One of the disturbing things you learn when you delve into corporate accounting is how much leeway companies are allowed when fixing their books. For example, a term like “cash flow” can mean lots of different things. But dividends are a check right from the company, so there’s no funny business going on.

I knew one person who liked to value companies based on a multiple of how much they paid in taxes. That’s based on a similar idea. If the company is admitting to a tax bill of that size, you can be sure they earned it and it’s not the result of funny accounting.

Also with dividends, there’s an implied promise that the company will at least do its best to maintain that dividend payment into the future. Of course, there’s no guarantee, but most companies at least try. Cutting your dividend is certainly not against the law, but it doesn’t look good.

I also like companies with long streaks of increasing their dividends each year. When a company in the S&P 500 has increased its dividend for 25 or more years, it’s known as a Dividend Aristocrat. Again, we have to look out for companies that only do token increases to keep their streaks alive.

Two websites that are invaluable for dividend investors are Dividend Value Builder and Dividend Growth Investor. I like that Dividend Value Builder also keeps takes on stocks not in the S&P 500 that have raised their dividend for 25 or more years.

Here’s a list of the longest dividend raisers:

Source: Dividend Value Builder

One stock on this list that grabs my attention is 3M (MMM). For years, this has been a great company. Blue chips don’t get much bluer than 3M. It’s beaten the market and consistently increased its dividend. Recently, however, the stock has lagged badly.

The company is a diversified industrial giant that has its hands in just about everything. Over the last four years, the S&P 500 Total Return Index has gained 83.25%. By contrast, 3M has lost 6.93%. Wall Street analysts hate the stock. 3M’s earnings peaked in 2018 and its profits fell in 2019 and again last year. So far this year, profits are running well ahead of last year, but it looks like 3M will still fall short of its 2018 peak.

When a well-run outfit sees its stock lag, I take notice. The problem 3M faces is lawsuits regarding the environmental damage resulting from chemicals it used to use. We don’t know what the eventual legal liabilities will be, but it won’t be small. There’s also a lawsuit regarding 3M’s earplugs for the military.

This is a difficult issue for an investor because a a new shareholder of today inherits the problems of the company’s past. I want nothing to do with environmental damage, but I recognize that’s not what 3M is today. At some point, 3M will be a big bargain, but we’re not quite there yet. I’m still keeping an eye on this one.

Older Male Investors Tend to Panic Sell More Often

I have bad news for the older guys out there. It turns out that you’re not so good at keeping cool during a market panic. Researchers at MIT found:

Investors who are male, over the age of 45, married or consider themselves as having “excellent investment experience” are more likely to “freak out” and dump their portfolio during a downturn, according to a paper published last month that analyzed more than 600,000 brokerage accounts.

The researchers say their work can be used to create predictive models, which would help identify individuals at risk of panic selling.

“Financial advisors have long advised their clients to stay calm and weather any passing financial storm in their portfolios,” wrote Daniel Elkind, Kathryn Kaminski, Andrew Lo and colleagues. “Despite this, a percentage of investors tend to freak out and sell off a large portion of their risky assets.”

I can’t say I’m surprised. If it didn’t already have a name, I would call testosterone, “bad investor juice.”

I can’t be too hard on the guys. During a market panic, it’s very hard to do nothing. The urge to pull the plug can be overwhelming. The researchers also found that investors with less than $20,000 in their portfolios were quick to liquidate the whole thing.

The fact is that the pain of losses weighs far more heavily on our psyches than the pleasure of winning does.

James O’Shaughnessy told me of a study that Fidelity did years ago of its clients. The firm wanted to see which investors did the best. Was it older investors or younger ones? Large portfolio investors or smaller ones? Men or women?

It turns out that the best investors among Fidelity’s clientele was an interesting group. It was people who had forgotten they had Fidelity accounts.

To quote the great Jesse Livermore:

“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.”

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

– Eddy

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FactSet Reaches New High
Posted by Eddy Elfenbein on October 5th, 2021 at 1:39 pm

The stock market is improving today. Yesterday, the S&P 500 closed at its lowest level in two months. It looks like we’ll have another 1% day but this time to the upside.

Thanks to Facebook (FB) tanking yesterday, Mark Zuckerberg lost more than $6 billion yesterday. He’s made back about $2 billion today.

On our Buy List, shares of FactSet (FDS) just touched a new 52-week high. I was not expecting the stock to respond so strongly to its earnings report from last week.

Intercontinental Exchange (ICE) is having a good day for us. The stock is up about 3%. It’s not far from a new 52-week high.

On the economic front, the ISM Services Index rose to 61.9. That’s quite good. The trade deficit increased to $73 billion.

Morning News: October 5, 2021
Posted by Eddy Elfenbein on October 5th, 2021 at 7:04 am

The End of a ‘Gilded Age’: China Is Bringing Business to Heel

New U.S. China Trade Plan Leaves Industry Hungry for Specifics

John Authers: Stagflation Fear Is Having a British Renaissance

Energy Prices Spike as Producers Worry Over Pandemic and Climate

OPEC Opts Against Big Output Boost, Pushing Oil Prices to Seven-Year High

Global Energy Crisis Shows Fragility of Clean-Power Era

The Fed’s Great Dissenter

Facebook Is Weaker Than We Knew

Here’s What Facebook Says Triggered the Massive Outage on Its Apps

Amazon is Starting Black Friday Deals Early. Like, Now

PepsiCo Raises Annual Revenue Forecast as Soda Demand Jumps

Ouster Will Buy Sense Photonics, Drive for More Automotive Deals

Hollywood Crew Union Votes to Authorize Strike Against Studios

Tesla Ordered to Pay $137 Million Over Racism in Rare Verdict

Law Firm at Center of Pandora Helped Global Rich Hide Billions

The Pope’s Corruption Problems

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Facebook Leads the Market Lower
Posted by Eddy Elfenbein on October 4th, 2021 at 2:14 pm

The stock market is having another rough day today. The S&P 500 is currently down over 1.5%. Tech stocks are suffering the most. The NASDAQ is currently off by more than 2.3%. Facebook, in particular, has been hit hard. The shares are currently down over 5%.

A Facebook whistle blower was featured on last night’s 60 Minutes.

The identity of the Facebook whistleblower who released tens of thousands of pages of internal research and documents — leading to a firestorm for the social media company in recent weeks — was revealed on “60 Minutes” Sunday night as Frances Haugen.

The 37-year-old former Facebook product manager who worked on civic integrity issues at the company says the documents show that Facebook knows its platforms are used to spread hate, violence and misinformation, and that the company has tried to hide that evidence.

“The thing I saw at Facebook over and over again was there were conflicts of interest between what was good for the public and what was good for Facebook, and Facebook over and over again chose to optimize for its own interests, like making more money,” Haugen told “60 Minutes.”

Morning News: October 4, 2021
Posted by Eddy Elfenbein on October 4th, 2021 at 7:04 am

Why Brexit Britain Is Isolated, Vulnerable and Running on Fumes

U.S. Signals Little Thaw in Trade Relations With China

China Steps Up Efforts to Ring-Fence Evergrande, Not Save It

The Stock Market’s Hot Summer Became a Swoon. Where Does It Go Next?

Soaring Wealth Inequality Sets The Stage For Soaring Opportunity

Doomsday Clock for U.S. Debt Ticks, With No Congressional Plan

Diverse Boards to Pick the Next Boston and Dallas Fed Bank Chiefs

Behind the Crypto Broker Accused of Enabling Ransomware Hackers

Here Are the Biggest Revelations From the Pandora Papers Leak

Whistle-Blower Says Facebook ‘Chooses Profits Over Safety’

‘The Beginning of the Snowball’: Supply-Chain Snarls Reach Publishing

Volvo Cars Is Completing Plans for IPO in Stockholm

What They Saw in Ozy

World Bank, IMF Face Long-Term Damage After Data Rigging Scandal

Pharmacy Chains Face First Trial Over U.S. Opioid Epidemic

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Highest PCE Core Inflation in 30 Years
Posted by Eddy Elfenbein on October 1st, 2021 at 12:54 pm

Now that it’s the first business day of the month, the ISM Manufacturing report came out. The reading for September was 61.1 which is very good. That’s up from 59.9 in August. Economists had been expecting 59.6. This means that the factory sector of the economy is still moving along.

After the GDP report, we always get the personal income and spending reports. For August, spending rose by 0.8% and income was up 0.2%. That’s not bad.

With the income and spending reports, we also get the inflation reports. This is different from the CPI report. Some economists, most prominently at the Fed, think this is a better measure of inflation.

For the 12 months ending in August, the PCE price index rose by 4.3%. The core PCE price index rose by 3.6%. The latter is the largest jump in more than 30 years.

The stock market is up so far today. The Dow is outpacing the S&P 500 thanks to Merck. The drug company said its new Covid pill reduces the risk of hospitalization by half for some patients. Merck is up 9% today.

Morning News: October 1, 2021
Posted by Eddy Elfenbein on October 1st, 2021 at 7:03 am

Stock, Bond and Real Estate Prices Are All Uncomfortably High

‘Perfect Storm’ Lifts Dollar Over Unsettled Markets

Factories Struggling as Supply Constraints Hit, Costs Rise

Silicon’s 300% Surge Throws Another Price Shock at the World

Consumer Bureau Chief Confirmed in Close Senate Vote

Bond Investors Brace for Worst Year in Decades

Only 35% Pass Wall St.’s Toughest Test. How Much Does That Matter?

Zoom’s Stock Drop Likely Nixed Five9 Deal

SoftBank-Backed Oyo Files to Raise $1.1 Billion in IPO

Airlines Are Ripping Out Business Seats to Create a New Middle Class

How Covid Is Transforming the $380 Billion Luxury Fashion Industry

China’s Box Office Becomes a Giant Headache for Hollywood

Would Ticket Holders Pay $25 if They Got Unlimited Food? One Movie Theater Decided to Find Out

Merck CEO Sees ‘Multibillion-Dollar’ Opportunity With Acceleron

Youth Vaping Declined Sharply for Second Year, New Data Show

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Tracking Our Lowest Close in Two Months
Posted by Eddy Elfenbein on September 30th, 2021 at 12:56 pm

The stock market is down again today. The S&P 500 isn’t far from the intra-day lows from the Monday before last. The index is on pace for its lowest close in two months.

As I write this, the S&P 500 is at 4,321 which is well below its 50-day moving average of 4,463 but still above its 200-day moving average of 4,134.

September is living up to its reputation as the worst month for stocks. This September will be the S&P 500’s worst since…well, last September.

There were two important economic reports this morning. The first is that Q2 GDP growth was revised upward to 6.7%. I think we all know that Q3 won’t be so good.

The other report is that jobless claims increased to 362,000. I tend to not place a great deal of emphasis on the weekly jobless claims reports because the number tends to bounce around a lot. I do place a lot of emphasis on the trend in jobless claims. That’s also why economists tend to look at the four-week moving average.

Having said that, this was the third weekly increase in a row. This generally lines up with weaker economic data.