Proclamation of Thanksgiving
Posted by Eddy Elfenbein on November 25th, 2021 at 10:40 am

By the President of the United States of America.

A Proclamation.

The year that is drawing towards its close, has been filled with the blessings of fruitful fields and healthful skies. To these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God. In the midst of a civil war of unequaled magnitude and severity, which has sometimes seemed to foreign States to invite and to provoke their aggression, peace has been preserved with all nations, order has been maintained, the laws have been respected and obeyed, and harmony has prevailed everywhere except in the theatre of military conflict; while that theatre has been greatly contracted by the advancing armies and navies of the Union. Needful diversions of wealth and of strength from the fields of peaceful industry to the national defence, have not arrested the plough, the shuttle or the ship; the axe has enlarged the borders of our settlements, and the mines, as well of iron and coal as of the precious metals, have yielded even more abundantly than heretofore. Population has steadily increased, notwithstanding the waste that has been made in the camp, the siege and the battle-field; and the country, rejoicing in the consciousness of augmented strength and vigor, is permitted to expect continuance of years with large increase of freedom. No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy. It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People. I do therefore invite my fellow citizens in every part of the United States, and also those who are at sea and those who are sojourning in foreign lands, to set apart and observe the last Thursday of November next, as a day of Thanksgiving and Praise to our beneficent Father who dwelleth in the Heavens. And I recommend to them that while offering up the ascriptions justly due to Him for such singular deliverances and blessings, they do also, with humble penitence for our national perverseness and disobedience, commend to His tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife in which we are unavoidably engaged, and fervently implore the interposition of the Almighty Hand to heal the wounds of the nation and to restore it as soon as may be consistent with the Divine purposes to the full enjoyment of peace, harmony, tranquility and Union.

In testimony whereof, I have hereunto set my hand and caused the Seal of the United States to be affixed.

Done at the City of Washington, this Third day of October, in the year of our Lord one thousand eight hundred and sixty-three, and of the Independence of the United States the Eighty-eighth.

By the President: Abraham Lincoln

William H. Seward,
Secretary of State

Morning News: November 25, 2021
Posted by Eddy Elfenbein on November 25th, 2021 at 7:00 am

Supply-Chain Crisis Only Getting Worse With China’s 7-Week Port Quarantine

Jamie Dimon’s Apology Undercuts His Own Words on China Free Speech

Stock Funds Took in More Cash in 2021 Than Two Decades Combined

U.S. Economy Eyes Strong 2021 Finish as Labor Market Tightens, Spending Accelerates

More Fed Officials Open to Speeding Up Bond-Buying Taper, Rates Liftoff

E-Commerce Needs Real Store Locations Now More Than Ever

The Anti-Work Brigade Is Coming for Amazon on Black Friday

Why the Retail Industry Is Fighting Vaccine Mandates

World’s Biggest Ikea Opens as Part of Global Push

The Best Tech Gifts That Aren’t Gadgets

AT&T, Verizon Propose 5G Limits to Break Air-Safety Standoff

Citigroup to Split Institutional Clients Group’s Ops, Tech Units

Once a Warrior, Then a Nonprofit Leader, Now an Entrepreneur

Are You Rich Yet? Really, That’s An Absurd Question

Has Cathie Lost Her Touch?

Be sure to follow me on Twitter.

Lowest Jobless Claims Since 1969
Posted by Eddy Elfenbein on November 24th, 2021 at 10:52 am

With Thanksgiving tomorrow, there’s a crush of economic news today. The Jobless Claims report fell to 199,000. That’s the lowest since November 15, 1969. Last year, Jobless Claims peaked at over 20 times the current level.

The Q3 GDP growth report was revised from 2% up to 2.1%. That’s annualized and inflation-adjusted.

Durable goods orders fell 0.5% while Wall Street had been expecting an increase of 0.3%.

However, excluding transportation, durable goods orders increased 0.5%, and excluding defense they were up 0.8%.

Nondefense new orders for capital goods, a proxy for business investment, fell 1.2% for the month. However, shipments, unfilled orders and inventories all rose.

The market is down so far this morning.

Morning News: November 24, 2021
Posted by Eddy Elfenbein on November 24th, 2021 at 7:01 am

A Huge Arbitrage Opportunity Has Just Opened Up in Crypto

India Sows Confusion with Plan to Ban ‘Private Cryptocurrencies’

As Virus Cases Rise in Europe, an Economic Toll Returns

As Inflation Surges, Pakistan Seeks a $6 Billion I.M.F. Lifeline

The Inflation Miscalculation Complicating Biden’s Agenda

With Fed’s Powell Renominated, Focus Turns to Speed of Bond-Buying Taper

Flush With Cash, Saudi Prince Snubs Biden and Sends a Message

U.S. Marshals Other Nations, Challenges OPEC+ with Release of Oil Reserves

What Is Happening with U.S. Gasoline Prices?

He’s Steering Volkswagen, With His Eyes on Beating Tesla

Xpeng Aims To Sell Nearly As Many Electric Vehicles Overseas As In China

Dollar Tree Is Raising Prices 25 Percent to $1.25

The Pandemic Cocktail Habit Behind NYC’s Booze-Free Bottle Shop

Wall Street Grudgingly Allows Remote Work as Bankers Dig In

JPMorgan CEO Jamie Dimon: Bank Will Outlive China’s Communist Party

Everyone’s Moving to Texas. Here’s Why.

Here’s What C.E.O.s Are Thankful For

Walgreens, Walmart and CVS Pharmacies Contributed to Opioid Epidemic, Ohio Jury Finds

Be sure to follow me on Twitter.

CWS Market Review – November 23, 2021
Posted by Eddy Elfenbein on November 23rd, 2021 at 7:10 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.”)

Biden Reappoints Powell

Yesterday, President Biden appointed Jay Powell to another four-year term as Chairman of the Federal Reserve Board. The stock market liked the news, at least at first. Early on Monday, the S&P 500 rallied nearly 1% and it reached an all-time intra-day high. Alas, it was not to last. The market gave back those gains and closed lower. The market gods giveth and the market gods taketh away.

What does the Powell nomination mean for us as investors? It’s definitely a positive, and that was reflected in yesterday’s early rally. Powell has shown himself to be attentive to the mood of Wall Street without being overly deferential. Once Covid broke out, he moved quickly on interest rates. You can’t argue with the market’s performance since the low from last March.

Several weeks ago, the Powell nomination seemed to be a no-brainer. Powell is as institutional-Washington as you can get. Recently, there were growing noises of dissent, especially from liberal Democrats like Senator Elizabeth Warren who favored Fed Governor Lael Brainard. Interestingly, there haven’t been quite the noises of discontent considering the explosion in the Fed’s balance sheet along with the worst inflation in 30 years.

Senator Warren criticized Powell as being weak on bank regulation and for what she perceived to be his distance to a climate change agenda. Perhaps sensing the challenge, President Biden nominated Brainard as the Fed’s Vice-Chair.

From the WSJ:

The president’s decision reflected a desire by Mr. Biden to maintain stability at the central bank amid public concerns about high prices for everything from groceries to fuel, administration officials said. Mr. Biden’s advisers said they want to focus much of their attention on passage of their social spending and climate legislation and believe Mr. Powell will more easily win Senate confirmation, despite objections from progressives.

“Put directly: at this moment both of enormous potential and enormous uncertainty for our economy, we need stability and independence at the Federal Reserve. Jay has proven the independence that I value in a Fed chair,” Mr. Biden said at the White House on Monday.

I suspect that Treasury Secretary Janet Yellen, a former Fed chair herself, pushed for Powell. I think it’s interesting that previous Fed chairs have been professional economists. Powell, instead, is a lawyer and as such, he tends to be much more direct than his predecessors. Previous Congressional appearances often sounded like a professor teaching a remedial econ class. (Actually, it kind of was.)

Alan Greenspan famously told Congress, “I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.” That’s not an issue with Powell.

For Biden, Powell Is a Safe Choice

There’s a little confusion as to how the Fed is run. Powell actually gets two nominations. One is as a member of the Federal Reserve Board. Another is as chairman of that board. The nomination to the Fed Board is a 14-year term. There are seven spots, so it means the president can add a new member every other year.

In reality, few members of the Fed board serve that long, but Fed chairs tend to stick around. In the last 70 years, there have 14 presidents but only eight Fed chairmen.

Powell was nominated by President Obama to the Federal Reserve Board in 2012 for a term that ended in 2014. He was re-nominated by Obama to that position which lasts all the way to 2028, assuming he wants to hang around that long.

Four years ago, President Trump nominated Powell to be Fed Chair. He was confirmed by the Senate 83-14. Interestingly, one of the dissenting votes came from then-Senator Kamala Harris. I doubt Powell will run into much difficulty in getting approval from the Senate, and that’s probably a reason why Biden went with him. I expect some senators will oppose Powell and cite the Fed’s record on inflation. They certainly have a point. Still, Powell has worked to make the Fed more transparent.

The Federal Reserve Board is different from the rate-setting committee which is the Federal Open Market Committee. My apologies, but this is where things get wonky. The FOMC is a 12-member committee which includes the seven members of the Federal Reserve Board, plus five of the 12 regional bank presidents. One exception is that the president of the New York Fed is always a member. The other seats rotate among the 11 other regional banks.

This may sound surprising to modern ears but the prominence of the Federal Reserve has increased dramatically over the past 40 years. Not that long ago, the Fed wasn’t that big a deal. It wasn’t in the news that much. In fact, the Fed didn’t even announce changes to interest rates. Fed watchers had to figure it out. That’s all changed for the better.

Technically, it’s possible for the Fed chair to be overruled on an interest-rate decision. It’s happened before, but it would a major story if it happened today. Now the Fed aims for consensus and most of the policy statements are bland and uninteresting. It’s not the Fed’s fault. That’s how the market likes it.

There’s been a big change in the market’s outlook for interest rates. Here’s an interesting chart from the futures market.

Two months ago, traders thought there was less than a 10% chance that the Fed would hike interest rates by June. Now they think there’s a 75%, which is probably about 24.5% too low.

Why the big change? The answer is Jay Powell. This is a good example of the Fed being transparent about its intentions. Powell can be criticized on many levels but he’s not to blame for there being a lack of political will to fight inflation.

The President today released 50 million barrels of oil from the Strategic Petroleum Reserve. While the intentions are good, the effect is probably minimal. Fifty million barrels may sound like a lot, but the U.S. economy will go through that quickly. Some other countries are doing the same to their reserves.

Ultimately, inflation is a political problem not unlike parking in a big city. It’s allowed to grow unchecked until enough people start to complain about it. We’re not there just yet. I’ll give you an example. The inflation-adjusted yield on the 10-year Treasury is now around -1%. That’s crazy low and it shows you why the stock market has been such an obvious alternative for investors.

Not only have valuations improved, but so, too, have the fundamentals for the stock market. At the beginning of this year, Wall Street had been expecting the S&P 500 to report Q4 earnings of $44.27 per share. That’s the index-adjusted number. Now expectations are up to $50.52 per share.

The stock market has been remarkably calm recently. Today was the 28th day in a row in which the S&P 500 closed up or down by less than 1%. Twenty-one of those days were moves of less than 0.5%.

Typically, volatility reflects what the stock market just did rather than being a forecast of what it will do. A rising market tends to be a calm one. A plunging market is a chaotic one. Most of the big swings in stock market history have come when the indexes were well off their highs. The S&P 500 reached an all-time closing high on Thursday and an intra-day high yesterday.

The stock market will be closed on Thursday for Thanksgiving. Due to the holiday, we’re going to get a crush of economic reports tomorrow. The jobless-claims report, which usually comes out each Thursday, will come out on Wednesday. The last report showed another post-Covid low.

The government will also update its Q3 GDP report. The initial report last month indicated growth of just 2%. That’s not that good. It will be interesting to see if it gets revised higher.

Usually, the day after the GDP report comes out, we get the reports on personal income and spending (see below). This time, they will come out the same day. So far, consumer spending has held up well despite growing dissatisfaction with the economy. If that’s not enough, we’ll also get reports on new-home sales and consumer confidence, and also the minutes to the last Fed meeting are due out.

The stock market will be open on Friday, but it will close at 1 p.m. ET. This is usually the slowest trading day of the year.

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

– Eddy

P.S. Don’t forget to sign up for our premium newsletter.

TikTok #2
Posted by Eddy Elfenbein on November 23rd, 2021 at 6:04 pm

@eddyelfenbein

♬ original sound – Eddy Elfenbein

Morning News: November 23, 2021
Posted by Eddy Elfenbein on November 23rd, 2021 at 7:15 am

Lira Losses Snowball in Turkey’s Worst Streak in 20 Years

Biden Sticks with Powell as Fed Chair, Resisting Political Pressure

President Biden Will Tap into U.S. Oil Reserves in Concert with Other Nations

Every Step of the Global Supply Chain Is Going Wrong — All at Once

‘Black Friday’ Drags Through November Amid Tight U.S. Inventories

Best Buy Forecasts Holiday Quarter Sales Below Estimates as Supply Issues Loom

Samsung to Choose Taylor, Texas, for $17 Billion Chip-Making Factory

JP Morgan Becomes World’s Most Systemic Bank

The Latest Farm Product: Carbon Credits

Payhawk Raises $112M to Better Compete in the Heated Corporate Card Race

Stripe ‘Happy’ to Stay Private After Reaching $95 Billion Value

Asia’s Richest Man Looks to Walton Family Playbook on Succession

Amazon and Apple Handed $225 Million in Italian Antitrust Fines

Deutsche Bank’s Rising Star Has a Rapid Change of Fortune

Will Olympics Sponsors Face Blowback Over Peng Shuai?

Better Get A Spending Strategy

Be sure to follow me on Twitter.

My First TikTok
Posted by Eddy Elfenbein on November 22nd, 2021 at 3:22 pm

I’m giving this a try.

@eddyelfenbein

♬ original sound – Eddy Elfenbein

The Replication Crisis in Finance
Posted by Eddy Elfenbein on November 22nd, 2021 at 2:28 pm

You may have heard of the Replication Crisis in medicine. Researchers have been unable to repeat the findings that were previously found in hundreds of academic papers. Robin Wigglesworth says there’s a similar crisis unfolding in finance:

That is the incendiary argument of Campbell Harvey, professor of finance at Duke university. He reckons that at least half of the 400 supposedly market-beating strategies identified in top financial journals over the years are bogus. Worse, he worries that many fellow academics are in denial about this.

“It’s a huge issue,” he says. “Step one in dealing with the replication crisis in finance is to accept that there is a crisis. And right now, many of my colleagues are not there yet.”

Harvey is not some obscure outsider or performative contrarian attempting to gain attention through needless controversy. He is the former editor of the Journal of Finance, a former president of the American Finance Association, and an adviser to investment firms like Research Affiliates and Man Group.

I can’t say I’m surprised. I’ve always been skeptical of the large databases of market performance. The historical data is pretty iffy.

The small-cap premium, for example, has struck me as probably bogus. Sure, it may have existed for a certain time period but doesn’t mean it’s a permanent effect.

I don’t trust much of the earnings numbers we see today, and modern accounting methods are much better than what we had decades ago.

Biden Picks Powell and Stocks Surge to New High
Posted by Eddy Elfenbein on November 22nd, 2021 at 10:15 am

The stock market is off to a strong start for this holiday-shortened week. The S&P 500 has been as high as 4,726.60 this morning which is a record intra-day high. The current highest close came exactly two weeks ago when the index finished the day at 4,701.70. It looks like we can beat that, but there’s a lot of trading left to go.

The big news today is that President Biden has reappointed Jerome Powell to another term as Chairman of the Federal Reserve. The nomination still has to be approved by the Senate. Powell was first appointed by President Trump four years ago.

There was some speculation that Biden might appoint Fed Governor Lael Brainard. The president has appointed her as Vice-Chairman.

“Chair Powell has provided steady leadership during an unprecedently challenging period, including the biggest economic downturn in modern history and attacks on the independence of the Federal Reserve,” a White House statement said. “During that time, Lael Brainard – one of our country’s leading macroeconomists – has played a key leadership role at the Federal Reserve, working with Powell to help power our country’s robust economic recovery.

As a technical note, there are actually two nominations for Powell. One is as a member of the Fed’s board. Those are 14-year positions. There’s a separate nomination to be Chairman of the Board, and that’s a four-year term. That means that if Biden had not reappointed Powell, he would still be a member of the board.

Powell was first made a board member by President Obama. President Trump elevated him to Chair, and President has reappointed him Chair.

Four years ago, the Senate approved Powell 84–13. Interestingly, one of the no votes was then-Senator Kamala Harris.

The stock market will be closed on Thursday for Thanksgiving. On Friday, the market will close at 1 p.m. That’s traditionally the lowest-volume day of the year.

In 2009, shares of Vonage got as low as 31 cents. Today, Ericsson is buying it for $21 per share, in cash. The deal is for $6.2 billion in cash.