Morning News: July 8, 2020
Posted by Eddy Elfenbein on July 8th, 2020 at 7:03 am

White House Warns Against Chinese Investment, Citing Risk of Further Sanctions

The Virus Has Trapped $111 Billion of Luxury Spending in China

U.S. Tech Giants Face Hard Choices Under Hong Kong’s New Security Law

The Hottest Hedge-Fund Strategy Hits an Existential Crisis

Many Americans Will Rein in Spending, Creating New Risk to Economy

Coronavirus ‘Collateral Damage’ Hits U.S. Rural Power Providers

Solar Deal Would Create a New Industry Giant

Facebook Fails to Appease Organizers of Ad Boycott

Disney World Draws Excitement and Incredulity as Reopening Nears

As Big Airlines Retrench, Some Carriers Detect an Opening

Ben Carlson: 5 Thoughts on a World with No Yield

Howard Lindzon: Catching Up On My Investment Mistakes From The March Panic

Joshua Brown: There Are A Lot Of “Textbook” Ideas That Won’t Survive Coronavirus And This Is One Of Them.

Nick Maggiulli: Regrets

Michael Batnick: Up and Down & Animal Spirits: The Future of Education

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Tech Vs. Everyone Else
Posted by Eddy Elfenbein on July 7th, 2020 at 1:27 pm

I thought this was an interesting chart. It shows two ETFs. The blue line is the S&P 500 Tech sector. The red line is the everything in the S&P 500 except the Tech sector.

This really shows you how much tech has dominated the market. In fact, it may understate the role since Amazon is classified as a consumer discretionary stock.

Morning News: July 7, 2020
Posted by Eddy Elfenbein on July 7th, 2020 at 7:06 am

EU Cuts Economic Forecasts for the Region, Now Projecting a 8.3% Slump This Year

TikTok to Withdraw From Hong Kong as Tech Giants Halt Data Requests

U.S. Firms in India Not Ready to Pay Digital Tax, Lobby Group Says

Fed’s Bostic Sees Signs That Economic Activity Is Leveling Off

Economists Call For More Direct Cash Payments Tied to the Health of the Economy

Lobbyists, Law Firms and Trade Groups Took Small-Business Loans

Zara Founder Unveils $17.2 Billion Global Real Estate Empire

Palantir Technologies Files to Go Public

Our Cash-Free Future Is Getting Closer

Sunrun Acquiring Vivint in Shake-Up of Home Solar Market

U.S. Government Awards Novavax $1.6 Billion for Coronavirus Vaccine

Venture Firms Say We Didn’t Seek Bailouts Despite What Data Show

Ben Carlson: Explaining the 2020 Stock Market

Howard Lindzon: Momentum Monday…Enjoy the Gains…Keep an Eye on Page 10

Joshua Brown: Chinese Stocks Break Out, The Most Expensive Stock on Earth & How to Turn Newborn Babies Into Future Millionaires!

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All-Time High for the Nasdaq
Posted by Eddy Elfenbein on July 6th, 2020 at 4:32 pm

Strong day for the market. The Nasdaq Composite closed at 10,433.65 which is an all-time high. Amazon closed above $3,000 for the first time ever.

Becton, Dickinson (BDX) had a good day. The FDA gave emergency approval for its rapid antigen test for COVID-19.

Disney‘s (DIS) streaming service, Disney+, got a big boost this weekend thanks to Hamilton. From Friday through Sunday, the mobile app was downloaded 513,323 times globally and 266,084 times in the United States.

Close to a Four-Month High
Posted by Eddy Elfenbein on July 6th, 2020 at 11:29 am

We’re not quite there yet, but the S&P 500 is now within range of hitting a new four-month high.

Buffett Finally Makes His Move
Posted by Eddy Elfenbein on July 6th, 2020 at 10:13 am

The stock market is up again today. This could be the market’s fifth daily gain in a row. The big news this morning is that Uber (UBER) is buying Postmates in an all-stock deal worth $2.65 billion.

The other big story is that Warren Buffett is going into natural gas. Berkshire Hathaway (BRK-A) will buy the natural gas assets of Dominion Energy (D) for $10 billion. Berkshire has been sitting on a mountain of cash. According to financial statements, it was $137 billion, but Buffett said he has not seen any attractive deals.

Goldman Sachs lowered its estimates for Q3 GDP growth. They originally saw GDP rising at a 33% annualized rate. They’ve lowered that to 25%. Later this month, the government will release its first estimate of Q2 GDP growth.

The S&P 500 has been up as much as 1.4% this morning. Financial stocks have been particularly strong.

Morning News: July 6, 2020
Posted by Eddy Elfenbein on July 6th, 2020 at 7:05 am

China Propels Global Stock Rally to One-Month High

China Dominates Medical Supplies, in This Outbreak and the Next

Buffett’s Berkshire Ends Deal Drought With Dominion Bet

Banks Are Ditching London Offices and Not Just Because of Covid-19

Second Stimulus Checks And Student Loan Forgiveness Could Be Coming

Uber to Buy Postmates for $2.65 Billion

Patchy Demand at Stores Spells More Pain for Garment Suppliers

With Department Stores Disappearing, Malls Could Be Next

Tesla Mocks Shortsellers With Sale of Red Satin Shorts

Howard Lindzon: Living At The Speed Of The Network – Om Malik Joins Me Again On Panic With Friends

Ben Carlson: TL;DR: The Best Finance Books in One Sentence & The Bear Market in Happiness

Jeff Miller: Weighing the Week Ahead: Don’t Look Back!

Roger Nusbaum: Is It Possible to Save Too Much Money?

Michael Batnick: Change My Mind

Joshua Brown: The Broker Who Saved America, Large, Dominant Companies Are Nothing New & Technology is Taking Over the Real Estate Sector Too

Be sure to follow me on Twitter.

CWS Market Review – July 3, 2020
Posted by Eddy Elfenbein on July 3rd, 2020 at 7:08 am

“We hold these truths to be self-evident, that all men are created equal.” – Thomas Jefferson

The first half of 2020 is on the books, and it was certainly an eventful six months.

How’s this for serendipity? For the first quarter of the year, the S&P 500 fell by 20%, almost on the nose (-20.001%). For the second quarter, the index rallied by 20%. Again, almost on the nose (-19.953%).

So, -20% followed by +20%. Perhaps that’s fitting for the year 2020.

Unfortunately, a 20% loss followed by a 20% rebound doesn’t bring us back to 0%. It’s still a 4% loss, but that’s well within the bounds of “normal” for the stock market. If you’d checked the stock market once every six months (not a bad idea, btw), then you’d hardly think anything happened from January to June 2020.

This is an oddly quiet time for our Buy List. Earnings season doesn’t get going for another few weeks. There hasn’t been much stock-specific news for us lately. Since we’re at the midpoint of the year, in this issue, I want to take the opportunity to summarize the Buy List’s performance so far. I’ll also discuss some stocks that might be candidates for next year’s Buy List.

But first, let’s look at the latest economic news. According to the government’s figures, the economy created 4.8 million net new jobs last month. That’s a massive gain. That’s the good news. The bad news is that we have a long, long way to go.

The U.S. Economy Created 4.8 Million Jobs in June

The stock market is closed on Friday, July 3, so we get the full three-day weekend for Independence Day. Because of that, the June jobs report came out on Thursday instead of its normal time on Friday.

Most months, the jobs report comes out after I send you the weekly newsletter. Thanks to the holiday, I got to see the report this month before our deadline.

The government said that the U.S. economy created 4.8 million jobs last month. That’s an amazing figure. It blows past any record, but it’s still only a fraction of the jobs that were lost. Economists had been expecting a gain of 2.9 million. The report said that 10 million Americans have permanently lost their job.

The unemployment rate fell 2.2% to 11.1%. That’s an encouraging drop, but to add context, the jobless rate is still higher than the peak rates of unemployment rate in 1982, 1992 or 2009. In other words, we’re down to levels that are still higher than some pretty rough times for the economy. Things are better, but there’s a long way to go.

Here’s a look at nonfarm payrolls.

Thanks to the strong jobs report, the S&P 500 closed higher on Thursday. In fact, the index closed higher each day this week.

Also on Friday, the jobless-claims report came in at 1.427 million. That’s the 15th week in a row that jobless claims have topped one million. Wall Street had been expecting 1.38 million.

On Wednesday, ADP said that private payrolls increased by 2.360 million in June. I don’t place a great deal of faith in some of these numbers. It’s not that I think anyone’s lying. Instead, the circumstances are so unusual that it’s hard to get an accurate picture of what’s really happening.

To give you an example, ADP revised the May number from a loss of 2.76 million jobs to a gain of 3.065 million. A big revision like that doesn’t exactly instill confidence. The lockdown seems to have screwed with so much economic data.

Also on Wednesday, the ISM Manufacturing Index for June came in at 52.6%. That’s up from 43.1% in May. Bear in mind that the ISM is always in relative terms. It’s only concerned with things improving or worsening, not with the overall standing. Wall Street had been expecting 49.0.

The bottom line is that the fortunes of the economy are tied to that of the coronavirus. It really is that simple. As long as states and localities can reopen, then the economy will improve. Lately, the coronavirus has been making its presence felt in regions that it had largely bypassed. The good news is that some of the early data suggests that the coronavirus is less lethal than previously believed.

My fear is that the economy will bounce back but will still be below the level it was at in February 2020. In fact, it may take years for some sectors of the economy to fully recover. After all, the U.S. didn’t fully shake off the Great Depression until World War II. The Dow didn’t take out its 1929 peak for 25 years. I’m not predicting that, but I am pointing out that the economy often grows unevenly and inconsistently.

First-Half Buy List Summary

Through Thursday, our Buy List is down 4.04% for the year. That’s not too bad, but it trails the S&P 500, which is down 3.12% for the year. (These figures don’t include dividends, but my final year-end numbers will.)

It’s frustrating to be losing to the S&P 500 because as recently as June 1, we were beating the market by nearly 2%. June was tough for our relative performance due to the big shift towards cyclical stocks.

Our big weakness is technology stocks. The tech sector is crushing the market this year, especially big tech. Amazon (AMZN), for example, is up 56% this year. When trillion-dollar companies move like that, it distorts the rest of the market.

I shouldn’t be too disappointed by trailing the index by less than 1%, but I’m very competitive by nature. Still, the 15-year track record is very much in our favor.

Now for some more details:

Trex (TREX) is our top-performing stock with a YTD gain of 41.1%. This was a great addition to the portfolio. FactSet (FDS) comes in at #2 with a gain of 25.2%. Interestingly, most of our stocks are beating the market this year (13 of 25). It’s just that the losers are weighing us down.

Eagle Bancorp (EGBN) is our biggest loser with a loss of 37.3% this year. Middleby (MIDD) is perhaps our most dramatic stock this year. At one point, MIDD was down 60% for us, but it’s rallied back 80% from its low. That’s still a big loss, but not as steep as it was. Of our four biggest losers this year, three are financial stocks (AFLAC, Eagle and Globe Life).

Per Buy List rules, at the end of each year, I add five new stocks and delete five current ones. Here are ten stocks I’m looking at for next year:

Paycom Software (PAYC)

The Trade Desk (TTD)

Colgate-Palmolive (CL)

Masimo (MASI)

Waters (WAT)

Tyler Technologies (TYL)

CAE Inc. (CAE)

Simulations Plus (SLP)

Cooper Companies (COO)

HEICO (HEI)

Next year is still six months away, so I haven’t made up my mind, but those are ones I’m seriously looking at.

That’s all for now. On Monday, the ISM Non-Manufacturing Index is due out. The job-openings report comes out on Tuesday followed by the consumer-credit report on Wednesday. Thursday means another jobless-claims report. Lastly, the wholesale-inflation report comes out next Friday. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Morning News: July 3, 2020
Posted by Eddy Elfenbein on July 3rd, 2020 at 7:03 am

Global Markets: COVID Recovery vs COVID Reality

Black Trader Sparks Debate on Race at China’s Biggest Brokerage

World’s Largest Pension Fund Loses $165 Billion in Worst Quarter

After June Job Gains, Still a ‘Deep Hole,’ and New Worries

The #Vanlife Business Is Booming

Goodbye to the Wild Wild Web

Tesla Shines During the Pandemic as Other Automakers Struggle

GM’s China Sales Drop 5% In Second Quarter, Underperforms Industry Recovery

Deutsche Bank May Offer Wirecard a Lifeline

Boeing’s 737 Max is Being Readied for a Comeback. What Travelers Need to Know

Airlines Are Taking New Bailout Cash as the Outlook Gets Worse

JPMorgan Drops Terms ‘Master,’ ‘Slave’ From Internal Tech Code and Materials

Tech IPOs Are Being Badly Mispriced, as Lemonade and Agora Double in Market Debuts

Ben Carlson: The Nifty Fifty and the Old Normal

Howard Lindzon: Wall Street Bound

Be sure to follow me on Twitter.

Massive Jobs Gains for June
Posted by Eddy Elfenbein on July 2nd, 2020 at 9:16 am

The June jobs report is out. The government said the U.S. economy created 4.8 million jobs last month. That blew past expectations of 2.9 million. The NFP chart looks like the back drop of a New Yorker cartoon.

The unemployment rate fell to 11.1%. Expectations were for 12.4%.

The jobs growth marked a big leap from the 2.7 million in May, which was revised up by 190,000. The June total is easily the largest single-month gain in U.S. history.

The numbers capture the move by all 50 states to get activity moving again after the virus seized up much of the U.S., particularly service-related industries.

However, because the government survey comes from the middle of the month, it does not account for the suspension or rollbacks in regions hit by a resurgence in coronavirus cases.

Weekly jobless claims rose by 1.427 million. This is the 15th straight week that the number has topped one million. Economists had been expecting an increase of 1.38 million.

The stock market is up in early trading and the cyclicals are leading the charge. The S&P 500 has been up as much as 1.5% this morning. This looks to be the index’s fourth daily gain in a row.

The stock market is closed tomorrow ahead of the Independence Day weekend.