Morning News: September 3, 2024
Posted by Eddy Elfenbein on September 3rd, 2024 at 7:07 am

New Argentine Currency Launched to Offset Milei’s Shock Therapy

Why It’s So Hard for China to Fix Its Ailing Economy

China Policy Outlook Hinges on the Definition of ‘About’

Russia’s Sberbank Says India Business Booming Despite Western Sanctions

Japan Bank Shares Rise as 10-Year JGB Yield Hits Nearly One-Month High

Wall Street Strategists Face Their Own Short Squeeze

Gold Is Rising Because of Demand for ‘Fallback Money’

Americans Are Really, Really Bullish on Stocks

Moody’s Upgrades Outlook on Global Reinsurers to Positive from Stable

Citadel Securities, Jane Street on Track for Record Revenue Haul

The New Rules of Debt Are Totally Cutthroat

Rise of the Pint-Size Startup Is Reshaping the U.S. Economy

Can Democrats Stop the ‘Tax Doom Loop’?

Claudia Sahm: The Jobs Numbers Went Down, But Trust in Them Shouldn’t

Delivery Hero Lines Up Banks for Talabat’s Dubai Listing

When Property Investors Want Out, These Bargain Hunters Rush In

This Once Hot Real-Estate Type Is Now Being Offered as Office Space

Shutting Off Elon Musk Won’t Help Brazil’s Democracy

Shorts Are Circling Some of the AI Boom’s Biggest Question Marks

China Needs More Factory Robots. Can It Build Its Own?

VW Turns on Germany as China Targets Europe’s EV Blunders

Uber Smells Opportunity in South Korean Internet Upheaval

Korea to Impose Stricter Emissions Trading Rules to Boost Prices

Kamala Harris Says U.S. Steel Should Stay American-Owned

Ryanair, Wizz Air August Passenger Numbers Reach New Records

The Day Delta’s ‘On-Time Machine’ Broke, and the Blame Game It Sparked

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Morning News: September 2, 2024
Posted by Eddy Elfenbein on September 2nd, 2024 at 7:09 am

China-Philippines Row Opens New Flashpoint in South China Sea

China Warns Japan of Retaliation for Possible New Chip Curbs

China’s Bulging Commodity Stockpiles Show Depth of Economic Woes

Asia Manufacturing PMIs Show Some Weak Spots But Keep Signaling Growth

Leveraged Finance More Than Doubles in Europe Despite ECB Probe

Swiss Franc Carry Trade Comes Fraught with Safe-Haven Rally Risk

Markets’ Summer Vacation Is Over

Treacherous September Is Leaving Traders Everywhere on Edge

Emerging Stocks Drop as Traders Watch China’s Economy, US Data

Hedge Funds Bet Against Banks, Insurance and Property, Says Goldman Sachs

Silicon Valley Bank Exits China Joint Venture, Local Partner Takes Full Control

Blackstone Is Said to Near $13 Billion Deal to Acquire AirTrunk

Nvidia CEO Jensen Huang Surprised by Skeptics

China EV Sales Rise on Government Subsidies, Inventory Buildup

Car Carriers With Greener Ships Face Higher Costs

About 10,000 Hotel Workers Walk Off the Job on Labor Day Weekend

Has the Spread of Tipping Reached Its Limit? Don’t Count on It.

A Funnel Cake Macchiato, Anyone? The Coffee Wars Are Heating Up.

Bayer Kidney Drug Helps Treat Common Form of Heart Failure

News Corp’s REA Mulls Offer for Rightmove

Musk’s Starlink Defies Order to Block X in Brazil

Mark Cuban Says Elon Musk’s ‘Biggest Power Play’ on X Is Letting Users Think They Have Free Speech

ESPN and ABC Go Dark on DirecTV in Feud With Disney

Netflix Is Trying to Get You Hooked on More Reality TV With Better Dubbing

$13 for a Video Call. $25 for a Movie. Tablets Connect Prisoners—at a Steep Price.

America’s Cup: The Billionaire’s Trophy Where $135 Million Disappears in Days

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Morning News: August 30, 2024
Posted by Eddy Elfenbein on August 30th, 2024 at 7:03 am

How Japan Ignored Climate Critics and Built a Global Gas Empire

Longi Reports Massive First-Half Loss After Solar Prices Crater

Climate Change Means Coffee’s Future May Depend on Niche Growers

Silicon Valley Wants to Fight Fires With Fire

Vanke Reports First Half-Year Loss in More Than Two Decades

China Considers Allowing Refinancing on $5.4 Trillion in Mortgages

ICBC’s Profit Slips as Low Rates Weigh

Russia Payment Hurdles with China Partners Intensified in August

Eurozone Inflation Closes in on ECB Target

US Stock Futures Gain as Rate-Cut View Mounts

Harris and Trump Have Housing Plans. Economists Have Doubts.

Why Interest Rate Cuts Won’t Fix a Global Housing Affordability Crisis

Swap Bonds for Commodities in 60/40 Funds, BofA Strategists Say

Money-Market Funds Attract 2024’s Biggest Monthly Cash Inflow

The Report Card on Guaranteed Income Is Still Incomplete

For More Americans, One Job Isn’t Enough

Singapore Proposes New Law That Lets Police Stop Bank Transfers

Intel Weighs Options Including Foundry Split to Stem Losses

Nokia Shares Slip After Company Denies Mobile-Network Business Sale Talks

Adani Ports Acquires Offshore Shipping Firm for $185 Million

Threat of Strike This Fall Hangs Over U.S. Ports

Budget Airlines Want to Go Premium. That’s Easier Said Than Done.

Dollar General Scales Back Guidance After Quarterly Results Fall Short of Target

The Doctor-Turned-CEO Aiming to Beat Obesity — and Ozempic

Why the NFL Let Private Equity Get Into the Game

YouTube Stars Want Some Respect

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Morning News: August 29, 2024
Posted by Eddy Elfenbein on August 29th, 2024 at 7:03 am

Why Ethiopia’s Bid for Red Sea Access Angers Somalia

China Oil Majors Paint Bleak Picture for Demand in Top Importer

Risks to US Job Market Start to Emerge in Regional Fed Surveys

King Dollar’s Softening Is Good News for Nearly Everyone

Most-Hated Credit Trade Turns Into a Big Winner for Hedge Funds

Warren Buffett’s Berkshire Hathaway Hits $1 Trillion in Market Value

Star Fund Manager’s Free Rein at Wamco Backfired for Franklin

‘Nvidia Day’ Inspires Watch Parties and Memes, but the Fanfare Doesn’t Last

When 50% Margins No Longer Impress, You’re Nvidia

Nvidia Tumbles After Disappointing Forecast, Blackwell Chip Snags

Telegram Founder Charged With Wide Range of Crimes in France

Can China Tech Find a Home in Silicon Valley?

ASML’s China Chip Business Faces New Curbs From Netherlands

US Snowboard Champ Pitches Green Shipping for Maersk

Lithium Startups Bet on High Demand in Battery-Powered Future

Polestar Posts $242 Million Loss Amid EV Demand Slowdown

How America Can Break Its Highway Addiction

Mars’ $36 Billion Deal Faces Tough Review by Lina Khan’s FTC

Dollar General Plunges as Core Customers Feel Budget Crunch

At Costco, Shopping for Clues About Consumers

Australian Winemaker to Benefit as China Uncorks Imports

Absolut Vodka Maker Pernod Ricard Expects Challenges in U.S., China to Persist

Private Equity Is Coming for Youth Sports

Asics to Exit Baseball Business to Focus on Cult Hit Sneakers

Birkenstock Hits Its Stride After Stumbling Earlier in the Year

He Raised Disney Park Prices—and Fans Still Love Him. Now He’s on the CEO Shortlist

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Morning News: August 28, 2024
Posted by Eddy Elfenbein on August 28th, 2024 at 7:04 am

Drought Strains Brazil Hydropower Supply, Raising Energy Costs

Oil Market Warnings Grow as OPEC+ Decision Nears

Protests in China on the Rise Amid Housing Crisis, Slowing Economy

Bank of Japan Deputy Governor Reaffirms Readiness for More Rate Hikes

Africa’s Debt Crisis Has ‘Catastrophic Implications’ for the World

Germany ‘Falling Into Crisis’ as Berlin Suffers Vision Deficit

The Geography of Unequal Recovery

The American Dream Feels Out of Reach for Most

Credit Scores Without Debt? Fintech Cards Baffle Credit Industry

Fighting Financial Crime Could Pay for Nasdaq

Warren Buffett Sells More BofA Shares, Reaping $982 Million

HSBC’s Incoming CEO Weighs Cutting Layers of Middle Management

Apple Cuts Jobs in Online Services Group as Priorities Shift

Musk’s Legal Fights Boost Longshot Texas Bid to Become Court Hub

Can Tech Executives Be Held Responsible for What Happens on Their Platforms?

Zuckerberg’s Free-Speech ‘Mea Culpa’ Is a Sleight of Hand

Nvidia’s Earnings Will Test the S&P 500’s $4 Trillion Recovery

The World’s Call Center Capital Is Gripped by AI Fever — and Fear

Li Auto Guides for Stronger Sales After Quarterly Profit Halves

BYD’s First-Half Profit Rose on Strong EV Sales Despite Slowing China Demand

Gloom Falls Over One of China’s Most Successful E-Commerce Giants

Canada Goose, Known for Heavyweight Parkas, Leans Into T-Shirts and Shorts

Abercrombie Boosts Sales Again But Investors Keep Expecting More

Kohl’s Shares Rise as It Lifts Full Year Profit Outlook

Lego Sales Climb Despite Woes in the Toy Market

Lego to Replace Oil In Its Bricks with Pricier Renewable Plastic

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CWS Market Review – August 27, 2024
Posted by Eddy Elfenbein on August 27th, 2024 at 5:29 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 time has come for policy to adjust.”

So said Fed Chairman Jerome Powell last Friday at his highly anticipated speech at the Fed’s annual conference in Jackson Hole, Wyoming. He basically said what everyone expected him to say: the time has come to lower interest rates.

This is a big deal. After all, the Fed hasn’t lowered interest rates since Covid. If you exclude that since Covid was a very unusual event, then the Fed hasn’t cut rates for pure economic reasons in 15 years.

The only questions now are when and by how much. Powell left both unanswered but Wall Street expects action soon. In his remarks, Powell noted how much the economy has improved:

“Inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic. Supply constraints have normalized.”

The story is not a complicated one. The Fed responded to Covid by dropping interest rates to the floor. That, and a lot of government money, helped spark the worst bout of inflation in 40 years. Even the lower rate is still higher than where it was during much of the 2010s. Here’s a look at the CPI:

The Fed responded to inflation by jacking up interest rates by 5.25% in 16 months.

It worked. After peaking two years ago, inflation has gradually retreated – not that prices are down – but the rate of increase is down.

“After a pause earlier this year, progress toward our 2 percent objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2 percent.”

Maybe. I have to confess that the Fed’s rate hikes did less damage to the economy than I expected, and higher rates certainly haven’t stopped the stock market. As you may recall, Powell and the Fed initially believed the uptick in inflation was “transitory.” The feeling was that as long as inflation expectations were low, then inflation would be low. That turned out not to be the case, and inflation was anything but transitory.

Why Interest Rates Are So Important for Stocks

I know I spend a lot of time going on about the Fed and interest rates, and I do so because it’s central to the stock market. Interest rates are important for two reasons. One is that interest costs are a major portion of a company’s income statement. Higher rates take a big bite out of the bottom line.

When rates are low, it’s easier for companies to finance expansion plans or to buy out other companies. Higher rates grind that to a halt. Not only are companies impacted but so are consumers. A company like a homebuilder can see its business evaporate when mortgage rates get too high.

The other key reason is that interest rates are in competition for investors’ money. In 1981, you could have locked in a 15.8% yield in a 10-year Treasury. Why buy stocks when you can get a low-risk return that high? Indeed, stocks had to plunge in value just to keep pace. Around that same time, the S&P 500 was trading for less than 6.5 times earnings.

In retrospect, I think the Fed responded to inflation the way it should have responded to the financial crisis of 2007-2008. The Bernanke Fed was very careful when it should have acted earlier and more aggressively. It was two years ago at Jackson Hole that the Powell Fed finally rejected the transitory idea and made it clear that the Fed would do whatever it takes to beat inflation.

On Friday, Powell also noted that the jobs market is cooling off, but what’s interesting is that it’s not dropping as it would normally ahead of a recession. Instead, the jobs market is seeing “a substantial increase in the supply of workers.” What this means, in the Fed’s view, is that the jobs market probably won’t be a driver of inflation anytime soon. I think that’s the key in why the Fed decided to alter course.

Powell also defended himself with some excuses that might be considered a little convenient. For example, Powell said that once inflation broke, it became a global issue because it rested on “rapid increases in the demand for goods, strained supply chains, tight labor markets, and sharp hikes in commodity prices.” In other words, things were affecting everyone.

Powell strongly wants to prevent the public from having higher inflation expectations. That’s what happened in the 1970s. If people expect inflation to rise, then it’s easier for prices to rise. Once the expectations take hold, they get embedded and it’s not easy to change them. I think Powell is particularly sensitive to the issue of expectations.

By 2022, we had a very unusual economy. The labor market was very tight and there were twice as many jobs as there were unemployed people. So, how come the jobs market wasn’t wrecked by the Fed’s anti-inflation crusade? That’s a puzzle to me.

According to Powell:

“Pandemic-related distortions to supply and demand, as well as severe shocks to energy and commodity markets, were important drivers of high inflation, and their reversal has been a key part of the story of its decline. The unwinding of these factors took much longer than expected but ultimately played a large role in the subsequent disinflation.”

Powell was very reticent on what the Fed has planned. The next FOMC meeting is in three weeks and market participants overwhelmingly expect a rate cut. Right now, the odds are at 65% for a 0.25% cut and at 35% for a 0.50% cut.

The following meeting is in November, shortly after the election. At that meeting, traders narrowly expect a 0.5% cut. Traders expect another 0.25% at the December meeting. Add it up and the Fed is expected to slash rates by a full 1% before the end of the year. For 2025, Wall Street expects more cuts of 1.25% to 1.50%.

Overall, lower interest rates should be good for the stock and the housing markets. Not only are lower rates good for the market, but I expect value stocks to continue to prosper. Many of these issues lagged the market as investors fell in love with the Mag 7. That love affair may have run its course. Tesla (TSLA) hasn’t made a new high in close to three years. Amazon (AMZN), Google (GOOGL) and Microsoft (MSFT) are all off more than 10% from their highs.

Heico: The Quiet 83,000% Winner

One of our Buy List stocks, Heico (HEI), issued a very good earnings report after yesterday’s close.

Heico has been a great stock for us this year. The shares are up more than 38% YTD. I’ll discuss Heico’s results in greater detail in Thursday’s premium issue, but I’ll highlight a few key stats for you (you can sign up for our premium issues here).

For its fiscal Q3, Heico’s EPS increased 31% to 97 cents per share. That beat Wall Street’s consensus of 92 cents per share. For the first nine months of this fiscal year, Heico’s earnings are up 23% to $2.67 per share.

For the quarter, Heico’s sales were up 37% to $992.2 million. Their operating income increased 45% to a record $216.4 million. I was impressed to see Heico increase its operating margin by 1.1% to 21.8%. Q3 EBITDA rose 45% to $261.4 million.

Heico is a great example of a niche business that’s not well-known. In 30 years, the stock is up 83,000%.

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

– Eddy

Morning News: August 27, 2024
Posted by Eddy Elfenbein on August 27th, 2024 at 7:19 am

Libyan Oil Shutdown Begins as UN Warns Feud Risks Economic Chaos

To Stay Relevant, a Spanish Energy Giant Turns to Waste

Woodside Gets Interest in Potential Selldown of U.S. Ammonia Project

Indonesia Sells Longest-Ever 40-Year Bond as Easing Pivot Nears

Weak German Consumer Confidence Adds to Economic Woes

PDD’s $55 Billion Stock Crash Sends Warning on China Economy

A $557 Billion Drop in Office Values Eclipses a Revival of Cities

The IPO Market Gets Cold Feet

The IPO Hopeful’s Dilemma: Cram Into Fall Window or Wait for ’25

US Lenders Lose Court Battle Over CFPB Rule to Collect Small Business Data

JD.com Unveils $5 Billion Share Buyback as China Concerns Grow

Nvidia’s Nnot Nnormal, Never Mind Earnings

Apple’s Maestri to Hand Off CFO Job, Move to Smaller Role

SpaceX Tightens Its Grip on NASA by Bringing Boeing Crew Home

Canada Joins Nations Using Tariffs to Combat Chinese EV Imports

California’s EV Dreams Face an Awkward Reality

Tesla’s Rivals Still Can’t Use Its Superchargers

How Telegram’s Founder Went From Russia’s Mark Zuckerberg to Wanted Man

Zuckerberg Says White House ‘Pressured’ Meta to Pull Covid Posts

On the Covid ‘Off-Ramp’: No Tests, Isolation or Masks

Lilly Sells Zepbound Vials at 50% Discount to Meet Weight Loss Drug Demand

The U.S. Corn Crop Is Great. Farmers’ Finances, Not So Much

Lowe’s Scraps Some DEI Policies as Activist Claims a New Win

Skydance Set to Seal Paramount Merger After Bronfman Drops Out

Why 7-Eleven Is So Enticing to Circle K’s Owner

The Office Therapist Will See You Now

Private Equity Ownership Is Coming to the NFL

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Morning News: August 26, 2024
Posted by Eddy Elfenbein on August 26th, 2024 at 7:08 am

Missed Warnings, $100 Vaccines and Red Tape — Why Mpox Was an Avoidable Emergency

Canada to Hit China With Tariffs on Electric Vehicles, Steel

German Business Increasingly in Trouble, Ifo Survey Says

Riksbank Minutes Show High Bar for Bigger Cuts in Key Rate

Milton Friedman’s Shower Scene Is Back

Powell’s Pivot Leaves Traders Debating Size, Path of Rate Cuts

As US Rate Cuts Near, Economic ‘Soft-Landing’ Odds Could Dictate Stock Performance

How a Corporate Tax Rate Change Could Impact Companies’ Growth, Investment

How Trump Was ‘Orange-Pilled’ by Three Bitcoiners in Puerto Rico and the Promise of $100 Million

Trump’s ‘Made in USA’ Bitcoin Threatens China Juggernaut Bitmain’s Reign

Crypto Bros Aren’t Flipping Watches. That Is an Issue for Luxury Brands

Nvidia Rally Mints Millionaires Too Busy to Bask in New Wealth

Dubai’s Red-Hot Luxury Housing Market Is Still a Bargain

The Breakout Star of the Democratic Convention Was … YIMBY

Soaring Insurance Costs Could ‘End’ Affordable Housing, Developers Warn

A Trial Asks: If Grocery Rivals Merge, Do Workers Suffer?

Far-Right ‘Terrorgram’ Chatrooms Are Fueling a Wave of Power Grid Attacks

Trump’s Drill-Baby-Drill Vow Is More Ethos Than Policy

US Oil Dominance Hinges on Quiet Corner of New Mexico

Why Nippon Steel’s $15 Billion Takeover of U.S. Steel Is in Peril

‘Dangerous Precedent’ Rattles Chile’s Renewable Energy Market

South Africa Seeks $18 Billion for Municipal Power-Grid Boost

IBM Shuts China R&D Operations in Latest Retreat by U.S. Companies

Uber Hit by Record $324 Million Fine for Data Transfers to US

Telegram Becomes Free Speech Flashpoint After Founder’s Arrest

‘Black Myth: Wukong’ Revives Faith in China’s Game-Making Skill

Apple Rethinks Its Movie Strategy After a String of Misses

Lululemon ‘Dupes’ Are Just as Cool With the TikTok Crowd

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Morning News: August 23, 2024
Posted by Eddy Elfenbein on August 23rd, 2024 at 7:03 am

China Bond Trading Collapses Amid PBOC Crackdown on Record Rally

In a Likely Overture to China, Nepal Lifts Ban on TikTok

Nepal Asks China to Wipe Away a Loan It Can’t Afford to Pay Back

What a Prolonged Rail Shutdown in Canada Would Mean for Trade

Japan Overall Consumer Prices Stay Above Central Bank’s Target in July

Ueda Keeps Rate Hikes in Play, Talks Down BOJ’s Part in Meltdown

Jackson Hole History Points to Powell Sidestepping Market Shocks

Why Jackson Hole Is the Fed’s Biggest Shindig

A Turbulent Month Shows Markets Are Fickle. So Be Patient

Price-Gouging Crusade Electrifies Democratic Rank and File

The Year Politicians Turned Their Backs on Economics

EY Sheds U.S. Audit Clients in Response to Shortfalls

‘It’s Just Atrocious’: Jobs Data Snafu Stirs Fury on Wall Street

U.S. Plans to Accuse Software Maker of Enabling Collusion on Rents

Easier AP Exams Offer College Students a Path to $30,000 Savings

Wamco Investigation Examining 17,000 Trades Over Three Years

Location Tracking Turns Up the Trust Among Friends

Tesla Finance VP Departs in Latest Executive Exit at Automaker

Tesla’s Steep Price Cuts Help Get the Used EV Market Humming

Zambia Rejects 156% Power-Price Rise as Drought Deepens Cuts

A Small Mining Firm Just Saw Its Stock Surge 91% After It Discovered the World’s 2nd-Largest Diamond

Halliburton Hit by Cyberattack

Starbucks’ New CEO Gets Bigger Mandate as Schultz’s Control Ebbs

Chipotle’s Next Boss Has One Job: Don’t Change Too Much

Nestle CEO Departure Seen as ‘Not Such a Bad Thing’ for Investors, Analyst Says

Private Equity Tycoon Looks to ABBA Toolbox to Reboot the Music Industry

Warner Gave Up on New TNT Dramas. Now It’s Trying to Revive Them

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Morning News: August 22, 2024
Posted by Eddy Elfenbein on August 22nd, 2024 at 7:01 am

Turkey’s Next Minimum Wage Rise to Show If Inflation Fight Real

Eurozone Gets Olympics Boost While U.K. Economy Gathers Pace

Eurozone Wages Slow Sharply, Paving Way for ECB Rate Cut

Powell Faces Economic Crossroads as He Prepares to Speak at Jackson Hole

Quantitative Tightening Goes Global for the First Time, in Test for Markets

Trump May Claim Credit for Stock Surges, but the Reality Is Far More Complicated

While the Public Awaited Jobs Data, Wall Street Firms Got a Look

What Kalamazoo (Yes, Kalamazoo) Reveals About the Nation’s Housing Crisis

Wamco’s Longtime Bond King Is Thrust Into Spotlight He Shunned

Hedge Fund Tribeca Says Weak Bank Research Fueled Its 19% Gain

Deutsche Bank Shares Rise 3% After Settlement of Bulk of Claims in Long-Running Postbank Suit

Is Elon Musk the Bankers’ Moby Dick? Not Yet

Dream or Disaster, Flying Cars Face Multibillion Dollar Moment

Tycoons Behind Taiwan’s ‘Silicon Shield’ Build a $50 Billion Fortune

Baidu’s AI Push Powers Profit Beat

Free Whopper? Walmart+ Offers Cheap Burger King as It Chases Amazon Prime

TD Misses Estimates on Wealth Unit After Hit From US Probe

Canada Railways Lock Out Workers as Talks Fail, Snarling Trade

The Wind Power Industry Isn’t Over Its Gloom Loop Yet

Engine Shortages Have Grounded Airlines. This Company Has the Formula to Fix That

Advance Auto Parts to Sell Worldpac to Carlyle for $1.5 Billion

Bavarian Nordic Shares Continue Higher After New Mpox Vaccine Order, Earnings Beat

Sugar Industry Faces Pressure Over Coerced Hysterectomies and Labor Abuses

Peloton Revenue, Profit Beat Estimates Amid Turnaround Effort

Urban Outfitters Shares Sink on Disappointing Sales Growth

Here’s How One Retailer Is Finding Profits in Borrowed Clothing

Why a Dior Bag Given to the First Lady Caused a Stir in South Korean Politics

Crayola Trademarks the Smell of Its Crayons

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