Morning News: May 31, 2024
Posted by Eddy Elfenbein on May 31st, 2024 at 7:04 am

OPEC+ Set to Extend Oil Cuts in Another Virtual Meeting

Saudi Arabia to Kick off Aramco Stock Sale of Up to $12 Billion

China Home Sales Slump Eases After New Government Support

China Securities Regulator Fines Evergrande Unit $580 Million

China’s Strategy to Use Factories to Revive Growth Begins to Show Cracks

Wall Street Lands on India, Looking for Profits It Can’t Find in China

Japan Spent Record $62 Billion to Prop Up Yen in Past Month

Inflation Ticks Up in the Eurozone

Banks Funnel Billions More Into Private Credit as Frenzy Spreads

Deutsche Bank Sees Slightly Lower Fixed Income Revenue in Q2

UBS Reaches Milestone in Credit Suisse Absorption as Parent Companies Merge

Higher for Longer Rates Mean No Escape From the Debt Squeeze

Robust Economy Can’t Shield Biden From Blame for Higher Prices

Wall Street Billionaires Are Rushing to Back Trump, Verdict Be Damned

Trump Media Stock Falls After Guilty Verdict

Ackman Plans Pershing Square IPO as Soon as 2025, WSJ Reports

How Rage, Boredom and WallStreetBets Created a New Generation of Young American Traders

American Express Zooms Ahead as Gen Z Gets Hooked on Card Rewards

Amazon’s Original Rivals Throw a Twist Into FTC Antitrust Case

Intel Betting on AI Well Beyond Data Centers

TikTok Pauses E-Commerce Push into Europe to Focus on US

Price Pack Architecture

Costco Q3 Earnings Beat All Key Metrics After Shares Closed at an All-Time High

Why Big Luxury Brands Are Rushing to Make Fine Jewelry for Men

Gap’s Look Is Finally Back on Point

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Morning News: May 30, 2024
Posted by Eddy Elfenbein on May 30th, 2024 at 7:07 am

A ‘Lost Decade’ Threatens Economy of Wartime Israel

Turkey Close to Exiting Global Watchdog’s Illicit Finance List

Eurozone Unemployment Hits Record Low

Tariffs Are More Than Just Taxes. They Are a Tool of Geopolitics

Throwing in the Towel on Rate Cuts Everywhere

The Fed Thinks It’s Fighting Inflation. Think Again

Fed’s Bostic Says Many Inflation Measures Moving to Target Range

Can Billions in New Subsidies Keep Family Farms in Business?

Traders Are Bracing for a Record-Smashing Summer That Will Shake Up Commodities

The People in Finance to Watch in 2024

UBS Splits Wealth Management Role as Part of Executive Reshuffle

Tesla Blasts Glass Lewis for Advising Against Elon Musk’s Pay Package

The People Running Elon Musk’s Companies as Tesla Spirals

American Air Fired Commercial Head After Sales Strategy Alienated Corporate Clients

China to Impose Export Controls on Aviation Equipment, Technology

The World’s Top Miner Abandoned Its Proposed Megadeal. Here’s What Could Be Next for BHP

Big Oil’s Latest Megadeal Shows Industry’s US Premium

The Solar Breakthrough That Could Help the U.S. Compete With China

Designer of World’s Tallest Building Wants to Turn Skyscrapers Into Batteries

Short on Curbside Chargers, New York EV Drivers Are Improvising

The Secret Ozempic Recipe Behind Novo’s Race to Boost Supplies

McDonald’s Just Wrote an Open Letter to Millions of Americans. The Very Last Line Mattered Most

Once a Sheriff’s Deputy in Florida, Now a Source of Disinformation From Russia

Disney Is Banking On Sequels to Help Get Pixar Back on Track

Golden Goose, Maker of Super-Star Sneakers, to IPO in Milan

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Morning News: May 29, 2024
Posted by Eddy Elfenbein on May 29th, 2024 at 7:02 am

ConocoPhillips to Acquire Marathon Oil in $17 Billion Deal

Anglo Won’t Extend BHP Deadline, Threatening $49 Billion Bid

Chevron’s $53 Billion Oil Deal Is Backed by Hess Shareholders

World’s Largest Nuclear Plant Sits Idle While Energy Needs Soar

Saudi Arabia Eyes a Future Beyond Oil

BYD Launches Hybrids With 1,300-Mile Driving Range

Most EVs in the US Are Still Being Shipped to the Same Few States

Toyota’s Engine Decision Shows How Hard Making Money in Cars Will Become

Southeast Asian Exports Seen Surging Through 2030

IMF Raises China Economic Growth Forecasts

Bank of Japan Reports Record Stock Gains for Last Financial Year

June ECB Rate Cut a Done Deal, Majority Expects Cuts in Sept, Dec Too: Reuters Poll

Fed in a Bind As Consumers Stay Upbeat

This Is the Word of the Summer on Wall Street

What’s a Carry Trade Again? And When Is It Not a Moneymaker?

Goldman Racks Up $21 Billion for Its Largest Private Credit Pool

BMO Misses Estimates on Higher-Than-Expected Provisions

In China’s Tech Sphere, Everything Eventually Descends Into a Price War

‘Not Gonna Be Pretty:’ Covid-Era Homebuyers Face Huge Rate Jump

Store Brands Are Filling Up More of Your Shopping Cart

How America Lost Its King Crab Supremacy

How A.I. Made Mark Zuckerberg Popular Again in Silicon Valley

Samsung Union Plans First-Ever Strike

Dick’s Sporting Surges After Boosting Outlook on Robust Demand

Its Future in Doubt, the Freewheeling ‘Inside the NBA’ Is on Edge Instead

Leslye Headland Hopes the Force Is With ‘The Acolyte’

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CWS Market Review – May 28, 2024
Posted by Eddy Elfenbein on May 28th, 2024 at 8:37 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.”)

This week, the stock market looks to close out a strong May. This is very much welcomed after a relatively poor April. Earlier today, the Nasdaq closed above 17,000 to reach a new high. That’s a 10-fold increase in 15 years.

We have a decent earnings season to thank for May’s rebound. The overall earnings results weren’t spectacular, but they were much better than what had been expected. As always, what matters on Wall Street is how well one does compared with expectations.

Wall Street isn’t much bothered by Armageddon, as long as it’s unfolding better than their models told them it would.

Historically, the early part of summer has been a mildly positive time of year for stocks. Since 1957, the S&P 500 has gained an average of 2.28% from May 25 to July 17. That’s about one-fifth of the index’s average annual capital gain. After that, however, the market hasn’t gotten moving again until late October.

Growth Is Leading Value

I like to keep an eye on how well Growth stocks are doing versus Value stocks. This is a quick and easy way to read the mind of the market. If Wall Street starts to get nervous, then Value stocks tend to do well, but if Wall Street is feeling optimistic, then Growth stocks take charge.

Lately, I’ve been impressed by how well Growth stocks are doing. Shares of Nvidia (NVDA), the growthiest of all, got another 7.1% boost today. That’s a gain of $180 billion.

The Growth/Value tradeoff tends to be cyclical. In plain English, once Growth starts beating Value, or vice versa, you can expect that to last for several months, or even several years. When Value leads Growth, it tends to be swift and sharp; but when Growth leads, it tends to be long and steady.

Here’s the S&P 500 Value ETF (in black) and the S&P 500 Growth ETF (in blue) since the early part of this year:

Last year, Growth stocks did very well against Value stocks, except for the last part of the year when Value started to shine. Since the start of this year, Growth has gotten its groove back, especially in the last few weeks. On Tuesday, the S&P 500 Growth ETF (SPYG) outpaced the S&P 500 ETF (SPY) for the sixth day in a row.

Value stocks also tend to do well when short-term interest rates are going down. While that’s not happening at the moment, there’s a good chance rates will start to come down before the end of this year.

Are Growth stocks telling us to be optimistic? Could be. Today’s consumer confidence report was unexpectedly strong. For May, the Consumer Confidence Index rose to 102. This was the first increase in four months. The reading for April was revised higher to 97.5.

Despite today’s report, consumer confidence has generally been dour in recent months. This has perplexed some analysts because the overall economic performance hasn’t been so bad. Kyla Scanlon has dubbed this effect the “vibe-cession.”

I suspect that certain problems in the economy have an outsized impact on the public’s perception of the economy. Inflation is a good example, particularly car insurance costs.

Since December 2021, car insurance costs are up by 45.8%. Consumers are very sensitive to these costs even though car insurance makes up less than 3% of the CPI. Consumers “feel” that increase more than they do other prices. Since 2019, the price of a Big Mac has doubled.

On Thursday, the government will release its first revision to Q1 GDP. The initial report said that the economy grew in real annualized terms of 1.6% for the first quarter of this year. That’s not that great and it’s down from some strong numbers for the second half of last year. Wall Street thinks the government will revise Q1 GDP down to 1.2%.

Elliott Looks to Shake Up Texas Instruments

This morning, Elliott Investment Management sent a letter to the board of directors of Texas Instruments (TXN) recommending some major changes.

Elliott is a well-known activist hedge fund. By activist, I mean a fund that takes a large position in a stock and then advocates for some important changes in the hopes of giving the stock a boost. Oftentimes, this means paying out a dividend or boosting capital expenditures.

Activist funds are a controversial topic and I can easily see both sides of the debate. Critics say that activist funds are out to make a quick buck (or several billion bucks) and are willing to sacrifice the long-term financial stability of the company to get the share price moving.

Activist defenders claim they’re merely defending shareholders and protecting them from sclerotic management. I won’t settle the debate here, but it’s been going on since the days of Gordon Gekko in Wall Street.

Elliott now owns $2.5 billion of Texas Instruments stock. TXN used to be a very good stock until about three years ago. It’s been lagging badly since then. In 2022, TXN made $9.41 per share. This year, it’s expected to make $5.16 per share.

According to Elliott, TXN can vastly improve its free-cash flow. Elliott thinks TXN can deliver free-cash flow of $9 per share by 2026. That’s 40% above what Wall Street currently expects.

As much as the activists are criticized, I have to concede that they often make good points. From CNBC:

Elliott believes Texas Instrument’s rigid adherence to a capital expenditure plan put in place in 2022 has eviscerated shareholder returns by greatly reducing a metric by which TI has always asked to be judged – free cash flow.

Citing the reduction of free cash flow from $6.40 a share in 2022 to an expected $1.83 a share this year Elliott maintains that TI has alienated investors who might otherwise gravitate to its dominant position in serving the automotive and industrial complexes with analog chips. Its stock price, Elliott insists, has suffered as a result, trailing its peer group by substantial margins over the last two, four, six and ten year periods.

The focus of Elliott’s letter is the 2022 capital expenditure plan which called for TI to ramp its Capex spending to a high of $5 billion a year from 2023-2026 bringing that spending to as much as 23% of revenues from what had been capex spending of roughly 5% revenues over the preceding decade.

This morning, the shares opened 3.4% higher and touched a new 52-week high. If the market responds that way, it’s difficult to say that activists aren’t serving the needs of shareholders.

As far as these letters go, Elliott was much friendlier than most. Still, Elliott can easily be ignored. Even a large firm like Elliott owns a little over 1% of the outstanding shares. These activist moves always make me wonder if they truly want changes or if they are only interested in the one-day rally on the news that an activist fund is getting involved.

A similar event happened recently to one of our Buy List stocks. I’ve long been a fan of Miller Industries (MLR), and it’s done well for us this year.

In March, an activist fund that owns 3.25% of Miller sent a letter to Miller’s board recommending several changes. The firm criticized Miller’s executive pay and suggested a share buyback and a dividend hike.

Miller said that the fund’s letter was “a self-serving and short-sighted public complaint, with spurious allegations and no credible path for long-term value creation.” Still, a few days later, Miller announced a $25 million share buyback. For the most part, boards should be focused on growing the business and should be neutral on a company’s share price.

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

– Eddy

Morning News: May 28, 2024
Posted by Eddy Elfenbein on May 28th, 2024 at 7:08 am

Russia’s Seaborne Crude Exports Drop Ahead of OPEC+ Meeting

Big Oil’s Winning Streak Forces Activist Investors to Regroup

Carbon Offsets, a Much-Criticized Climate Tool, Get Federal Guidelines

‘Overcapacity’ Is the New Buzzword to Whack China

Business-First Hong Kong Now Comes With a Catch: Beijing Politics

London Moves to Revive Its Reputation as a Financial Hub

Meet the Shirt Maker Who Loves U.S. Tariffs

Wall Street Moves to Fastest Settlement of Trades in a Century

The ‘Everyone Wins’ Stock Market Is Dead — Ask Target

What JPMorgan Can Learn From Morgan Stanley and Manchester United

For Private Credit’s Top Talent, $1 Million a Year Is Not Enough

Riot Platforms Pursues Takeover of Rival Bitcoin Miner Bitfarms

Slow-Moving Property Crisis Means Averting a Greater One

Mortgages Stuck Around 7% Force Rapid Rethink of American Dream

Why a California Plan to Build More Homes Is Failing

The Slowdown in US Electric Vehicle Sales Looks More Like a Blip

Toyota to Develop New Engines That Run on Carbon-Neutral Fuels

OpenAI Says It Has Begun Training a New Flagship A.I. Model

If A.I. Can Do Your Job, Maybe It Can Also Replace Your C.E.O.

PayPal Is Planning an Ad Business Using Data on Its Millions of Shoppers

GameStop Shares Rise 26% In Premarket Trading After $933 Million Stock Sale

Apple’s China iPhone Shipments Up 52% as Rebound Gains Steam

T-Mobile to Buy Most of US Cellular

Asahi Kasei Makes $1.1 Billion Bid For Swedish Calliditas Therapeutics

Moderna Makes Big Play for Big Tech Talent

Streaming Bundles Are Here, and You May Need a Ph.D. to Navigate the Options

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Morning News: May 27, 2024
Posted by Eddy Elfenbein on May 27th, 2024 at 7:04 am

How China Pulled So Far Ahead on Industrial Policy

BOJ Signals Room for Interest Rate Hikes After Price Norm Shift

ECB’s Lane Says Way Is Clear for Rate Cuts, With Inflation and Wage Rises on Downward Trend

Dollar Bulls Retreat as US Economic Print Cools, CFTC Data Show

Some Good News for Bond Traders Stuck in Fed Waiting Game

Crypto Traders Eye Ether Record, Rising Volatility From US ETF Hype

‘Bond King’ Bill Gross Warns Trump Would Worsen Deficits And Be ‘More Disruptive’ For The Bond Market Than Biden, Report Says

China Creates $47.5 Billion Chip Fund to Back Nation’s Firms

France Envisions AI Tent Big Enough for US, China and French Startups

Musk’s xAI Raises $6 Billion in Bid to Challenge OpenAI

Tesla Shareholders Advised to Vote Against Elon Musk’s Pay Package

Another Roadblock to the EV Transition: Personal Politics

Shares of China Evergrande’s EV Unit Soar After Liquidators’ Stake Sale Deal

An Oil-Patch Brawl Over a $53 Billion Megadeal Entwines the Legacies of Three CEOs

Vedanta Is Said to Weigh $1 Billion Share Sale as Soon as June

Lendlease Quits International Construction to Free $2.98 Billion

Why a California Plan to Build More Homes Is Failing

Astra, Daiichi Drug Extends Lives of Some Lung Cancer Patients

What Happened to Our Ad-Free TV?

The NCAA Has a $15 Billion Problem. Private Equity Can Help.

Reebok Isn’t a ‘Hobby’ for Shaquille O’Neal

Sneaker Rivals Race to Find the Next Super Foam

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Morning News: May 24, 2024
Posted by Eddy Elfenbein on May 24th, 2024 at 7:02 am

Russia, in New Push, Increasingly Disrupts Ukraine’s Starlink Service

Rich Investors Cheer Milei as Argentines Bear Brunt of Austerity

Nigerian Economy Grows at Slightly Slower Pace in First Quarter

Britain to World: Don’t Let What Happened to Us Happen to You

China Has a Plan for Its Housing Crisis. Here’s Why It’s Not Enough.

Why Biden Is Doubling Down on Trump’s China Tariffs

Central Bankers Should Acknowledge Blind Spots, Fed’s Mester Says

Atlas Shrugged as Bonds Steal Nvidia’s Thunder

U.S. Approves Investment Product Tied to Popular Cryptocurrency Ether

Kabosu, Shiba Inu Who Helped Define the Doge Meme, Dies at 18

Cathie Wood Sees a Great Depression-Like Search for Safety in the Stock Market

Carry Trade Is All the Rage Across Global Bond and FX Markets

The Rise and Fall of Simon Sadler’s Segantii, One of Asia’s Most Successful Hedge Funds

Citi, HSBC, Barclays Ramp Up Demands for Five Days in Office

Facing Possible Cash Crunch, Giant Real Estate Fund Limits Withdrawals

A Lender to Consumer Start-Ups Falters, Rattling Its Clients

Nvidia’s Huang Is Now Richer Than Every Member of Walmart’s Founding Family

How TikTok’s Looking for a Man in Finance Became a Viral Hit

Alibaba to Raise $4.5 Billion Through Convertible Bonds to Fund Buybacks

BHP’s Push to Woo Anglo Investors Hangs on South Africa

Novo’s Ozempic Slashes Risk of Death in Kidney Disease Study

Are University Athletes About to Earn a Big Payday?

U.S. Calls for Breakup of Ticketmaster Owner

Sony’s Entertainment Unit Syncs Up for Success, With or Without Paramount

Why a Shabby Luxury Brand Is Hard to Fix

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Morning News: May 23, 2024
Posted by Eddy Elfenbein on May 23rd, 2024 at 7:04 am

The Six Choke Points That Can Upend Global Trade

Will ‘Finland’s Achilles Heel’ Become a Problem for Europe?

Russia Says EU Will Feel ‘Full Measure’ of Retaliation Over Frozen Assets Plan

Eurozone Rebound Continues Apace as Germany Powers Recovery, Surveys Show

Turkey Holds Rates Again, Pledges Measures to Mop Up Liquidity

Singapore’s Economy on Track as Inflation Steadies, Trade Improves

Yellen Warns Israel Against Cutting off Palestinian Banks

Some Prominent Silicon Valley Investors Shift to the Right

What Trump 2.0 Could Mean for the Federal Reserve

Fed’s Inflation Debate Shifts to How Much Goods Prices Can Drop

Prices at the Pump Are Dropping Just in Time for Memorial Day Weekend

CFOs Lock in Savings with Interest-Rate Swaps Amid Uncertainty About Fed Cuts

Losses Pile Up in Top-Rated Bonds Backed by Commercial Real Estate Debt

JPMorgan CEO Jamie Dimon Says Can’t Rule Out ‘Hard Landing’ for the U.S., Stagflation Will Be ‘Worst Outcome’

JPMorgan Hunts for Private Credit Firm to Bulk Up in Hot Sector

Segantii Hedge Fund to Shutter Amid Insider Trading Charges

Hedge Funds Chip Away at China’s Dominance of Metals Market

TikTok Moves to Limit Russian and Chinese Media’s Reach in Big Election Year

Nvidia Stock Surges as Sales Forecast Delivers on AI Hopes

Xiaomi’s First-Quarter Profit, Revenue Beat Expectations

Some Mondelez Shareholders Say It’s Not Doing Enough on Russia

Hydrogen-Powered Private Jets Can Cut Emissions — If They Can Get Off the Ground

How Dodgers Billionaire Mark Walters’ Bet on India Ended in Disaster

How Taylor Swift’s Eras Tour Left Ticketmaster In Trouble

The Case for Japan’s Amazing Clothes-Drying Bathrooms

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Morning News: May 22, 2024
Posted by Eddy Elfenbein on May 22nd, 2024 at 7:04 am

Reagan’s Uncomfortable Question Confronts China’s Leader

China’s Housing Crash Could Set Back Millions of Promising Careers

Iran’s Center of Power Shifts From ‘Clerical Slippers to Combat Boots’

Indonesia’s Central Bank Stands Pat as It Keeps Eye on Rupiah, Inflation

Japan’s 10-Year Government Bond Yield Hits 1%, An 11-Year High

Japan’s Exports Rise for Fifth Straight Month

US Bonds Fall as Traders Look to Fed Minutes for Rate-Cut Clues

US Consumer Watchdog Will Apply Credit Card Rules to Buy Now, Pay Later Companies

Citi Fined $79 Million by UK Regulators Over ‘Fat-Finger’ Failures

What Do Students at Elite Colleges Really Want?

Even Advertisers Are Telling You to Get Off Your Smartphone

Some Corporations Seek to Silence ‘Trojan Horse’ Activists

Testing the Nvidia Boom

Nvidia Is the Final Hurdle for Mega Tech’s Earnings Victory Lap

Qualcomm Bets on AI to Knock Intel From PC Perch

China’s $10,000 EV Is Coming for Europe’s Carmakers

EU Car Registrations Jump on Growth in Major Markets, Extra Sales Days

Germany to Push for Stricter EU-Wide Climate Rules for Industry

Anglo’s Second Largest Investor Says BHP Proposal Needs Revising

Target Reports Another Sales Drop

Lululemon’s Product Chief Departure Adds to ‘Wall of Worry’

How the $17 Desk Salad Won

TV Networks Embrace Their Aging Audience With a New Mantra: Age Doesn’t Matter

Millennials are ‘Quiet Vacationing’ Rather than Asking their Boss for PTO: ‘There’s a Giant Workaround Culture’

Fraud Trial to Begin for Chinese Billionaire Who Allied Himself With America’s Right

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CWS Market Review – May 21, 2024
Posted by Eddy Elfenbein on May 21st, 2024 at 6:34 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 S&P 500 has closed higher 11 times in the last 14 sessions. What’s interesting is how small those three drops have been.

The largest loss of the three came on May 16 when the index fell just 0.30%. By historical standards, that’s not much. The second-worst drop came on May 13 when the S&P 500 lost a tiny 0.02%, but that doesn’t compare with the absolutely miniscule loss from May 8.

On May 8, the S&P 500 closed lower by 0.03 points. In percentage terms, the S&P 500 lost 0.0006%. The drop from May 13 was 41 times that of the loss from May 8, and the loss from May 8 was tiny to begin with.

If the stock market were to suffer May 8’s loss every single trading day for 10 years, the combined loss would still be less than 1.5%.

The good news is that the S&P 500 closed at another all-time high today of 5,321.41. The index is now up 11.56% for the year. The S&P 500 hasn’t had a daily loss of more than 0.25% since May 1. The Wall Street adage to “sell in May and go away” isn’t holding up well this year.

The market has been helped in recent weeks by an earnings season that was better than expected. We nearly have all the numbers for Q1 and the S&P 500 posted Q1 earnings growth of 5.36%. One month ago, Wall Street had been expecting growth of just 0.38%. The market beat very low expectations.

There’s growing concern over exactly where the Federal Reserve stands. In fact, I think it’s possible we may see the Fed split into two camps in the coming months.

Earlier today, Fed Governor Christopher Waller gave a speech to the Peterson Institute for International Economics in Washington. This is noteworthy because Waller has gained a reputation as one of the most influential Fed members, perhaps second only to Jerome Powell. He’s also seen as one of the more hawkish members of the FOMC.

In his remarks, Waller noted that inflation is indeed slowing down and, for the time being, no more rate hikes are needed. However, Waller said that he wants to see more solid data before he’s convinced that the Fed should start cutting rates. This view could be gaining strength within the Fed. It seems to be a bit odd to call for rate cuts as the stock market is rallying and inflation is above the Fed’s own target.

Waller conceded that some recent economic reports have been weak, such as retail sales and manufacturing data. Higher rates take some time to work, but they’re clearly having an effect. Waller also said that there are signs that the labor market is loosening.

Specifically, Waller said, “in the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy.” That’s clearly different from what Powell has been saying.

Waller said that the recent inflation report was a pleasant surprise, but it wasn’t enough to alter his view. The next jobs report will be out on June 7. For now, Wall Street still sees the Fed cutting rates in September, but if Waller’s view gains strength, those rate cuts could be off the table.

Silver: The Poor Man’s Gold

Last month, William Herbert Hunt passed away at the age of 95. Forbes estimated his net worth at $5.3 billion.

I mention Mr. Hunt’s passing not only because he was a man of great wealth but also because he was involved in one of the most spectacular investment schemes in recent history. Forty-five years ago, Mr. Hunt and his brother, Nelson Bunker Hunt, tried to corner the world silver market.

The scheme failed and the Hunts lost billions. In two months, the Hunts’ silver position, including futures, fell from $7 billion to negative $1.7 billion, or as Nelson Bunker put it, “A billion dollars ain’t what it used to be.” Tell me about it. In 1990, Herbert Hunt filed for bankruptcy.

Silver, often called “the poor man’s gold,” has rallied impressively in recent weeks. It’s currently trading around $32 per ounce. That’s up from $22 per ounce less than three months ago. Buying silver is like buying gold but even more so. Silver is almost like a natural 2X or 3X gold ETF.

Yet even after this rally, silver is still going for well below its Hunt-induced peak from 45 years ago. At its height, silver breached $50 per ounce.

Gold now trades at 75 times silver. During the early part of Covid, the Gold/Silver ratio reached 125. The Gold/Silver ratio has been an important ratio through history. Way back in antiquity, Plato mentioned that the ratio was 12-to-1.

In 1792, the U.S. Congress, at the advice of Alexander Hamilton, passed the Coinage Act of 1792. This was the government’s first attempt at price-fixing (and it wasn’t the last). In other words, Hamilton pegged the Gold/Silver ratio at 15. He wasn’t quite right and in 1834, Congress had to bump it up to 16.

Here’s the Gold/Silver ratio since 1990:

When the Hunts launched their plan, silver was around $6 per ounce. By early 1980, it rose to $50 per ounce. Time Magazine estimated the Hunts made between $2 billion and $4 billion in just nine months. To pull this off, they had to borrow zillions of dollars. At one point, it was estimated that they held one-third of the world’s silver. Tiffany took out a full-page article to denounce them.

The Hunt brothers were the sons of the legendary oilman, Haroldson Lafayette “H.L” Hunt, Jr. Hunt the senior was one of those people who’s called eccentric, but if he’d had less money, he probably would have been called something else.

To give you an idea, H.L. Hunt wrote a novel outlining his ideas for a utopia called Alpaca. I recall one person calling it 1984, but Big Brother is the good guy. After he died, the Hunts learned that their father had two other families.

Another brother was Lamar Hunt who was one of the most influential people in the development of modern football. He helped start the AFL and owned the Kansas City Chiefs. He was the person who came up with the name “Super Bowl.” Each year, the winner of the AFC title game is awarded the Lamar Hunt trophy in his honor.

The Hunt brothers were convinced that the Establishment was out to crush them, and they were right. The exchange changed the margin requirement which forced the brothers to put up much more collateral. They soon faced a $100 million margin call.

On March 27, 1980, the bottom fell out of the silver market. This is now known as “Silver Thursday.” The Hunts had to put up more money, but they couldn’t reach their margin requirement. The government was worried that Wall Street banks were so much in debt to the Hunts that if the Hunts went under, so would the banks. A silver panic could start a banking panic. With a margin call, you either put up more money or sell. There is no third option. Eventually, a consortium of banks offered a $1 billion line of credit to keep the banking system going.

The Hunts were wiped out. The brothers eventually become the models for brothers Randolph and Mortimer Duke in the movie Trading Places.

Hunt’s son Bruce said of his father, “Yeah, we took some hits. But his whole deal was: That’s the past. Let’s look forward. Let’s go back to what we do.”

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

– Eddy