Morning News: March 15, 2024
Posted by Eddy Elfenbein on March 15th, 2024 at 7:03 am

Russia Strengthens Its Internet Controls in Critical Year for Putin

Sri Lanka’s Economy Expands For a Second Straight Quarter

Angola Seeks Chinese, Private Funds for Refinery, Air Force Base

China Urges EV Makers to Buy Local Chips as US Clash Deepens

Mexican Peso Is So Strong Investors Fear Betting Against It

Fed Seen Sticking With Three 2024 Cuts Despite Higher Inflation

Peak Rates Boost U.S. Demand for Riskier Form of Corporate Debt

Blame Crypto Bros for the Rising Cost of Your Rolex

‘No Time to Waste’: Japan Inc Set to Step Up Outbound M&A

US Steel Rival Is Ready to Pick Up the Pieces If Nippon Deal Collapses

Honda and Nissan Look to Tie Up in EVs

Self-Driving Cars Enter the Next Frontier: Freeways

OpenAI and the Fierce AI Industry Debate Over Open Source

Why Corporate America Has a Diversity Problem

Young Entrepreneurs Find a Way to Indulge Their C.E.O. Dreams

More Middle Managers Are Being Laid Off

Big Profits and High Prices: There Is a Connection

American Debt Stings Like Never Before in New Era for Households

Dollar Stores Get Devalued as Low-Income Consumers Struggle

Cities Face Cutbacks as Commercial Real Estate Prices Tumble

Texas Cities Grow Fastest in US as NYC Keeps Losing People

When It Comes to Texas, Is Musk All Hat and No Cattle?

Why Having a Baby Isn’t Really Bad for the Planet

McDonald’s Technology Outage Forces Restaurant Closures

Boeing’s Problems Could Soon Become Your Problem

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Morning News: March 14, 2024
Posted by Eddy Elfenbein on March 14th, 2024 at 7:03 am

Can Europe Save Forests Without Killing Jobs in Malaysia?

E.U. Removes Russian Tech Tycoon From Sanctions List

IEA Slightly Raises Oil-Demand Growth View But Cuts Supply Forecast

Hapag-Lloyd Expects Sharp Earnings Drop Amid Choppy Geopolitical Waters

Saudi Wealth Fund Eyes Bond Sales, IPOs to Finance Spending Ambitions

An $80 Billion Crash in India’s Small Caps Flashes Warning Signs

Private Credit Ties to Banks Deepen in Europe as Default Risk Rises

Bond Traders Prep for New Dot Plot, With Three Cuts in Question

Yellen Says Rates ‘Unlikely’ to Return to Pre-Covid Levels

Why the Stock Market Doesn’t Care About Rate Cuts

Duo Behind TikTok Bill Casts a Spotlight on China Fears

TikTok Sell-or-Ban Push to Slow as Bill Hits Senate Turbulence

TikTok Needs to Get Creative to Find a Deal That Wards Off a US Ban

Elon Musk’s Plans to Conquer Europe Collide With Germany’s Culture Wars

Tesla Gets Tagged With Once-Unthinkable Call: Sales Will Fall

Inside the Steel Deal That Has Biden on Edge

Biden Jump-Starts Electric-Vehicle Push With Massive Lithium Loan

Shell Weakens 2030 Emissions-Cut Target in Move Away From Clean Power

Housing Is in Crisis All Around the World

America’s Plumber Deficit Isn’t Good for the Economy

‘Rebate Aggregators’ Are Cashing in on Home Electrification

Dollar General Rises After Outlook Signals Turnaround Is Working

One Big Reason Gen Z Is Still on Facebook: To Save Money

The Vicuñas and the $9,000 Sweater

Watching Sports Is a Mess. Can a New Streaming Service Fix That?

Bud Stock Drops. A Major Shareholder Is Selling Down Its Stake

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Morning News: March 13, 2024
Posted by Eddy Elfenbein on March 13th, 2024 at 7:02 am

Denmark to Add $6 Billion to Defense, Start Drafting Women

Malaysia Rises as Crucial Link in Chip Supply Chain

Now Lawyers Are Suffering From China’s Deal Slump

US, Europe Court Southeast Asia as China Hedge

Sex Abuse Inquiry Poses Leadership Test for World Bank’s Ajay Banga

The Fed Will Slow QT. What Matters Is Where It Stops

It’s a Higher-for-Longer World for Rates, and That’s OK

A Finance Reporter Who Invests in Readers’ Well-Being

US 30-Year Mortgage Rate Drops Below 7%, Spurring Home Purchases

We Still Don’t Believe How Much Things Cost

Corporate Bond Issuance Is Booming—But Not Sustainability-Linked Bonds

How a Physics Whiz Made a Killing Betting on Nature’s Catastrophes

How the World’s Biggest Plane Would Supersize Wind Energy

Pentagon Scraps Plan to Spend $2.5 Billion on Intel Grant

A Ban? A Sale? The Big Questions Hanging Over TikTok

China Condemns U.S. Proposal to Force the Sale of TikTok

TikTok Plans Legal Fight If US Divestment Bill Becomes Law

Gold-Medalist Coders Build an AI That Can Do Their Job for Them

Edtech Unicorns Are Evolving Rather Than Disrupting

Reddit’s Long, Rocky Road to an Initial Public Offering

In Silicon Valley, Venture Capital Meets a Generational Shift

Volkswagen Brand Posts Higher Profit, But Audi Unit Takes Hit

Cancer Clinics Face Cash Crunch After Hack Rocks US Health Care

Lilly Partners With Amazon to Sell More Weight-Loss Drugs

Surge in Fake Ozempic Reveals Dark Side of Weight-Loss Frenzy

Adidas Proposes Flat Dividend as 2024 Growth Expected in Second Half

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CWS Market Review – March 12, 2024
Posted by Eddy Elfenbein on March 12th, 2024 at 6:23 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.”)

Four Years Ago Today

In last week’s issue, I talked about how this time of year has been popular for large-scale market reversals. Today, I want to start off by focusing on one day in particular: March 12, 2020, which was exactly four years ago today.

This was the point at which the world was becoming aware of the scope and magnitude of Covid-19, and March 12, 2020 became one of the most dramatic days in Wall Street history.

By the time trading was done on March 12, it was the fourth-worst day for the Dow in percentage terms in its 128-year history. Poetically, the Dow fell by 9.99%. The only days worse than that came in 1929 and 1987. Investors were completely panicked. Five of the six largest daily point losses for the Dow came in March 2020. Not only that, but six of the eight largest point gains came in that same month.

The market was particularly rattled that day because the ECB decided against raising interest rates which went against expectations. For its part, the Federal Reserve announced $1.5 trillion in open market purchases.

Trading was halted for the second time that week after the S&P 500 fell 7%. Under the rules of the New York Stock Exchange, trading is halted for 15 minutes after a 7% decline. Trading is halted again after a 13% decline. If the market falls 20% in one day, then the exchange is shut down for the day. I thought that might happen in 2020, but we steered clear of it.

On the NYSE, there were 2,376 new lows and just two new highs. The Volatility Index, or VIX, got up to 76.83. That’s close to the highest in history. The S&P 500 finished that day more than 20% off its high. This marked the first official bear market in 11 years.

On March 12, 2020, guess how many stocks in the S&P 500 were more than 10% off their 52-week high? The answer is 502. That’s not a misprint. Nor are my math skills failing me. There are 500 companies in the index but 505 stocks.

I bring these ugly stats up to show you how well the market has done since that scary day. Indeed, it wasn’t the end of the world. It was really a great time to buy assuming you didn’t panic. Over the last four years, that S&P 500 has more than doubled. If we include dividends, then the market has gained more than 120%. The VIX is now down near 14. I think most people have forgotten about March 12, 2020, but it really happened.

To borrow from Mr. Kipling, “If you can keep your head when all about you are losing theirs…then yours is the Earth and everything that’s in it.”

The U.S. Economy Created 275,000 Jobs in February

On Friday, the government said that the U.S. economy created 275,000 net new jobs last month. That beat expectations of 198,000. There was good and bad in this report.

The unemployment rate increased to 3.9%. Technically, this is the highest unemployment level in two years, but it’s still close to a 50-year low. We also had downward revisions in the December and January numbers that came to 167,000 jobs.

Another weak spot is wages. Last month, wages increased by just 0.1%. That was below expectations. Over the last year, wages are up by 4.3%.

The labor force participation rate was unchanged at 62.5%, but the “prime age” rate increased by 0.2% to 83.5%. That’s close to a 20-year high.

Here are some other details:

Job creation skewed toward part-time positions. Full-time jobs decreased by 187,000 while part-time employment rose by 51,000, according to the household survey. An alternative jobless measure, sometimes called the “real” unemployment rate, that includes discouraged workers and those holding part-time jobs for economic reasons rose slightly to 7.3%.

From a sector standpoint, health care led with 67,000 new jobs. Government again was a big contributor, with 52,000, while restaurants and bars added 42,000 and social assistance increased by 24,000. Other gainers included construction (23,000), transportation and warehousing (20,000) and retail (19,000).

In recent weeks, the weekly jobless claims reports have been stable. The economy still had almost 9 million job openings, which is 1.4 for every unemployed person.

Inflation Is Still Running at More than 3%

This morning, the Labor Department released the CPI report for February, and it was largely as expected. Last month, consumer prices increased by 0.4% which matched expectations. Over the last year, inflation is running at 3.2%. That was 0.1% above Wall Street’s forecast.

Core prices also increased by 0.4%. That was 0.1% higher than expected. Over the last year, core inflation is running at 3.8%. That was also 0.1% above consensus. Here’s a look at monthly core inflation:

While there’s no terrible news in this report, inflation is still running above the Fed’s target of 2%. If we ignore shelter costs, then inflation is running at 1.8% over the last year. It’s shelter that’s been driving core inflation.

A 2.3% increase in energy costs helped boost the headline inflation number. Food costs were flat on the month, while shelter rose another 0.4%.

The BLS reported that the increases in energy and shelter amounted to more than 60% of the total gain. Gasoline jumped 3.8% on the month while owners’ equivalent rent, a hypothetical gauge of what homeowners could get renting their properties, rose 0.4%.

A few weeks ago, I mentioned the “supercore rate” of inflation which is the cost of services except energy and housing. The supercore rate is more sensitive to labor costs, and it’s tended to remain high. Last month, the supercore rate cooled off to an increase of 0.47%. That’s down from a 0.87% jump in January.

While inflation is down from its peak from two years ago, the numbers are very stubborn once inflation dips below 4%. The stock market wasn’t terribly bothered by this morning’s report, and that seems like the right way to look at it. Growth stocks were up signicantly today while the gains for Value were more modest.

The Federal Reserve meets again next week, and I’ll spoil it for you. They won’t touch interest rates. Nor will they make any changes in May. At the start of this year, Wall Street expected a rate cut in March and May (there’s not a meeting in April).

The June meeting is a different story. I think there’s a decent chance that the Fed will shave 0.25% off interest rates. Traders still see the Fed cutting rates three times this year.

In recent days, it appears that the stock market is following an “either/or” menu. By that, I mean that either the Nasdaq Composite rises and then the Russell 2000 does the exact opposite, or the Russell rises and the Nasdaq falls. There appears to be no middle ground. Today, it was the Nasdaq up and the Russell 2000 down.

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

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.

Morning News: March 12, 2024
Posted by Eddy Elfenbein on March 12th, 2024 at 7:05 am

Why Seizing Russian Assets to Fund Ukraine Is Fraught

China’s Exports Are Surging. Get Ready for the Global Backlash

China’s Vague Hopes for Tech to Reboot Its Economy

China Vanke in Debt Swap Talks With Banks to Stave Off Default

UK’s Bond Sale Draws Highest Demand Since Pandemic Struck

Inflation Thermometer Tops Market Dashboard

Insurance Costs Are Pushing Up Overall Inflation

U.S. Small Business Optimism Weakens on Inflation Worries

US CPI Won’t Inspire Fed to Cut Rates, Bloomberg Economics Says

Goldman Sachs Seeks to Expand Private Credit Portfolio to $300 Billion in Five Years

After SVB’s Failure, Its Attempted Rescuer Charged $285 Million in Fees

Upstarts Challenge a Foundation of Modern Investing

Don’t Bet on That Marketing Degree, Gen Z

Sprouts of Hope in a Gloomy Media Landscape

Lula Plans Airline Bailout to Make Flying Cheaper for Brazilians

Southwest Air to Cut 2024 Capacity, Citing Boeing Challenges

Alaska Airlines Returns Fleet to Service After Boeing Grounding

Air New Zealand Pauses Chicago Flights Due to Engine Shortage

How EV Charger Hacking Threatens Personal Data and the Power Grid

China’s Xiaomi to Start Deliveries of Its First EV Model, Shares Soar

Tesla Abandons an Auto Lobby Over Emissions Rules

Porsche AG Warns of Lower Margins As It Launches New EV, Hybrid Models

Lego Builds Market Share as Ever-Popular Toy Bricks Defy Demand Drop

Kohl’s Falls After Same-Store Sales Miss Expectations

See-Through Baseball Pants Have Fans, and Brands, Pointing Fingers

BAT to Sell as Much as $2.1 Billion of ITC Stock in Block Trade

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Morning News: March 11, 2024
Posted by Eddy Elfenbein on March 11th, 2024 at 7:09 am

Oil Prices Steady as Middle East War Counters China Demand Concerns

The Houthis Are Schooling Us in Asymmetric Warfare

Japan’s Economy Expanded in Fourth Quarter on Capital Spending Boost

Australia to Abolish Nearly 500 So-Called Nuisance Tariffs

Bank of England Forecasts in the Dock as Bernanke Verdict Looms

US Will ‘Do Whatever It Takes’ to Curb China Tech, Raimondo Says

The Federal Reserve’s Challenge Is Economists, Not Too Much Growth

Emergency Fed Bank Effort Ends Lending, as Eyes Turn to Discount Window

Traders Are on Alert for a Hotter-Than-Expected Inflation Print

One of the Most Infamous Trades on Wall Street Is Roaring Back

GoldenTree Raises $1.35 Billion in First Private Credit Fund

Rich Banker’s Lawyer Accused of Being Too Polite to Vet His Cash

A Year Later, Lessons From Silicon Valley Bank’s Epic Collapse

Apple to Open New Store in Shanghai Amid Falling iPhone Sales

Reddit Launches Long-Awaited IPO With $748 Million Target

EQT to Buy Mountain Valley Pipeline Owner for $5.5 Billion

Academics Question ESG Studies That Helped Fuel Investing Boom

Behind the Alaska Blowout: a Manufacturing Habit Boeing Can’t Break

Why Is My Electric Vehicle Dead? Check the 12-Volt Battery

Choice Hotels Scraps Roughly $7 Billion Bid For Wyndham After Rebuff

He’s Not Just Looking to Make a Quick Billion

Restaurants Are Raising Prices in California as Pay Rises. One Chain Isn’t

When Canceling Your Reservation Costs as Much as Dinner

Saudi Arabia Is Splurging on Sports. Is It Working?

Elon Musk Has a Giant Charity. Its Money Stays Close to Home

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Morning News: March 8, 2024
Posted by Eddy Elfenbein on March 8th, 2024 at 7:02 am

EU, US to Open Sea Corridor for Gaza in Days as Peace Talks Fail

African Drought and Europe’s Farming Troubles

China Readies $27 Billion Chip Fund to Counter Growing US Curbs

Global Equity Funds Draw Inflows of $6.5 Billion on Rate-Cut Hopes

Biden Portrays Next Phase of Economic Agenda as Middle-Class Lifeline

Credit Market Euphoria Is Like Rate Hikes Never Happened

US Small Businesses Struggle for Credit, One Year After Regional Turmoil

Bond Market Looks to Jobs Data to Validate Rate-Cut Expectations

Cathie Wood, Flying Taxis, and ARK’s Rematch With a Grizzly Bear

The New Job Hot-Spots: Phoenix, Orlando and Albuquerque

Debt Swaps Explored by Global Fund Targeting Health Investments

F.D.A. Delays Action on Closely Watched Alzheimer’s Drug

Rite Aid Advisers Rake in Millions Through Bankruptcy. Opioid Victims Brace For Nothing

A.L.S. Drug Relyvrio Fails Clinical Trial and May Be Withdrawn From the Market

Novo Nordisk Market Cap Surpasses Tesla on New Obesity Pill Trial Data

Unless You’re Nvidia, the AI Chip Business Is Complicated

Nvidia Looks Primed for a Stock Split After $1 Trillion Rally

Open AI’s GPT Is a Recruiter’s Dream Tool. Tests Show There’s Racial Bias

Boeing to Tie More of Employees’ Incentive Pay to Safety

China’s Vehicle Sales Dropped in February Amid Price War, Long Holiday

Tesla Loses Power After Years of Waving Away Germans’ Concerns

Rivian Follows Tesla’s Lead, but Is It Too Late?

Rivian Will Delay Construction of a $5 Billion Factory in Georgia

BP Claws Back a Further $2.3 Million From Ex-CEO Looney

Rupert Murdoch’s New Russian Fiancée Ties Him to a Sprawling Web of Money — With Some Surprising Connections

HelloFresh Shares Slump After Company Drops Midterm Targets

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Morning News: March 7, 2024
Posted by Eddy Elfenbein on March 7th, 2024 at 7:05 am

Nickel Prices May Soon Recover From Indonesia-Induced Slump

Looking Beyond Diamonds and Money

How China Came to Dominate the World in Solar Energy

China’s Export Bounce Draws Notes of Caution From Economists

China Scrutinizes Bond Buying at Smaller Banks as Market Soars

BOJ Bets Swing Toward March Rate Hike

Bank of Canada Keeps Policy Rate at 5%, ‘Too Early’ to Weigh Cuts

I.M.F. Agrees to Much Larger Rescue Package for Egypt

OECD Government Borrowing Expected to Rise to Record $15.8 Trillion This Year

Fed Chair Powell Still Expects to Cut Rates This Year, but Not Yet

Wall Street Wins After Powell Signals Changes to Contentious Bank Rules

Billionaire, Corporate Tax Hikes Will Be Focus of Biden Speech

How Trump’s Ex-Treasury Chief Landed 2024’s Highest-Profile US Bank Deal

NYCB Total Deposits Drop 7% to $77.2 Billion, Shares Fall

How Microsoft’s Bing Helps Maintain Beijing’s Great Firewall

How Apple Sank About $1 Billion a Year Into a Car It Never Built

Elon Musk Is Right About OpenAI But for the Wrong Reasons

EVs Can’t Fix a Global Epidemic of ‘Car Harm,’ Study Finds

GE Aerospace Sets Tone With Post-Breakup Profit Goal, Dividend

Airbus Is Soaring at Boeing’s Expense

Merck KGaA Expects Organic Sales, Earnings Growth This Year

Big American Tech Profits From Chinese Ad Spending Spree

Walmart, TikTok and Shein Lure Amazon Merchants at Vegas Event

Abercrombie & Fitch Is Reaping the Rewards of Taking Adult Women Seriously

The Youths Have Spoken: Wallets Are Uncool. Go Digital

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Morning News: March 6, 2024
Posted by Eddy Elfenbein on March 6th, 2024 at 7:04 am

Startups Beckon for Women Seeking Equality in Japan

South Korea Inflation Reaccelerates, Backing BOK’s Hawkish Stance

What’s the ‘Korea Discount’ and Why Is It a Problem?

A Window Into Chinese Government Has Now Slammed Shut

Morgan Stanley Cuts 9% of China Fund Unit Staff Amid Market Rout

Australia’s Economy Continues to Slow as Rates, Costs Crush Confidence

Germany’s Trade Surplus Widened in January

US Regulators Expected to Significantly Reduce Basel Capital Burden

Gold Steady After Surging to Record on Rate-Cut Bets, Haven Bids

Crypto’s $800 Billion Rally Widens Beyond Record-Setting Bitcoin

What’s Behind Record Highs for Gold and Bitcoin?

Bitcoin’s Wild Price Booms and Busts Are Going to Continue Forever

Yes, Even Cookie Monster Is Upset About ‘Shrinkflation’

There’s a New Financial Crisis Brewing in Uninsurable US Homes

Nvidia Is the Latest Shiny Object to Spur Stocks to New Heights

Reddit’s IPO Success Hinges on Infamously Unruly User Base

Why Elon Musk Has It In for Sam Altman

OpenAI Fires Back at Musk Allegations With Trove of Emails

Cyberattack Paralyzes the Largest U.S. Health Care Payment System

‘Exit Scam’ – Hackers That Hit UnitedHealth Pull Disappearing Act

Moderna Looks to Pare R&D Spending Even as It Pivots From Covid Vaccines

Flexible Hours Come to the Factory: A Look Inside Land O’Lakes’ Plant

Newsom Donor to Boost Pay at His Panera Franchises After Bill Controversy

Oscar Mayer Debuts Vegan Hot Dog With Help From Bezos-Backed Startup

$1,780 to Spend the Night in a ‘Cocoon’? Hotels Are Betting on Sleep Tourism

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CWS Market Review – March 5, 2024
Posted by Eddy Elfenbein on March 5th, 2024 at 6:40 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.”)

Beware the Reversals of March

In recent years, March has been the time for dramatic market turnarounds. Sometimes, March has welcomed major high points while other times, it’s been lows; but whatever the direction, this has been the time of year for them.

Why March? Beats me. Perhaps the coming of spring gives new hope to those who’ve been on the wrong end of the market for so long.

I’ll give you a few examples. Probably the biggest was the Great Tech Bubble which peaked in March 2000. The Nasdaq Composite closed at 5,048 on March 10, 2000.

This was the top of a blistering rally. In the previous 18 months, the index had soared 250%. The good times didn’t last. One year later, the Nasdaq was down 60%. Within two-and-a-half years, the Nasdaq was off by more than 75%. Anyone heard from Pets-dot-com lately?

The bear market low of 2002-03 is up for some debate. That’s because the market low officially came in October 2002. However, the stock market put on a nice 19% rally over the next four weeks…before it collapsed again.

Some analysts will claim that a rally of that size qualifies as a new bull market. Frankly, I’m agnostic on these points, but the S&P 500 reached another major low on March 11, 2003, right at the start of the Iraq War. The market low came exactly three years and one day after the Tech Bubble popped.

The Financial Crisis of 2007-08 is an interesting case because it took some time before the size of the damage was fully realized. The stock market peaked in October 2007 before it gradually eroded, and that erosion soon turned into an avalanche.

The closing low for the S&P 500 came on March 10, 2009 at 676.53. In terms of pure valuation, that may stand out as a multi-decade low. Adjusted for inflation, the Dow Jones Industrial Average was where it was 43 years before. Everyone, it seemed, hated Wall Street. If you recall, this was the time Jim Cramer went on Jon Stewart’s show. Like the others, this was also a great time to buy.

Then there’s the Covid bear market. That was an extremely dramatic market and again, March was the turning point. I’ve never seen a market so panicked. In March 2020, the S&P 500 had two of its six worst days in history, and it had two of its ten best days in history. In 13 trading days, the S&P 500 lost close to 30%. The S&P 500 finally reached its closing low of 2,237.40 on March 23, 2020.

Of course, that was also a great time to buy (thanks to extraordinary efforts from the Federal Reserve). In less than 17 months, the S&P 500 doubled, and it’s up another 14% from there.

It’s interesting to see how the market emerges from whatever chaos we face. On Wall Street, we refer to market drops as being “corrections” but from a long-term perspective, those drops are really the errors.

There’s an old saying on Wall Street that “bull markets go up the staircase while bear markets jump out the window.” That’s very true and you can really see the impact by looking at the long term.

Permit me a brief thought experiment. Think of investing as a roulette wheel with very unusual rules. You spin the wheel once a year, and you face two possible payoffs. You have either an 85% chance of making 15% on your investment next year, or you have a 15% chance of losing 20%.

I made up those numbers, but it’s close to what investors actually see. The long-term payoff is close to 10% but the key is that you have to keep playing through those 20% drawdown years. In fact, the odds are high that in an investing lifetime, you’ll almost certainly see two bad years within a five-year span.

The other part of this thought experiment is that bull markets can seem, to a rational observer, unusually hot. After all, the market is performing at a 50% faster rate than its long-term average, and that can happen for several years. This causes too many investors to jump ship too soon, and that’s a big mistake.

One of my favorite quotes from Peter Lynch is, “Far more money has been lost by investors’ preparing for corrections, or trying to anticipate corrections, than has been lost in the corrections themselves.”

Target to Start Membership Program

Shares of Target (TGT) got a nice 12% boost today after the retailer said it’s going to start a paid membership program next month. Of course, this is exactly what other retailers like Amazon and Walmart do. I’m curious what took Target so long. Amazon Prime is a smash hit, and Walmart said that Walmart+ has been doing very well.

The new service will be called Target Circle 360. The service “will include unlimited free same-day delivery for orders over $35 in as little as one hour with no delivery fees and free two-day shipping, along with other perks.”

The initial price will be $49 per year, but it will bump up to $99 per year after the initial promotion ends on May 18.

I’ve been following Target recently and the retailer appears to be at a turning point. There are still a lot of problems at Target, but for the first time in a long time, the company may be a worthwhile investment.

The shares had not been performing very well versus the overall market until late last year.

Then in November, Target released an encouraging, but not great, earnings report. I don’t want to overstate the case because Target still has problems. For Q3, same-store sales fell by 4.9%. Retail is a tough game, and it’s especially hard if your sales are falling. Retail is all about managing your inventory efficiently and getting the lowest price to your customer.

Still, the company said in November that it had improved its efficiency and was managing its inventory better. For its fiscal Q3, Target made $2.10 per share which was well ahead of the consensus for $1.48 per share. After the November report came out, the stock jumped 17% in one day.

Today, Target reported its fiscal-Q4 earnings, which covers the important holiday shopping season. Once again, Target didn’t have great news to report but it was a lot better than was feared. Same-store sales fell 4.4%. That was the third drop in a row. For the first time since 2016, Target’s annual sales fell.

For earnings, Target made $2.98 per share for its Q4. That was much better than Wall Street’s consensus for $2.42 per share. Target’s own range for earnings was $1.90 to $2.60 per share. Quarterly revenue hit $31.92 billion which was $90 million better than consensus.

For Q1, the current quarter, Target sees same-store sales falling by 3% to 5%, and earnings ranging between $1.70 and $2.10 per share. For the full-year, Target expects same-store sales to be flat to -2%, and full-year earnings coming in between $8.60 and $9.60 per share. That’s not great, but it could have been much worse.

Turnaround plays are tough. I generally avoid them. The issue is that investors need to figure out which is a fixable problem and which is not, because once a company loses its competitive edge, it’s very difficult to get it back. I’m pleased to see the progress at Target but the company still has to do more.

JetBlue and Spirit Call Off Merger Plans

JetBlue (JBLU) and Spirit Airlines (SAVE) finally ditched their plans for a $3.8 billion merger. The Biden administration fought to stop the deal, claiming it would harm consumers. In January, a federal judge sided with the administration and blocked the deal.

The two airlines had been looking to appeal the decision but have now agreed to part ways. JetBlue now owes Spirit a breakup fee of $69 million and $400 million to Spirit’s shareholders. I’ll be honest—Jet Blue shareholders dodged a big bullet with this one.

Despite the payment, Spirit is in very rough shape. They weren’t pursuing this deal because they wanted to but because they had to. In the chart above, notice how badly shares of SAVE got punished after the judge’s decision in January.

Spirit is a mess. The airline has a massive debt load, and they haven’t turned a quarterly profit since Covid. The airline is projected to lose money this year and next year as well. Perhaps someone else will buy them. Frontier (ULCC) had been kicking the tires, but they were eventually outbid by JetBlue.

I bet Frontier or someone else could get a good deal, but taking on Spirit won’t be easy. The DOJ will almost certainly challenge any deal.

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

– Eddy

P.S. If you want more info on our ETF, you can check out the ETF’s website.