Morning News: December 27, 2023
Posted by Eddy Elfenbein on December 27th, 2023 at 7:04 am

Xi Touts Alternative to Western Capitalism in Speech on Mao

Ghost Ships at Reawakened North Korea Port Put Ukraine in Peril

World Stocks Sail to Highest in Over a Year on Rate Cut Hopes

Wall Street Quants Warm Up to Zero-Day Options Amid Trading Boom

Tips for Battling Your Year-End Financial Stress

How Can Spending Be Up When People Feel Down?

Free Returns Are Going Away

It Was a Tough Year for Almost Every Bank Not Named JPMorgan

Finance Executives Hope Certainty Is Ahead on ESG Disclosures

Facing Tight Budgets in 2024, CIOs Seek Wiggle Room for Tech Investments

Adler ‘Significantly Overstated’ Value of Old Debt, German Watchdog Finds

What’s Next in Artificial Intelligence?

The Late-Night Email to Tim Cook That Set the Apple Watch Saga in Motion

Will China Ease Its New Video Game Controls? Investors Think So

Chinese Carmaker Overtakes Tesla as World’s Most Popular EV Maker

Tesla Strike Is a Culture Clash: Swedish Labor vs. American Management

Tesla Plans Revamp of Smash Hit Model Y From China Plant

How Electric-Vehicle Demand Is Losing Steam in the U.S., in Charts

Tired: Buying an EV. Wired: Leasing One for Six Months or Less

Cytokinetics Soars as Heart Drug Hits Goal in Late-Stage Trial

The First Secret Asteroid Mission Won’t Be the Last

Will 2024 Mark the End of the ‘Digital Agency’?

The Bud Light Boycott Was Just the Beginning of a Crazy Year for Beer

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Morning News: December 26, 2023
Posted by Eddy Elfenbein on December 26th, 2023 at 7:03 am

Oil Edges Up as Investors Eye Middle East Tensions and US Rate Cut

Investors Sour on EV Charging Companies

Global 2024 Staple Food Supplies To Be Strained by Dry Weather, Export Curbs

PBOC Shuffling Continues With Another Deputy Governor Replaced

Goldman’s Painful 2023 Lesson on China Forces Rethink of Emerging Markets

Chinese Gaming Firms Unveil Share Buybacks After Regulatory Move Unnerves Investors

UK Economy Forecast to Narrow GDP Gap With Germany by 2038

Downturn or Not? At Year’s End, Wall St. Is Split on What’s Ahead

What to Expect From ‘Magnificent 7’ in 2024: More Gains From AI, Experts Say

Ousted Binance Founder CZ’s Fortune Grew by $25 Billion in 2023

Hospital Price Gaps Show Just How Broken the US Health-Care Market Is

Bristol Adds to Buying Spree With $4.1 Billion Drugmaker Deal

Verano Executive Bullish on the Future of the U.S. Cannabis Industry

What’s Next After US Apple Watch Import Ban?

Intel to Invest $25 Billion in Israel After Winning Incentives

The 2023 Good Tech Awards

A Look Back at the Top Business Stories of 2023

Retailers Are Bracing for Their Postholiday Returns Hangover

The 11 Best Beers of the Year, Chosen by a Guy Who Tasted 879

2023 Box Office Lessons: Audiences Sought Comfort, Skipped Spectacle

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CWS Market Review – December 25, 2023
Posted by Eddy Elfenbein on December 25th, 2023 at 7:17 pm

Ladies and Gentlemen:

Drumroll please.

I give you our 2024 Buy List:

Abbott Laboratories (ABT)
AFLAC (AFL)
American Water Works (AWK)
Amphenol (APH)
Broadridge Financial (BR)
Celanese (CE)
Cencora (COR)
FactSet Research (FDS)
Federal Agricultural Mortgage (AGM)
FICO (FICO)
Fiserv (FISV)
HEICO (HEI)
Hershey (HSY)
Intercontinental Exchange (ICE)
Intuit (INTU)
McGrath RentCorp (MGRC)
Miller Industries (MLR)
Moody’s (MCO)
Otis Worldwide (OTIS)
Polaris (PII)
Rollins (ROL)
Science Applications International (SAIC)
Silgan (SLGN)
Stryker (SYK)
Thermo Fisher Scientific (TMO)

The five new buys are:

American Water Works (AWK)
Amphenol (APH)
Federal Agricultural Mortgage (AGM)
McGrath RentCorp (MGRC)
Rollins (ROL)

The six sells are:

Carrier Global (CARR)
Danaher (DHR)
Middleby (MIDD)
Stepan (SCL)
Veralto (VLTO)
Trex (TREX)

We’re selling six this year because we got Veralto as a spinoff from Danaher.

This is our 19th annual Buy List. The new Buy List won’t go into effect until the start of trading on Tuesday, January 2. The 25 stocks will be equally weighted based on the closing price as of December 29.

Our ETF is based on the Buy List, but it’s not always a perfect match. Here’s the performance of CWS (red) versus the S&P 500 ETF (blue) over the last 18 months.

The Five New Buys

I’ll have more to say about the new buys in upcoming issues, but I’ll share some thoughts with you here.

McGrath rents relocatable modular buildings, portable storage containers, electronic test equipment and liquid-containment tanks. This means things like modular classrooms. Or imagine a construction site in the middle of nowhere. McGrath can rent the foremen an instant office. These things are more common than you might expect.

But McGrath does more than that. It also rents test equipment and storage tanks. The company has raised its dividend for 32 years in a row.

The Federal Agricultural Mortgage Corporation is better known as Farmer Mac. The company was chartered by Congress in 1988, and five of the 15 members of the Board of Directors are appointed by the President.

The idea of Farmer Mac was to create a secondary market for agricultural loans such as mortgages in rural areas. While Farmer Mac’s debts are not guaranteed by the federal government, much of the farm sector is protected by the government. In fact, farming may be one of the most state-protected industries in America.

Thanks to its close relationship to the government, Farmer Mac is able to have far lower interest-rate risk than many major banks. AGM has a market value of about $2 billion. The stock is going for about 11 times 2024 estimated earnings.

American Water Works is a public utility that provides water to millions of Americans. Water is a good business to be in. No town wants to be another Flint, Michigan.

AWK provides “safe, clean, reliable and affordable drinking-water and wastewater services to more than 14 million people with regulated operations in 14 states.” AWK also has a 50-year contract to provide water and wastewater utility services at 18 military installations.

Amphenol is a former Buy List stock. The company makes electronic and fiber-optic connectors. I stupidly kicked APH off the Buy List in 2010.

Rollins is in the pest-control biz. It’s amazing how few people know about this stock. Rollins is the parent of Orkin. Years ago, Rollins was a diversified company with lots of holdings. It eventually spun off its oil and gas units into another company. What was left was the pest-control business, which is a very nice business to own.

The Six Sells

Coming up with the sells each year is hard, because you can’t help getting attached to some stocks. In retrospect, I made a mistake in having both Thermo Fisher and Danaher on the Buy List when I really should have had just one of them. I made the decision to keep Thermo, so I’m selling both Danaher and Veralto.

Middleby was another mistake. I added it back after removing it from the Buy List during 2022. Earnings growth hasn’t been as strong as I hoped.

Carrier was a tough choice. The company is undergoing a major transition. If it can pull it off, it will be very profitable. I wish the firm well, but I can’t say this is a low-risk move.

Stepan was an easy choice to make. The company had a terrible year. At least the stock rebounded nicely during Q4. The rally turned a 40% loss this year into a 10% loss.

Trex has been a fun stock to own. It either rallies strongly, or it gets crushed. This year, Trex was in rally mode. The stock nearly doubled for us in 2023. This is a good time for us to exit Trex.

Thank You!

I’ll have all the details of our Buy List’s performance in 2023 in the next newsletter, which comes out on December 31.

This was an amazing year for us. I want to thank everyone for their support. I admit that our long-term buy-and-hold strategy can be a little boring, but it works. We’ve been doing it for 18 years.

I’m pleased to see that our ETF just hit a new all-time high. This year, the ETF had to add more than 700,000 shares to keep up with investor demand.

This year had other unforgettable moments. In April, I got to ring the opening bell of the NYSE. That was so exciting. Equally exciting was following the market with intelligent, engaged readers like the ones here at CWS. Thanks to each and every one of you.

I want to wish you all a Merry Christmas and a happy, healthy and prosperous New Year.

– Eddy

Morning News: December 25, 2023
Posted by Eddy Elfenbein on December 25th, 2023 at 7:01 am

Bank of Russia Governor Says She Is Bracing for More Sanctions

BOJ Ueda Touts Benefits of Positive Inflation on Policy Process

Wall Street Learns That This Year, Nothing Beat Owning the S&P 500

For Much of the World, Inflation Will Be Normal in 2024—Finally

This N.Y.U. Student Owns a $6 Million Crypto Mine. His Secret Is Out

Quantum Computing Is Finally Here. But What Is It?

Two Wars, 50 Elections: The Economy Faces Rising Geopolitical Risks

Maersk Prepares to Return to Red Sea Under US-Led Protection

How a Crisis in Truck Driving Could Change Life in Japan

Daihatsu to Suspend Operations in January, Compensate Partners

We Own More Cars Than Ever. So Why Are We Driving Less?

Claudine Gay Turmoil Forces Harvard’s Secretive ‘Corporation’ Into Spotlight

China Is Softening Stance on Gaming After $80 Billion Rout

Your Kid Prefers YouTube to Netflix. That’s a Problem for Streamers

The Item That’s on Christmas Lists Every Year—and Some Don’t Like It

Return Policies Have Gotten More Annoying This Holiday Season

The Secret Life of Gift Cards: Here’s What Happens to the Billions That Go Unspent Each Year

Manchester United Saga Ends With $1.3 Billion Ratcliffe Deal

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Morning News: December 22, 2023
Posted by Eddy Elfenbein on December 22nd, 2023 at 7:02 am

US LNG Cargoes to Asia Embark on Longer Routes to Avoid Red Sea

Electric Cars Are Pushing the Age of Oil to Extinction in China

BYD, a Chinese Powerhouse in Electric Cars, Will Build a Plant in Hungary

Tencent Leads $80 Billion Rout as China Rekindles Crackdown Fear

US Aims Tougher Sanctions at Banks in Latest Bid to Hurt Putin

U.S. to Clamp Down on Financial Firms That Help Russia Buy Military Supplies

ECB Still Has ‘Some Way to Go’ on Inflation, Schnabel Tells SZ

Fed Rate Cuts Pit Economists Versus Markets on Timing, Depth

US Equity Funds See Big Outflows on Profit-Taking Ahead of Inflation Report

The Eye-Popping Numbers Driving the Markets

Vilified Zero-Day Options Blamed by Traders for S&P Decline

The 11 Big Trades of 2023: From Market Busts to Career-Making Wins

IRS Offers Deal to Employers Who Regret Claiming Pandemic Tax Credit

In 2024, FASB to Nudge Forward Projects on Software, Compensation and Green Credits

Parents Are Risking Their Retirements to Support Adult Children

Drugmakers Delay In-Demand Medicines to Evade Biden’s New Pricing Rules

Fake Ozempic Seized by FDA as Demand for Obesity Drugs Soars

No Oversight: Inside a Boom-Time Start-Up Fraud and Its Unraveling

Tesla Loses Legal Appeal in Sweden as Strike Hits Eight Weeks

Nike Stock Dives On Earnings, Revenue Guidance, As Dow Giant Plans To ‘Streamline’ Business

This Retailer Launched Last Year and It’s Shipping a Million Packages a Day

New Yelp Has Earned Its Extra Stars

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Morning News: December 21, 2023
Posted by Eddy Elfenbein on December 21st, 2023 at 7:06 am

With Ukraine’s Aid in Doubt, Companies Say They’re the Plan B

War in Ukraine Has China Cashing In

Milei Issues Sweeping Decree to Privatize Argentina’s State-Run Companies

G7 Tightens Enforcement of Oil Price Cap Amid Widespread Russian Evasion

Angola Announces Exit From OPEC Amid Spat Over Oil Quotas

One Last Postcard From the Future of Clean Energy

California’s Push for Rooftop Solar Panels Isn’t Going So Well Right Now

Biden Administration Explores Raising Tariffs on Chinese EVs

US Inflation Report to Show Fed’s Battle Is Now All But Complete

Vilified Zero-Day Options Blamed by Traders for S&P Decline

Wall Street Couldn’t Beat Private Credit. Now It Wants a Cut

Citigroup Is Exiting Distressed Debt Trading

Elisha Wiesel, Son of Holocaust Survivor, Has Words for Wall Street and Ivy Leagues

Apple’s $1 Trillion Rally Will Be Tough to Live Up To in 2024

Salesforce’s Newest Bull Predicts AI Will Send Stock to Record

Billionaires Compete to Own SpaceX’s Rocket Rival

Toyota Motor to Recall 1 Million Toyota, Lexus Models Over Airbag-Related Sensor

A Law to Help Neglected Diseases is Giving Billion-Dollar Drugs Government Freebies

Hotel Owners Push Back on Merger of National Brands

Warner Bros. Is in Talks to Merge With Paramount Global

Why a Warner Bros.-Paramount Does (and Doesn’t) Makes Sense

Why Peacock Is Giving Fans a Taste of the NFL Without Commercials

Need Last-Minute Holiday Gifts? This Lobbying Group Has a ‘Made in America’ Catalog for You

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Morning News: December 20, 2023
Posted by Eddy Elfenbein on December 20th, 2023 at 7:05 am

Argentina’s Ruined Railways Will Force Milei to Confront Poverty

An Egg Fried Rice Recipe Shows the Absurdity of China’s Speech Limits

A New Wave of Chinese Middle-Class Migrants Is Coming to the US

That’s Two for Two: The World’s Other Big Canal Is in Trouble

Over 100 Container Ships Reroute as US Weighs Red Sea Response

Cyprus, Israel Working on Start of Gaza Maritime Aid Corridor

Powell’s Pivot Sows Confusion Over When and How Fast Fed Will Cut

Meet the New Economy, Just Like the Old Economy

As Golden Age for Private Capital Ends, 2024 Heralds More Consolidation

The Hedge Fund Traders Dominating a Massive Bet on Bonds

The Hot New Market in Crypto? Trading FTX’s Carcass

Toshiba Delisted After 74 Years, Faces Future with New Owners

What Social Trends Taught Us About the 2023 Economy

Washington Comes for the U.S. Steel Deal

A $1.3 Trillion Home-Loan System Gone Astray Is Fighting Reform

As Need Rises, Housing Aid Hits Lowest Level in Nearly 25 Years

The Future of Homebuying Is Here — and It’s Going to Be a Whole Lot Better

Seeking a Big Edge in A.I., South Korean Firms Think Smaller

BT Risks Fine as UK Deadline Looms for Pulling Huawei From Core Network

US New Vehicle Dealers Jump-Start Holiday Sales with Better Incentives

Tesla Skips Merit-Based Stock Awards, Squeezing Compensation

Tesla Supplier Panasonic Drops Plan for Oklahoma EV Battery Factory

Walgreens’s Ambitions Lean on Its Technology. First, It Has to Build Up Its IT Department

The Fast-Food Industry Wants to Be the Fast-Drinks Industry, Too

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CWS Market Review – December 19, 2023
Posted by Eddy Elfenbein on December 19th, 2023 at 7:22 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.”)

Before I begin, a quick reminder: I’m going to unveil the 2024 Buy List next week.

I’ll send you the next free issue of CWS Market Review on Monday, which is Christmas Day. The stock market will be closed that day. This will be our 19th annual Buy List.

Normally, our Buy List has 25 stocks and each year: five new stocks go in, and five old ones come out. This year, we got an extra stock when Danaher spun off Veralto. That means six stocks will go out and five new ones will come in.

I’ll have all the details for you soon, but it appears that our Buy List has returned over 500% in its entire history. Here’s to the next 19 years!

The S&P 500 Hits a 23-Month High

Now let’s look at the stock market which has certainly been in the holiday spirit lately. On Tuesday, the S&P 500 closed at its highest level in nearly two years. The index is getting very close to its all-time high (less than 0.6% away).

Historically, there really has been a Santa Claus Rally. I broke down the entire history of the Dow back to its beginning in 1896. I found that from December 21 to January 8, the Dow has gained an average of 2.83%. That means that more than one-third of the Dow’s historic gain has come over a period of less than three weeks.

Roughly one-third of the stock market’s gain over the last four years has come in the last seven weeks. The stock market tends to act like a rabbit: it can sit still for long stretches before it suddenly hops away. That’s one of the reasons why I avoid trying to time the market.

The Federal Reserve meets again in six weeks, and I doubt they’ll make any changes to interest rates. But the meeting after that, the one on March 20, could be a very important meeting.

Wall Street has completely changed its mind on what could happen. One month ago, traders thought there was a 28% chance of the Fed cutting rates at the March meeting. Today, those odds are up to 75%.

What’s the cause for the change in outlook? Two things. The jobs reports have gotten noticeably weaker. Nothing alarming, but noticeable. The other is that the inflation reports have been relatively benign. We’re not out of the inflation woods just yet, but we have to note that there has been improvement.

Lower interest rates, or even the prospect of lower rates, can have a big impact on the economy. Notice, of course, the markets’ nice bounce since late October. Not only that, but interest rates also have a major impact on the housing market.

Housing Is On the Rebound

During the middle of each month, several of the important reports on housing are released. Many stock investors tend to overlook these reports, but that’s a mistake. The housing sector is vital to the economy. In fact, several years ago, Edward Leamer, a well-respected economist, went as far as to say that “Housing IS the Business Cycle.” I think he’s right.

On Monday, the National Association for Home Builders said that homebuilder confidence rebounded slightly in December. The confidence number rose from 34 to 37 while Wall Street had been expecting 36. That’s not a terribly large jump, but it’s good to see something positive as mortgage rates have started to move lower recently.

I don’t want to declare victory too soon, but it looks like interest rates have peaked for this cycle. Even the Fed sees rates being significantly lower by this time next year.

On Tuesday, we got a nice surprise from the housing starts report. Last month, single-family housing starts rose to a 19-month high. The report also said that the figure for permits for new construction rose to its highest level since May 2022. This was much better than Wall Street had been expecting.

The problem right now for housing is that there aren’t enough homes, and that’s caused prices to spike. Builders need to catch up to demand.

Activity was also likely supported by mild temperatures and dry conditions. Data for October was revised slightly lower to show single-family starts rising to a rate of 969,000 units instead of the previously reported 970,000 units.

Starts vaulted 42.2% on a year-on-year basis in November.
Single-family homebuilding soared in the Northeast, Midwest and the densely populated South. It declined in the West.

The rate on the popular 30-year fixed mortgage averaged 6.95% last week, the lowest level since August, from 7.03% in the prior week, according to data from mortgage finance agency Freddie Mac. It has tumbled from a 23-year high of 7.79% in late October, tracking the decline in U.S. Treasury yields.

The stock market turned right as mortgage rates peaked. I can’t say I’m surprised.

There are currently about one million homes on the market. Just before Covid hit, there were two million homes on the market. The housing reports helped Goldman Sachs raised its estimate for Q4 economic growth by 0.2% to 1.7%. The Atlanta Fed sees Q4 growth coming in at 2.7%.

I’m going to watch housing closely. The report on existing home sales is out tomorrow, and on Friday we’ll get the report for new home sales.

Q4 Earnings Season Will Start Soon

We’re getting close to Q4 earnings season, and I’ll caution that it probably won’t be a very strong one for the market as a whole. That’s more a reflection of how things have been rather than how they will be.

For Q3, the S&P 500 had earnings growth of 4.9%, and analysts expect growth to slow down to 2.4% for Q4. Analysts expect quarterly revenue growth of 3.1%. For the year, the S&P 500 is expected to post earnings growth of just 0.6% and revenue growth of 2.3%.

FactSet (which is not only a Buy List stock, but a great resource for stats on the market) said that the broadline retail industry is expected to report earnings of $30 billion this year. That’s up from a loss of -$1.2 billion last year.

The earnings figure for the consumer discretionary sector is expected to rise by 43.9%, but there’s a major caveat. If we exclude Amazon, then earnings growth for consumer discretionary would fall to just 16.2%.

Overall, businesses are healthy even though this has been a subdued period for growth. For 2023, the estimated net profit margin is expected to be 11.6%. That’s down slightly from 11.8% for 2022, but it’s still above average for the last ten years.

If interest rates come down in 2024, that will spur a housing rebound and that will be good for consumers and businesses. This is why stocks have been in such a good mood.

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: December 19, 2023
Posted by Eddy Elfenbein on December 19th, 2023 at 7:03 am

What Icelandic Eruption Means for Travel, Economy

Russia’s Crude Flows Stay Strong Despite Baltic Port Stoppage

Gaza Is Making Oil and Gas Markets Twitchier

How the Suez Canal Attacks Could Upend Global Trade

With Houthis Menacing Fleet, Shipping’s Great Detour Around Africa Gathers Pace

Bank of Japan Chief, Bucking Expectations, Avoids Talk of Rate Increase

Wall Street’s Tepid Bonuses for Traders Lumber Into Another Year

The Other Side of Greenwich: Hunger Among the Hedge Funds

The Private Equity Firm Tapping America’s Spring Water

Borrowers Turned to Nonbank Lenders for Mortgages — And It’s Costing Them

How the Housing Market Slowdown Is Rippling Through the Economy in Five Charts

America Doesn’t Have Enough Air-Traffic Controllers, and That’s a Problem

Apple to Halt US Sales of Smartwatches After Patent Loss

Apple Races to Tweak Software Ahead of Looming US Watch Ban

These Tesla Wannabes Are Running Out of Road

Nippon Makes Steely Bet on a U.S. Manufacturing Renaissance

End of Adobe’s Takeover Bid for Figma Spells New Challenges for Venture Deals, Startups

Family Split at LG, a South Korean Giant, Tests Corporate Succession

Behind the Shortage Keeping Cancer Patients From Chemo

Possible Ways to Ease Drug Shortages

Bill Ackman Took a Wall Street Tactic to an Ivy League Fight in His Attempt to Oust Harvard’s President

Chinese Company Ditches Year-End Bonus for Exercise-Based Reward

What’s Ahead in 2024? The Cookie Cutters Tell All

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Morning News: December 18, 2023
Posted by Eddy Elfenbein on December 18th, 2023 at 7:04 am

China’s Millionaires Are Worried. That’s a Problem for Wall Street

Goldman Strategists Lift S&P 500 Forecast a Month After Setting It

The Market is Second-Guessing its Dovish Reaction to Powell. This Analyst Says the Fed Could Slash Rates by as Much as 75%

To Trade the Fed’s Pivot, Wall Street Turns to Short-Dated Debt

A $1.3 Trillion Debt-Fueled Boom in Deals Faces a Grim New Reality

With U.S. Debt Soaring, Wall Street’s ‘Vigilantes’ Are Back. Others ‘Yawn.’

Why Central Banks Should (but Might Not) Keep the Market Flooded With Money

The Era of Big Taxes Is Upon Us

A Shock for Many Retirees: Social Security Benefits Can Be Taxed

Nasdaq Drops Zoom in Sign Pandemic-Era Darling Trade Is Over

A-Rod’s Slam SPAC Is Said to Plan Merger With Lynk Global

Dimon’s Heir at JPMorgan Still Hazy as ‘Five More Years’ Tick By

Lina Khan’s F.T.C. Secures a Big Win

Mitsubishi UFJ Agrees to Buy Australia’s Link Administration

IBM to Buy Software AG’s Enterprise Integration Platforms for $2.3 Billion

EU Clears Credit Agricole’s Purchase of Belgium’s Degroof Petercam

Nippon Steel Agrees to Buy US Steel for $14.1 Billion

BP to Pause All Tanker Transits Through the Red Sea

Oil Prices Climb as Red Sea Attacks Disrupt Shipments by BP and Others

US Frackers Return to Haunt OPEC’s Pricing Strategy

Inside Amazon’s Effort to Challenge Musk’s Starlink Internet Business

Amazon Strikes Deal With Games Workshop to Bring Warhammer to Screen

Tencent Shuts US Video Games Studio Team Kaiju

U.S. Fines Southwest Airlines $140 Million for Holiday Meltdown

Did the Grinch Come for the Office Holiday Party?

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