Morning News: July 4, 2023
Posted by Eddy Elfenbein on July 4th, 2023 at 7:15 am

Italy Has Frozen Russian Oligarchs’ Assets Worth $2.5 Billion

Spain May Be Moving Too Fast in Its Green Energy Push

China Takes the Trade Fight to Europe, Targeting the Green Transition

Yellen’s China Visit Aims to Ease Tensions Amid Deep Divisions

U.S. Looks to Restrict China’s Access to Cloud Computing to Protect Advanced Technology

Mackenzie Equity Chief Says It’s Time to Buy Bonds After Tech-Fueled Rally

Credit Suisse Wealth Staff Told to Prep for Management Roles

The Surprising Striver in the World’s Space Business

A Flying Car Prototype Just Got an Airworthiness Certificate from the FAA

Samsung’s A.I. Moment Is Here, but Is It Ready?

Tesla’s June Shipments in China Soar as Global Sales Hit Record

Twitter to Make TweetDeck Available Only to Paid, Verified Users

Instagram Launch of Twitter Rival ‘Threads’ Expected on Thursday

Meta Loses Appeal on How It Harvests Data in Germany

Billionaire Winklevoss Outlines ‘Final Offer’ in Genesis Crypto Bankruptcy

Crispin Odey’s Hedge Fund Empire Is Disintegrating Bit by Bit

SPAC Tied to Trump’s Media Business Says It Has a Deal With Regulators

Migrant Workers Flee Florida as New Immigration Law Takes Effect

Remote Work Sticks for All Kinds of Jobs

Spider-Man’s Pavitr Prabhakar, Based on Peter Parker, Drives India Wild

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Morning News: July 3, 2023
Posted by Eddy Elfenbein on July 3rd, 2023 at 7:06 am

A $30 Billion Disaster Is Just the Tip of a Deadly Climate Cycle

Widespread Drought Creates Winners and Losers in U.S. Agriculture

Saudis and Russia Extend Oil Supply Cuts, Bolstering Prices

Utility Companies Sell Wind, Solar Farms to Shore Up U.S. Power Grid

Cracking Down on Dissent, Russia Seeds a Surveillance Supply Chain

Yellen Heads to China This Week Advancing US Bid to Fix Ties

An 800% Stock Market Rally Puts Zimbabweans on Edge

Bridgewater’s Greg Jensen Sees a ‘Bad’ Outlook for Bonds and Stocks

Hedge Funds on the Brink of Abandoning Bullish Dollar Bets

Lithium Scarcity Pushes Carmakers Into the Mining Business

Tesla and BYD Post Record Sales on Surge in Electric-Car Demand

What Apple Did to Hit $3 Trillion

Zuckerberg’s Quest to Re-Enter China Faces Challenge: His Own Words

He Spent $140 Billion on AI With Little to Show. Now He Is Trying Again

Labor Market Headfake? Key Report Could Be Overestimating Job Growth

Industries Reliant on Thriving Downtowns Suffer From Remote Work

How to Succeed in Business Like Taylor Swift

More Chicken, Lighter Beer, Pink Drinks: Companies Craft New Products for Gen Z Tastes

Tyson Foods to Drop ‘No Antibiotics Ever’ Label on Some Chicken Products

Fireworks Have a New Competitor: Drones

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Morning News: June 30, 2023
Posted by Eddy Elfenbein on June 30th, 2023 at 6:15 am

China’s Economic Woes Are Multiplying — and Xi Jinping Has No Easy Fix

What Wagner’s Russian Mutiny Means for Putin and the World

Billionaire in Erdogan’s Shadow Thrives From Turkey’s Gold Trade

Eurozone Inflation Slows, but Underlying Price Pressures Persist

The End of LIBOR Is (Finally) Here

Jerome Powell Says Next Phase of Rate Rises Will Be Harder to Predict

SEC Chair Gensler Must Recuse Himself From Crypto Enforcement Decisions

American States Once Awash In Cash See Their Fortunes Suddenly Reversed

Wall St. Foresees a Rosy 6 Months. Corporate America Isn’t So Sure

Allianz Says Pimco Flows ‘Shaky’ as Investors Assess Rates

Scaramucci Says AI Stocks Are a Bubble But Buy Them Anyway

Apple Eyes Historic $3 Trillion Valuation Amid Big Tech Surge

TikTok Dangles Zero Seller Fees Ahead of US Marketplace Debut

You Should Be Getting Paid to Prevent Heat Wave Power Outages

New Mexico Regulators Fine Oil Producer $40 Million for Burning Off Vast Amounts of Natural Gas

Elite US Colleges Lose Diversity ‘Shortcut’ After Affirmative Action Ruling

Nike Increased Prices Along With Everyone Else and Now Discounts Are Mounting

Shein Flew Influencers to China to Help Its Image. A Backlash Ensued

The Summer of ‘Barbie’ Has Only Just Begun

Grimace Shake Trend Mixes Horror with McDonald’s Mascot on TikTok

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Morning News: June 29, 2023
Posted by Eddy Elfenbein on June 29th, 2023 at 7:05 am

Where Did All That Russian Gas Go?

Wind Turbines That Shake and Break Cost Their Maker Billions

China Regulators Step Up Yuan Surveys as Currency Slump Worsens

Top Central Bankers Expect More Rate Increases Amid Stubborn Inflation

Powell Says Likely Need Two or More Hikes to Cool Inflation

Why a US Recession Might Happen in Time for 2024 Election

Biden in a Race to Reverse Voters’ Pessimism About Economy

‘Hot Money’ Is Piling Up at Banks and It’s Starting to Take a Toll

US Bank Stocks Rise as Lenders Sail Through Fed’s Stress Tests

A $100 Billion Wealth Migration Tilts US Economy’s Center of Gravity South

Dealmakers Adrift as $1 Trillion Vanishes in First Half

Jefferies Signals Green Shoots in Wall Street’s Investment Banking Lull

Popularity of Apps for Early Paydays Masks Added Risks

Lina Khan Is Coming for Amazon, Armed With an FTC Antitrust Suit

Beyond Musk vs. Zuck: How the Big Tech Rivalries Are Shifting

Nvidia Warns of Lost Opportunities if U.S. Bans AI Chip Exports to China

The Air Jordan Drop So Hot It Blew Up an Alleged $85 Million Ponzi Scheme

Cheaper Than Water? Retailers Try to Unload Bud Light

How America’s New Favorite Beer Hammered the Competition

Overstock.com Buys Bed Bath & Beyond Intellectual Property for $21.5 Million

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Morning News: June 28, 2023
Posted by Eddy Elfenbein on June 28th, 2023 at 7:07 am

Can China Export Its Way Out of Its Economic Slump?

Biden Pitches Voters on Benefits of Big Government ‘Bidenomics’

Why Bidenomics Gets No Love From Voters

Waiting for the Godot Recession

Andurand’s Oil Hedge Fund Plunge Exceeds 50% in Worst Ever Loss

Some Wall Street Interns Are Raking in $120 an Hour This Summer

Billionaires and Bureaucrats Mobilize China for AI Race With US

Nvidia Drops on Report US Plans More AI Chip Curbs for China

Millennials Feel Shame Asking Their Parents for Money

No Job, No Marriage, No Kid: China’s Workers and the Curse of 35

Too Many Workers, or Too Few: India’s Colossal Employment Challenge

UPS Labor Talks Heat Up as Both Sides Race to Prevent First Strike in 25 Years

After Montana Banned TikTok, Users Sued. TikTok Is Footing Their Bill

Rolex and Patek Prices Fall as Subdial Index Nears Two-Year Low

Homebuyers With Short Memories Are Driving Up Prices in Hurricane-Hit Town

UK Considers Nationalization of Thames Water as Crisis Escalates

Oil, Gas Companies Urged to Pursue Relatively Cheap Fix on Emissions

The Spying Scandal Inside One of America’s Biggest Power Companies

Man Is Sentenced in $9 Million Cow Manure Ponzi Scheme

Everyone in South Korea Is About to Get One or Two Years Younger

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CWS Market Review – June 27, 2023
Posted by Eddy Elfenbein on June 27th, 2023 at 6:39 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.”)

UBS Takes the Axe to Credit Suisse

Spare a kind thought for your friendly neighborhood investment banker. This is a tough time for him or her. All over Wall Street, bankers are being laid off, and it’s not over.

Things are especially bad for Credit Suisse. Earlier this year, the legendary Swiss bank, Credit Suisse, came to an ugly end. UBS, its longtime rival, bought it for $3.2 billion.

The plunge was epic. At the end of last year, Credit Suisse had a balance sheet of half a trillion dollars and 50,000 employees globally. Within weeks, it was a total trainwreck.

In March, I wrote:

To say this was a fire sale badly understates the events. The Swiss government essentially forced this deal to happen. They aimed to stop the banking crisis cold. To give you an idea of how far they went, the settled price for Credit Suisse was less than half of Friday’s closing price. It works out to 7% of CS’s tangible book value.

CS shareholders will get one share of UBS for every 22.48 shares of CS they own. That values a share of CS at 0.76 Swiss francs which is 99% below its high.

Yikes!

Today UBS said that it’s going to cut more than half of Credit Suisse’s workforce. Most of the cuts will be among traders, support staff and investment bankers. Bear in mind that this deal was done to prevent as many job losses as possible.

UBS looks to do three rounds of cuts before the end of the year. By the time they’re done, UBS will have cut their total workforce by 30% or about 35,000.

UBS isn’t alone. Goldman Sachs is also feeling the squeeze. Simply put, nobody is doing any deals this year. In dollar terms, the amount of Wall Street deals is down 40% this year.

Goldman is going to cut 125 managing directors. I’m sure that’s a lot of money. To be a managing director at Goldman is almost like Wall Street’s version of being a “made man.”

This is Goldman’s third round of layoffs in less than a year. In January, Goldman cut a bunch of jobs and the employees didn’t get their year-end bonuses.

JPMorgan Chase is cutting about 40 investment banking jobs. Citigroup will cut 30 investment-banking jobs. Last month, Morgan Stanley said it’s cutting another 3,000 jobs. A few years ago, many of these same banks went on a hiring binge. Now that’s over.

I have to be frank: this doesn’t impact the direction of stocks so much. Stocks can do very well even when the amount of Wall Street wheeling and dealing dries up. Lately, however, the noticeable trend from stocks is the big drop in volatility. We’re not seeing the kind of daily gyrations that characterized recent years.

The Volatility Index Hits a Three-Year Low

Today was a good day for stocks. The S&P 500 closed higher by more than 1.15%. The tech-heavy Nasdaq was up by 1.65%. The cyclical-skewed Russell 2000 also did well as it gained 1.46%. The S&P 500 ended a run of five down days in six sessions.

High beta stocks significantly outperformed low volatility stocks. The S&P 500 High Beta Index gained 2.59% today while the S&P 500 Low Vol Index gained just 0.34%. Interestingly, the growth/value divide wasn’t so large today.

I like to track the VIX which is the Volatility Index, or as some call it, the Fear Index. Last Thursday, the VIX closed at 12.91 which is a three-and-a-half year low. The last time the market was this calm was just before Covid hit.

Traders are gradually resigning themselves to the fact that the Federal Reserve isn’t done with its rate hikes. The Fed won’t meet for another month, but the mood on Wall Street has definitely changed. Traders now realize that the Fed won’t let up until inflation is gone.

The mood change is also apparent in the stock market. For much of this year, growth stocks were leading value stocks. Lately, however, value stocks have struck back. This is likely due to the changing outlook for Fed policy. When rates go higher, investors become more conservative. We can’t say if it’s a meaningful turn, but it’s good to see.

I think too many investors thought that lower rates would bring us back to the free-and-easy investing of the Covid years. When rates are near 0%, P/E Ratios don’t mean much. Now that rates are over 5%, investors have become a lot more discerning.

My concern is that too many growth stocks have been allowed to get rich valuation without any market pressure. A good example, in fact maybe the ideal example, is Tesla (TSLA). I need to preface by stressing that I’m in no way anti-Tesla, but the stock has had a remarkable run this year. At one point, shares of Tesla were up 120% this year. The stock was trading at nearly 100 times this year’s estimated earnings.

I certainly understand that Tesla is a remarkable company, and it’s leading a major change in the automotive sector, but it can’t escape the simple question: how much is too much? In the last week, Tesla has lost more than 10%.

We may be in an odd spot where more good economic news is bad for growth stocks. I’ve been impressed by how resilient the economy has been.

One bright spot for the economy is that the housing market may be on a rebound. This comes after a long, difficult stretch. This morning, the government reported that new home sales surged last month.

Let me take a step back to explain. What happened is that as the Fed raised interest rates, not many new homes were made. As a result, the inventory of new homes dropped very low relative to sales. At the end of May, total housing inventory was 1.08 million units. That’s down 6.1% from last year.

So many people locked in mortgages at low rates that they had little incentive to sell. At some point, you need greater inventory and that means more building. That’s exactly what’s happening.

From April to May, new home sales jumped 12.2%. In the last year, new home sales are up 20%. Sales of single-family homes came in at 763,000 (that’s an annualized figure). That’s up from 680,000 in April. I’m also impressed to see that the quality of mortgage loans is much higher than it was during the financial crisis.

It’s difficult for the broad economy to slip into a recession if the housing market is healthy. This is because housing touches so many different sectors. Median home prices are now down 16% from their peak. The Homebuilders ETF (XHB) touched a new 52-week high today.

It’s not just housing. We also learned this morning that orders for durable goods increased by 1.7% last month. That’s very good. This tells us that companies are probably making more long-term investments.

For durable goods, the key is to watch core capital goods orders. That’s a good proxy for business investment. Core capital goods excludes aircraft and military sales. For May, core capital goods rose by 0.7%. That compares with an increase of 0.6% in April.

Not only is the economy growing, but it may be accelerating. On Thursday, the government will release its second revision to Q1 GDP growth. The last report said that the U.S. economy expanded at a real annualized rate of 1.3% during Q1.

In late July, the government will release its first estimate for Q2 GDP. Most economists expect slightly higher growth for Q2 compared with Q1. According to the latest, Bank of America expects Q2 growth of 1.4%. Goldman is at 1.8% and the Atlanta Fed’s GDP Now model is at 1.9%.

The most widely-expected recession in recent history continues to be a stubborn no-show. Now traders don’t expect the Fed to cut rates until March 2024. That’s a big change from just a few weeks ago.

Until a few years ago, setting the Fed’s interest rate policy was pretty simple. When the economy entered a recession, all you had to do was bring short-term interest rates down to the same level of inflation. That meant that the “real” interest rate was 0%.

During an economic recovery, all you had to do was gradually raise interest rates until they were 3% above the rate of inflation. In other words, the Fed would simply oscillate between real Fed funds rates of 0% to 3%.

I’m exaggerating but not by much. That’s largely what the Fed did for a few decades. Then came the financial crisis and all of that went out the window. Since then, the Fed has kept interest rates well below the rate of inflation. Now it seems that the Fed is willing to raise interest rates much higher than expected. That’s good news for value-oriented portfolios.

Stock Focus: Graco (GGG)

Speaking of which, here’s the latest in our series of great stocks that no one knows about. Graco (GGG) of Minneapolis specializes in fluid-handling systems and products. The company has been in business since 1926.

Graco’s business covers several different areas such painting, anti-corrosion, fluid transfer, gluing and sanitary applications, automotive, aeronautic, body refinish, wood, construction and marine.

I know it sounds boring, but it’s a very good business to be in. Many boring-sounding businesses can be wonderful investments. Last year, Graco did $2.14 billion in sales and net income was $460 million, or $2.63 per share.

Graco has been a big winner for decades. Ten years ago, it made $1.12 per share for the year. Ten years before that, it made 41 cents per share for the year. The company’s earnings don’t rise every year, but it’s a strong upward trend.

Thirty years ago, you could have picked up one share of Graco for $31.50. Adjusted for several stock splits, that works out to less than $1 per share in today’s terms. Meanwhile, the stock is at $85 per share today. That means that Graco has gained more than 90-fold over the last 30 years. If we include dividends, then Graco is up more than 18,500% over the last three decades.

Despite all its success, Graco doesn’t get much attention. Only about ten analysts bother following it. The market cap is about $14 billion.

In April, Graco reported Q1 earnings of 74 cents per share. That beat estimates by 12 cents per share. The stock jumped over 12% on its earnings report. Wall Street expects earnings for this year of $3.04 per share and of $3.19 per share for 2024. The stock is a little pricey but nothing outrageous.

The Q2 earnings report will be out in about a month. Wall Street expects 79 cents per share. Look for another earnings beat.

That’s all for now. There will be no free issue next week. The stock market will close early on Monday, July 3, and it will be closed all day on July 4 for Independence Day. 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: June 27, 2023
Posted by Eddy Elfenbein on June 27th, 2023 at 7:09 am

China Starts to Slow Yuan’s One-Way Slide

Inside Yevgeny Prigozhin’s Money-Making Machine

Inflation Is Proving Persistent as It Moves Through the Eurozone Economy

ECB Staff Preparing for New Era of Tighter Money

Banks Face Growing Capital Scrutiny With Stress Tests Up First

BNP CEO Faces $8.3 Billion Temptation After Ascent to Top

The Stock Market Isn’t as Calm as It Seems

America’s Biggest Power Source Wasn’t Built for Extreme Weather

A Giant Wind Farm Is Taking Root Off Massachusetts

More Data in the Cloud Means More Centers on the Ground to Move It

Tesla May Have Already Won the Charging Wars

Lordstown Files for Bankruptcy After Foxconn Deal Falls Through

Japan Wades Into the Chip Wars

IBM Can’t Acquire Its Way Into Tech’s Top Ranks

J&J’s Push to End Cancer Suits Meets Trial in Bankruptcy Court

AI’s Explosive Growth Exposes Gaps Between EU, US Regulation

Snowflake Adds Partnerships with Nvidia and Microsoft for AI Double Play

A.I. May Someday Work Medical Miracles. For Now, It Helps Do Paperwork

What Is Mark Zuckerberg Thinking?

Magic Mushrooms. LSD. Ketamine. The Drugs That Power Silicon Valley

Pickleball Injuries May Cost Americans Nearly $400 Million This Year, According to UBS

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

Wagner Mutiny Revives U.S. Fears Over Control of Russia’s Nuclear Weapons

Tech Startup Targets Missile Motors as Silicon Valley Moves Into Weapons

China Economy Gloom Worsens With Weak Consumer Spending Data

The U.S.-China Rivalry Is Complicating the World’s Debt Crisis

Philippines Agrees $1.14 Billion Loans with World Bank for Environment, Farming

Japan’s Top Currency Diplomat Escalates Warning Against Weak Yen

The Bank Robbers Who Are Stealing Their Own Money

Banks Rally, Lira Drops as Turkey Unwinds FX Support Mechanism

Where Stock Market Is Headed After Wild First Half: Five Charts

Morgan Stanley’s Wilson Says Stock Risks Rarely Been Higher

PacWest Sells $3.5 Billion Asset-Backed Loan Portfolio to Ares

Buy Now, Pay Later Programs Are Booming. Here’s Why Their Profits Aren’t

Apollo Leads $2 Billion Private Financing for Semiconductor Firm Wolfspeed

Palantir’s AI Surge Hardens Resolve of Stock’s Bears

What Is Happening in the Housing Market?

The Uneven Effect of Remote Work, in One List

New Rules Aim to Clamp Down on Corporate Greenwashing

China’s ‘Tesla Killer’ Stumbles as EV Price War Takes Toll

Deal for Formula 1 Team Reflects Growing U.S. Interest in the Sport

The Ultimate Score for Rich People? “Golden” Passports

Pill for Obesity Has Wall Street Salivating

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Morning News: June 23, 2023
Posted by Eddy Elfenbein on June 23rd, 2023 at 7:04 am

The World’s Empty Office Buildings Have Become a Debt Time Bomb

Debt Collectors’ Awkward Moment: Their Own Debt Is Now Sinking

Dollars Are So Scarce in Argentina That Yuan Use Is at a Record

Central-Bank Action Finally Cooling Global Economy, Data Indicate

Where’s the Recession We Were Promised?

Forget the Cost of Living. What’s the Cost of Thriving in America?

U.S. Equity Funds See Biggest Outflow in 12 Weeks

Big VC, Tech Got Backstop for Billions in Uninsured SVB Deposits

The 10 AI Startups Leading the Pack

AI Founders Vie for Big Wealth in Unicorn Frenzy

Why Is Apple Getting ‘Spatial’?

Canada Forces Google and Facebook to Pay News Outlets for Linking to Articles

Musk vs. Zuckerberg: The Billionaire Bout for the Social-Media Age

Reddit Wants to Grow Up. Will Its Community Let It?

Overstock.com Wins $21.5 Million Bid for Bed Bath & Beyond’s Assets

Starbucks Workers at Over 150 Stores to Strike Over Pride Décor Row

3M Reaches $10.3 Billion Settlement in ‘Forever Chemicals’ Suits

Beef Dodged Fake Meat’s Threat, But Is Still No Match for Chicken

Sweet and Fruity E-Cigarettes Thrive Despite Teen-Vaping Crackdown

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Morning News: June 22, 2023
Posted by Eddy Elfenbein on June 22nd, 2023 at 7:01 am

How India Profits from Its Neutrality in the Ukraine War

Countries on Front Lines of Climate Change Seek New Lifeline in Paris

Turkish Central Bank Jacks Up Interest Rates in Reversal for Erdogan

Bank of England Pushes Interest Rates Up by a Half Point

Swiss Central Bank Signals More Tightening to Come After Latest Rate Hike

Le Maire: High Investment Key to Avoid Recession

Biden’s Trade Challenge: Kicking the China Dependency Habit

America’s Top Fast-Fashion Retailer Tries to Shed Its Chinese Image

Powell Defies Critics and Makes Case for Why Rates Must Rise

Private Equity’s Race to Poach Junior Bankers Finds Its Limit

On Wall Street, Lawyers Make More Than Bankers Now

After $29 Billion Wipeout, Star Invesco Investor Plots Comeback

Insider Trading Bromance Ends With Betrayal and Guilty Verdict

China’s Cloud Computing Firms Raise Concern for U.S.

Twitter CEO Intervened to Mend Google Relationship After Cloud Payment Issue

FTC Sues Amazon Over ‘Manipulative’ Tactics Used to Enroll Millions in Prime

Ford Gets $9.2 Billion to Help US Catch Up With China’s EV Dominance

Paris Air Show Brings So-So News for Boeing. It’s Better for Airbus

Bosses’ New Task Is Figuring Out Who’s High at Work

How ‘A Hazard of New Fortunes’ Explains America

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