Morning News: March 6, 2023
Posted by Eddy Elfenbein on March 6th, 2023 at 7:04 am

Missing Banker Reignites Fear of Xi Among China’s Tech Bosses

World’s Riskiest Markets Stumble Into Crisis With Dollars Scarce

Chinese Companies Hang Onto Dollars, Hedge to Prepare for Volatile Yuan

Japan Piled Back Into U.S. Treasurys This Year. Investors Worry It Won’t Last

Republican Votes Helped Washington Pile Up Debt

Powell Set to Lay Groundwork for Higher Rates on Capitol Hill

Fed’s Rate Moves Put Manufacturing Sector at Risk

The Paul Volcker Narrative Imagines an Economy That Doesn’t Exist, and That Never Has

Holding Cash Will Be a Winning Strategy in 2023, Investors Say

Billion-Dollar Power Lines Finally Inching Ahead to Help US Grids

The Trillion-Dollar Debate Over Share Buybacks

Credit Suisse Loses One of Its Biggest Backers

EVs Boost Chip Demand Despite Semiconductor Makers’ Woes

Here’s How Much $1,000 Invested In Tesla Will Be Worth If Cathie Wood’s 2026 Price Target Comes True

Housing Market Momentum Stalls as Critical Spring Season Approaches

Bars, Hotels and Restaurants Become the Economy’s Fastest-Growing Employers

You’re Now a ‘Manager.’ Forget About Overtime Pay.

What Is a CEO’s Pay Actually Worth?

How Chili’s Is Prepping for Tough Times, Starting With the Fries

Toblerone Chocolate Is No Longer ‘Swiss’ Enough for Alps Logo

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Morning News: March 3, 2023
Posted by Eddy Elfenbein on March 3rd, 2023 at 7:02 am

How Gas From Texas Becomes Cooking Fuel in France

Nigeria’s Supreme Court Orders Halt to Cash Replacement Policy

Rules to Curb Illicit Dollar Flows Create Hardships for Iraqis

What Wall Street Gets Wrong About Xi Jinping’s New Money Men

Academic Fight Erupts Over Measuring the West’s Pressure on Russian Economy

The World Economy Is Doing Well—This Is Bad News for Central Bankers

Fed Official Says Hotter Data Will Warrant Higher Rates

Clueless Wall Street Is Racing to Size Up Zero-Day Options Boom

Investors Shore Up Stablecoins as Silvergate Exodus Worsens

iPhone Maker Plans $700 Million India Plant in Shift From China

Office Mandates. Pickleball. Beer. What Will Make Hybrid Work Stick?

Zoom Abruptly Fires President Greg Tomb ‘Without Cause’

Key American Allies Aren’t Following Governmentwide TikTok Bans

Why Barnes & Noble Is Copying Local Bookstores It Once Threatened

Nordstrom to Close All Its Canadian Stores, Lay Off 2,500 Workers

Adani Shares Surge After $1.87 Billion GQG Investment; More Road Shows Lined Up

Ericsson to Pay About $207 Million After DOJ Finds It Breached Deal

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Morning News: March 2, 2023
Posted by Eddy Elfenbein on March 2nd, 2023 at 7:08 am

Leave Russia? A Year Later Many Companies Can’t, or Won’t

Carbon Emissions Climbed Less Than Feared in 2022 Despite Coal Resurgence

Idled Ships, Empty Containers. Ocean Shipping Faces Its Biggest Slump in Years

Eurozone Inflation Edges Lower, but Pressure on Prices Continues

How One of the Fugees Got Sucked Into US-China Intrigue

Credit Suisse Offers Higher Deposit Rates in Asia to Woo the Wealthy

Today’s QE Saddles Governments With Soaring Debt Costs

Fed Might Be Winning Inflation Fight, Depending on Index Use

Uncle Sam Is Disrupting the Venture Capital World

Silvergate’s Big Crypto Losses Feed Watchdogs’ Worst Fears

Goldman Sachs Faces Hard Sell for Its Consumer Assets

Tesla Investor Day Disappoints With Sparse Detail on New Models

Salesforce Stock Surges as Software Maker Sees Its Profitability Rising

Eli Lilly to Slash Prices for Insulin Drugs by 70%

Delta Pilots Approve Contract Raising Pay by 34%

Macy’s Earnings Smash Expectations. The Stock Flies — Thank the Outlook

I Spent Two Years Revenge Spending. It Was Hard to Stop

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Morning News: March 1, 2023
Posted by Eddy Elfenbein on March 1st, 2023 at 7:08 am

Kremlin Critics Seek Sanctions Relief for Anti-War Tycoons

China Leaders Surprised by Pace of Economy’s Rebound

Fewer American Companies See China as a Top Investment Priority

Where Digital Payments, Even for a 10-Cent Chai, Are Colossal in Scale

Finance Is Failing the World’s Best Defense Against Climate Change

World’s Rich Snap Up Commercial Property Like Never Before

U.S. Mortgage Interest Rates Remain at Highest Level Since November

Car Debt Is Piling Up as More Americans Owe Thousands More Than Vehicles Are Worth

Long-Robust U.S. Labor Market Shows Signs of Cooling

Fed’s Soft Landing Hinges on a Wage Inflation ‘Head Scratcher’

Biden Is Betting on Government Aid to Change Corporate Behavior

‘Sometimes Things Break’: Twitter Outages Are on the Rise

Elon Musk Aims to Rally Tesla Shareholders Around Long-Term Vision at Investor Day

As Dollar Stores Proliferate, Some Communities Say No

Rivian Posts Mixed Quarterly Results, Issues New Recall

Lowe’s Stock Slips as Q4 Sales Lag Expectations

McDonald’s Cardi B and Offset Promotion Draws Pushback From Some Restaurant Owners

The 15-Minute City: Where Urban Planning Meets Conspiracy Theories

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CWS Market Review – February 28, 2023
Posted by Eddy Elfenbein on February 28th, 2023 at 5:07 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 Market’s Cold February Comes to an End

The month of February has come to an end, and I, for one, won’t miss it. Wall Street was squeezed by a lackluster earnings season and stubborn inflation. That’s a bad combo for stock prices. Apparently, the bulls saw their shadows and scurried off. Indeed, the S&P 500 lost just over 2.6% during February.

According to Bloomberg, Q4 earnings “were 0.1% below Wall Street’s forecast at the start of earnings season.” That’s very bad. Before the pandemic, companies had beaten forecasts by an average of 3.7%. Versus expectations, this has been on of the worst earnings seasons in years.

There are, however, reasons for optimism. My friend Gary Alexander points out that over the last 20 years, the stock market has done better in the three months from March through June than in the other nine months combined. We also shouldn’t forget that the stock market is still positive by 3.4% for the year.

The big market story for February is that we thought the Federal Reserve was close to the end of its interest-rate hiking. Now that appears not to be the case.

How much higher will rates go? Well, that’s still a mystery, but I suspect it won’t be too much longer. Make no mistake: the end of rate hikes will lift a major weight from the back of the stock market. There are few things bulls like better than the Fed slashing short-term rates. Some folks think we’ll see that before the end of the year.

The other big market story for February was the brief rotation away from high-risk stocks. Those sectors got off to a fiery start this year, but that trend got tripped up in February.

Investors need to understand that these two stories are related. The stock market has grown more conservative exactly as it has feared a more aggressive Fed. That’s one of the major reasons why our Buy List did so well against the stock market last year, and we’re beating the market again this year.

Inflation Is Still a Big Problem

Let’s break down some of the recent economic data. Last Thursday, the Commerce Department said that the U.S. economy grew, in real terms, at an annualized rate of 2.7% in the final three months of 2022. That’s a downgrade from the initial report which said that the economy grew at a 2.9% rate. For comparison, the economy grew by 3.2% in the third quarter.

While those numbers aren’t great, they’re not that bad. At least it’s not a recession. The first two months of last year showed negative economic growth—the economy receded, but that was more due to technical reasons rather than a broad slow down. There hasn’t been a recession yet, but that may soon change.

What can we expect for Q1? We’re already two-thirds of the way through Q1. Bank of America said it expects real growth of 1.3%. Goldman Sachs is a little more optimistic. They expect growth of 1.8%. The Atlanta Fed’s GDPNow model is the most bullish. Their model currently expects Q1 growth of 2.7%.

I have to stress that the economic data can often be confusing, and it seems to point in several directions at once. I’ve often been a guest on financial news shows and I’m afraid I don’t come off well. The producers want to have a bull line up with a bear and have them duke it out. It makes for great TV. Instead, they get me, and I’ll say something like, “Well, it’s hard to say at this point, and there are several conflicting trends at once.” That’s awful TV.

Back to the economy. The day after the GDP report comes out, the Commerce Department releases the numbers for the Personal Consumption Price index. This is important to watch because it’s the preferred inflation measurement for the Federal Reserve.

That data showed that inflation rose by 0.6% in January which means inflation accelerated from a 0.2% increase for December. The 12-month rate increased from 5.3% ending in December to 5.4% for the 12 months ending in January.

The core PCE rate rose by 0.6% in January and by 4.7% for the 12 months ending in January. Wall Street had been expecting a 12-month rate of 4.3%.

Wall Street, and the bond market in particular, did not take these numbers well. On Monday, the yield on the six-month Treasury got to 5.18%. For context, at one point in June 2021, the six-month bill was yielding just 0.02%.

The futures market now expects the Fed to increase rates by 0.25% at its next three meetings (March 22, May 3 and June 14). After that, traders expect the Fed to pause until the end of the year.

The labor market continues to be very strong. The last jobs report showed an unemployment rate of 3.4%. That’s the lowest in 53 years. Labor force participation has improved, but I’d like to see it climb higher. Initial jobless claims are down to 192,000. That’s quite good. That data series has trended lower since November.

The next jobs report won’t be out until the second Friday of the month which will be March 10.

On Friday, the Census Bureau said that new single-family home sales came in at an annualized rate of 670,000. That’s down 19% over the last year but it’s up 7% over December.

Over the last year, the average home price is down 5.3% but the median price is down just 0.7%. That suggests that the higher-priced homes are feeling the largest impact.

On Monday, we got the report on pending home sales. The National Association of Realtors said that pending home sales rose by 8.1% last month. That’s the largest increase since June 2020. Some of the increase is due to lower mortgage rates at the end of last year. Even with the increase, over the past year, pending sales are down more than 24%. From Bloomberg, “The jump beat all estimates in a Bloomberg survey of economists, which called for a 1% advance.”

On Monday morning, we got the report on orders for durable goods. The headline number was very bad. Orders for durable goods plunged by 4.5%, but that drop was almost all due to Boeing. In December, Boeing got a surge in orders, so that led to a slow January.

Airplane orders can be very volatile. If we exclude transportation, then orders were up by 0.7%.

From MarketWatch:

More important, business investment climbed 0.8% to mark the fastest gain since last August. Investment had declined in three of the last four months of 2022.

Still, the annual rate of growth in business investment slowed again to 4.3% from 5% — less than half the pace compared with one year ago.

These orders exclude military spending and the auto and aerospace industries.

The odds are low that the economy will avoid a recession this year, but it looks like those odds are rising. Now let’s look at a little-known stock that has proved to be a winner in good times and bad.

Stock Focus Amphenol Corporation

Last week, we looked at Illinois Tool Works (ITW) which is a big company that’s done very well but it seems to get overlooked. This week, I want to look at another such company.

This week, we’re looking at Amphenol (APH). Over the last 30 years, APH is up an amazing 326-fold. That’s more than 21% per year.

Despite its success, Amphenol doesn’t seem to get much attention. The stock is rarely mentioned in the media. Last year, it had sales of $12.6 billion. The name Amphenol comes from the company’s original name which was the American Phenolic Corporation. The company was founded by Arthur J. Schmitt in 1932.

Schmitt found that “insulating plastic could effectively be used to produce tube sockets in a quicker and simpler method than using Bakelite or ceramic.” The company made military equipment and radios during World War II.

Today, the company is a major producer of electronic and fiber optic connectors, cable and interconnect systems such as coaxial cables. Amphenol is based Wallingford, Connecticut and has 91,000 employees.

On January 25, Amphenol reported Q4 earnings of 78 cents per share. That beat estimates by three cents per share. For 2022, Amphenol made $3.00 per share. That’s up from $2.48 per share in 2021.

For Q1, Amphenol expects to fall by 2% to 4% to a range of $2.84 to $2.9 billion. Amphenol sees earnings between 65 and 67 cents per share.

For this year, Wall Street expects earnings of $2.99 per share, and it sees $3.30 per share for 2024. That gives the stock a decent valuation of 23.5 times next year’s estimate. Ideally, I’d like to see APH a little cheaper, but this is one of the most consistent stocks around.

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 to learn more about the stocks on our Buy List, please sign up for our premium service. It’s $20 per month, or $200 per an entire year.

Morning News: February 28, 2023
Posted by Eddy Elfenbein on February 28th, 2023 at 7:05 am

Sanctions Net Widens to Catch Russia’s Middle East Shipping Company

China’s Coal Build-Out Is a Dirty, Costly Backup Plan

Banks Need Even Bigger Low-Carbon Pivot to Avert Climate Crisis

Nuclear Power’s Revival Reaches the Home of the Last Meltdown

Biden’s Semiconductor Plan Flexes the Power of the Federal Government

Pentagon to Reap Rewards From $53 Billion Chips Act

Powell’s Debt-Limit Alarm Echoes Stealth Lobbying Effort in 2011

Citi Strategists Say Traders Are Piling Up Short Bets on Stocks

The SPAC Fad Is Ending in a Pile of Bankruptcies and Fire Sales

More US Homebuyers Are Paying in Cash, Sweeping a Majority of Sales in Some Markets

Restaurant Chains Make It Cost More to Be Loyal

Zoom Revenue Up on Growth From Big Customers

Target Tempers Strong Fourth Quarter With Cautious Forecast

Apple Suppliers Are Racing to Exit China, AirPods Maker Says

Student-Loan Forgiveness Case at Supreme Court Hinges on ‘Harm’

Elon Musk is the Richest Person in the World Again

What You Get for Being Loyal to Elon Musk

TD Bank Agrees to Pay $1.2 Billion to Settle Ponzi Scheme Case

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The Two-Year Reaches Its Highest Yield Since 2007
Posted by Eddy Elfenbein on February 27th, 2023 at 12:12 pm

The stock market is having a good day so far. At noon, the S&P 500 is up about 0.5%. Earlier, it was up over 1%.

The yield on the two-year Treasury reached 4.857%. That’s its highest level in nearly 16 years.

Our Buy List is outpacing the market by a small amount so far today. Some of our leaders today are Trex (TREX), Middleby (MIDD) and Polaris (PII). Those are all cyclical stocks. Trex and Celanese (CE) will report after today’s close.

This morning we got the report on orders for durable goods. The headline number was very bad. Orders for durable goods plunged by 4.5%, but that drop was almost all due to Boeing. In December, Boeing got a surge in orders so that led to a slow January.

Airplane orders can be very volatile. If we exclude transportation, then orders were up by 0.7%.

From MarketWatch:

More important, business investment climbed 0.8% to mark the fastest gain since last August. Investment had declined in three of the last four months of 2022.

Still, the annual rate of growth in business investment slowed again to 4.3% from 5% — less than half the pace compared with one year ago.

These orders exclude military spending and the auto and aerospace industries.

Finally some good news for housing. This morning, the National Association of Realtors said that pending home sales rose by 8.1% last month. That’s the largest increase since June 2020.

Even with that increase, over the past year, pending sales are down more than 24%. From Bloomberg, “The jump beat all estimates in a Bloomberg survey of economists, which called for a 1% advance.”

Shares of Union Pacific are up about 10% on news that the CEO is stepping down. If the news of you leaving your job adds $11 billion in market value, then it probably wasn’t meant to be.

Morning News: February 27, 2023
Posted by Eddy Elfenbein on February 27th, 2023 at 7:02 am

Gas Crisis Is Far From Over for Europe Inc.

As Oil Companies Stay Lean, Workers Move to Renewable Energy

Higher Interest Rates Slam Stocks and Profits, But Spare Workers

What Layoffs? Many Employers Are Eager to Hang On to Workers

I.R.S. Decision Not to Tax Certain Payments Carries Fiscal Cost

As Wall Street Chokes on Bad Buyout Loans, Rivals Seize Opening

Buyout Firms Looking for Bargains Will Be Left Disappointed

Goldman Turns to ‘Make-or-Break’ Unit as CEO Solomon Put to Test

JPMorgan Investment Arm Purges Its ESG Funds of Adani Stocks

Why Warren Buffett Doesn’t Worry Much When the Market Goes Down

Lamar Jackson and the NFL’s Salary Cap Capably Indicate What ‘Inflation’ Isn’t

Americans Are Saving $500 Million Monthly on Internet Fees

How Repaying Student Loans Is Changing—Dramatically

Apartment Rents Fall as Crush of New Supply Hits Market

Why We Don’t Build More Apartments for Families

Apple’s iPhones Winning Over Gen Z—and the World’s Premium Market

From McDonald’s to Ralph Lauren, U.S. Companies Are Planning China Expansions

China Renaissance Says Its Missing Founder Bao Fan is Cooperating With a Government Probe

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Morning News: February 24, 2023
Posted by Eddy Elfenbein on February 24th, 2023 at 7:04 am

A Year After Russia’s Invasion of Ukraine, Tough Sanctions Linger

Europe Has Weathered an Energy Crisis, for Now

How One Ukrainian Company Survived, and Thrived, Through a Year of War

Israel’s Tech Industry Rebels Against Netanyahu’s Judicial Overhaul

As India Shakes Off Shackles, It Emerges as Global Economic Power

US Likely to Put a Tech Cap on South Korean Chipmaking in China

The World’s Most Painful Trade Is Finally Ending as Dollar Peaks

Biden to Nominate Former Mastercard Executive Ajay Banga to Lead World Bank

Bank of Japan Governor Nominee Predicts Inflation Rate Will Fall Soon

Economy Showing Strength in Early 2023 After Last Quarter’s GDP Gain Revised Modestly Lower

How ‘Base Effects’ Trip Up Our Understanding of the Economy

Inverted Yield Curve: Is It Still a Recession Indicator?

Why the Time to ‘Fix’ the 40 in Your 60/40 Portfolio Is Now

Investors Are Dumping Equities and Cash Amid Fears of Hawkish Fed, BofA Says

JPMorgan Could Reach $1 Trillion Market Value by 2030, Morgan Stanley Says

Egg Prices Will Fall Nearly 30% this Year, USDA Says

History May Wonder Why Microsoft Let Its Principles Go for a Creepy, Clingy Bot

Netflix Drops Prices in Over 30 Countries Amid Password-Sharing Crackdown

The Billionaire’s Daughter Knows What You’re Thinking

Goldman Expects $2.3 Billion More in Potential Losses from Legal Disputes

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Morning News: February 23, 2023
Posted by Eddy Elfenbein on February 23rd, 2023 at 7:09 am

China’s Tech Rainmaker Vanishes, and So Does Business Confidence

China’s Cities Are Cutting Health Insurance, and People Are Angry

Yellen Calls for More Ukraine Support and Warns China Against Helping Russia

Russian Oil Is Still Flowing, and That Is What the West Wants

Without Gas and Cash, Fed Up Nigerians Head to Polls

A $14 Billion Bailout for Eskom Leaves South African Power Crisis Unresolved

How Arizona Is Positioning Itself for $52 Billion to the Chips Industry

U.S. Aims to Create Semiconductor Manufacturing Clusters With Chips Act Funds

SEC, New York Regulator Oppose Binance.US’ $1 Billion Voyager Deal

Fed Minutes Show Most Officials Favored Quarter-Point Rate Rise

White House Considers Two Economists for Fed Vice Chair

Jerome Powell’s Worst Fear Could Come True in Southern Job Market

After Multibillion-Dollar Fintech Binge, Wall Street Has a Writedown Hangover

Why Interest Rates on Savings Accounts Are Still So Low

US Housing Market Posts $2.3 Trillion Drop, Biggest Since 2008

These Three Words Are Taking Over LinkedIn

U.S. Labor Board Limits Gag Clauses in Severance Agreements

Newmont’s Gold Output Stagnates as It Chases Big Takeover

Lucid Sees Disappointing 2023 EV Production as Orders Drop Amid Weakening Demand

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