Morning News: February 6, 2023
Posted by Eddy Elfenbein on February 6th, 2023 at 7:07 am

Chevron Explores Algerian Gas Plans Amid Russian Sanctions

Newmont Proposes $17 Billion Takeover of Australia’s Newcrest Mining

Flowers, Fresh Fish and Movies: China Is Spending Again, Cautiously

With Debt Ceiling in Sight, Treasury Resorts to ‘Extraordinary Measures’

Opposite What Economists Believe, Rising Wages Signal Easing Inflation

States Are Flush With Cash, Which Could Soften a Possible Recession

Many Banks Pay High Rates on Savings. So Why Aren’t You Moving Your Money?

Steve Eisman on the ‘Paradigm Shift’ Happening in Markets Right Now

The Man Behind Pimco’s Great Debt Bet Closes In on His Next Big Trade

Adani Stock Selloff Enters Third Week

Adani Crisis Sparks Protests and Arrests in India as Sell-Off Losses Top $110 Billion

The World’s Richest Person Is Trying to Head Off a Succession Battle

Rothschild Family to Take Bank Private in $4 Billion Deal

The Blurred Lines Between Goldman C.E.O.’s Day Job and His D.J. Gig

Carlyle Taps a Former Goldman Executive to Fill Its Leadership Void

Twitter Set to Charge Businesses $1K a Month for Gold Verification

Tesla’s Pickup Truck Is Coming Soon. Maybe.

U.S. Car Makers’ EV Plans Hinge on Made-in-America Batteries

Nissan, Renault Alliance Shake-Up to Give Each Company More Independence

The World’s Biggest Planes Are Finding Their Way Back Into the Skies

Dell to Cut About 6,650 Jobs, Battered by Plunging PC Sales

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Morning News: February 3, 2023
Posted by Eddy Elfenbein on February 3rd, 2023 at 7:20 am

Apple Sales Shrink as Pandemic Rally Ends for iPhone Maker, Other Tech Giants

Why Chinese Companies Are Investing Billions in Mexico

Why Governments Won’t Let Inflation Go Away

Turkey Deposit Rates Above 25% Begin Luring Cash from Stocks

Adani’s $108 Billion Crisis Shakes Investors’ Faith in India

Nasdaq Rally Gets a Reality Check as Megacaps Miss

Cathie Wood Claims Victory Lap, Calling ARKK ‘the New Nasdaq’

BofA Warns Investors Risk Sleepwalking Into Selloff

Cyberattack Sends Derivatives Trading Back to the 1980s

Amazon Reports Almost No Profit and Slowing Growth

Alphabet’s Profit Falls 34% Amid Ads Slowdown

Apple Sales Shrink as Pandemic Rally Ends for iPhone Maker, Other Tech Giants

Elon Musk’s Twitter Pushes to Win Back Advertisers During Super Bowl Weekend

Ford Posts Full-Year Net Loss, Ugly Fourth Quarter as ‘Execution Issues’ Plague Operations

‘Assassin’s Creed’ Creators Cling to Family Control at Ubisoft

Activist Investor Nelson Peltz Steps Up Pressure on Disney Board

The Bosses Are Back in Charge

Frontier Airlines Launches All-You-Can-Fly Summer Pass for $399

Searches for ‘Cancel Netflix Account’ Surge Over Anti-Password Sharing

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Morning News: February 2, 2023
Posted by Eddy Elfenbein on February 2nd, 2023 at 7:09 am

Russian Diesel Is Europe’s New Embargo Target

Bank of England Raises Rates to 4 Percent, Its 10th Straight Increase

Australia Won’t Put King Charles on Its 5-Dollar Bill

Fed Slows Its Tightening With Quarter-Point Interest Rate Rise

Adani Crisis Deepens as Stock Rout Hits $108 Billion, Bonds Sink

How Extreme Bets Fueled an $11.4 Billion Fortune

Deutsche Bank Leans on Lending Units as Investment Bank Sputters

Falling Mortgage Rates Bring Some Home Buyers Back to Market

Forget Pandemic Puppies. Meet the Inflation Chicken

The Trillion-Dollar Question: Could a Coin Save the Day?

Adani, Embattled Indian Company, Scraps $2.5 Billion Share Sale

Judge Is Said to Let Meta’s Virtual Reality Deal Move Forward

Meta’s Stock Market Rebound to Surpass $200 Billion in Value

Shell’s Profit Soared to $42 Billion Last Year

Drugmakers Raise Prices on Nearly 1,000 Medicines but Show Restraint

Tesla Slashed its Prices Across the Board. We’re Now Starting to See the Consequences

The Lego Approach to Building the World’s Biggest Projects

A Billionaire’s Son Battles a Turbulent WWE Over the Future of Pro Wrestling

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Morning News: February 1, 2023
Posted by Eddy Elfenbein on February 1st, 2023 at 7:06 am

U.S. Pursues India as a Supply-Chain Alternative to China

Eurozone Inflation Slows Sharply as Energy Costs Continue to Ease

Central Banks Bought the Most Gold Since 1967 Last Year, WGC Says

Wall Street’s Newfound Optimism Faces a Test as the Fed Meets

Cooler Pay Gains Add to Debate on When Fed Might Pause Rate Hikes

Wall Street Is Making the Same Fed Bet That’s Burned It Repeatedly

ChatGPT Unleashes Stock Trader Stampede for Everything AI

Oil Giants, After Surge in Profits, Are Wary About Spending

Whole Foods Asks Suppliers to Lower Prices

Black Americans Are Much More Likely to Face Tax Audits, Study Finds

Vaccine Makers Kept $1.4 Billion in Prepayments for Canceled Covid Shots for the World’s Poor

How the World’s Second-Richest Man Lost $68 Billion in a Week

Adani Stock Meltdown Hits $92 Billion as Collateral Worries Grow

Peloton No Longer at ‘Brink of Extinction’ as Losses Narrow

GM’s Fourth-Quarter Profit Soared as Supply-Chain Problems Eased

Porsche Blunder Puts $148,000 Sportscar on Sale for Just $18,000

The Next Retirement Communities Won’t Be Just for Seniors

The Unlikely New TikTok Influencers: Old-School Watch Dealers

Snap Is Stuck in the Darkroom

Warner Bros. Discovery’s DC Superhero Universe to Take On Marvel

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Morning News: January 31, 2023
Posted by Eddy Elfenbein on January 31st, 2023 at 7:07 am

Cash Is King in Lebanon as Banks Atrophy

Common Currency Proposal for Brazil and Argentina Draws Skepticism

Russia Sidesteps Western Punishments, With Help From Friends

The World’s Next Big Inflation Surprise Is Looming In China

Europe’s Economy Edges Higher, Heading Off Forecasts of Recession

IMF Upgrades Outlook for Global Economy as Inflation Eases and China Reopens

The Alternative, Optimistic Story of Population Decline

Fed Points Toward a Pause in May Once Hikes Have Time to Sink In

Fed Officials See Lots of Room to Shed Bonds from Balance Sheet

Wall St. Is Counting on a Debt Limit Trick That Could Entail Trouble

Top Bond Fund Bets Markets Are Wrong on Rates, Again

Ex-Citi Analyst Who Exposed Libor Takes Aim at Its Successor

The U.S. Consumer Is Starting to Freak Out

The Pandemic Used-Car Boom Is Coming to an Abrupt End

Caterpillar Costs Bite in First Earnings Miss Since 2020

The Last Boeing 747 Leaves the Factory

Can the DOJ Disrupt Google’s Ad Tech Dominance?

Celebrities Who Endorsed Crypto, NFTs Land in Legal Crosshairs After Investor Losses

J&J’s Talc Bankruptcy Case Thrown Out by Appeals Court

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Morning News: January 30, 2023
Posted by Eddy Elfenbein on January 30th, 2023 at 7:02 am

Upstart Indian Shipper Helps Get Russian Oil to Market

How Quickly Rate Increases Slow the Economy Could Shape 2023 Fed Policy

Milton Friedman Isn’t Required To Confirm That Monetarism Is Monetary Phrenology

Morgan Stanley Says Don’t Buy the Rally as Fed Looms

Adani Rout Hits $68 Billion as Fight With Hindenburg Intensifies

Even on $100k Plus, More Americans Are Living Paycheck-to-Paycheck

Key Part of Biden’s Student Loan Plan Carries Hefty Price Tag

Wall Street Is Losing Out to Amateur Buyers in the Housing Slump

Politicians Want to Keep Money Out of E.S.G. Funds. Could It Backfire?

‘Recession Resilient’ Climate Start-Ups Shine in Tech Downturn

Toyota Rethinks EV Strategy With New CEO

Nissan, Renault Agree on Alliance Shake-Up

The Computer Chip Wars: How AMD Ended Intel’s Market Dominance

Historic Crash for Memory Chips Threatens to Wipe Out Earnings

Chinese Search Giant Baidu to Launch ChatGPT-Style Bot

How a Drug Company Made $114 Billion by Gaming the U.S. Patent System

When Private Equity Came for the Toddler Gyms

Bed Bath & Beyond’s Woes Prompt Landlords to Line Up New Tenants

Will the Metaverse Be Entertaining? Ask South Korea.

Be

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

UK Chancellor Dismisses Tax Cuts and Pushes Against Green Subsidies

Is UK Being Left Behind in Global Fight for Investment?

Bond Strategists Take Axe to U.S. Treasury Yield Forecasts

Debt Ceiling Clash Revives Dispute Over Paying Bondholders First

Fed Sees Soft Landing as Silver Lining of Temp Jobs Decline

This Fund Made a 32% Return by Embracing the ‘Uncomfortable’

What’s Passive Income? It’s Not What Influencers Say It Is.

Want a Pay Raise? Work Five Days a Week in the Office

Thank You for ‘Navigating’ the Pandemic

Adani Rout Crosses $51 Billion as Stocks Plunge by Daily Limits

World’s Richest Man Sees LVMH Empire Post Record $86 Billion in Sales

Chevron Posts Record Profit, Bolstering $75 Billion Buyback Plan

AmEx Misses Profit Estimate as Loan-Loss Provisions Weigh

Bed Bath & Beyond Says It Defaulted on Debt Payments

H&M Profit Battered by Rising Costs, Russia Exit

Intel Slumps on Disappointing Earnings Amid PC Weakness

BuzzFeed to Use ChatGPT Creator OpenAI to Help Create Quizzes and Other Content

How Lego Built a Media Empire Beyond Bricks

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Morning News: January 26, 2023
Posted by Eddy Elfenbein on January 26th, 2023 at 7:09 am

Strong U.S. Economic Growth Expected in Fourth Quarter, Outlook Darkening

The Cost of Going Over the Fiscal Cliff Is Trauma Then Unending Pain

U.S. Inflation Roller Coaster Prompts Fresh Look at Long-Ignored Money Supply

America Has a Debt Problem, and the Answer to It Starts With Form 1040

NYSE Mayhem Traced to a Staffer Who Left a Backup System Running

Why The Times is Resuming Its Emphasis on Annualized Figures for G.D.P.

Hindenburg vs Adani: The Short Seller Taking on Asia’s Richest Person

Morgan Stanley Fines Its Bankers Over Messaging Breaches

Canada Expected to Buck Trend of Big Investment Banking Layoffs

Small-Business Hiring at Odds With Fed Strategy

Google Girds for Second Antitrust Battle as DOJ Targets Its Ads Business

What the NFL Playoffs and Tech Layoffs Have in Common

Tesla Warns of Uncertainties as It Posts Record Profit

Elon Musk Explores Raising Up to $3 Billion to Help Pay Off Twitter Debt

The US Hasn’t Noticed That China-Made Cars Are Taking Over the World

Toyota CEO to Step Down, Become Chairman

High-Earning Men Are Cutting Back on Their Working Hours

McDonald’s, In-N-Out, and Chipotle Are Spending Millions to Block Raises for Their Workers

Sundance, Once a Hotbed for Film Deals, Tries to Find Its Footing

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Morning News: January 25, 2023
Posted by Eddy Elfenbein on January 25th, 2023 at 7:04 am

Natural Gas Shortages Hit China as Temperatures Plunge

Climate Change May Usher in a New Era of Trade Wars

The Newest Contraband at the Mexican Border: Eggs

Inflation Is Cooling, but Prices on Many Items Are Going to Stay High for Months

U.S. Economy Slows, as Europe’s Picks Up

Is a US Recession Near? Making the Call Is Trickier Than Ever

Does America Have Too Much Debt?

Private Equity’s Loved Assets Turn Problem Children in Downturn

Bank of America Employees to Share in Restricted Stock Award

Hindenburg Targets Asia’s Richest Man, Triggering Adani Selloff

Murdoch Backtracks on Plan to Merge His Media Empire

DOJ Sues Google, Seeking to Break Up Online Advertising Business

Microsoft Earnings Fall Amid Economic Concerns

The Unknown Hedge Fund That Got $400 Million From Sam Bankman-Fried

Walmart Raises Starting Wages for Store Workers

How Tesla’s Price Cuts Could Spur an EV Pricing War

Tesla Eyes $3.6 Billion Factory Expansion

Five Stars, Zero Clue: Fighting the ‘Scourge’ of Fake Online Reviews

How to Be 18 Years Old Again for Only $2 Million a Year

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CWS Market Review – January 24, 2023
Posted by Eddy Elfenbein on January 24th, 2023 at 7:38 pm

(This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

The S&P 500 Closes Above 4,000

Yesterday, the S&P 500 closed above 4,000 for the first time in six weeks. Previously, the index had popped its head above 4,000 a few times, but yesterday was the first time it had closed above 4,000 since December 13.

The stock market looked like it was going to close much lower today, but thanks to some strength in the afternoon, the S&P 500 only lost 0.07% and is still above 4,000.

We’re in earnings season and it’s still early but the numbers are looking favorable. On our Buy List, Danaher and Silgan solidly beat earnings (I’ll have more details later this week in the premium letter.)

So far, just 11% of the companies in the S&P 500 have reported results but 67% have reported an earnings surprise and 64% have reported a sales surprise.

One hitch is that prior to earnings season, Wall Street analysts dramatically cut back on their estimates. This means that while many companies are beating estimates, those are much-lowered forecasts.

According to FactSet, the market’s overall net profit margin is down for the sixth quarter in a row. In other words, sales are growing faster than earnings. That’s not necessarily a problem for the market, but it’s indicative of where we are in the economic cycle. When companies see growing inventories, that often leads to more generous pricing which leads to lower profit margins. This is what usually happens later in an economic cycle.

The Federal Reserve meets again next week, and it seems very likely that the Fed will raise short-term interest rates by another 0.25%. The central bank has all but admitted its plans. This is an admission that the inflation news has been encouraging, but I want to stress that the job isn’t done yet.

The Fed is entering a difficult spot because the economy appears to be weakening and inflation hasn’t completely faded. This is a problem because the Fed wants to appear vigilant against inflation, but at some point, the economy will need to lower interest rates. In fact, futures traders think that the Fed will start cutting interest rates before the end of this year.

The current outlook from the futures market is for two more 0.25% hikes. The first one will be next week. Another 0.25% will follow in March. That will bring the target for the Fed funds rate to 4.75% to 5%. After that, the futures market sees the Fed pausing for several months. Note that this is noticeably more lenient than the rhetoric coming from the Fed. By no means is the futures market accurate, but it shows you how people are betting.

Parts of the economy are starting to show some cracks. The housing sector has been weak for several months. Friday’s report on existing home sales showed the 11th monthly decline in a row. That’s the longest losing streak in the data’s history. For December, existing home sales were down by 1.5%. For the year, existing home sales fell by 34%. That was a worse calendar year drop than in 2007, 2008 or 2009—the key years of the housing bust. Except for the pandemic, this was the lowest sales rate since 2010.

While the overall labor market is still healthy, we’re seeing many layoff announcements, especially in the tech sector. This has even led some people to speak of a “Techcession.” Spotify just said that it’s laying off 6% of its workforce. Microsoft said it’s cutting 10,000 jobs. Amazon is letting 18,000 jobs go. Google said it’s getting rid of 12,000 jobs.

Speaking of Google, the Justice Department said it’s seeking to break up Google’s online ad business, claiming it has a monopoly-like hold over the industry. I should note that the government doesn’t have a great track record in going after high-tech companies.

The most infamous case may be when the government went after IBM in the 1970s. The case was filed in January 1969 in the closing days of the Johnson Administration. It dragged on in the courts for years. By 1982, the government saw little chance of winning. After realizing it had already spent so much, the government threw in the towel and gave up the case.

Even though nothing came of the anti-trust case, it had a big impact on Corporate America. A few years later, when Microsoft came along, any modern investor would have wondered why IBM didn’t simply buy out Bill Gates’s little company. Nowadays, that would be the easy way to take care of the problem, but back then, big companies were too scared of getting any attention from the DOJ.

What gets DOJ’s ire is if a company uses its strength in one market to gain an advantage in another market. There can be Acme Car Company. That’s fine, but Acme can’t say that it only runs on Acme Gasoline. The Justice Department said, “Google would no longer have to compete on the merits; it could simply set the rules of the game to exclude rivals.” For its part, Google says that the government is doubling down on the types of cases it has already lost. This is the fifth case the government has brought against Google since 2020.

Outside of any Techsession, big layoffs are hitting other industries as well. In finance, Goldman Sachs said it’s cutting 3,200 jobs. Both Bank of New York Mellon and BlackRock are cutting 3% of their respective workforces. In the crypto world, Coinbase said it’s cutting 20% of its workforce.

One interesting dynamic in the stock market this year has been the resurgence of riskier stocks. From December 28 through yesterday, the S&P 500 High Beta Index has gained over 17.4% while the S&P 500 Low Volatility Index is down 1.3%. That’s a huge gap for such a short time span.

Coming out of the pandemic, High Beta outperformed Low Vol by a substantial margin. Last year, Low Vol did much better, but so far this year, High Beta is out in front.

Part of this is related to Fed policy. When interest rates were near 0%, taking on a lot of risk was a no-brainer. Now that interest rates are going higher, risk is suddenly a lot more important. I think some traders assume that High Beta will soar out in front if the Fed starts cutting again. That might be a mistake. If the Fed does cut, it won’t be for several months, and I’m not sure if they’ll cut by a lot.

The next big economic report will be the Q4 GDP report which will be out on Thursday morning. This will be the first report on Q4 GDP growth. The report will be revised again in late February and again in late March.

You may recall that the GDP reports for Q1 and Q2 both showed declines. While that’s not technically a recession, it was cause for concern. The numbers for Q3 were much better. The U.S. economy grew in real annualized terms by 3.2% for the third three months of the year.

What should we expect for Q4? The consensus on Wall Street is for real annualized growth of 2.8%. That may be too low. I don’t think we’ll see recession-type numbers in the Q4 report, except for housing. However, I do believe that the economy will get weaker as the year goes on.

I checked which outstanding Treasury security has the highest current yield. The answer is the Treasury due in October of this year, roughly an eight-month bill. The current yield is 4.749%. Out of the trillions in Treasury debt, that’s the highest. It reiterates the idea that the Fed may start cutting rates later this year. The strong rhetoric coming from the Fed simply isn’t credible.

Stock Focus: U.S. Lime and Minerals

This morning, AmerisourceBergen announced that it’s changing its name to Cencora later this year. This is a reminder of how much I hate modern corporate names. Companies tend to spend tons of money coming up with names that sound like nothing. Verizon? Prologis? Yuck! As bad as Cencora is, at least it’s better than AmerisourceBergen.

In 1927, the Dow Jones Industrial Average had 20 stocks. Seven of them began with American, three with United and two with General. How I miss those names.

This leads me to this week’s stock in focus which is United States Lime & Minerals (USLM). Now that’s a name!

Twenty years ago, you could have picked up one share of USLM for $2.82. A few days ago, it was going for $154 per share. That works out to an average annualized gain of more than 22%.

Plus, that return doesn’t include any dividends. A dividend increase may be coming soon. One year ago this week, USLM increased its payout by 20%.

You might think that with a track record like that, USLM would have tons of analysts who follow it. Well, that’s not the case. Actually, not a single Wall Street analyst follows USLM. That’s a 54-fold gain in 20 years, and no one saw it. When earnings come out, we can’t say if it beat or not because there is no consensus.

So what does United Lime do? As the name suggests, lime. Lots of it. The company “is a manufacturer of lime and limestone products, supplying primarily the construction (including highway, road and building contractors), industrial (including paper and glass manufacturers), metals (including steel producers), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), roof shingle manufacturers, agriculture (including poultry and cattle feed producers), and oil and gas services industries.”

The company has been doing well lately. The Q4 earnings report should be out within the next week or so. For Q3, Lime’s revenues increased 27% to $66.5 million. Net income increased 39% to $2.77 per share. For the first three quarters of 2022, Lime earned $6.10 per share. That’s up from $5.19 per share in 2021.

President and CEO Timothy W. Byrne, said, “We continue to see strong demand from our construction customers and have benefited from long stretches of dry weather in our Texas markets.”

My rough estimate is that USLM will report earnings of $1.60 per share for Q4 which would bring the full-year results to $7.70 per share. That would mean the company is going for about 19 times trailing earnings. That’s not bad.

USLM currently had a market value of $830 million. The company is based in Dallas and it has 308 full-time employees. I recently updated my Watch List and USLM continues to be among my favorites.

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.