Morning News: February 2, 2024
Posted by Eddy Elfenbein on February 2nd, 2024 at 7:02 am

India’s Quiet Push to Steal More of China’s iPhone Business

China Criticizes IMF’s Growth Outlook, Calls to Boost Confidence

Homebuyers in Canada Are So Frenzied They Won’t Wait for Rates to Go Down

Commercial Real Estate’s Slow-Motion Crisis Explained

A New Perk for Some Student Loan Borrowers: A 401(k) Match

US Jobs Report to Show Slower Hiring Pace After Annual Revisions

Biden Takes Aim at Grocery Chains Over Food Prices

Missing Chinese Banker Resigns After Investigation

What’s Really Going On with Bank Stocks

BofA’s Hartnett Says Stock Markets Are Behaving Like Dot-Com Era

US Equity Funds Draw Inflows Amid Positive Economic and Inflation Data

JPMorgan’s Trades Threaten to Take Privacy Out of Private Credit

US Regional Bank Stocks Brace for Final Trading Session of Painful Week

Meta, Amazon Surge by $279 Billion After Cuts Boost Profit

Amazon Enters Chatbot Fray With Shopping Tool

Exxon, Chevron Surpass Forecasts as Shale Drilling Lifts Output

Tesla Runs Afoul of Font-Size Rule in 2.2 Million Electric Cars

China’s New Energy Vehicle Sales Are Softening in Early 2024

A Year After Bankruptcy Concerns, Carvana is Leaner and Ready for its Wall Street Redemption

AbbVie Sees Signs of Post-Humira Growth in Positive 2024 Outlook

Bristol Sees New Drugs Fueling Upbeat 2024 Profit Outlook

Dual Mission for Macy’s New Chief: Revive Stores and Fend Off Takeover

Barbie Owner Mattel Draws Activist Seeking Changes at Toy Maker

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Morning News: February 1, 2024
Posted by Eddy Elfenbein on February 1st, 2024 at 7:13 am

Beijing Pledges More Fiscal Support as Economy Stumbles

A $560 Billion Property Warning Hits Banks From NY to Tokyo

ECB’s Lane Sees Profits and Wages Important for Inflation Path

BOE Raises Prospect of Rate Cuts in 2024 If Inflation Eases

NY Community Bancorp Plunges as Real Estate Risks Jolt Market

Deutsche Bank to Cut 3,500 Jobs and Reward Shareholders

BNP Paribas Delays Profit Target in Shock to Investors

A New Global Tax Is About to Raise Billions. The U.S. Is Missing Out.

Risky Borrowers Storm Loan Market for Once ‘Unthinkable’ Savings

The Fed Is Taking It Slow. But the Markets Want More

Powell Navigates ‘Toxic’ Politics of Rate Cuts as Election Nears

US Firms’ Hiring Announcements Ease to Slowest January on Record

Employed But Unhappy: What’s in Store for US Workers in 2024

Generative A.I.’s Biggest Impact Will Be in Banking and Tech, Report Says

Can This A.I.-Powered Search Engine Replace Google? It Has for Me

A.I. Fuels a New Era of Product Placement

U.S. Makes Initial Offers in Medicare Drug Price Negotiations

In Year Since Ohio Crash, Railroads Barely Move Needle on Safety

Wind Farms Are Overstating Their Output — And Consumers Are Paying For It

Shell Hikes Dividend as Gas Trading Business Boosts Bottom Line Amid Turn Away from Renewables

‘Your Product Is Killing People’: Tech Leaders Denounced Over Child Safety

Volvo, An Early Electric Car Adopter, Cuts Off Funding For Its EV Affiliate

Musk Moves Ahead With Plan to Shift Tesla Domicile to Texas

The Lawyer—and Drummer—Who Felled Elon Musk’s $55.8 Billion Compensation Package

Amazon Could Soon Be on Hook for Safety of Third-Party Products It Sells and Ships

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Morning News: January 31, 2024
Posted by Eddy Elfenbein on January 31st, 2024 at 7:04 am

China’s Censorship Dragnet Targets Critics of the Economy

Pro Take: Foreign Creditors Face Challenge in Reaching China Evergrande’s Assets

Saudi Arabia Eyes Reviving Multibillion Dollar Aramco Share Sale

Oil Traders Won Ecuador Deals With $70,000 Watch and Bags of Cash

A New Solution for CO2 Emissions: Bury Them at Sea

Europe Regulates Its Way to Last Place

Unlikely Allies Want to Bar a Brazilian Beef Giant From U.S. Stock Markets

Will a Hiring Slowdown Push the Fed to Cut Rates Soon?

Fed to Hold Interest Rates Steady But Start Considering Cuts

There Are No ‘Price Controls,’ There’s Just Scarcity

Pimco Squares Up for a Bareknuckle Fight in Private Credit

A Pre-I.P.O. Gift to Company Executives: ‘11th-Hour Options Discounting’

Wall Street Punishes Alphabet and Microsoft Despite Earnings Beats After Stocks Hit Record

Microsoft Has Three Trillion Reasons to Keep the Heat on Google

Boeing Pulls Guidance to Show Investors That Safety Comes First

Novo Nordisk Smashes Past $500 Billion Value on Wegovy Frenzy

Novartis Shares Fall After Earnings Miss Hopes, Outlook Disappoints

GSK Bets on Further Growth After Shingles and RSV Vaccines Boost Sales

Byron Allen Makes $14 Billion Offer for Paramount Global

Musk’s $55 Billion Pay Package Voided, Threatening World’s Biggest Fortune

Who Is Most Likely to Get Fired? Remote Workers, Middle Managers

H&M Replaces CEO After Another Lackluster Year

PGA Said to Approve $3 Billion Investment From Fenway-Led Group

N.C.A.A. Inquiry Takes On Growing Role of Booster Groups

Universal Music Group Poised to Stop Licensing Music to TikTok

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Morning News: January 30, 2024
Posted by Eddy Elfenbein on January 30th, 2024 at 7:02 am

IMF Lifts World GDP Outlook on US Strength, China Fiscal Support

Evergrande Liquidation to Leave Little for Creditors to Claim

China’s Real Estate Crisis ‘Has Not Touched Bottom’

Global Clean Energy Spending Surges to $1.8 Trillion. It’s Not Enough

Saudi Aramco Drops Expansion Plan, Raising Demand Questions

The Billionaire Sultan Set to Gain Even More Power in Malaysia

Eurozone Economy Flatlines, Raising Concerns About Falling Behind

Germany’s Economy Shrank at End of 2023 as Gloomy Sentiment Persists

Global Deal Activity on Course to Rebound This Year

Fewer Workers Are Quitting. Here’s What That Means for the Economy

Why Cut Rates in an Economy This Strong? A Big Question Confronts the Fed.

Banks Are Hawking US Recession Hedges Tied to Both Stocks, Bonds

Preparing to Access Beneficial Ownership Database Will Cost Banking Industry Millions, FinCEN Estimates

JPMorgan Quants Warn of Dot-Com Style Concentration in US Stocks

Scandal-Hit Trading Desk Turns Into Money Spinner at Wells Fargo

Toyota Remains World’s Top-Selling Automaker; Chairman Apologises Over Scandals

GM Sees Higher Profits Ahead as 2023’s Problems Recede

BYD Shares Fall as China’s Auto Price War Weighs on Bottom Line

As Demand for Fast Deliveries Surges, the Industry Struggles on EV Transition

Truck Makers Team Up to Push for Electric Vehicle Chargers

Companies Hire ‘Robot Wranglers’ to Corral Lost and Confused Cyborgs

Walmart Hopes New Flashing Lights Will Help Shoppers Find Stuff

The World’s Biggest Jeweler Now Only Sources Recycled Metals

How Do You Make a Weed Empire? Sell It Like Streetwear

Joel Embiid Wants the African Diaspora to Flourish Onscreen

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CWS Market Review – January 29, 2024
Posted by Eddy Elfenbein on January 29th, 2024 at 1:15 pm

Exciting news today! One of our Buy List stocks, McGrath RentCorp (MGRC), is being bought out for $123 per share. That’s a 10% premium to Friday’s closing price.

I wanted to send you this special alert to let you know what’s happening.

McGrath RentCorp has reached a deal with WillScot Mobile Mini Holdings (WSC) to be bought for $123 per share in cash and stock. WillScott describes itself as “a leader in innovative temporary space solutions.” McGrath is one of our new buys this year.

The deal is expected to close in the second quarter of this year. WillScot merged with Mobile Mini a few years ago.

I’ll be honest – I’m not wild about this deal price. I think McGrath may be selling itself short. The stock was close to $123 just a few weeks ago. Still, I understand there was probably a lot of negotiating behind the scenes, and that could be why a large amount of the deal is in cash.

Both boards have approved the deal, but it’s not done just yet. The deal still needs regulatory approval and the approval of shareholders. I don’t think that will be a problem, and the stock market apparently agrees. You can tell that by how closely MGRC has been trading to $123 per share.

Here are the details. McGrath shareholders have a choice. For each share of MGRC they own, they can either get $123.00 in cash or 2.8211 shares of WillScot Mobile Mini. However, shareholders may run up against limitations since the entire deal is to be 60% cash and 40% stock. I don’t know the details just yet. Personally, I favor getting as many shares of WSC as possible.

In the press release, the companies spell out the benefits of the deal:

• Highly complementary businesses with diversified customer segments: The acquisition brings together two complementary businesses, enhancing diversity across customer segments. The combined company’s broad offering, attractive unit economics and long rental durations underpin its uniquely predictable recurring cash flow profile. On a pro forma basis, approximately 90% of combined total revenue is derived from leasing and related services, while the addition of Enviroplex expands WillScot Mobile Mini’s permanent modular capabilities.
• Operating synergies with a high confidence of realization: $50 million of run-rate operating synergies expected to be achieved within 24 months of closing. Confidence in targets reinforced by WillScot Mobile Mini’s long history of successful M&A integrations.
• Increased scale allowing accelerated rollout of growth initiatives: The combined customer base and rental fleet represent an expanded platform for the rollout of WillScot Mobile Mini’s strategic levers, such as Value-Added Products and Services, cross-selling and commercial best practices, and operations excellence. Together, these provide a clear path to multiple years of sustained growth and margin expansion.
• Strong financial position underpins reinvestment in growth: The combined company’s strengthened financial profile, enhanced cash generation and de-leveraging capability, and disciplined capital allocation amplify WillScot Mobile Mini’s ability to reinvest in growth and compound returns.

McGrath shareholders will ultimately own 12.6% of WSC. Putting aside my concerns about the sale price, this is a very good day for us and for CWS.

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: January 29, 2024
Posted by Eddy Elfenbein on January 29th, 2024 at 7:04 am

Evergrande Set for Liquidation as China Property Crisis Drags On

EU Reinforces Tight Limits on Crypto Firms from Outside Bloc

A Little Dual Easing Soon Could Help the Fed Avoid Major Easing Later

Xi Jinping Can’t Prop Up Chinese Shares Much As Fed Can’t U.S. Shares

Treasury Seen Boosting Long-Term Debt Sales One Last Time

Mortgage Rates in US to Snap Three-Year Streak of Gains, Survey Shows

Traders Line Up for ‘Once-in-a-Generation’ Emerging Markets Bet

Biden Power Plant and EV Plans Hit a New Obstacle: Vulnerable Democrats

US Chicken Prices to Fall at Last Thanks to Green Fuel Boom

Activist Investors Fret Over Exxon Mobil’s Lawsuit Bypassing US Regulator

There’s So Much Data Even Spies Are Struggling to Find Secrets

Hottest Job in Corporate America? The Executive in Charge of A.I.

US Wants Cloud Firms to Reveal Foreign Clients in China AI Race

U.S. Oil Drillers Are Going Electric—and Hitting Speed Bumps

Logistics-Tech Startups Face Uncertain Future as Freight Slump Continues

Blackstone Is Building a $25 Billion Empire of Power-Hungry Data Centers

BYD Preliminary Net Income Rises Up to 87% But Misses Estimates

Toyota Halts Shipments of 10 Models Over Mishandling of Engine Tests

Ring to Stop Allowing Police to Request Videos From Security Cameras

Amazon Is Now Charging Prime Members Extra for Ad-Free Streaming. For Some, That’s a Deal Breaker

Basketball, Basketball, Basketball: Inside Steve Ballmer’s New $2 Billion Arena

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Morning News: January 26, 2024
Posted by Eddy Elfenbein on January 26th, 2024 at 7:02 am

China Signals More Targeted Stimulus to Come

China Evergrande Unit Starts Legal Proceedings Against Parent

As China’s Markets Stumble, Japan Rises Toward Record

German Consumers Feel the Chill as Inflation Keeps Biting

Biden Freezes Approvals to Export Gas, Imperiling Major Projects

Reforms to US Disaster Aid Expose Growing Home Insurance Gap

American Workers Come Out Winners in a Clash Between Economists Over a Curve

The Fed Tells Banks Not to Be Shy About Asking It for Money

Wall Street Unleashes Quants in Race for Private-Market Billions

Us Equity Fund Withdrawals Ebb To Four-Week Low Amid Tech-Led Wall Street Rally

Is Cryptocurrency Like Stocks and Bonds? Courts Move Closer to an Answer

JPMorgan Shuffles Top Managers as Jamie Dimon Prepares Successors

The F.T.C. Takes on A.I. Deals

The Sleepy Copyright Office in the Middle of a High-Stakes Clash Over A.I.

Companies Turn to Earnouts to Find Common Ground on M&A Valuations

KKR-Backed BrightSpring Prices Its $693 Million IPO Below Range

Microsoft’s Rise to $3 Trillion Took Much More Than Windows

Intel Poised for Biggest Plunge Since 2021 on Weak Forecast

Starbucks, Coke Boycotts Over Gaza War Are Boosting Middle East Rivals

Americans Keep Signing Up for New Phone Plans. Who’s Driving the Growth?

How a Lucky Break Fueled Eli Lilly’s $600 Billion Weight-Loss Empire

These Gyms Survived the Pandemic. They’re Still Sweating

Will Fanatics Upend the World of Sports Collectibles?

Nascar Targets Diverse Audiences to Expand Viewership, Despite Anti-DEI Backlash

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Morning News: January 25, 2024
Posted by Eddy Elfenbein on January 25th, 2024 at 7:06 am

Turkey Ends Rate-Hike Cycle With Final Move to 45% But Keeps Hawkish Bias in Place

China’s $6 Trillion Stock Wipeout Exposes Deeper Problems for Xi

Most of Russia’s War Chips Are Made by US and European Companies

Germany Drafts Plan With UK and France on Missiles for Ukraine

Red Sea Attacks Push BHP to Divert Shipping

EU Official Says Bloc Will Copy Wall Street Move to Shorten Stocks Settlement

The Fed Risks Getting Caught Up in Politics, Whatever It Does

What to Watch in the GDP Report: How 2023 Defied Recession Fear

US GDP Data Will Feature Consumer Set to Power Growth in ’24

Meet the Swiss Billionaire Cast by US Conservatives as the ‘New Soros’

ASML’s China Sales Surged Despite Secret Dutch Deal With US

Dell, Micron Backed a Group Raising Alarms on Rivals’ China Ties

The Samsung Rival Taking an Early Lead in the Race for AI Memory Chips

How One Company Hoovered Up $3 Billion in Broadband Subsidies

Comcast Tops Revenue And Profit Estimates Despite Broadband Subscriber Losses, Raises Dividend By 7%

Alaska Cites ‘Challenging’ Start to 2024 Amid Max Grounding

Tesla Tumbles as Growth Stalls

Musk Fails to Convince Tesla Investors to Overlook Slowdown

Porsche’s Second EV Is Two Years Late — and Key to Its Future

Why Did Car Insurance Get So Expensive?

Atlanta’s Squatter Problem Is Vexing Wall Street Landlords

In a New Cannabis Landscape, a Navy Veteran Battles for Racial Equity

Bud Light’s Comeback Tour Will Hit the Super Bowl, Its Biggest Stage Yet

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Morning News: January 24, 2024
Posted by Eddy Elfenbein on January 24th, 2024 at 7:07 am

Japan Export Beat Lifts Odds Economy Resumed Growth Last Quarter

China Moves to Boost Bank Lending in Broad Effort to Prop Up Growth

China Boosts Stimulus by Allowing Banks to Keep Smaller Reserves

What Makes Italy’s Capital Markets Bill Controversial?

US GDP Data Will Showcase Consumer Set to Power Economy in 2024

Ackman Ramps Up Israel Support With 5% Stake in Tel Aviv Bourse

Trade Turmoil Sparks Supply Snarls in Europe’s Biggest Economies

How Yemen’s Houthi Attacks Are Hurting the Global Supply Chain

Goldman, Lazard Look to Ex-Spies to Gain an Edge in Volatile World

Biden Aims to Impose Tightest Gun-Export Restrictions in Decades

Shawn Fain Takes On Musk, Trump Over Labor’s Green Future

Amid a Housing Crunch, Religious Groups Unlock Land to Build Homes

Stuck in a Downturn, Startups Ghost Investors

ASML Orders Triple in Sign of Semiconductor Industry Revival

SAP to Launch Restructuring Program Affecting 8,000 Jobs in AI Push

Ebay to Lay Off 9% of Full-Time Workforce

Jack Ma Doubles Down on Alibaba

Netflix Posts Best Customer Gain Since Surge During Pandemic

Streaming Pirates Are Hollywood’s New Villains

The Sports Illustrated Cover, a Faded Canvas That Once Defined Sports

Retailers Return to Bringing in Inventory ‘Just in Time’

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CWS Market Review – January 23, 2024
Posted by Eddy Elfenbein on January 23rd, 2024 at 6:29 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.”)

A New All-Time High

On Friday, the stock market closed at a new all-time high. The S&P 500 had gone slightly more than two years, or 512 trading days to be precise, without making a new high.

From high to low, the market had lost more than 25%. It takes a 33% gain to wipe out a 25% loss, but we did it. The drop took nine months while the rally took 15 months.

I don’t want you to think I’m an uncritical cheerleader for the bulls. Of course, if we were to include inflation, then we’re still well short of a new high. Still, in nominal terms, we’ve never been higher.

Take it away, Rita.

The stock market closed even higher on Monday and again on Tuesday. This brings up an interesting subject which is, how well does the market do when it’s at an all-time high?

You might think the market hasn’t done well since, by definition, the market’s never been higher than it is at an all-time high. Also, every bear market starts at a new high. Of course, that’s not a coincidence. Axiomatically, shouldn’t an all-time high be a bad time to invest?

The answer is no. In fact, the market has performed quite well at its all-time high. This gets to an important fact about the stock market and investing: the real money is made during relatively uninteresting markets.

I recently ran the numbers. Since 1957, the S&P 500 has made a new all-time high more than 1,100 times. (I could even be sneaky with the data because the market didn’t pass its 1929 high for 25 years, but I purposely started after that.)

If we were to invest in only those days following a new high, then the market has risen at an average annualized rate of just over 15%. When the market hasn’t been at an all-time high, it’s gained an average of just 6.7%. The market has performed more than twice as well when it’s been at a new all-time high compared to when it hasn’t been. Buy high and sell even higher.

To me the arresting fact isn’t how well the market has done at its high but rather how calm it’s been. The volatility is about 36% less than normal. You rarely see a big day after a new high. Most of the big drops don’t come right at the new high. Instead, the big drops come after a slide.

Since 1957, the S&P 500 has risen by more than 2% following a new high just three times. The normal market sees 2% up days more than four times more frequently. Generally speaking, when the market goes down, volatility goes up. The largest rally off a new high came on January 6, 1999 when the S&P 500 gained 2.21%. That’s a nice gain but compared with other big days, it’s barely a bump.

I’ll give you another example of how boring is good. Low volatility days are much better for the market. If we take all of the daily returns for the last 60 years and divide them into two buckets, the first bucket is days when the market moved up or down by more than 1.2%, and the other bucket is when the market moved up or down by less than 1.2%.

The combined daily returns of the greater than 1.2% days comes to nothing (actually, a small loss). The stock market’s entire gain for the last several decades has come on low volatility days. The simple fact is that most of the big days have been bad days, or they’ve been good days during lousy markets. As the great Jesse Livermore said, “It never was my thinking that made the big money for me. It always was my sitting.”

Don’t Look Past Boring Stocks

Not only are boring markets good, but so are many boring stocks. For some reason, many investors think that a company has to be reinventing the world to be a good investment. That’s not the case. There are many completely boring companies that have been wonderful investments. Many of the worst investments have been in fast-growing sectors.

Here are a few charts you might enjoy:

The red line (Disney) is perhaps the most important name in entertainment with unparalleled intellectual property. The blue line is a hot dog stand.

Goldman Sachs (red line) is one of the largest and most powerful financial institutions in the world. The blue line makes condoms and baking soda.

Intel (black line) is one of the world’s largest semiconductor chip manufacturers. The blue line makes croutons.

Of course, I’m exaggerating, but the underlying point still stands. There’s a lot of money to be made from a dull or uninteresting company. Two boring stocks that I like at the moment are Amphenol (APH) and Miller Industries (MLR)

Q4 Earnings Season so Far

We’re still early in the Q4 earnings season, but I wanted to see how it looks so far. Right now, earnings for the S&P 500 are tracking for an increase of 0.71% compared with last year. That’s a little lower than where it had been. One month ago, we had been expecting growth of 2.24%.

So far, 76.5% of companies have beaten their earnings estimates while 59.6% have beaten on sales. Just under half, or 47.1%, have beaten on both sales and earnings.

For all of 2023, the S&P 500 is on pace to post earnings of $216.85. That means the market is going for about 22 times trailing earnings. That’s elevated but not worrying.

Generally, lower interest rates lead to higher earnings multiples. It looks like rates will be going down this year but not as quickly as previously assumed.

The Federal Reserve starts its first meeting of the year one week from today. The Fed’s policy statement will be due out next Wednesday. It’s widely believed that the Fed won’t make any changes to interest rates at this meeting, but that may change very soon.

For its March meeting, futures traders are nearly evenly divided on the need for a rate cut. For now, the markets are leaning towards the Fed keeping rates unchanged in March. For the May meeting, however, the market places the odds of a rate cut at close to 90%. The Fed hasn’t lowered interest rates in nearly four years.

The market was shaken by the recent comments from Fed Governor Christopher Waller. He said that rate cuts are coming this year, but the market should be cautious in its expectations. The futures market expects the Fed to cut rates by 1.5% this year. That could be too high.

Not that long ago, many folks on Wall Street believed the economy would be in recession by now, but the recent economic news has been somewhat good. Last week’s report on initial jobless claims was quite good. The retail sales report came in above expectations. Homebuilder confidence surged and consumer confidence is at its highest level since July 2021.

By no means do I intend to gloss over the weaknesses in the economy. The housing market is in rough shape and credit-card delinquencies are at some of their worst levels in years. Of course, the economic outlook can change very quickly. Rates will probably come down this year, but the market needs to temper its expectations.

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.