Morning News: January 10, 2024
Posted by Eddy Elfenbein on January 10th, 2024 at 7:00 am

Xi’s Empty Dream City Shows Limits of His Power, Even in China

How the War With Hamas Has Damaged Israel’s Tech Firms and Economy

Importers Face Surging Shipping Costs, Delays as Red Sea Diversions Pile Up

This Inflation Measure Is Running Hot. It’s Probably Wrong

US Inflation Is Set to Fade in 2024 as Goods Prices Keep Falling

Top US Banks Eager for Relief From Rate Pressure After Fed Hikes

The Big Bitcoin Tease

SEC’s X Account Hacked to Falsely Say Bitcoin ETF Approved

The Bond Market Rally Is Overlooking a Soaring $2 Trillion Debt Problem

Global Activist Investors Pressed Companies to Sell or Spin in 2023 as M&A Dropped Off

Mortgage Rates and Inflation Could Draw Attention to the Fed This Election

Elections and Disinformation Are Colliding Like Never Before in 2024

Trumponomics 2.0: What to Expect If Trump Wins the 2024 Election

The Class of 2024 Gets Ready for the Real World

Boomer Retirement Bomb

Nu Mexico to Roll Out Enhanced App to Receive Money From the US

The Next Front in the U.S.-China Battle Over Chips

Microsoft Debates What to Do With A.I. Lab in China

Equinix Raises Debt Abroad to Clip Interest Costs

BMW Converts Century-Old German Plant to Only Make Electric Cars

Vietnam’s VinFast Aims to Qualify for Biden’s EV Tax Credits

Boeing CEO Says Company Needs to Acknowledge ‘Our Mistake’

Unstoppable in Red

Brick-Filled Boxes. Bogus Receipts. Retailers Battle Fraudulent Returns

Is America’s Ultra-Processed Diet That Bad? Big Food Fights Back

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CWS Market Review – January 9, 2024
Posted by Eddy Elfenbein on January 9th, 2024 at 8:07 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.”)

Wall Street Gets Off to a Slow Start for 2024

The stock market is off to a somewhat slow start this year. Last week, the S&P 500 snapped a nine-week winning streak. The index has now closed lower in five of the past seven sessions.

In reality, the current market action is closer to how we should expect markets to act, at least in the near-term. What was unusual about this market was the furious rally that closed out last year.

As late as mid-October, last year was looking to be a fairly standard year for investors. However, once it became clear that the Fed was done with its interest rate hikes, stocks started to rally. In less than two months, the S&P 500 jumped 16%.

As we got to the finish line for 2023, many of those prominent growth stocks and riskier “high-beta” stocks lagged the market. This trend lasted into the first few days of 2024 but has since reversed.

Q4 Earnings Season Is About to Begin

There are two events to look out for this week. The first will be on Thursday when the government releases the inflation report for December. For the most part, inflation has been better behaved, but I don’t want to call victory too soon. Older investors will remember how inflation kept coming back in the 1960s and 70s. In fact, each peak got progressively higher.

The other event will be the start of Q4 earnings season. This is unofficial, but on Friday, several major Wall Street banks and financial institutions will tell us how well they did during the final quarter of 2023.

Some of the financial institutions due to report on Friday include Bank of America (BAC), Bank of New York Mellon (BK), BlackRock (BLK), JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC).

Overall, this looks to be a rather sluggish quarter for earnings growth. According to the latest numbers, Wall Street expects Q4 earnings growth of 1.82% for the S&P 500. That’s down from 2.85% from one month ago.

Within industry sectors, analysts expect 15.80% growth from Consumer Discretionary. That’s up from 13.52% from one month ago. For Tech, analysts have raised their estimate from 14.74% growth from one month ago to 15.08% now.

The big loser is the Energy sector. Profits for Energy are expected to fall 26.94%. As bad as that is, it’s dropping. One month ago, analysts had been expecting Energy’s profits to fall by 23.42%.

The first of our Buy List stocks to report will probably be in about two weeks. I’ll caution you that companies often need a little more time to compile their Q4 earnings reports compared with the other three quarters.

Don’t get worried if a company needs a little extra time. If a company reports its Q1 earnings on, let’s say, April 27, you can most likely expect its other earnings to be around July 27 and October 27, but the Q4 report may be a week or so after January 27.

The U.S. Economy Added 216,000 Jobs in December

Last Friday, the government said that the U.S. economy added 216,000 net new jobs last months. That was much better than expectations. Wall Street had been looking for an increase of 170,000 new jobs. The unemployment rate held steady at 3.7%. Wall Street had been expecting it to rise to 3.8%.

While the jobs numbers for December were decent, the jobs gains for October and November were revised lower to 173,000 and 105,000, respectively.

The U-6 rate, which is a wider measure of joblessness, increased to 7.1%. The labor force participation rate (LFPR) fell 0.3% to 62.5%. That number is now at its lowest point since February.

The labor force participation rate had been improving for several months. The problem with the LFPR is that it can be distorted by demographic factors. For example, more retirees will drive down the LFPR. If we look at it just for folks in the prime working-age category (25 to 54), then the LFPR is close to a 20-year high.

Perhaps the most important stat in the jobs report is average hourly earnings. Last month, average hourly earnings rose by 0.4%. That’s good, but I hope to see better. Over the last year, average hourly earnings are up by 4.1%. The problem is that so much of the wage gains have been eaten up by inflation.

One of the problems with this jobs report is that the job gains have been concentrated in a few areas while important sectors of the economy have actually seen job losses:

The December hiring boost as reflected in the Labor Department report came from a gain of 52,000 in government jobs and another 38,000 in health care-related fields such as ambulatory health-care services and hospitals. Leisure and hospitality contributed 40,000 to the total, while social assistance increased by 21,000 and construction added 17,000. Retail trade grew by 17,000 as the industry has been mostly flat since early 2022, the Labor Department said.

On the downside, transportation and warehousing saw a loss of 23,000.

For the year, the U.S. economy added 2.7 million jobs. That’s a noticeable drop off from 4.8 million in 2022.

The Federal Reserve meets again at the end of this month, and again, I don’t expect to see any changes to interest rates. The March meeting is a different story. Currently, the futures market thinks there’s a 64% chance that the Fed will cut rates. That’s down a bit from the odds before the jobs report.

Later this month, we’ll get the initial report on Q4 GDP growth. The Atlanta Fed’s GDP Now model said that the economy grew at a real, annualized rate of 2.2% for Q4.

The End of the Month Effect

One of my peculiar habits is that I maintain a very large database of historical market stats. For example, I have every closing for the Dow Jones Industrial Average since the index was birthed in 1896. That’s more than 30,000 data points.

At the end of each year, I update all the numbers. I then slice and dice the numbers several different ways to see how the market has performed historically. (I know…I need a better hobby.)

Today I wanted to share with you one of the more fascinating results I got which is the end-of-the-month effect. Very simply, all of the stock market’s gains over the last 13 decades have come on the first and last days of each month. The rest of the month has been net flat.

Make no mistake. I’m not advocating for some kind of trading strategy to try and profit from the end-of-the-month effect. I’m still a buy-and-hold guy, but I find the effect fascinating.

I took all the numbers and squished them together to show you what the average month has looked like for the DJIA since 1896. Here it is:

I used the days of January as a placeholder for the horizontal axis, and I started the series at 100 at the start of the month. On average, the Dow has gained 0.650% each month.

During the first six days of the month, the Dow has had an average gain of 0.615%. During the rest of the month, the Dow has eked out a miniscule 0.035%.

If we dig a little further, we see that the Dow has lost an average of 0.216% by investing from the 6th to the 25th of each month. That’s roughly one-third of the entire monthly gain. From the 25th to the 6th, the Dow has gained an average of 0.867%.

What causes this? I’m not certain, but I’d guess that that’s when investors have gotten new money to add to stocks. It’s amazing that 130 years of data shows such a large impact from the calendar.

That’s all for now. The stock market will be closed on Monday in honor of Dr. Martin Luther King’s birthday. He would have been 95 years old. 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 9, 2024
Posted by Eddy Elfenbein on January 9th, 2024 at 7:07 am

On Board a Ship Sailing the World’s Most Dangerous Shipping Lane

Xi, Biden and the $10 Trillion Cost of War Over Taiwan

Lawmakers Push U.S. to Consider Trade Limits With A.I. Giant Tied to China

China Says It Cracked Apple AirDrop to Identify Message Sources

Bill Gross Casts Shade on Treasuries, Sees 10-Year ‘Overvalued’ at 4%

‘Market’s Wrong, I’m Not’: Mike Mayo Loves Playing a Provocateur

Blackstone’s First Private Equity Fund for Rich Individuals Gets $1.3 Billion

The Latest Dirty Word in Corporate America: ESG

50 Companies to Watch in 2024

Consultancy Bain & Company Names New Global CEO

Startup Founders Fret Over Getting Fired Like Sam Altman

Microsoft’s OpenAI Ties Face Potential EU Merger Probe

SandboxAQ Buys Good Chemistry, Melding AI and Quantum Tech for Drug Discovery

Goodyear Unveils Plans for an EV Future With New Tires at CES

Chinese Billionaire Is Second-Biggest Foreign Owner of US Land

Boeing’s Max 9 Crisis Deepens

How Astronomers Are Saving Astronomy From Satellites — For Now

What You Can Learn About Job-Hunting From Dating Apps. Really.

New Biden Administration Rule Seeks to Make More Gig Workers Employees

In the N.F.L. and at Big Companies, Diversity Playbooks Face Hurdles

When ‘Contemporary Issues’ and Campus Politics Collide

PepsiCo, Grocery Giant Bicker Over Who Dumped Whom

As Retailers Cite Rising Theft and Shrinkage, Analysts Want More Details

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Morning News: January 8, 2024
Posted by Eddy Elfenbein on January 8th, 2024 at 7:05 am

Fed Pivot Will Dominate Year of Rate Cuts in Turn of Global Cycle

Private Equity’s Horrible, No-Good ’23 Set to Continue Into ’24

Nation’s Top Economists Are Short-Term Happy, Long-Term Glum

New Year Market Funk Sees 5-Day Blues

Hedge Funds Dump Tech, Consumer Stocks at Start of Year

BlackRock, Ark File Amended Forms in Final Push for Bitcoin ETFs

Buying Home and Auto Insurance Is Becoming Impossible

Can Retirees Keep Splurging? Don’t Count on It

Robots Learn, Chatbots Visualize: How 2024 Will Be A.I.’s ‘Leap Forward’

Japanese Company’s Bid for U.S. Steel Tests Biden’s Industrial Policy

Boston Scientific To Acquire Axonics For About $3.7 Billion

Merck Is in Advanced Talks to Buy Cancer Drugmaker Harpoon Therapeutics

First Flight of the Vulcan Rocket Sends an American Lander Toward the Moon

Elon Musk’s Drug Use Is the Latest Headache for Tesla’s Board

Boeing Max 9 Jets Remain Grounded as Airlines Await Inspection Instructions

Investors Bail on Boeing Following Max 9 Grounding

Shell Flags Earnings Hit of Up to $4.5 Billion From Impairments

The Cable Company That Wants to Take the Pain Out of Streaming

Everyone Wants a Piece of the NBA’s New National TV Contract

The Woman Shaking Up the $50 Billion Instant-Ramen Industry

Abercrombie Raises Outlook After Women’s Business Boosts Sales

Lululemon Lifts Outlook on Solid Year-End Activewear Sales

How Harvard’s Board Broke Up With Claudine Gay

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Morning News: January 5, 2024
Posted by Eddy Elfenbein on January 5th, 2024 at 7:02 am

Eurozone Inflation Rose Less Than Expected, Keeping Rate-Cut Talk on Track

Investors Kick Off 2024 with $123 Billion Record Cash Shift

Investors Flee to US Money Market Funds on Caution as Rate Cut Optimism Cools

Economist Alberto Musalem Named Next President of St. Louis Fed

Troubled China Shadow Bank Zhongzhi Files for Bankruptcy

Haidar Overhauls Macro Hedge Fund Trades Amid Record 43% Plunge

Red Sea Attacks Menace Energy Tankers but Don’t Stop Them

Exxon Mobil Expects Up to $2.6 Billion in Upstream Impairments

US Jobs Report to Show Hiring Concentrated in Only a Few Sectors

Apple’s Ugly 2024 Start Puts Most-Valuable Stock Title at Risk

Netflix Considers Ways to Make Money From Videogames in Possible Pivot

How China’s BYD Beat Tesla at Its Own Game

Driverless Truck Companies Plan to Ditch Human Copilots in 2024

Late M&A Bonanza Stokes Healthcare Dealmakers Ahead of JPMorgan Conference

Ozempic Mania’s Billions in Bills Are Coming for US Taxpayers

Starbucks Faces New Pressure Over Union Campaign

Major French Retailer Drops PepsiCo Products Over High Prices

Gen Zers Who Want the Buzz But Not the Hangover Are Fueling a Nonalcoholic Spirits Boom

Tepper’s $2 Billion Hedge Fund Payday Marred by NFL Meltdown

Victor Wembanyama Sets Course to Become a Basketball Billionaire Unlike Any Other

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Morning News: January 4, 2023
Posted by Eddy Elfenbein on January 4th, 2024 at 7:04 am

Germany Cut Gas Imports By a Third in 2023

In Europe, Trains Are Full, and More Are on the Way

Citi Targets China Investment Bank Unit Launch, 30 New Hires By End 2024

Wall Street’s Ambitions in China Run Into a Rising Firewall

Wall Street Is Already Cutting Oil-Price Forecasts for This Year

APA to Buy Callon Petroleum in $4.5 Billion Deal

How Supply-Chain Snarls Made Everyone Wrong on Inflation

Fed Minutes Showed Officials Feeling Better About Inflation

The Hidden Force Pushing Mortgage Rates Down

Why Companies Still Aren’t in a Firing Mood

U.S. Awards Chip Supplier $162 Million to Bolster Critical Industries

Apple Hit With Second Downgrade This Week as iPhone Worries Grow

U.S. Auto Sales Bounced Back in 2023

EV Startup Fisker Ditches Tesla-Style Direct Sales Model

Billionaire Space Battle Heats Up as Bezos Eyes SpaceX Rival

SpaceX Illegally Fired Workers Critical of Musk, Federal Agency Says

Clorox’s Future Depends on Winning Your Cat’s Litterbox

Jeff Zucker’s Latest Bet: Prestige TV

Big Fashion Still Hasn’t Figured Out How to Pay a Living Wage

How the Push for Diversity at Colleges and Companies Came Under Siege

Just a Billion Doesn’t Cut It on This Exclusive Florida Island

Pop-Tarts’ Devoured Mascot May Live to Be Eaten Again

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Morning News: January 3, 2024
Posted by Eddy Elfenbein on January 3rd, 2024 at 7:03 am

Saving the Panama Canal Will Take Years and Cost Billions, If It’s Even Possible

China’s Top Banks Tighten Exposure to Smaller Peers to Curb Credit Risk

Xi’s Mixed Messages Leave Whiplashed Investors Wary of China

US National Debt Hits Record $34 Trillion

Treasury 10-Year Yield Eyes 4% as Bonds Dip Ahead of US Data

Will America’s Good News on Inflation Last?

Bitcoin Reverses Course Ahead of Eagerly Awaited ETF Decision

How to Save for an Emergency, with Help from Your Employer

Finding a New Job Is Getting Harder

Unemployed Americans Are Being Forgotten in a Strong Job Market

Sustainable Energy Goals Require Public Investment in Emerging Technologies, BCG Chair Says

U.S. Auto Sales Bounced Back in 2023

Why America’s Electric Car Push Isn’t Working

Tesla Faces a Higher Bar for Hype in 2024

U-Haul Report Shows Texas Attracted the Most Number of People Relocating

Harvard’s Governance Dilemma

Disney to Work With ValueAct in Bid to Stave Off Billionaire Activist Peltz

He Revived Old Spice. Can This CEO Save a Sneaker That Lost Its Cool?

Starbucks Will Now Let Customers Use Personal Cups for Nearly All Orders

SoftBank Veteran Arora a Billionaire After Another Huge Payday

Inside a Flaming Jet, 367 Passengers Had Minutes to Flee. Here’s How They Did It.

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Morning News: January 2, 2024
Posted by Eddy Elfenbein on January 2nd, 2024 at 7:05 am

Iran Sends Warship to Red Sea After US Sinks Houthi Boats

Bangladesh’s Tangles with Yunus, Nobel Winner and Microloan Founder

US Pressured Netherlands to Block China-Bound Chip Machinery

Nigeria to End Practice of Using Central Bank to Fund Deficit

India Is Chasing China’s Economy. But Something Is Holding It Back

Britain’s Economy Is ‘Not Working.’ Here Are 2 Key Reasons

For Investors, 2024 is Year of Transition to a New Economic Order

Here’s (Almost) Everything Wall Street Expects in 2024

US Fintechs Push Into Fixed-Income Trading as Retail Investor Interest Grows

New Disruptions, Geopolitics Hang Over 2024 Supply Chains

As CFOs Prepare for an Unpredictable 2024, Here’s What Tops Their Checklists

Is America on the Mend?

I Spent New Year’s Eve Trying to Do the FAFSA. It Didn’t Go Well

Apple Stock Downgraded as Barclays Warns on Cooling iPhone Demand

Iberdrola Ends $4.3 Billion Deal to Buy US Power Firm PNM

Musk’s X Value Cut by Another Fidelity Writedown, Axios Reports

China’s EV Champion BYD Will Take on the World in 2024

Evergrande Auto’s Investment Agreement With Dubai Automaker Lapses

Wayfair’s CEO Wants Staff to Work Harder. Your Boss Probably Agrees

Americans Are Canceling More of Their Streaming Services

The Businesses Betting on New Year’s Resolutions

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Morning News: January 1, 2024
Posted by Eddy Elfenbein on January 1st, 2024 at 7:33 am

China and US Should Strive for Peaceful Coexistence, Xi Says

Putin Says He Wants Peace in Ukraine But on Russia’s Own Terms

Iran Says Prospect for Talks Over Nuclear Deal ‘Still Exists’

Maersk Halts Red Sea Shipping as US Navy Sinks Houthi Boats

Shale Is Keeping the World Awash With Oil as Conflicts Abound

Meet America’s Newest Oil-Trader Extraordinaire: Joe Biden

Pakistan’s Inflation Quickens for Second Straight Month

Bangladesh Sentences Nobel Peace Prize Winner to 6 Months in Prison

‘There’s No Other Job’: The Colonial Roots of Philippine Poverty

US Overtakes China as South Korea’s Top Export Market

Chief Justice Roberts Says AI Will Transform How the Courts Work

The Way Big Banks Shut Down Customer Accounts Is Callous. Let’s Fix It.

Chill in the Housing Market Seeps Into Other Industries

Covid Slashed Consumer Choices. This Is Why They Aren’t Coming Back

Where the Job Market Is Heading in 2024, in Six Charts

Baidu’s Live-Streaming Hopes Hit by Lapse of $3.6 Billion Deal to Buy YY

BYD Posts Record Sales Quarter to Challenge Tesla at Own EV Game

Western Anxiety About Chinese EVs Could Prove Self-Defeating

Volkswagen’s Elusive Quest to Make an EV for the Masses

Climate Activists Block Amsterdam Highway in Protest Against ING

PGA Tour and Saudi-Backed LIV Extend Deadline to Finalize Deal

The Sports-Betting Traders Deciding How Much You Win or Lose

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The 2024 Buy List
Posted by Eddy Elfenbein on December 31st, 2023 at 9:05 pm

Here are the 25 stocks for the 2024 Buy List. It’s locked and sealed, and I can’t make any changes for 12 months.

For tracking purposes, I assume the Buy List is a $1 million portfolio that’s equally divided among 25 stocks. Below are all 25 positions with the number of shares for each and the closing price for 2023. Whenever I discuss how the Buy List is doing, the list below is what I’m referring to.

It’s locked and sealed, and I can’t make any changes for 12 months.

Here are the five new buys with their starting Buy Below prices:

American Water Works ($140)
Amphenol ($110)
Farmer Mac ($200)
McGrath RentCorp ($130)
Rollins ($50)

The six sells are:

Carrier Global
Danaher
Middleby
Stepan
Trex
Veralto

Here are the corporate descriptions of our five new stocks:

American Water is the largest regulated water and wastewater utility company in the United States. With a history dating back to 1886, We Keep Life Flowing® by providing safe, clean, reliable and affordable drinking water and wastewater services to more than 14 million people with regulated operations in 14 states and on 18 military installations. American Water’s 6,500 talented professionals leverage their significant expertise and the company’s national size and scale to achieve excellent outcomes for the benefit of customers, employees, investors and other stakeholders.

As one of the fastest growing utilities in the U.S., American Water expects to invest $34 to $38 billion in infrastructure repairs and replacement, system resiliency and regulated acquisitions over the next 10 years. The company has a long-standing history of executing its core operations, aligned with sustainable best practices, through its commitments to safety, affordability, customer service, protecting the environment, an inclusive workforce and strengthening communities.

Amphenol Corporation is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors and interconnect systems, antennas, sensors and sensor-based products and coaxial and high-speed specialty cable. Amphenol designs, manufactures and assembles its products at facilities in approximately 40 countries around the world and sells its products through its own global sales force, independent representatives and a global network of electronics distributors. Amphenol has a diversified presence as a leader in high-growth areas of the interconnect market including: Automotive, Broadband Communications, Commercial Aerospace, Industrial, Information Technology and Data Communications, Military, Mobile Devices and Mobile Networks.

Farmer Mac is a vital part of the agricultural credit markets and was created to increase access to and reduce the cost of credit for the benefit of American agricultural and rural communities. As the nation’s secondary market for agricultural credit, we provide financial solutions to a broad spectrum of the agricultural community, including agricultural lenders, agribusinesses, and other institutions that can benefit from access to flexible, low-cost financing and risk management tools. Farmer Mac’s customers benefit from our low cost of funds, low overhead costs, and high operational efficiency.

McGrath RentCorp is a leading business-to-business rental company in North America with a strong record of profitable business growth. Founded in 1979, McGrath’s operations are centered on modular solutions through its Mobile Modular and Mobile Modular Portable Storage businesses. In addition, its TRS-RenTelco business offers electronic test equipment rental solutions. The Company’s rental product offerings and services are part of the circular supply economy, helping customers work more efficiently, and sustainably manage their environmental footprint. With over 40 years of experience, McGrath’s success is driven by a focus on exceptional customer experiences. This focus has underpinned the Company’s long-term financial success and supported over 30 consecutive years of annual dividend increases to shareholders, a rare distinction among publicly listed companies.

Rollins, Inc. is a premier global consumer and commercial services company. Through its family of leading brands, the Company and its franchises provide essential pest control services and protection against termite damage, rodents, and insects to more than 2.8 million customers in North America, South America, Europe, Asia, Africa, and Australia, with more than 19,000 employees from more than 800 locations. Rollins is parent to Orkin, HomeTeam Pest Defense, Clark Pest Control, Northwest Exterminating, McCall Service, Trutech, Critter Control, Western Pest Services, Waltham Services, OPC Pest Services, The Industrial Fumigant Company, PermaTreat, Crane Pest Control, Missquito, Fox Pest Control, Orkin Canada, Orkin Australia, Safeguard (UK), Aardwolf Pestkare (Singapore), and more.

In terms of market value, Thermo Fisher remains our biggest stock at $205 billion. Abbott Labs is second at $191 billion. Eleven of the 25 stocks have market values between $15 billion and $50 billion. Miller Industries is still our smallest stock at $484 million.

FICO and Fiserv are the only two stocks that don’t pay dividends.

Twenty-one of our 25 stocks are on the normal March/June/September/December reporting cycle. Intuit, SAIC and Heico are on the January/April/July/October cycle. FactSet is the only one that follows February/May/August/December.