Morning News: August 15, 2023
Posted by Eddy Elfenbein on August 15th, 2023 at 7:03 am

Roaring Back From Pandemic, Japan’s Economy Grows at 6% Rate

Taiwan’s Election Is All About War

Argentine Shops Hit With 20% Overnight Price Hike After Election

Uganda Cuts Rate for First Time in Two Years on Easing Inflation

Russia’s Emergency Rate Hike Fails to Lift Ruble After Crash

China Slashes Rates, Suspends Youth Jobless Data as Economy Signals Sharper Downturn

The Fed’s Interest-Rate Debate Is Shifting

How (Many) Economists Missed the Big Disinflation

Binance Files for Protective Order Against SEC

FDIC to Propose Comprehensive Changes to Regional US Bank Living Wills

Fitch Warns It May Be Forced to Downgrade Multiple Banks, Including JPMorgan

Steve Schwarzman Is Pushing Blackstone Growth to Get its Act Together

Suncor Energy’s Quarterly Profit Halves on Lower Oil and Gas Prices

Home Depot Beats Earnings Estimates, But Sales Slide As Consumers Pull Back on Big-Ticket Buys

Target’s Struggles Are Only Getting Worse

Streaming Prices Are Up Nearly 25% in a Year. That’s Part of the Plan

Using a Credit Card? At These Restaurants It’ll Cost You.

More Americans Are Ending Up Homeless—at a Record Rate

Serve a Drink, Then Save a Life: This Is Restaurant Work During the Opioid Epidemic

The Airport Is an Increasingly Dangerous Place to Work

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Morning News: August 14, 2023
Posted by Eddy Elfenbein on August 14th, 2023 at 7:07 am

The Economic Losers in the New World Order

Russia’s Ruble Hits a 17-Month Low to the Dollar as the Ukraine War Bites

Yen Breaches 145 Mark Against the Dollar, Prompting Expectations of BOJ Intervention

China Finance Giant’s Missed Payments Alarm Regulators, Markets

China’s Worsening Economy Is Hurting Corporate America

After Pulling Inflation Down, Gasoline and Food Threaten to Nudge It Up

The Fed Is Playing a Waiting Game to Try to Avoid a Recession

Binance Shows Why Your Fears of Fed ‘Tightness’ Are Unfounded

Yellen Warns of Risks of Over-Concentration of Clean Energy Supply Chains

US Steel Shares Soar After It Rejects $7.25 Billion Cliffs Bid

Texas Oil Executives Net $122 Million in Bankruptcy-to-Exxon Journey

Two Towns, Two Factories: How a $500 Billion Boom Exposes American Failures

San Francisco Prices Are Sinking, and Property Owners Want a Tax Cut

Can San Francisco Save Itself From the Doom Loop?

Private Equity Firms Are Slow to Sell Holdings Amid Higher Rates

Carl Icahn Should Be Sailing Into the Sunset. Instead, He’s Scrambling to Save His Empire

iPhone Maker Foxconn Beats Expectations. Apple Stock Edges Higher

The $900,000 AI Job Is Here

The Dream Was Universal Access to Knowledge. The Result Was a Fiasco

Everyone Has An Idea For How to Fix Disney. Does Bob Iger?

Banned in Kuwait, ‘Barbie’ Sparks Delight, and Anger, in Saudi Arabia

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Morning News: August 11, 2023
Posted by Eddy Elfenbein on August 11th, 2023 at 7:05 am

Turkey Finally Stamps Out Credit Oddity as Hikes Lift Loan Rates

Meloni-Style Capitalism is Reshaping Corporate Italy

Adani Ports Auditor Deloitte to Resign After Flagging Concerns

Biden Calls China’s Economy a ‘Ticking Time Bomb’

Interest Rates on Loans Hit 790% in Latin America’s Big Fintech Shakeout

U.K. Economy Grows Weakly

New U.K. Alcohol Taxes Cut Beer Costs In Pubs, But Other Drink Prices Will Rise

Hard Landing Is Here for Trade, Roiling World Export Champs

CFOs Are More Optimistic on Side-Stepping a Recession

UBS Ends Taxpayer Backstop Granted for Credit Suisse Rescue

Consulting Firms Are Paying Undergrads $25,000 to Do Nothing

Regulators Give Green Light to Driverless Taxis in San Francisco

UPS Pay Hikes for Package Handlers Raise Pressure on FedEx

Airline Passengers Will Be Forced to Pay for $5 Trillion Carbon Cleanup

Before Joining Federal Safety Program, Freight Railroads Push to Change It

Goldman’s C.E.O. Is Stuck, Without a Clear Lifeline

Outrage as Chinese Real Estate Giant Wobbles and Its Stock Dives

The Summer Women Flexed Their Spending Power

Diamonds Are on Sale. They Won’t Be Forever

Amazon Cuts Dozens of House Brands as It Battles Costs, Regulators

Colleges Spend Like There’s No Tomorrow. ‘These Places Are Just Devouring Money.’

Paul Krugman on AI, Superconductors, and Why Alien Invasions Are Inflationary

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Morning News: August 10, 2023
Posted by Eddy Elfenbein on August 10th, 2023 at 7:04 am

ECB Is on Back Foot and For Once It’s Down to Germany

Turkey Inflation: Erdogan’s Policy U-Turn Tests Patience

US Set to Unveil Long-Awaited Crackdown on Real Estate Money Laundering

The US Is Pushing Guns on a Country It Labels Violent and Corrupt

Biden Orders Ban on New Investments in China’s Sensitive High-Tech Industries

Lessons From a Law Firm’s Decision to Leave China

China Relies on U.S., Allies for Hundreds of Products

Heat, War and Trade Protections Raise Uncertainty for Food Prices

How Long Will Companies Keep Raising Prices on Consumer Goods?

What to Watch in July’s CPI Report: Why an Uptick in Annual Inflation Might Not Worry the Fed

US Consumer Prices Data Set to Show ‘Wave of Disinflation’

Moody’s Warning on US Banks a Wake-Up Call for Sanguine Investors

In Wall Street’s Hottest CEO Race, Morgan Stanley Hopes for Drama-Free Handoff

WeWork’s ‘Going Concern’ Language Shows the Office Culture of the 2010s Is Dead—Even If the Office Provider Survives Into the Hybrid Era

Is the Airbnb Dream Dead?

For Disney, Streaming Losses and TV’s Decline are a One-Two Punch

Disney to Launch Cheaper Ad-Supported Service in UK

Studios Are Raking in Profits While Actors and Writers Are on Strike

Retailers Say Organized Theft Is Biting Into Profits, but Internal Issues May Really Be to Blame

The $1.4 Billion Corporate Sponsorship Hole in the Women’s World Cup

Lyft to Expand Its Ad Business as New CEO Eyes a Turnaround

Coach Owner Creates US Luxury Giant with $8.5 Billion Deal for Michael Kors Parent

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Morning News: August 9, 2023
Posted by Eddy Elfenbein on August 9th, 2023 at 6:47 am

China Slides Into Deflation as Consumer, Factory Prices Drop

China Sprints Ahead in Race to Modernize Global Money Flows

U.S. to Ban Some Investments in China

Japanese Carmakers See Next Few Years as Fight for Survival in China

Another Chinese Property Giant Teeters, Raising Worries About the Economy

Why Germany’s Property Sector is in the Dumps

First Scorched, Then Soaked: Weather Whiplash Confounds Farmers

First American City to Tame Inflation Owes Its Success to Affordable Housing

Bond Traders Prepare to Brave ‘Painful’ Yield Curve Bets as Rate Hikes Slow

Moody’s Says US Banks Are Still Strong Despite Downgrades

The Reality of ESG Is Messier Than the Stark Politics Around It

Total Household Debt Reaches $17.06 Trillion in Q2 2023; Credit Card Debt Exceeds $1 Trillion

How to Catch Pandemic Fraud? Prosecutors Try Novel Methods

WeWork’s ‘Substantial Doubt’ About Its Future Marks a Stunning Fall

For Younger Workers, Job Hopping Has Lost Its Stigma. Should It?

Amazon Is in Talks to Become Anchor Investor in Arm IPO

At This Point, Zoom Could Use Another Pandemic

Ford Shuts Down in Brazil, and China’s Top EV Maker Comes to the Rescue

The Weight-Loss Drug Frenzy Is Outrunning the Company Behind It

ESPN Is Getting Into Sports Betting With Penn Entertainment

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CWS Market Review – August 8, 2023
Posted by Eddy Elfenbein on August 8th, 2023 at 7:06 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 Age of Decoupling

One of the important changes impacting the U.S. economy is that American companies are altering their businesses so they’re not as dependent on China.

The buzzword is “decoupling,” and it’s been happening quickly. Through May, imports from China are down 24%. Some of it is politics, but a lot of it comes down to simple economics.

Thanks to decoupling, America’s top trading partner is now Mexico. Adjusted for inflation, the value of imports from China are down 12% over the last five years. Meanwhile, imports from Mexico are up about $10 billion compared with the same period last year.

Decoupling shows little sign of slowing down. On Tuesday, China said that exports fell by 14.5% in July from a year ago and imports dropped by 12.4%. That was much worse than expected. Exports to the U.S. fell by 23.1%. Exports from China have fallen for three months while imports are down for five months in a row.

After growing quickly for several years, the Chinese economy is in a bad state. Domestic demand has slowed to a crawl. Even after Covid restrictions were lifting, the economy didn’t see a rebound.

American companies have come to realize that it’s risky to have so much of their supply lines dependent on China. We’re also seeing that retailers like Target and Walmart are ordering fewer Chinese goods. For example, China’s share of personal computers fell from 61% in 2016 to 45% last year. For printers, China’s share fell from 48% to 23%.

For many years, China was incredibly important to global manufacturing, but that position is being challenged. It’s still important but countries like Mexico, Vietnam and Thailand are gaining market share. The interesting part of this change is that it’s happening not from governments but from businesses.

When Donald Trump was president, the U.S. government placed tariffs on several Chinese-made goods. Also, Chinese workers have been getting higher pay, and that cuts into the country’s former strength as being the low-cost producer.

It’s not just the U.S., but it’s been happening in Japan as well. Companies are opening fewer manufacturing facilities in China.

We’re also seeing Chinese firms trying to bypass the tariffs. For example, companies will build nearly everything in China and then send it to Mexico for final assembly. The products are really made in China but are stamped as being made somewhere else.

This is important because in the U.S., the Federal Reserve has been fighting inflation by hitting demand. In response, consumers are shifting their spending from goods to services. That leaves Chinese-made goods on the outs. This change may last a long time. We’re now living in the Age of Decoupling.

The July Jobs Report: OK But Not Great

Despite many predictions of its imminent demise, the U.S. labor market continues to churn out more jobs, albeit at a slower rate. On Friday, the government released the jobs report for July. According to the Bureau of Labor Statistics, the U.S. economy created 187,000 net new jobs last month.

To be frank, that’s an okay number but not a great one. Wall Street had been expecting a gain of 200,000. July was the slowest month for job gains since December 2020 when the economy shed 268,000 jobs.

In this chart, you can really see the drop in job gains:

The year-over-year percentage of jobs gained has declined 16 times in the last 17 months. In other words, the economy is still creating new jobs but at a progressively slower rate.

Some of the details are encouraging. Private payrolls increased by 172,000. We’re also seeing better numbers for wages. Last month, average hourly earnings rose by 0.4%. That was 0.1% better than expected. Over the past year, average hourly earnings are up 4.4%. The problem is that inflation has taken a big bite out of workers’ paychecks.

Here are some more details:

Health care led job creation by industry, adding 63,000 jobs for the month. Other sectors contributing included social assistance (24,000), financial activities (19,000) and wholesale trade (18,000). The other services category contributed 20,000 to the total, which included 11,000 from personal and laundry services.

Leisure and hospitality, which has been a leading sector for most of the recovery in the Covid pandemic era, added just 17,000 jobs, consistent with a slowing trend after averaging gains of 67,000 a month in the first three months of 2023.

Previous months’ totals were revised lower — the June count dropped to185,000, a downward revision of 24,000, while May was cut to 281,000, down 25,000 from the previous estimate.

Economists like to look at the broader U-6 rate which is often referred to as the underemployment rate. For July, that was 6.7%. That’s not far from the cyclical low of 6.5%.

The unemployment rate ticked down to 3.5%. On Twitter (or X), I noted that “The unemployment rate is lower today than *at any point* in the 1970s, 80s, 90s, 00s and 10s.”

This prompted several responses telling me to look at the labor force participation rate. Here’s a sample:

Well, let’s go for it. The labor force participation rate (LFPR) measures the percentage of people who are employed or are actively looking for work.

There seems to be a widespread belief that the only reason that the unemployment rate is low is because the government doesn’t count the people who have stopped looking for work.

This is simply incorrect. For July, the LFPR rate held at 62.6% for the fourth month in a row. That’s the highest it’s been this cycle.

In an interview with the New York Times, John C. Williams, the president of the New York Fed, said “we’ve seen the labor force participation, labor force growth improve quite significantly.”

It’s true that during Covid, many folks left the work force, but they’ve come back. At its low, the labor force participation rate got to 60.1 in April 2020. The current LFPR is below its pre-Covid high, but it’s not that far from it. The fact is that the workforce has largely returned to normal.

Here’s the catch. That LFPR can be influenced by demographic factors such as the growing number of retirees. It’s not that bummed out young people have stopped looking for work. Instead, it’s that grandma and grandpa have retired and moved to Florida.

That’s why I prefer to watch the labor force participation rate for people from ages 25 to 54. That helps us skirt the age issue. For July, that was 83.4% which is close to its highest level of the last 20 years. June’s rate was 83.5% which is the highest since May 2002.

There are plenty of criticisms for the economy. The pace of jobs growth is rapidly slowing, and wages lagged inflation for several months, but we absolutely have not seen a mass exodus from the jobs market.

The next big econ report will be this Thursday when the CPI report for July is out. The inflation numbers have improved over the past year, but tackling the last bit may prove difficult.

For the 12 months through June, consumer prices increased by 3%. The core rate, which excludes food and energy, increased by 4.8%. For Thursday, Wall Street expects the 12-month headline rate to rise to 3.3% and the core rate to drop to 4.7%.

Currently, the futures market expects the Fed to pause again at its meeting on September 19-20. In fact, the futures don’t see the Fed making any changes until March 2024, and that first move is expected to be a rate cut. Until then, don’t let scary headlines make you flee the market.

The FTC Finally Gives In

One of our favorite Buy List stocks is Intercontinental Exchange (ICE). The company owns the New York Stock Exchange, plus a few other financial exchanges. Last week, the company released another solid earnings report ($1.43 vs $1.37 est.). What I like about the business is that ICE’s operating margin often runs around 60%. ICE has grown by using a series of aggressive but shrewd acquisitions.

More recently, ICE started moving into mortgage technology. In 2020, ICE bought Ellie Mae, a mortgage technology business, for $11 billion. This strategy took a very big leap last year when ICE said it was buying Black Knight (BKI), a mortgage data vendor, for $11.7 billion.

That got the attention of the U.S. Federal Trade Commission. They didn’t like the deal at all. The government felt that an ICE/Black Knight deal would put too much power in too few hands. The key to understanding the deal is that it’s all about data.

The FTC contends that such a deal would stifle innovation and raise prices for consumers. Lina Khan, the head of the FTC, has gotten a lot of attention for her aggressive policies against corporate mergers. The problem for the FTC is that it hasn’t been doing well when its battles go to court. The FTC failed in its attempt to block Microsoft’s $70 billion acquisition of Activision. Leaving that aside, the FTC has been doing everything it can to scuttle the Black Knight deal.

ICE and Black Knight struck back by selling off different units to appease the FTC. For example, Black Knight said it would sell its Optimal Blue business for $700 million. The company also said it would sell its Empower loan origination system business.

The strategy finally worked, and the government threw in the towel. Yesterday, the FTC told a federal court that it will drop its lawsuit trying to stop the deal from going through. The trial had been set to start on Monday, August 14.

Not that long ago, the merger deal was viewed as hopeless. The deal price was for $75 per each share of BKI. Less than a month ago, shares of BKI were trading for around $58. That’s changed. Yesterday, BKI rallied 4% to close at $74.36 per share. This is a big victory for Intercontinental Exchange.

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: August 8, 2023
Posted by Eddy Elfenbein on August 8th, 2023 at 7:06 am

China’s Trade Plunges More Than Forecast in Blow to Recovery

Don’t Be So Picky About a Job, China’s College Graduates Are Told

Argentina’s Next President Is on a Collision Course With Hyperinflation

Italy’s New Tax Wipes Out $10 Billion from Market Value of Banks

Moody’s Cuts US Banks on Mounting Funding Costs, Office Risk

The S.E.C.’s Chief Is Worried About A.I.

SoftBank Plans Fresh AI Bets After First Investment Gains in 18 Months

Stability AI’s Lead Threatened by Departures, CEO Concerns

Nobody Beats Wiz: Meet The Aggressive, $10 Billion Startup Shaking Up Cloud Security

How Yellow’s Downfall Is Rippling Through the Economy

UPS Says Its Profit Will Fall After It Reaches a Teamsters Deal. Its Stock is Sinking Sharply

Tesla’s New CFO Now Has Two Jobs and a Lot of Question Marks

Elon Musk Calls Cybertruck Tesla’s ‘Best Product Ever.’ Here Comes the Test

American Cars Are Developing a Serious Weight Problem

Saudi Aramco Reports $30 Billion in Profit for Latest Quarter

Rising Oil Prices Are Bad News for Drivers—and the Fed

Paramount Agrees to Sell Simon & Schuster to KKR, a Private Equity Firm

Eli Lilly Raises Full-Year Guidance as Drug Pipeline Drives Second-Quarter Profit Up 85%

The U.S. Has a Beef With Europe—Over Cheese

Bacardi’s Russia Business Grows as Other Booze Makers Leave Country

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Morning News: August 7, 2023
Posted by Eddy Elfenbein on August 7th, 2023 at 7:50 am

Rising Money Flows, Fueled by Record Migration, Prop Up Autocrats

China or India? How to Invest in the Coming Asia Boom

‘Inflation’ Reality Can Be Found In Adam Smith, Not ‘Fiscal Theory’

How Long Will Interest Rates Stay High?

A Fed Official Wonders: ‘Do We Need to Do Another Rate Increase?’

The New York Fed President Sees Interest Rates Coming Down With Inflation

Government Shutdown Threat Builds After Downgrade, Imperiling Wall Street Bets

Warren Buffett Is Trying to Tell Us Something About the Economy with Berkshire Hathaway’s Earnings and the $147 Billion of Cash on Hand

Short Seller Hindenburg Nabs Tiny Gains Off $173 Billion Carnage

Property Loans Are So Unappealing That Banks Want to Dump Them

Big Oil’s Talent Crisis: High Salaries Are No Longer Enough

Trucker Yellow Goes Bankrupt After Debt, Labor Woes Pile Up

America’s Truckers, Cargo Pilots and Package Carriers Are Fed Up

Siemens Energy CEO on $2.4 Billion Wind Turbine Hit: We Were ‘Going Too Fast’ with New Products

Pfizer’s Covid Boost Crashes to Earth

Boeing Aims to Get Starliner Spacecraft Ready to Fly Next March

A Zoom Call, Fake Names and an A.I. Presentation Gone Awry

Musk’s X to Pay Legal Bills of People ‘Unfairly Treated’ for Posting on Platform

Where to Find a $4-an-Hour Math Tutor With a Ph.D.? Overseas

The Era of Ultracheap Stuff Is Under Threat

‘Barbie’ Reaches $1 Billion at the Box Office, Studio Says

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Morning News: August 4, 2023
Posted by Eddy Elfenbein on August 4th, 2023 at 7:05 am

Inflation Is Cooling. Food Inflation Could Get Worse

Hiring Has Stayed Strong. Here’s Where to Look for Signs of Cooling

Slowing US Wage Growth to Set Stage for End of Fed Tightening

Congress Ended a Tax Break. How That May Help Higher Earners

BofA Clients Turn Cautious, Flee From Stocks on Recession Risks

Credit Suisse Collapsed, And Switzerland Went Back to Making Money

‘Going Concern,’ Going Bust

‘You Have to Work Extra to Hire People’: What Companies Have Been Saying About Jobs

The Chip Titan Whose Life’s Work Is at the Center of a Tech Cold War

Superconductor Breakthrough Claims Traced to Seoul Basement Lab

Apple Set to Relinquish Historic $3 Trillion Value

Amazon Shines During Apple’s Off-Season

Disney’s ESPN Plots Its Streaming Future, Seeking Tie-Ups With Leagues and Rivals

The Women Behind Cadillac’s $300,000 EV Aimed at Rolls-Royce

The Brand Stories of Our Lives

Revolut to Stop Crypto Services for U.S. Customers

Teen Gamers Swiped $24 Million in Crypto, Then Turned on Each Other

‘Bitcoin Bonnie and Clyde’ Plead Guilty to Money Laundering

A Look Inside Sam Bankman-Fried’s Empire Before It Collapsed

Israeli AI Startup Vesttoo Sparks a Global Insurance Scandal

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

BOE Raises Rates to 5.25% With Warning Policy Will Remain Tight

BOJ Makes Bold Shift as Yen Risks Grow Too Big to Ignore

A Sudden Jump in Volatility Spells Trouble for Stocks

Markets Still Weigh the Meaning of a U.S. Credit Rating Cut

Is Good News Finally Good News Again?

Bill Ackman Says He’s Short 30-Year Treasuries as Supply Ramps Up

Larry Fink’s Bet on Saudi Oil Money Is Also His Latest E.S.G. Woe

Apollo Posts Record $1 Billion Profit as Rate Hikes Fuel Athene

Winners and Losers Likely as Switzerland Absorbs Credit Suisse Layoffs

How an Ex-Goldman Banker Fought US Sanctions Over Russia — and Won

U.S. Steelmakers Are Still Expanding as Demand Slows

California Law Threatens to Help Drive Up Bacon Prices

Workers to Employers: We’re Just Not That Into You

Shrinking Minority of Americans Able to Cover $400 Surprise Bill

Apple and Amazon Results Pose Tech Rally’s Toughest Hurdle Yet

Meta’s Ray-Ban Smart Glasses Fail to Catch On

Yellow’s Downfall Throws $700 Million US Covid Loan in Jeopardy

Fall in Bud Light Sales Puts Dent in Beer Maker’s Earnings

How Primark Built a Thriving Fashion Business Without Selling Online

Hollywood Studios Signal New Strategy by Talking With Writers

Murder, Money and the Battle for a Pharmaceutical Empire

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