Morning News: August 2, 2023
Posted by Eddy Elfenbein on August 2nd, 2023 at 7:05 am

The West Attacked Russia’s Economy. The Result Is Another Stalemate

A Former Banker Investigates What Could Be the Biggest Tax Heist in France’s History

Wall Street Reaped Ruble Fortune on Clients Fleeing From Russia

A Run of Strong Data Buoys Biden on the Economy

Fitch’s US Credit Downgrade Sparks Criticism and Unease

BofA Joins Fed in Reversing Recession Call Amid Growing Optimism

Many Small US Banks Not Ready to Borrow from Fed in an Emergency

AI Study Says Stocks Already Pricing a Job-Replacement Premium

‘How Do I Do That?’ The New Hires of 2023 Are Unprepared for Work

Bulb Becomes a Flashpoint as the Sun Sets on Incandescent Lights

Divvy Wants to Make Rent-to-Own Deals Easy. Many Customers Find Them Hard

Miami Sees Its First Population Drop in Decades

Health Insurers Don’t Want You to Know Where Your Money Is Going

Amazon Unveils Biggest Grocery Overhaul Since Buying Whole Foods

Why Trucking Giant Yellow’s Shutdown Could Cost Taxpayers Money

How ESPN Went From Disney’s Financial Engine to Its Problem

Taco Bell Owner Yum Brands Misses Revenue Estimates Despite Soaring KFC Sales

Business Meals Are Back With a Vengeance, and Everyone Feels Awkward

Toyota’s Land Cruiser to Return to U.S.

Ferrari Hikes Targets Amid Strong Demand for Supercars

Overstock.com Is Revamping Using Bed Bath & Beyond’s Name

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CWS Market Review – August 1, 2023
Posted by Eddy Elfenbein on August 1st, 2023 at 6:19 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.”)

On Monday, the S&P 500 closed out July with another nice gain. This was the index’s fifth monthly gain in a row which is the longest monthly winning streak in two years. This is also the S&P 500’s best YTD gain through July since 1997.

It’s been a calmer stock market as well. On Friday, the Volatility Index closed at 13.33. That was its lowest level since January 2020.

I’ve been pleased to see the rally becoming broader, meaning that more stocks are joining in on the fun. Until recently, the market had been very narrow. It was rightfully criticized for being overly focused on a few large-cap tech stocks.

That’s not so true anymore. For the last two months, the S&P 500 Equal Weight ETF (RSP) has outpaced the rest of the market. Ryan Detrick, a great stat resource, points out that at one point last week, more than 89% of the stocks in the S&P 500 were trading above their 50-day moving averages. In other words, the minnows are joining the rally.

The Resilient U.S. Economy

The U.S. economy continues to hold up as well. I can’t think of a recession that’s been so widely expected yet so stubborn in refusing to make its appearance. Most of the recent economic signs have been fairly positive.

Just look at the earnings reports this season. This will be the busiest week of earnings season with 160 stocks in the S&P 500 due to report. So far, 82% of companies that have reported have beaten expectations.

Last Thursday, the government reported that the U.S. economy grew at a real annualized rate of 2.4% during the second quarter. Wall Street had been expecting growth of 1.5%.

Some people thought this spring’s banking crisis would trip up the economy. Nope, that didn’t happen. Other folks thought all the tech layoffs would push us unto recession. Again, that didn’t happen.

The economy’s performance is especially impressive because not that long ago, many economists assumed that the economy would be well on its way to a recession by now.

In April, the Conference Board said the odds of a recession starting in the next 12 months were “near 99%.” Now, the Federal Reserve’s own staff no longer expects a recession to begin this year. In fact, consumers are pretty optimistic. The sentiment survey put out by the University of Michigan recently hit its highest level in nearly two years. That’s some recession!

If anything, economic growth appears to be accelerating. Growth for Q1 was 2.0%. In the Fed’s last policy statement, it described the economy’s growth as “moderate.” In June, the Fed said growth was “modest.” I realize this may sound weirdly technical, but such wording changes are a big deal on Planet Fed.

So what’s powering the economy? The answer is consumer spending. Last quarter, the economy was also helped by increases in nonresidential fixed investment, government spending and inventory growth.

During Q2, personal consumption expenditures rose by 1.6%. While that was lower than the rate from Q1, during Q2, the economy was running against higher interest rates. Since March 2022, the Federal Reserve has raised interest rates 11 times. Interest rates are now at a 22-year high.

Another good sign is that inflation has been cooling off. The personal consumption expenditure price increase rose by 2.6% during Q2. That’s down from 4.1% in Q1.

Investors got nervous last year when the economy had negative growth for two quarters in a row. Since then, the economy has rattled off four straight quarters of positive growth. We’ll learn more about the economy this Friday when the July jobs report will be out. The estimate is that the economy created 200,000 nonfarm jobs and that the unemployment rate will be unchanged at 3.6%.

More positive economic news came on Thursday when we got the durable goods report for June. That came in at 4.7% which was well above Wall Street’s forecast of 1.5%. On Friday, the Bureau of Economic Analysis said that personal income increased by 0.3% in June while personal spending increased by 0.5%.

Earlier today, the ISM Manufacturing Index for July was reported at 46.4. That was a little below expectations. Any number below 50 means that the factory sector of the economy is contracting.

What’s the Fed’s next move? Probably nothing. In the last three recessions prior to the Covid-led recession in 2020, the Fed had started cutting rates before the time the recessions had arrived. This underscores an important problem: the Fed’s major policy tool, adjusting interest rates, is highly imperfect.

For one, it takes a long time after the Fed makes any changes in rates to witness the intended results. This is one of the reasons why the Fed so often seems to mistime events. Just recently, the Fed was well behind the curve regarding inflation.

Fed Chairman Jerome Powell continues to sound stern. He recently said, “We think we need to stay on task. We think we’re going to need to hold policy at restrictive levels for some time. And we need to be prepared to raise further.” The market, however, isn’t so sure.

The Fed doesn’t meet again until September 19-20. For now, traders expect another pause from the Fed. In fact, the Fed might pause for a few meetings. Futures prices don’t see the Fed making a move until March, and that initial move is expected to be a rate cut.

The early evidence suggests that inflation continues to moderate. The issue is how quickly will the Fed finally recognize that inflation is under control. My view is that the rally is telling us the truth and that there are lots of reasons to be bullish.

Trex Rallies on Strong Earnings

Trex (TREX) is a valued member of our Buy List. The deck stock, like some people, has a habit of either running very hot or very cold. There’s not much in between.

Trex was our #1 performing stock in 2020 (+86%) and 2021 (+61%). Last year, it was our worst performer by far (-68%). This year, Trex is again our top performer (+79%).

If you’re not familiar with the company, Trex is a major maker of wood-alternative decking and railing. In my opinion, what they make looks a lot like wood, but it’s cheaper and involves a lot less maintenance.

Trex is also better for the environment. Pressure-treated wood still dominates which means there’s plenty of room for Trex to grow. It’s also nice to know that with Trex, you don’t have to take another tree out of the Amazon rainforest to make your backyard deck.

Trex is made from 95% recycled material. Every year, the company effectively takes 500 pounds of plastic out of landfills and uses it for alternative wood. It’s not just good for the planet, but it’s smart business.

Trex takes all those used bags and bottles, then combines them with recycled sawdust from cabinet and furniture manufacturers, and that’s what Trex is made of. By the way, this also saves a lot of water.

Some other key advantages are that Trex weighs less than wood and that it’s also more resistant to mold and insects. You don’t need expensive staining or sanding, and repairs are much less frequent. You’ll often hear people say that Trex looks fake. I think that used to be true, but it’s much less the case today.

The recent problem for Trex is that the Fed’s desire to crush inflation also crushed its business. That’s because higher interest rates squeezed the housing market. Last year, shares of Trex plunged by two-thirds.

The good news is that Trex is improving nicely. After the closing bell yesterday, Trex reported Q2 earnings of 71 cents per share. That topped Wall Street’s consensus of 53 cents per share.

Trex had quarterly net sales of $357 million. Although that’s down 5% from last year’s Q2, it was well above Trex’s own guidance range of $310 million to $320 million.

I’m also pleased to see that Trex isn’t reaching for sales by slashing prices. As investors, this is something we have to look out for. When some companies run into trouble, they’ll slash prices to goose sales at the expense of profit margins. Not so with Trex. The company’s Q2 gross margin increased by 220 basis points to 43.9%. Trex had an EBITDA margin of 32.8%.

Now let’s look at guidance. The company expects full-year sales to range between $1.04 and $1.06 billion. For Q3, Trex sees sales of $280 million to $290 million. Wall Street had been expecting $264.22 million.

Most impressively, Trex raised it guidance for full-year EBITDA margin to a range of 28% to 29%. That’s up from the previous guidance of 26% to 27%.

During Q2, Trex bought back 264,896 shares for $16 million. Trex’s board recently approved a massive buyback program of up to 10.8 million shares. That’s 10% of all the outstanding shares.

Shares of Trex jumped 10% today and reached a new 52-week high. We now have a 79% YTD gain with Trex. Thanks to our buy-and-hold philosophy, we have a three-and-a-half-year profit in Trex even after last year’s implosion, and we’ve beaten the overall market as well. Focus on good stocks and be patient.

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 1, 2023
Posted by Eddy Elfenbein on August 1st, 2023 at 7:05 am

War, AI and Climate Change Shake Up $32 Trillion in Global Trade

Global Demand for Coal Is Bringing Mayhem to South African Towns

Solar Supply Chain Grows More Opaque Amid Human Rights Concerns

The U.S. Clean-Energy Company That Hit the Subsidies Jackpot

BP Says $6.8 Billion German Offshore Wind Bet Will Make Money

Occidental, Adnoc Agree to Team up on Carbon Capture Investments

Ratings Firms Struggle With Climate Risk in $133 Trillion Market

A New Worry for Mexicans in the U.S.: The Strong Peso

China Asks Some Banks to Reduce or Delay Dollar Buying

Goldilocks and the Bidenomics Bears

Wall Street Economists Are Looking at a September Rate Pause

In Marc Rowan Era, Apollo Is Working to Shed Its Ruthless Image

HSBC Rides Rising Rates to Double Its Income, Launches $2 Billion Share Buyback

BP Boosts Dividend Even as Profit Slumps 70% to $2.6 Billion

Merck Earnings Top Expectations. More M&A Could Be Next.

New Factories Are Coming to the US, Even as Existing Ones Struggle

Local Malls, Stuck in ‘Death Spiral,’ Plunge in Value

Disney Goes Back to the Future

Uber Delivers First-Ever Operating Profit in Drive to Curb Losses

Elon Musk Is Finally Cracking Tesla’s Invincibility Shield

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Morning News: July 31, 2023
Posted by Eddy Elfenbein on July 31st, 2023 at 7:05 am

China Is Trying to Make Its Gloomy Consumers Spend More

Why China’s Miracle Growth Story May Be Coming to an End

Russia Takes Its Ukraine Information War Into Video Games

A Spending Boom Fuels Russia’s Wartime Economy, Raising Bubble Fears

Why One Country Is Struggling to Break Away From Russian Gas

Extreme Heat and Aging Power Grids Are a Deadly Combination

A Record $90 Billion in Ship Orders Loom Over Boom-Bust Industry

Asia’s Richest Families Fuel Race for Lucrative Finance Jobs

Traders Brace for $102 Billion Wave of Treasury Bond Sales

Why the Drivers of Lower Inflation Matter

Clock on the Fed’s ‘Soft Landing’ May Already Be Ticking

Why the FTC’s Lina Khan Is Taking on Big Tech, Even if It Means Losing

Lots of US Homeowners Want to Move. They Just Have Nowhere to Go

Has America’s Air Travel Boom Peaked?

Elon Musk’s Unmatched Power in the Stars

Walmart Buys Tiger Global’s Flipkart Stake for $1.4 Billion

After $700 Million U.S. Bailout, Trucking Firm Is Shutting Down

Ford Realizes Customers Can’t Quit Hybrids

Is It an E-Bike, or a Motorcycle for Children?

China-Founded Rivals Shein and Temu Ramp Up War for American Shoppers

That Cool New Bookstore? It’s a Barnes & Noble

The Psychedelics Stock Universe Is Shrinking, Despite the Hype

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Morning News: July 28, 2023
Posted by Eddy Elfenbein on July 28th, 2023 at 7:03 am

China’s Push to Expand BRICS Membership Falters

Europe Avoids China’s Belt and Road Forum, Keeping a Distance From Xi and Putin

Europe Vowed to Make Russia Pay for the War. It’s Not That Easy

Global Bonds Slide on Surprise Bank of Japan Move

He Held Up a Bank to Get His Own Money

Social Security’s Next Cost-of-Living Raise Is Forecast Around 3%

Wall St. Pessimists Are Getting Used to Being Wrong

Why ‘Soft Landing’ Optimists Shouldn’t Celebrate Just Yet

$2 Billion Default Followed Warnings to Everyone but Investors

What Fed Hikes? Much of America’s Consumer Debt Is Still Riding Ultralow Interest Rates

The Extreme Solutions That Can Fix Climate Change

Exxon and Chevron Stalk More Shale Deals as Profits Dip

Volkswagen Seeks to Reclaim China Crown in Deal With EV-Maker XPeng

Ford Raises Profit Forecast Despite Steeper EV Losses

5 Ways That Buying a Car Has Drastically Changed

Biogen to Buy Reata for $7.3 Billion in Rare-Disease Expansion

Aided by A.I. Language Models, Google’s Robots Are Getting Smart

P&G Earnings Show Its Pricing Power Endures

The Former Banker Gambling on FanDuel’s American Dream

Adidas Plans Sale of Second Yeezy Batch to Eat Into Stockpile

Wanted: Turnaround Artist to Revive Tired Clothing Brand. Apparel Experience Optional

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Morning News: July 27, 2023
Posted by Eddy Elfenbein on July 27th, 2023 at 7:05 am

How Bad Is China’s Economy? Millions of Young People Are Unemployed and Disillusioned

The Skyrocketing Toll of the Billion-Dollar Climate Disaster

Biden’s ‘Made in America’ Pledge Collides With His Climate Goals

An American Energy Giant Sees Israel as a Springboard to Europe

Shell and TotalEnergies Profits Cut in Half by Lower Oil Prices

Federal Reserve Raises Interest Rates to 22-Year High

GDP Data Set to Reinforce Fed View the US Will Avoid Recession

The Economy Has Defied Expectations. Here’s What to Focus On in the GDP Data

Stock Pickers Are Missing Out on Tech Boom Thanks to 80-Year-Old Rules

A Brexit Champion’s Feud With His Elite Bank Brings a C.E.O. Down

A Beach Club Dinner and Jamie Dimon’s Touch: How PacWest Was Rescued

European Commercial Property Deals Drop 58% to Lowest Since 2010

Hamptons Luxury Bidding Wars Hit Record High Even as Prices Sag

Florida’s Flood of New Wealth Boosts High-Speed Train Bonds

Warren and Graham Team Up to Take on Big Tech

Microsoft Faces European Antitrust Investigation Over Bundling of Teams Software

Netflix Reworks Microsoft Pact, Lowers Ad Prices in Bid for Growth

Researchers Poke Holes in Safety Controls of ChatGPT and Other Chatbots

AI in Hollywood Has Gone From Contract Sticking Point to Existential Crisis

Tesla Owners Have Soured on Elon Musk, But Still Love Their Model 3s

McDonald’s Sales, Profit Beat Estimates as Diners Flock to Chain

More Income for the Supreme Court: Million-Dollar Book Deals

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Morning News: July 26, 2023
Posted by Eddy Elfenbein on July 26th, 2023 at 7:05 am

Subsidy Wars Heat Up With US Allies Forced to Pay Up or Lose Out

How Financial Crises Shaped the Federal Reserve

Powell Has Stopped Handing Gifts to Wall Street on Fed Day

Private Equity Finally Gets a Piece of the Banking Crisis

Deutsche Bank’s Rising Costs Take Shine Off Debt Trading Beat

Elon Musk the Banker Wants to Take On Dimon Where Google Failed

Banc of California Agrees to Buy PacWest as Regional Lenders Seek Strength Together

Indiana and Midwest Take Top Slots in WSJ/Realtor.com Housing Index

Thirsty Data Centers Are Making Hot Summers Even Scarier

San Francisco’s Office Demand Surges, Largely Thanks to AI Companies

Microsoft, Alphabet Earnings Lay Bare the AI Hype. Why Patience Is Needed

The Luxury Home Market Confronts Its New Reality: Not Enough Buyers and Sellers

UPS Blinked, Teamsters Leader Says, Clearing Way for Labor Deal

AT&T Tops Profit, Cash Flow Estimate as Customer Growth Dips

Samsung to Launch New Galaxy Z Fold, Flip Phones Amid Slow Adoption So Far

Elon Musk’s Rebranded Twitter Cuts Ad Prices

How Jack Ma’s Ant Group Is Inching Toward IPO Reboot

Boeing’s Quarterly Results Top Expectations as Airplane Deliveries Pick Up Pace

Coca-Cola Earnings, Sales Beat Street Forecasts As Drinks Maker Follows PepsiCo With Price Hikes

Joe Lewis, Billionaire Owner of Tottenham Hotspur, Charged with Insider Trading

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Morning News: July 25, 2023
Posted by Eddy Elfenbein on July 25th, 2023 at 7:07 am

How America Drives Gun Exports and Fuels Violence Around the World

Russia Strikes Danube Port, Escalating Attacks on Ukraine Grain Routes

The Little Known Metals Giant that Rules a Global Market

Warren Buffett Lifts Fossil Fuel Bets

China’s New Central Banker Once Fixed a Crisis. He May Need to Again

I.R.S. Halts Surprise Visits to Homes and Businesses

Clash of Fed Doves and Hawks Over Rates Deepens

Sensing End of Fed Hikes, Some Investors Return to Dividend Stocks

FDIC Scolds Banks for Manipulating Deposit Data

UBS Is Fined Nearly $400 Million in Credit Suisse’s Archegos Mess

The World Tied $3.5 Trillion-Plus of Debt to Inflation. The Costs Are Now Adding Up

How to Fight Inflation When Consumers Think Home Prices Can Only Go Up

Tech Firms Once Powered New York’s Economy. Now They’re Scaling Back

GE Boosts Outlook on Aerospace Gains, Rebound in Renewables

Slow Battery Production Crimps G.M.’s Electric Vehicle Rollout

Musk Explains Why He’s Dumping Twitter Name and Iconic Logo

TikTok’s Next Plan for U.S. Dominance: Selling Made-in-China Goods

A Soap Maker Cracks the Code to ‘Made in America’

Unilever Says Inflation Has Peaked as Sales Growth Rises

At Spotify, Podcast Cuts and Higher Music Royalties Deepen Losses

‘Barbenheimer’ Weekend Was a Real Team Effort

Parents Hire $4,000 Sorority Consultants to Help Daughters Dress and Impress During Rush

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Morning News: July 24, 2023
Posted by Eddy Elfenbein on July 24th, 2023 at 7:05 am

China Holds Off on Major Stimulus as It Signals Property Easing

Housing-Market Rebound Poses Challenge for Fed’s Inflation Fight

Why the Fed Isn’t Ready to Declare Victory on Inflation

It’s Taylor Swift’s Economy, and We’re All Living in It

The Great M&A Slump Is Shaking Up Giants of Investment Banking

What Is the ‘Basel III Endgame’ and Why Are Banks Worked Up About It?

Wall Street Is Grappling With Crypto’s Trillion-Dollar Custody Question

OpenAI’s Sam Altman Launches Worldcoin Crypto Project

Why Businesses Can’t Stop Asking for Tips

Big Pharma Bets Big on China

Drugmakers Are ‘Throwing the Kitchen Sink’ to Halt Medicare Price Negotiations

Apple Aims to Keep iPhone Shipments Steady Despite 2023 Turmoil

Musk Makes Fan-Created ‘X’ Twitter’s New Logo in Abrupt Change

Tesla Is Lapping Germany’s Automakers in the Global EV Race

Why GE Shares Are Hotter Than Apple, Meta or Tesla

AT&T, Verizon Investors Have More Than Lead Cables to Worry About

3M’s Dark Chapter Deepens as CEO Faces Beaten Down Investors

How a Mexican Lager Quietly Rose to Become America’s Best-Selling Beer

At Hotel Spas, CBD Oil Nets 900% Markups—and Guests Pay Happily

‘Barbie’ Box Office to the World: The Pandemic Is Officially Over

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Morning News: July 21, 2023
Posted by Eddy Elfenbein on July 21st, 2023 at 7:03 am

Africa’s Most-Developed Nation Is on the Brink of Chaos

Russia Boosts Rates as Ukraine War Costs Mount

Ukraine to Seize Russian-Controlled Bank in Bid to Curb Moscow’s Influence

Why Is Switzerland — of All Places — Importing So Much Cheese?

Untangling the U.S. From China’s Economy Is Messy

America’s Rise as an Energy Export Powerhouse Hinges on One Town

Americans Feel Better About the Economy. Should We Believe Them?

US Recession Becomes Closer Call as Economists Rethink Forecasts

Billionaire Sternlicht Sees ‘Category 5 Hurricane’ Spurred by Fed Rate Hikes

UPS Strike Would Deal Blow to Inflation Fight, Supply Chain

Microsoft-Activision Antitrust Win Raises M&A Revival Hopes

Sergey Brin Is Back in the Trenches at Google

Threads User Engagement Continues to Drop, Adding Urgency for New Features

Lawmakers Challenge Ford and Chinese Battery Partner Over Forced Labor

Your C.F.O., a ‘Fraction’ of the Time

With Hollywood on Strike, a Bright Spot in New York’s Economy Goes Dark

Searching for Someone to Deliver a Hollywood Ending

She Was the Oppenheimer of Barbie. Her Invention Blew Up.

Tour de France Cycling Boom Helps French Family Firm Make Half a Billion Euros

Latest Wild FTX Allegations Include Plan to Buy Island of Nauru to Survive Cataclysm

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