Archive for June, 2021

• AMC Soars Another 24%
  Eddy Elfenbein, June 7th, 2021 at 11:24 am

  AMC (AMC) is up another 15% today as the meme stock craze continues. At one point, AMC was up over 24% today. GameStop (GME) is also doing well.

  

  The overall market is down a bit but only by about 0.2%. The S&P 500 isn’t far from a new all-time high. The highest close was 4,232.60 from May 7.

  There’s not much in the way of economic reports today although we’ll get the CPI reports later this week. There are a few items I wanted to pass along. The FDA approved a new Alzheimer’s drug from Biogen. This is newsworthy because it’s the first such drug in 20 years.

  FactSet (FDS) has an interesting piece. They say that more than 30% of companies in the S&P 500 cited ESG on their earnings calls. I see that the Peru ETF (EPU) is down 6.3% after a very close presidential election.

• Morning News: June 7, 2021
  Eddy Elfenbein, June 7th, 2021 at 7:07 am

  A Lifeline For The Unemployed Is About To End In Half Of U.S. Here’s What’s At Stake

  Bitcoin’s Price Declines Amid Weibo’s Crackdown on Crypto

  Economist Who Said Inflation Was Dead Now Thinks It’s Alive

  Yellen Passes Deal-Making Test on Taxes, With Long Road Ahead

  Why Wall Street Fears A Global Tax Deal

  Market for U.S. Oil Acreage Booms Along with Crude Price Recovery

  Offshore Wind Farms Show What Biden’s Climate Plan Is Up Against

  Biggest Companies Plan to Reduce Emissons By Culling Suppliers

  Some on Wall Street Try Options Trade to Bet Against AMC Without Getting Burned

  Why Amazon Is Confronting the Richest Man in India

  Google Settles Antitrust Case Over Advertising Practices

  Joshua Brown: Miss Me With That Metaverse s***

  Howard Lindzon: Technology Changes But Fear And Greed Never Do….And Sunday Reads

  Michael Batnick: No More Bear Markets

  Ben Carlson: The Stock Market vs. Earnings Growth & A Short History of Money Market Funds

  Be sure to follow me on Twitter.

• May 2021 NFP = +559,000
  Eddy Elfenbein, June 4th, 2021 at 8:34 am

  The May jobs report is out. Last month, the U.S. economy created 559,000 net new jobs and the employment rate dropped 5.8%. Wall Street had been expecting 671,000 new jobs.

  Let’s dig into some details. Private payrolls added 492,000 and manufacturing added 23,000. Average hourly earnings increased by 0.5%. In the last year, average hourly earnings are up 2%.

  The average work week was 34.9. The labor force participation rate was 61.6%. The under-employment rate fell to 10.2%. The payroll gain for March was revised to 785,000. The number for April was revised up to 278,000.

  The unemployment rate fell to 5.8% from 6.1%, which was better than the estimate of 5.9%. An alternative measure of unemployment that includes discouraged workers and those holding parttime jobs for economic reasons edged lower to 10.2%.

  May’s letdown came after April sharply undershot expectations, with the upwardly revised 278,000 still well short of the initial 1 million estimate that came with high hopes for an economy trying to shake loose its pandemic shackles.

  Markets were not disappointed by the report. Stock market futures actually rose, with investors continuing to bet that the measured pace of job gains would keep the Federal Reserve from raising interest rates and tightening monetary policy.

  Diminishing Covid-19 cases along with a continued brisk pace in vaccines has pushed elected leaders to relax restrictions put in place to halt the spread of the virus. The economy grew at a 6.4% pace in the first quarter and is on track to accelerate at a 10.3% pace in the second quarter, according to the latest reading from the Federal Reserve in Atlanta.

  

  

• Morning News: June 4, 2021
  Eddy Elfenbein, June 4th, 2021 at 7:00 am

  Wage Growth Is Holding Up in Aftermath of the Economic Crash

  How China Beat the U.S. to Become World’s Undisputed Solar Champion

  Biden’s Electric Vehicle Plan Includes Battery Recycling Push

  U.S. to Give Ransomware Hacks Similar Priority as Terrorism

  AMC Rides Roller-Coaster in Wild Week for New King of Memes

  SEB First to Defy Bank Industry’s ‘Elite, Closed’ Structure

  Fixing the Insider Trading Prohibition Act

  India and Israel Inflame Facebook’s Fights With Its Own Employees

  Facebook Plans to End Hands-Off Approach to Politicians’ Posts

  Twitter Will Now Allow You To Undo Tweets — If You Pay.

  Bill Ackman SPAC Seeks Warner Music Deal at $42 Billion Valuation

  Joshua Brown: Talking AMC with Stephanie Ruhle on MSNBC

  Michael Batnick: Animal Spirits: Commodities Supercycle

  Ben Carlson: Some Random Thoughts About Inflation, AMC & Small Caps

  Howard Lindzon: Charlie Bilello, Founder and CEO of Compound Capital Advisors, Joins Me on Panic with Friends to Discuss Inflation and Irrational Exuberance

  Be sure to follow me on Twitter.

• Jobless Claims Fall to 385,000
  Eddy Elfenbein, June 3rd, 2021 at 10:13 am

  Tomorrow is the big jobs report. This morning, we got a few more pieces to the puzzle.

  First up, the ADP private payroll report said that 978,000 jobs were added in May. That’s a huge increase. However, the ADP report doesn’t always match the official figures from the government.

  In the other report, weekly unemployment claims fell to 385,000. That’s another pandemic low and it was below forecasts.

  The ISM Services Index came in at 64.0. That’s the highest since 1997.

  Also today, shares of AMC (AMC) have been halted. The company announced plans to sell 11 million shares. The stock plunged and the exchange halted trading. Yesterday, AMC traded 761 million shares. There are only 450 million shares outstanding.

• Morning News: June 3, 2021
  Eddy Elfenbein, June 3rd, 2021 at 7:03 am

  Petrostates See Dire Consequences If World Rejects Oil Too Fast

  A ‘Tsunami’ of Cash is Driving Rates Ever Lower. What Will the Fed Do?

  Yellen Aims to Win Support for Global Tax Deal

  Defiant Meme-Stock Short Sellers Stare Down $4.5 Billion Loss

  NFTs Are Crashing and Who Could Have Seen This Coming Other Than Basically Anyone?

  The Tech Aristocracy’s ‘Guaranteed Income,’ And A Jobs-Based Alternative

  Private Equity Bet on Troubled Caribbean Refinery Blows Up on Retirement Funds

  Russian Cybercriminal Group Was Behind Meat Plant Attack, F.B.I. Says

  Russia Cuts Dollar Holdings From $119 Billion Wealth Fund Amid Sanctions

  Why Etsy Dropped $1.6 Billion on Depop

  This Ominous Warning From Moderna Could Shake Up the COVID Vaccine Market

  Bill Gates and Warren Buffett Are Building a $1 Billion ‘Next-Generation’ Nuclear Reactor in Wyoming

  United Airlines Wants to Bring Back Supersonic Air Travel

  Cullen Roche: Three Things I Think I Think – The More Things Change the More They Stay the Same

  Joshua Brown: Changing of the Guard

  Be sure to follow me on Twitter.

• Heico Rallies to New High
  Eddy Elfenbein, June 2nd, 2021 at 11:04 am

  

  Heico (HEI) initially fell after its recent earnings report. The shares have now rallied seven times in the last eight days, and it’s up again today.

• Morning News: June 2, 2021
  Eddy Elfenbein, June 2nd, 2021 at 7:04 am

  ECB Says Lack of Official Digital Currency Risks Loss of Control

  Portugal Is Riding a Boom in Bicycles

  Why China’s Most-Hated Internet Company Decided to Play Nice

  Russian Criminals Suspected in Cyber Attack on World’s Largest Meat Processor

  Meat Giant Poised to Reopen Most Packing Plants Hobbled by Cyberattack

  Investors’ Inflation Bet Loses Some Steam

  The $15 Billion Jet Dilemma Facing Boeing’s CEO

  The $10 Billion Bright Spot in the Battered World of Office Real Estate

  AMC Up 40% as Reddit Bulls Drown Out Hedge Fund Share Dump

  Supreme Court Will Not Take Up Johnson & Johnson Challenge of $2.1 Billion Cancer Case Award

  Theranos’ Elizabeth Holmes Mimicked Bill Gates and Steve Jobs. The Difference Is She Failed.

  Nick Maggiulli: Is $1 Million Still Worth $1 Million?

  Ben Carlson: If You’re Still Worried, You Aren’t Wealthy

  Michael Batnick: Animal Spirits: And then I Got Scammed & The Biggest Risk

  Howard Lindzon: Momentum Monday – Traders Have A Lot To Choose From

  Joshua Brown: The Race to Hedge Inflation

  Be sure to follow me on Twitter.

• CWS Market Review – June 1, 2021
  Eddy Elfenbein, June 1st, 2021 at 3:17 pm

  (This is the free version of CWS Market Review. Don’t forget to sign up for the premium newsletter for $20 per month or $200 for the whole year. Thank you for your support.)

  The month of May is on the books, and it was another good one for Wall Street. The S&P 500 gained 0.55% last month. If we include dividends, then the index gained 0.70%. This was the index’s fourth monthly gain in a row, and the 11th up month of the last 14.

  Interestingly, May has been a sluggish month historically for the stock market. Adding up the numbers, the Dow has lost an average of 0.22% during May.

  That may sound small, and it is, but it’s quite large for an average of 125 years. By tradition, the market starts to heat up along with summer temperatures. For July and August, the Dow has gained an average of nearly 3%. That’s close to 40% of the index’s total gain for the year coming in just two months. Historically, the market acts well during the summer but then usually gets weak again shortly after Labor Day.

  The stock market was down slightly today, although we’re not far from our all-time high. The S&P 500 lost only 0.05% today. Today was the fifth day in a row that the S&P 500 closed up or down by less than 0.22%.

  Jobs and the Stock Market

  This morning, the Institute for Supply Management said the ISM Manufacturing Index rose to 61.2 for May. That’s up from 60.7 for April. That’s a very good number. Wall Street had been expecting 60.9. Any number above 50 means that the factory sector of the economy is expanding.

  I like to watch for the ISM figure for a few reasons. Although the manufacturing sector is currently above 12% of the economy, the ISM usually comes on the first business day of the month. Usually, the better the economic report, the longer the lead time. The ISM has a pretty good track record of signaling recessions. Recessions usually occur when the ISM is around 45 or less. We’re far from that.

  What’s happening is that there’s clearly a lot of pent-up demand in the economy. When you keep people locked up for so long, they’re going to want to go out and spend. On top of that, the major stimulus efforts from Washington are aiding the economy. In fact, one of the major obstacles that the economy faces right now is supply bottlenecks.

  The U.S. economy is at an unusual crossroads. There are 10 million unemployed, yet there’s a worker shortage. That sounds weird but here we are. Part of that, without a doubt, is due to generous unemployment benefits that are keeping folks from returning to work. Many people also face problems with childcare. And there are many people who are still cautious about returning to an office environment.

  This is jobs week which means we’ll get the big May employment report this Friday. Leading up to the jobs report, we’ll get the ADP private payrolls report on Thursday. Also on Thursday, we’ll see the latest report on jobless claims. The last jobless claims report was 406,00 which was another pandemic low.

  These reports are slowly getting back to normal. The last report was lower than nearly every jobless-claims report in 2009 and 2010. Bear in mind that a little over a year ago, the jobless claims figure peaked at more than six million.

  For Friday’s jobs report, Wall Street expects a gain of 674,000 nonfarm jobs, and it expects the unemployment rate to fall to 5.9%.

  The jobs report for April was a huge disappointment. Economists were expecting an increase of one million jobs. Instead, the U.S. economy added just 266,000. The unemployment rate ticked up to 6.1%. The jobs report was especially frustrating as more state and local economies are getting back to normal. One analyst said, “This might be one of the most disappointing jobs reports of all time.”

  I have to agree. Plus, it came at the same time we got reports that job openings were at an all-time high. Bloomberg reports that “many employers say they are unable to fill positions because of ongoing fears of catching the coronavirus, child-care responsibilities and generous unemployment benefits.” There are two million more job vacancies than new hires. That’s the highest on record.

  Here’s a chart of the stock market in blue and the unemployment rate in red. It’s a fascinating chart.

  

  Historically, what’s been the relationship between unemployment and the stock market? To find out, I went over to the Bureau of Labor Statistics and downloaded all the monthly unemployment numbers since 1948. That’s when the series begins. I then went to Professor Robert Shiller’s data library (a great resource) and downloaded all the monthly inflation-adjusted returns of the stock market since 1948. (His numbers go way back.)

  I then separated the data into four roughly equal groups. When the unemployment rate has been 4.65% or less, stocks have averaged 4.82% annualized.

  When the unemployment rate has been between 4.65% and 5.69%, stocks have averaged 4.81% annualized. Almost exactly the same as the first group.

  Now things get interesting. When the unemployment rate has been between 5.69% and 7.28%, stocks have averaged an 8.42% annualized returned. The worse for jobs, the better for stocks, which makes sense.

  Now for the final group. When the unemployment rate has been greater than 7.28%, stocks have averaged an annualized gain of 14.87%. That’s quite good.

  Very roughly, the tripping point appears to be 6%. Below that, stocks have averaged 3.85%. Above 6%, stocks have gained 15.50%. It’s far from a perfect relationship but it illustrates Warren Buffett’s famous dictum: “Be fearful when others are greedy, and greedy when others are fearful.”

  Another sign of a return to normalcy is that the price for oil got to a two-year high today. OPEC and its allies are adjusting to surging demand but they’re trying to do it carefully. Oil is already up 30% this year.

  Stock Focus: Mueller Industries (MLI)

  One of the most-requested features I run is when I highlight a not-well-known company with a great long-term track record.

  A perfect example of this is this week’s stock in focus, Mueller Industries (MLI). Mueller is a leading manufacturer of copper, brass, aluminum and plastic products. This is a classic small-cap cyclical stock. Once you realize the scope of their business, you understand that the use of Mueller’s products is seemingly endless. Mueller makes everything from copper tubing and fittings to brass and copper alloy bars and refrigeration valves.

  You can find Mueller most anywhere. Some of the companies that rely on Mueller are in sectors like plumbing, heating, air conditioning, refrigeration, appliance, medical, automotive, military and defense, marine and recreational. Mueller’s operations are located throughout the United States and in Canada, Mexico, Great Britain, South Korea, and China.

  Mueller has about 5,000 employees and it’s based in Collierville, Tennessee. The company’s operations are divided among three divisions: Piping Systems, Industrial Metals, and Climate.

  MLI’s current market cap is about $2.7 billion. Mueller pays out a quarterly dividend of 13 cents per share. That gives the stock a dividend yield of about 1.1%. Mueller traces its roots back to 1917.

  

  Last year, when Covid first hit, shares of MLI got chopped in half within a few weeks. The stock fell from $34 to $16. Since then, the shares have roared back. Recently, MLI broke above $48 per share. That’s a remarkable turnaround. Over the last 30 years, MLY has gained 132-fold (including dividends).

  Let’s look at some numbers. A few weeks ago, Mueller reported very good numbers for Q1. The company made $1.11 per share which nearly doubled the 57 cents per share one year ago. The rise in copper prices has been a big help for Mueller.

  Last year, Mueller made $2.47 per share. I think the company has a decent shot of making $4 per share for this year. If I’m right, that means the stock is going for less than 12 times this year’s earnings.

  One of the best valuation metrics to follow is Enterprise Value/EBITDA. For Mueller, that’s currently just under 9.57 which is very good. In fact, I think it would be quite reasonable to pay 20% more than that. In February, Muller raised its quarterly dividend by 30% to 13 cents per share.

  Best of all, zero Wall Street analysts follow the stock. Keep an eye on Mueller. This could be a big winner in the months ahead.

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

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• Abbott Labs Lowers Guidance
  Eddy Elfenbein, June 1st, 2021 at 10:07 am

  Abbott Labs (ABT) had bad news this morning. The company had to lower its guidance due to “significantly lower” demand for Covid testing.

  This has been driven by several factors, including significant reductions in cases in the U.S. and other major developed countries, accelerated rollout of COVID-19 vaccines globally and, most recently, U.S. health authority guidance on testing for fully vaccinated individuals.

  Abbott now sees earnings this year of $4.30 to $4.50 per share. Wall Street had been expecting earnings of $5.04 per share. Previously, Abbott said it expected earnings of at least $5 per share.

  “We’ve recently seen a rapid decline in COVID-19 testing demand and anticipate this trend will continue, which led us to adjust our full-year guidance,” said Robert B. Ford, president and chief executive officer, Abbott. “At the same time, excluding COVID-19 tests, our organic base business growth is accelerating, we continue to see improving end-markets and our new product pipeline continues to be highly productive.”