Archive for October, 2021

• Morning News: October 14, 2021
  Eddy Elfenbein, October 14th, 2021 at 7:03 am

  Global Gas Crisis Spilling Over Into Oil Markets, IEA Says

  Putin Suggests Germany Approve Nord Stream 2 to Solve Energy Crisis

  China’s Record Factory Inflation Poses Another Threat to Supply Chains

  East Asia Crypto Transactions Plunged Amid China Crackdown

  Consumer Prices Jump Again, Presenting a Dilemma for Washington

  Social Security Benefits to Rise 5.9% in 2022, Most in Four Decades

  Biden Administration Plans Wind Farms Along Nearly the Entire U.S. Coastline

  Rich Countries Must Bear the Cost if We Can Ever Hope to Achieve a Net-Zero World

  Fed’s Embarrassing Ethics Scandal Spurs Calls for More Oversight

  Reports of the Death of 60/40 Funds Are Greatly Exaggerated

  TSMC Announces Chip Plant in Japan, Flags ‘Tight’ Capacity Throughout 2022

  Bank of America Tops Estimates on Reserve Release, Strong Advisory and Asset Management Results

  Domino’s Pizza Posts Surprise Fall in U.S. Same-Store Sales as Demand Slows

  Walgreens Profit Surges 68% on Strong Pharmacy, Retail Sales

  The Shorter Work Week Really Worked in Iceland. Here’s How

  How a $2 Million Luxury Condo in Brooklyn Ends Up With a $157 Tax Bill

  Be sure to follow me on Twitter.

• This Morning’s CPI Report
  Eddy Elfenbein, October 13th, 2021 at 12:10 pm

  The CPI report came out this morning and there’s still evidence of inflationary pressures. For September, consumer prices rose by 0.41%. Wall Street had been expecting 0.3%. Year-over-year, inflation is up 5.38%.

  The big culprit is energy prices. Take the core rate, which excludes food and energy, and inflation rose by just 0.24% last month.

  Gasoline prices rose another 1.2% for the month, bringing the annual increase to 42.1%. Fuel oil shot up 3.9%, for a 42.6% year over year surge.

  Food prices also showed notable gains for the month, with food at home rising 1.2%. Meat prices rose 3.3% just in September and increased 12.6% year over year.

  “Food and energy are more variable, but that’s where the problem is,” said Bob Doll, chief investment officer at Crossmark Global Investments. “Hopefully, we start solving our supply shortage problem. But when the dust settles, inflation is not going back to zero to 2 [percent] where it was for the last decade.”

  Interestingly, used car prices, which had been a major problem earlier, saw their prices fall 0.7% in September. Airlines’ prices fell 6.4% in September. That’s after falling 9.1% in August.

• Morning News: October 13, 2021
  Eddy Elfenbein, October 13th, 2021 at 7:02 am

  World’s Growth Cools and the Rich-Poor Divide Widens

  China’s Power Problems Expose a Strategic Weakness

  Peak Oil Is Coming. That Won’t Save The World

  U.S. Will Reopen Land Borders With Canada and Mexico for Vaccinated Travelers

  Consumer Prices Are Still Rising Fast, and A Problem for Washington and Wall Street

  Apple Finally Falls Victim to Never-Ending Supply Chain Crisis

  Biden, Battling Supply Chain Woes, to Announce Port Will Operate 24/7

  A Stock Market Malaise With the Shadow of ’70s-Style Stagflation

  Inflation Revival Is a Victory, Not a Defeat, for Central Banks

  Seeding Accounts for Kindergartners and Hoping to Grow College Graduates

  Ping An’s $90 Billion Fall Grounds One-Time China High Flyer

  Jane Fraser Has a Plan to Remake Citigroup While Tormenting Rivals

  Michael Burry of ‘Big Short’ Fame Posts Twitter Rant Over Taxing the Rich

  Netflix Says ‘Squid Game’ Is Its Biggest Series Launch Ever

  Delta Air Warns of Pre-Tax Loss in Fourth Quarter As Fuel Prices Surge

  JPMorgan Smashes Profit Estimates on M&A Boom, Wealth Management Strength

  FDA Has Authorized e-Cigarettes for the First Time, Citing Benefits for Smokers

  Be sure to follow me on Twitter.

• Trex Downgraded
  Eddy Elfenbein, October 12th, 2021 at 1:28 pm

  Shares of Trex (TREX) are down sharply today. Timothy Wojs, an analyst at Robert W. Baird, lowered Trex from Outperform to Neutral. He also lowered his target price to $108 per share. The downgrade was due to supply issues. Trex has been down as much as 9% today.

  Trex hasn’t said when it will report earnings, but going by previous years, the report will probably be out in early November. Wall Street expects earnings of 58 cents per share.

• Morning News: October 12, 2021
  Eddy Elfenbein, October 12th, 2021 at 7:10 am

  Japan Confronts Rising Inequality After Abenomics

  In China, Home Buyers Who Went All In Say They Want Out

  The I.M.F.’s Executive Board Clears Kristalina Georgieva to Remain Managing Director

  Bitcoin’s Record High Is Within Sight After Sharp Recent Rally

  Talks to Remove Digital Taxes Should End Tariff Risks -U.S. Treasury Officials

  Biden’s Proposal to Empower I.R.S. Rattles Banks and Their Customers

  Loans Will Be the Key to Banks’ Future Fortunes

  Roubini Says Fed May ‘Wimp Out’ on Hikes Despite Inflation

  Americans May Not Get Some Christmas Treats, White House Officials Warn

  ‘Desperate for Tires.’ Components Shortage Roils U.S. Harvest

  As Big Tech Grows in the Pandemic, Seattle Grows With It

  A Neighborhood Watch to Keep New York’s Delivery Workers Safe

  Adler’s Caner Files Criminal Complaint Against Short Seller

  An Empire of Dying Wells Is Cooking the Planet and Making One Man Very Rich

  The City of London Is Hiding the World’s Stolen Money

  Be sure to follow me on Twitter.

• What If the Stock Market Were a Bond?
  Eddy Elfenbein, October 11th, 2021 at 2:45 pm

  Here’s an update to one of my more off-the-wall ideas. I was curious to see what the historical performance of the stock market looks like, but in the form of a bond.

  Crazy? Let me explain.

  I took all of the historical market performance of the Wilshire 5000 (including dividends) and invented a hypothetical long-term bond that matched the market’s daily gains step-for-step.

  I assumed that it’s a bond of infinite maturity and pays a fixed coupon.

  There’s one hitch, though. I have to choose a starting yield-to-maturity for the beginning of the data series in December 1970. So this isn’t a completely kosher experiment because the starting point is based on my guess.

  If I choose a number that’s too high, the historical performance wouldn’t be able to keep up, and the yield-to-maturity would grow higher and higher and soon leave orbit. Conversely, if my starting YTM is too low, the yield would gradually get pushed down to microscopic levels.

  Fortunately, the data makes my job easy. After five decades, the window I have to work with is pretty narrow. Starting with 10% is too high, and 8% is too low. After playing with the numbers, I finally settled on 8.85%.

  Even though this “bond” is completely make-believe, it reflects what the actual stock market really did for the past 50 years. It’s the same old stock market but it’s expressed in the form of a bond. Through Friday, the “bond’s” yield stood at 1.81%.

  Here’s what the actual stock market looks like, expressed in the form of a bond. For comparison, I added Moody’s AAA Bond Index (in red). That series starts in 1983.

  

  Here’s the same chart but just the last eight years.

  

  It’s been nearly one year since the black line was higher than the red. When bonds have yielded more than stocks (red higher than black), the stock market has returned an average annual gain of 2.3%. But when stocks yield more than bonds (black higher than red), the stock market has returned an average annual gain of 29.6%.

• Tennessee Celeste Claflin: Wall Street Trailblazer or Scam Artist?
  Eddy Elfenbein, October 11th, 2021 at 2:09 pm

  Sometimes American history can be downright surreal.

  In 1870, the first brokerage firm owned by women opened its doors in New York. Located at 44 Broad St., some two blocks from the Stock Exchange, it was thronged its first day by men who had come to gawk at the show. Its proprietors, the sisters Victoria Woodhull and Tennessee Claflin, wore trousers instead of petticoats, smoked, and posted a sign above the door: “Gentlemen will state their business and then retire at once.” Strong feminists and publishers of a women’s-liberation broadsheet that ran for six years and sold 20,000 copies a day, they also amassed a respectable list of clients who were themselves primarily women. One of the male visitors came away pleasantly surprised: “They know a thing or two,” he was heard to have said.

  An important blow for women’s rights? A harbinger of the strong female executives of today?

  Well, that depends on who you ask.

  If that person were, for example, one of the townspeople in her native Columbus, Ohio, he or she would probably be skeptical. It seems that the girls’ father, Buck Claflin, paraded Tennessee rather shamelessly in front of the locals, first as a promoter of beauty treatments, then as a child medium. That’s right, a medium. Apparently, her “consultations” frequently netted her a hundred dollars a day. Later, when Tennessee matured and her beauty attracted many gentleman callers, her consultations became something else entirely. Her “spiritual services” were widely regarded as a front for prostitution. After the end of the Civil War, Tennessee wandered through the South, providing comfort to the defeated and the despondent.

  On the other hand, if you were to ask Cornelius Vanderbilt, whose lover Tennessee became in the late 1860s, he would no doubt have wonderful things to say about the healing effects of her attentions, for which he paid handsomely. He was evidently sufficiently enamored of her to give her the financial backing she needed for her brokerage firm, though not enough to forge a more lasting union (he married a woman from his own class in 1868). After his death, Tennessee was paid $100,000 by the family not to appear at a hearing where the will would be disputed. She took a cruise ship to England instead.

  Then again, if you were to ask Tennessee’s clients back at the brokerage firm, they might have still another view. According to contemporary accounts, it’s not clear that Tennessee and Victoria were actually trading stocks at all. Instead, they were using the pin money of the old ladies who invested with them to fund radical feminist weeklies. One critic quipped:

  So far the house has done little or nothing. The expenses are heavy, and funds must come from some source….It was currently reported when they first came on the Street, that Vanderbilt was to back them for any amount. Vanderbilt denies this, but reputable gentlemen, who have called on him in regard to business transactions, in which these ladies were concerned, have received his assurance, that it is all right….Beside their brokerage business, they practice in New York as clairvoyants. Whether they buy and sell stocks on that system is not known.

  Not even the feminists were entirely comfortable with Tennessee. Though she was invited to the 1871 Suffrage Convention after her sister testified before the House Judiciary Committee on women’s right to vote, it seems her beauty and flamboyant sexuality upset a number of the other ladies in attendance. Among the principal themes of Tennessee’s weekly were prostitution, venereal disease, abortion, and women’s right to sexual expression and satisfaction; needless to say, these topics were viewed as somewhat prejudicial to the sisterhood’s cause. Some even questioned whether she wasn’t more interested in promoting herself than women’s rights. At many private gatherings, she openly flirted with other women’s husbands.

  In later years, Tennessee ran for Congress in New York (she lost), became the Colonel of a black National Guard regiment, and moved to England to marry a wealthy Portuguese baronet.

  So: a medium, a prostitute, a kept woman dependent on rich men for her livelihood, a con artist and despoiler of other women, with a dubious commitment to women’s rights.

  I think NOW will have to look elsewhere for its historical forbears.

• Ross Stores Just Opened 28 New Locations
  Eddy Elfenbein, October 11th, 2021 at 11:54 am

  The stock market is up again today. This could be our fourth up day in the last five sessions. The S&P 500 is getting close to rising back above its 50-day moving average.

  While the stock market is open for Columbus Day, the bond market is closed as are many government offices. There are no major economic reports today.

  Ross Stores (ROST) said it opened 28 new locations in September and October.

  “This fall, we continued to expand our Ross and dd’s footprints across our existing markets as well as in our newer states. In addition to openings in California, Florida, and Texas, Ross strengthened its presence in Nebraska and Ohio while dd’s bolstered its store base in Illinois,” said Gregg McGillis, Group Executive Vice President, Property Development. “Looking ahead, we remain confident in our expansion plans and continue to see plenty of opportunity to grow to at least 2,400 Ross Dress for Less and 600 dd’s DISCOUNTS locations over time.”

  Shares of Ross have been uncharacteristically weak this year. The shares peaked at $134 in May. Lately, ROST has traded as low as $105. The company should report earnings again shortly before Thanksgiving.

  

• Morning News: October 11, 2021
  Eddy Elfenbein, October 11th, 2021 at 7:06 am

  China Property Bonds Dive as Evergrande Debt Holders Await Coupon Deadline

  How Evergrande’s Rags-to-Riches Founder Is Trying to Save His Empire

  The Zambian Economist at the Crossroads of Global Business

  Vietnam Factories Struggle to Supply Nike, Gap for Black Friday

  ‘It’s Not Sustainable’: What America’s Port Crisis Looks Like Up Close

  U.S. Earnings Seen Strong, But Supply Chains and Costs Worry Investors

  There Is Shadow Inflation Taking Place All Around Us

  Yellen Confident U.S. Congress Will Pass Minimum Global Corporate Tax

  The Pandemic’s Over for Big Banks. Now Comes the Hard Part.

  Goldman and JPMorgan Say Buy the Dip

  Five Traders Tell Us How to Survive a World of Disrupted Markets

  Nobel in Economics Goes to David Card, Joshua Angrist and Guido Imbens

  Let’s Be Serious, There’s No Such Thing As A $1 Trillion Coin

  Saudi Aramco Taps Banks for $12-14 Billion Gas Pipeline Loan

  Southwest Airlines’ Widespread Cancellations Disrupt Weekend Travel

  Be sure to follow me on Twitter.

• JP Morgan on ICE
  Eddy Elfenbein, October 8th, 2021 at 11:30 pm

  Barron’s passes on JP Morgan’s opinion on Intercontinental Exchange (ICE):

  ICE’s stock price has underperformed in 2021. However, we see ICE on the cusp of returning to repurchasing its stock for the first time since it announced the acquisition of Ellie Mae in Aug 2020. We estimate ICE has deleveraged enough to begin repurchasing shares in the fourth quarter and will initially divide its significant cash flow between repurchasing shares and deleveraging. ICE’s stock has outperformed in the past when it was actively repurchasing its shares. Furthermore, we see ICE’s businesses performing well, with energy-trading revenue growth solid, in particular, and with further upside potential, should the better activity levels seen more recently persist. ICE data growth is solid at 5% to 6%, and we see the potential for organic growth in ICE’s mortgage business potentially surprising to the upside, despite lower refinance activity. We maintain our Overweight rating and $139 price target.