Archive for January, 2022

• Fascinating MLK Interview
  Eddy Elfenbein, January 15th, 2022 at 5:39 pm

  From 1967:

• Sherwin-Williams Lowers Guidance
  Eddy Elfenbein, January 14th, 2022 at 10:28 am

  The big banks kicked off Q4 earnings season this morning, and so far, they’ve soundly beaten expectations. Wells Fargo (WFC) earned $1.38 per share which was 26 cents more than Wall Street had been expecting.

  Citigroup’s (C) beat was even bigger. For Q4, the bank made $1.98 per share. That beat by 61 cents per share.

  BlackRock (BLK) made $10.42 per share compared with estimates of $10.15 per share.

  The only dud was JP Morgan (JPM). They made $2.86 per share versus estimates of $3.01 per share. Still, the bank had net income of $10.4 billion. The shares are down about 5% this morning.

  Sherwin-Williams (SHW) won’t report earnings until January 27, but the paint people warned that results will be below expectations. Sherwin blamed “slower than expected improvement in raw material availability and COVID-related labor headwinds in December.”

  The company released preliminary results. They said Q4 sales rose by 6.1% and earnings were $1.15 per share which includes 20 cents of acquisition-related amortization expenses. Wall Street had been expecting $1.69 per share. For the year, that brings earnings to $8.15 per share.

  “While we met our consolidated fourth quarter net sales guidance and demand remains robust, we are disappointed in our weaker than expected earnings results in the quarter,” said Chairman, President and Chief Executive Officer, John G. Morikis. “Our lower than expected earnings relative to our prior guidance is related to a shortfall in The Americas Group, where sales were below our guidance due to slower than expected improvement in raw material availability and COVID-related labor headwinds in December. While availability of some raw materials has improved slightly, others including select resins and additives specific to our professional contractor products remain in tight supply. Logistics and transportation issues have further impacted the supply chain. Additionally, we faced meaningful labor challenges in The Americas Group in December related to the COVID Omicron variant, as our workforce, including store managers, field sales reps and drivers, experienced reduced staff availability and store hours in some locations. Many of our suppliers and customers have also reported labor-related impacts due to the ongoing COVID resurgence. Sales in our Consumer Brands Group exceeded expectations, driven primarily by non-paint products. Performance Coatings Group’s top line results also exceeded expectations and were strong in all businesses and regions.

  “As we enter 2022, demand remains strong across the majority of our end markets, though we expect raw material availability and COVID-related issues to persist through the first quarter. Raw material and other costs remain elevated, and we continue to respond with pricing actions in every Group to offset higher costs, including a 12% price increase in The Americas Group effective February 1st. We have continued to invest in our business, including adding 50 million gallons of incremental architectural capacity that is now online. Additionally, we opened 79 paint stores in the U.S. and Canada during 2021, including 32 in the fourth quarter. We remain highly confident in our strategy, our people, and our ability to emerge as an even stronger Company following the current near-term disruptions.”

  SHW is currently down about 3%.

• Podcast with Trey Lockerbie
  Eddy Elfenbein, January 14th, 2022 at 9:59 am

  Here’s a recent podcast I did with Trey Lockerbie:

• Morning News: January 14, 2022
  Eddy Elfenbein, January 14th, 2022 at 7:02 am

  Oil Producers Aren’t Keeping Up With Demand, Causing Prices to Stay High

  Critics Say I.M.F. Loan Fees Are Hurting Nations in Desperate Need

  Markets Could Reimpose Discipline on Euro Zone Debt Soon – German Official

  Biden Will Nominate Three New Fed Officials

  Shopping, Planes and Khloé Kardashian: How Private Debt Helps Power the Global Economy

  The Secret Triumph of Economic Policy

  What’s Behind the Tech Wreck? Hint: It’s Not All About Rates

  As Fintech Eats Into Profits, Big Banks Fight Back in Washington

  Cathie Wood Outflows Grow as Diehard Fans Face Biggest Test

  JPMorgan Falls on Trading Revenue Slump, Muted Loan Growth

  Wells Fargo Profit Beats Estimates on Cost Cuts, Loan Demand

  BlackRock Profit Beats Estimates as Assets Cross $10 Trillion

  Dogecoin Soars 18% After Elon Musk Says It Can Be Used to Buy Tesla Merchandise

  Unionizing Starbucks, Inspired by Bernie Sanders

  Netflix Needs New Subscribers. Its Korean Playbook Is Its Secret Weapon.

  Google Doubles Down on the Office, Buying London Site for $1 Billion

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• Morning News: January 13, 2022
  Eddy Elfenbein, January 13th, 2022 at 7:07 am

  Russia Has Worsened Europe’s Gas Crisis, IEA Chief Birol Says

  For Macron and France, It’s the Economy, Stupide

  Is Gruyère Still Gruyère if It Doesn’t Come From Gruyères?

  Shipping Congestion Is Growing at World’s Biggest Port

  Libor, Long the Most Important Number in Finance, Dies at 52

  Demand for Chocolate Fuels Surge in Price of Cocoa

  Consumer Prices Popped Again in December, Casting a Shadow Over the Economy

  Fed’s ‘Most Important Task’ Is To Control Inflation, Brainard Says

  What Inflation and Rate Hikes Mean for Your Portfolio

  Facebook Judge Rejects Argument for FTC Chair’s Recusal: ‘Courts Must Tread Carefully’

  TSMC Sees Multi-Year Growth Ahead, to Boost Chip Spending in 2022

  Tesla Is Inching Dangerously Close To Taking The Luxury Car Sales Throne

  Automakers Say They Won’t Let Tesla Steal the Truck Race

  Smart Headlights Are Finally on Their Way

  The Florida Financiers Buying Up Europe’s Football Teams

  C.E.O.s Were Our Heroes, at Least According to Them

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• Buy and Hold and Hold and Hold and ….
  Eddy Elfenbein, January 12th, 2022 at 5:23 pm

  From David Baskin’s blog:

  We like the style usually called “buy and hold”. It is based on using fundamental research to buy stocks that we think we will want to hold for a long time. Once, when asked what his ideal holding period was for a stock, Warren Buffett answered “forever”.

  Eddy Elfenbein, who runs a site and newsletter called Crossing Wall Street creates a stock buy list of twenty-five names every new year, and then holds those stocks for the entire year. I am sure he agonizes over every name on the list, knowing that he will be looking at those stocks each day for 12 whole months. (By the way, he does a terrific job and his newsletter is well worth reading.) He is a good example of a “buy and hold” investor.

  But imagine if you had to hold every stock you bought for five years. No mulligans, no do-overs, no substitutions. You buy it, you own it for sixty months. What kind of portfolio would you build?

  Check out the whole thing.

• December CPI Report
  Eddy Elfenbein, January 12th, 2022 at 8:47 am

  The December CPI report is out. For the last month of 2021, headline inflation increased by 0.47% and the core rate increase by 0.55%.

  Over the course of 2021, the headline CPI rose by 7.12%. The core rate rose by 5.49%.

  That’s the highest 12-month headline rate since June 1982. It’s the highest 12-month core rate since February 1991.

  Shelter costs, which make up about one-third of the total rose 0.4% for the month and 4.1% for the year. That was the fastest pace since February 2007.

  Used vehicle prices, which have been a major component of the inflation increase during the pandemic due to supply chain constraints that have limited new vehicle production, rose another 3.5% in December, bringing the increase from a year ago to 37.3%.

  Conversely, energy prices mostly declined for the month, falling 0.4% as fuel oil was down 2.4% and gasoline fell 0.5%. Still, the complex as a whole rose 29.3% in the 12-month period, including a gain of 49.6% for gasoline.

  Here’s a look at the seasonally-adjusted monthly headline rate of inflation. Of the last 10 months, December had the eighth-highest inflation rate.

  

• Morning News: January 12, 2022
  Eddy Elfenbein, January 12th, 2022 at 7:03 am

  Turks Pile Into Bitcoin and Tether to Escape Plunging Lira

  China’s Guangxi Region Reopens Border for Trade With Vietnam Province

  World’s Worst-Performing Bank Lent Billions to China Evergrande

  A People’s Fed? It’s Starting to at Least Look That Way

  Central Banks’ Inflation Bets Come Due in 2022

  Price Inflation Is Expected to Pop Again as Policymakers Await an Elusive Peak

  The Psychology of 7% Is Hiding Other Inflation Data

  The Market Is Too Serene About Inflation

  Is Government Money Creation Actually Enabling Deficit Spending?

  Goldman Sachs Clients Favor European Stocks as U.S. Risks Grow

  Cathie Wood Is Expecting a ‘Bloodbath’ in This Segment of the Market

  Time to Buy: Retail Investors Swoop In When Stocks Falter

  Why Grocery Store Shelves Are Bare. Again.

  DirecTV and Dish in Merger Talks Once Again Despite Past Antitrust Concerns

  Delta Air Lines and A Union Spar Over Isolation Periods for Sick Workers

  Travel Is ‘Roaring Back’ — But the Industry Might Not Be Ready for a Boom

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• CWS Market Review – January 11, 2022
  Eddy Elfenbein, January 11th, 2022 at 7:12 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 Great Resignation

  On Friday, the government released the jobs report for December. According to the Bureau of Labor Statistics, the U.S. economy created 199,000 net new jobs last month.

  In normal times, that’s a pretty good number, but in the post-lockdown era, that’s not so good. It was less than half of Wall Street’s expectation of 422,000.

  This was especially disappointing because two days earlier, the ADP jobs report doubled expectations. Also, the weekly jobless claims have continued to be near 52-year lows. I should mention that ADP uses real-time info. The government’s numbers will be revised in the months ahead. Sometimes these revisions can be quite large.

  Despite the poor jobs figure, the unemployment rate fell to 3.894%. That’s lower than the unemployment rate for every single month during the entire 1970s, 1980s and 1990s.

  

  (Your humble editor tweeted out that fact and it was retweeted by White House Chief of Staff Ronald Klain. Naturally, this demonstrates my immense power and influence.)

  For December, average hourly earnings rose by 0.6%. In the last year, average hourly earnings are up 4.7%. Again, that sounds impressive until you realize that it’s less than the rate of inflation. The sad reality is that many workers are seeing a decrease in their standard of living.

  Among business sectors, leisure and hospitality added 53,000 jobs, professional and business services added 43,000 and manufacturing added 26,000. One encouraging sign is that the broader U-6 unemployment rate fell 0.4% to 7.3%.

  The labor force participation rate increased slightly to 61.91%. That’s the highest since March 2020. While more folks are gradually returning to the labor market, the U.S. continues to experience the Great Resignation.

  What’s happening is that many folks near retirement age have decided to go ahead and retire right now. I’m sure many near-retirees have done well with the stock market, so retiring now may make sense for them. Who needs to deal with the daily rat race especially with Covid? During November, 4.5 million Americans quit their jobs. That’s an all-time record.

  The labor force participation rate among prime-working-age adults (age 25 to 54) is holding up fairly well but the real decrease has come among people 55 and over. I suspect that we will see the labor force continue to expand. As my friend Gary Alexander wrote, “Covid and its consequences brought us a record level of savings, government benefits, and stimulus checks, which have now run dry and so work income is once again necessary.”

  The Market Is Nervous about Tomorrow’s Inflation Report

  The bond market wasn’t exactly placated by the jobs report. In fact, the futures market now believes that the Federal Reserve will hike interest rates four times in 2022. Futures traders now put a 21% chance on a fifth hike this year. I can’t say I’m surprised. The first rate hike could come as soon as March.

  Nerves on Wall Street were soothed today during Federal Reserve Chairman Jerome Powell’s confirmation testimony. There weren’t any surprises. Powell said that the economy is ready for tighter monetary policy. He also said that the economy will only have “short-lived” impacts from Covid.

  The markets liked what they heard. Actually, this was the second day in a row the market saw some big reversals. Yesterday, the Nasdaq dropped 2.7% before rallying 2.8% off its low. The index closed slightly in the black yesterday. Today we saw much the same. The Nasdaq initially fell by 0.7% but rallied by more than 2.1% off its low.

  

  What we’re seeing is some pushback from the trend that I’ve talked so much about. During much of November and December, low volatility stocks strongly outperformed high beta. Lately, high beta is getting its revenge. Today, the S&P 500 High Beta index rose by 1.96% while the S&P 500 Low Vol Index fell 0.20%. I don’t expect this to last. The risky stocks still need to lag some more before they’re anywhere close to being reasonably priced.

  The market may soon get a lot more interesting. This Friday is the unofficial start of the Q4 earnings season. Citigroup, Wells Fargo and BlackRock are due to report earnings. The stock market will be closed on Monday in honor of Dr. Martin Luther King’s birthday. Then on Tuesday, Goldman Sachs is scheduled to report. I suspect we’ll see very good results.

  Tomorrow, the government will release the December CPI report. I think a lot of folks will be on pins and needles for this report. The inflation numbers last time were not good. For November, headline inflation rose by 0.78% while core inflation increased by 0.54%. Over the prior 12 months, headline inflation increased by 6.88% and core inflation rose by 4.96%.

  These are some of the highest numbers we’ve seen in decades, and they’ve completely discredited the Fed’s line that it will be transitory. I wouldn’t be surprised if headline inflation for 2021 was close to 7.5%.

  For tomorrow, Wall Street expects to see December headline inflation of 0.4% and core inflation of 0.5%. So far, the Fed has only hinted of rate hikes, but inflation may turn out to be a difficult dragon to slay in 2022.

  The Fed has come under additional scrutiny lately due to Vice-Chairman Richard Clarida’s stock trades. In February 2020, Clarida sold some mutual funds that he bought back shortly thereafter at the same time the Fed was preparing its response to Covid. Clarida announced that he’s going to resign from the Fed at the end of this week. His term expires at the end of January.

  Now let’s look at some good news from one of my favorite Buy List stocks.

  Danaher Guides Above Expectations

  We had some good news today from Danaher (DHR), one of our Buy List stocks. This is particularly welcome news because the shares had been a little weak lately. In any event, CEO Rainer M. Blair said that Q4 core revenue growth will be above the company’s previous guidance.

  Let’s take a step back. In October, Danaher said it expected Q4 core revenue growth “in the low-to-mid teens percent range.” Now the company expects core revenue in the high teens. For Q4 non-core revenue growth, Danaher now expects “high-teens to low-twenties.”

  Mr. Blair stated, “Our team delivered an outstanding finish to 2021, with better-than-expected results across all three reporting segments led by Life Sciences and Diagnostics. We were particularly pleased with the strength of our base business across the portfolio, which was up approximately 10% in the quarter. We also saw better than expected revenue growth in Cepheid’s molecular diagnostics business driven by both respiratory and non-respiratory testing demand.”

  Blair continued, “Our performance is a testament to the power of our portfolio and our team’s commitment to the Danaher Business System, and we are excited about the opportunities ahead to continue building long-term, sustainable value for our shareholders.”

  Danaher does so many things so well that it’s easy to overlook them. Danaher has beaten earnings for the last 26 quarters in a row. For the last six quarters, it’s beaten expectations by more than 10%.

  We first added Danaher to our Buy List in 2017. Since then, DHR has gained more than 292% for us. Including dividends, it’s up 302%. That makes it a four-bagger for us.

  Danaher will report its Q4 earnings on Thursday, January 27. Wall Street currently expects earnings of $2.48 per share.

  

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

  – Eddy

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• Morning News: January 11, 2022
  Eddy Elfenbein, January 11th, 2022 at 7:05 am

  Wary Global Bond Markets Brace for the Supply Floodgates to Open

  The Clashing Forces That Will Drive U.S. Inflation in 2022

  Is SEC’s Gary Gensler the Skunk at the Fintech Party or the Adult in the Room?

  Fed’s Bostic Says Three Hikes, Fast Balance Sheet Runoff Needed for Inflation Fight

  The Fed’s Vice Chair Resigns As Questions Mount About His Early-Pandemic Trades

  The I.R.S. Is Warning of A Messy Tax Season

  Economists Pin More Blame on Tech for Rising Inequality

  50 Company Stocks to Watch in 2022

  Flush With Cash, California Has Problems That Are No Quick Fix

  Workers Sick With Omicron Add to Manufacturing Woes. ‘The Hope Was That 2022 Would Get Better.’

  UBS Targets Less-Wealthy Customers With Advice by Device

  How Amazon’s Battle with Reliance for India Retail Supremacy Became A Legal Jungle

  Take-Two Pays Hefty Premium for Mobile Experiment

  Smart Guns Finally Arriving In U.S., Seeking to Shake Up Firearms Market

  Crocs Estimates Its Revenue Surged 67 Percent Last Year

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