Archive for January, 2023

• Morning News: January 10, 2023
  Eddy Elfenbein, January 10th, 2023 at 7:10 am

  China Is Edging Out the US and Europe in the Race for Clean Hydrogen

  Head of Battered German Utility Uniper to Resign After Nationalization

  G-7 Eyes Two Prices Caps for Russian Refined Petroleum Products

  Transcript: San Francisco Fed President Mary Daly at WSJ Live Q&A Event

  Biden Administration Plans to Ease Rules for Income-Based Student-Loan Forgiveness

  Wall Street Is Down on Corporate America

  Markets Are Underestimating Inflation Again, BlackRock and Fidelity Warn

  Jamie Dimon Says Fed May Need to Hike Interest Rates Beyond 5%

  U.S. Banks Get Ready for Shrinking Profits and Recession

  Dalio’s Bridgewater Cements Rank in 2022 as Top Foreign Hedge Fund in China

  Coinbase Eliminates 20% of Staff in Latest Round of Layoffs

  As Infrastructure Money Lands, the Job Dividends Begin

  White-Collar Recession: Why Job Cuts Are Hitting Professional Workers

  Goldman Sachs Bankers Have Nickname for Layoff Bloodbath Planned by CEO

  The Law That Made Social Media Possible Faces a Supreme Court Showdown

  Microsoft Considers $10 Billion Investment in ChatGPT Creator

  Disney Is Bringing Employees Back Four Days a Week

  Tesla Has a Major Problem That’s Bigger Than Elon Musk’s Twitter Hijinks

  Failure of Britain’s First Space Launch Is a Setback to Emerging Industry

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• Morning News: January 9, 2023
  Eddy Elfenbein, January 9th, 2023 at 7:09 am

  Goldman Sachs Is Cutting Up to 3,200 Employees this Week as Wall Street Girds for Tough Year

  iPhone Exports from India Double to Surpass $2.5 Billion

  China, a Pioneer in Regulating Algorithms, Turns Its Focus to Deepfakes

  Developing Nations Aren’t Ready for EVs—Unless They Are Made in China

  Angry Tesla Owners Swarm Showrooms in China After Missing Price Cuts

  Public Transit Goes Off the Rails With Fewer Riders, Dwindling Cash, Rising Crime

  Opposite Neel Kashkari’s Analysis, ‘Surge Pricing’ Has Nothing to Do with Inflation

  Morgan Stanley Warns US Stocks Risk 22% Slump

  Goldman to Cut About 3,200 Jobs This Week After Cost Review

  Alibaba Stock Surges After Jack Ma Gives Up Control of Ant Group

  Tech Industry Reversal Intensifies With New Rounds of Layoffs

  Getting Rid of Remote Work Will Take More Than a Downturn

  50 Companies to Watch in 2023

  Mega Bonuses of 50 Months’ Salary Handed Out by Shipping Firm

  Lina Khan’s Non-Compete Favor to Big Labor

  Facebook’s Bridge to Nowhere

  Noma, Rated the World’s Best Restaurant, Is Closing Its Doors

  CES 2023: All the Cool, Crazy and Cute Tech We Found in Las Vegas

  The Dystopia We Fear Is Keeping Us From the Utopia We Deserve

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• December Jobs Report
  Eddy Elfenbein, January 6th, 2023 at 8:34 am

  The government said that the U.S. economy created 223,000 net new jobs last month. Wall Street had been expecting 200,000. The unemployment rate fell to 3.5%.

  Average hourly earnings were up 0.3%. Year-over-year, average hourly earnings were up 4.6%.

  The labor force participation rate was 62.3%. The broader U-6 rate was 6.5%.

• Morning News: January 6, 2023
  Eddy Elfenbein, January 6th, 2023 at 7:03 am

  Eurozone Inflation Eases on Lower Energy Prices

  Russia Looks to Press Big Firms for More Cash as War Costs Mount

  The US Keeps Offering China Its Covid Vaccines. China Keeps Saying No

  The World’s Love Affair With Japanese Cars Is Souring

  U.S. EV Sales Jolted Higher in 2022 as Newcomers Target Tesla

  Tesla Now Over 40% Cheaper in China Than US as Prices Cut Again

  Mercedes-Benz Plans to Build U.S. Electric Car Charging Network

  U.S. Trade Deficit Narrowed Sharply in November as Global Demand Cooled

  Even a Soft Landing for the Economy May Be Uneven

  December Jobs Report to Show Labor Market’s Strength as 2022 Closed

  U.S. Moves to Bar Noncompete Agreements in Labor Contracts

  How to Be a Better Investor in 2023

  Said Haidar Streaks Ahead of Macro Hedge Funds With 193% Gain

  ChatGPT Creator in Investor Talks at $29 Billion Valuation

  Salesforce Guts Tableau After Spending $15.7 Billion in 2019 Deal

  Southwest’s Meltdown Could Cost It Up to $825 Million

  Facebook Wanted Out of Politics. It Was Messier Than Anyone Expected.

  Jeff Bezos Could ‘Pull a Bob Iger’ and Return as Amazon CEO

  Bed Bath & Beyond Warns of Potential Bankruptcy

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• Morning News: January 5, 2023
  Eddy Elfenbein, January 5th, 2023 at 7:03 am

  BOJ’s Policy Tweak Hasn’t Led to Lending Windfall, Mizuho Head Says

  France’s Le Maire Says Inflation, Public Finances Key Challenges

  How a Texas Border City Is Shaping the Future of Global Trade

  Fed Official Compares Inflation to Uber Surge Pricing

  Fed Officials Fretted That Markets Would Misread Rate Slowdown

  Why Republicans Probably Won’t Tank the Economy to Stick It to Biden

  Good News on Taxes Came Too Late for Many SPACs

  Supply Problems Hurt Auto Sales in 2022. Now Demand Is Weakening.

  Tesla Bulls Brace for a Rough Year Ahead

  US Job Growth to Slow or Even Reverse After Near-Record Year

  Amazon Layoffs to Hit Over 18,000 Workers, the Most in Recent Tech Wave

  Samsung’s Consumer-Products CEO Expects Tech Slump to Persist

  Meta’s Ad Practices Ruled Illegal Under E.U. Law

  Why It’s Hard for Apple to Make iPhones Outside of China

  The Huge Number of Small Breweries Creates a Beer Glut

  FTX’s Former Top Lawyer Aided U.S. Authorities in Bankman-Fried Case

  Silvergate Raced to Cover $8.1 Billion in Withdrawals During Crypto Meltdown

  20 Great Stock Ideas For 2023 From Top-Performing Fund Managers

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• Morning News: January 4, 2023
  Eddy Elfenbein, January 4th, 2023 at 7:03 am

  The UK Recession Will Be Almost as Deep as That of Russia, Economists Predict

  Why Are Energy Prices So High? Some Experts Blame Deregulation.

  Renewable Companies Strive for 24-Hour Power

  Job-Openings Report to Give Snapshot of Labor Demand

  Jack Ma’s Ant Wins Approval for $1.5 Billion Capital Plan

  Salesforce Plans to Cut 10% of Jobs After Customers Pull Back

  Big Tech Is in Crisis. That’s Exactly What It Needed.

  Video Game Workers Get a Union Foothold at Microsoft

  CES 2023: Annual Tech Show Kicks Off as Hardware Startups Face an Innovation Crunch

  New Hedge Fund Soars 163% Betting Everything Is Going Down

  Crispin Odey’s Hedge Fund Soars 152% in Best Ever Year on Inflation Bet

  Investing Novices Are Calling the Shots for $4 Trillion at US Pensions

  Cathie Wood Bought Tesla During Biggest Rout in Two Years

  Banks Should Be More Cautious on Crypto Contagion Risks, U.S. Regulators Warn

  Ex-CFO Pleads Guilty to Stealing from SPACs to Trade Meme Stocks, Cryptocurrencies

  Southwest Airlines Offers 25,000 Points to Passengers Hit by Travel Meltdown

  Don’t Blame the Weather for Flight Delays. Here’s Who’s at Fault

  How McDonald’s Won Russia—and Then Lost It All

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• CWS Market Review – January 3, 2023
  Eddy Elfenbein, January 3rd, 2023 at 6:48 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.”)

  Happy 2023!

  If you haven’t had a chance to see it, here’s our 2023 Buy List. I’m proud to say that after one day, we’re already beating the market this year. The bad part is that like much of 2022, we’re down, just by less than everybody else.

  I’ll be honest with you, I’m not sorry to see 2022 go. It was a difficult year for investors.

  Last year was the fourth-worst year for the stock market in the last 80 years. Some of that, I should add, is due to the calendar effect. The market peaked on the first day of trading in 2022, and things got worse from there.

  Investors were also fooled by several bear-market rallies. It seems like the market knows exactly when to lure you in and then hit you with another downturn.

  

  The major investing story this past year was the resurgence of inflation combined with the Federal Reserve’s interest rate hikes. In retrospect, it’s alarming how slow the Fed was to realize the scope of the problem.

  I don’t expect the Fed to get everything right, but even after the evidence became clear, the Fed was still slow to react. I’ll give you an example. At the December 2021 meeting, the Fed released its economic projections for 2022. The FOMC members expected inflation to be just 2.6% in 2022. They weren’t even close.

  The Fed finally raised interest rates in March 2022, but even that was by just 0.25%. They still didn’t get it. Only after the issue became unavoidable did the Fed snap into action. For the year, the Fed raised rates seven times, and four of those times were by 0.75%.

  The Fed’s target range for interest rates is 4.25% to 4.50%, and that will most likely rise another 0.25% in four weeks.

  The Fed consistently fights its current battle with what it should have done in its previous battle. When Covid appeared, the Fed and the Federal government responded massively.

  I suspect they were trying to avoid the Fed’s slow response to the Financial Crisis. If you recall, Ben Bernanke famously said that the subprime mess was “contained.” The Fed got the message, eventually.

  But in 2020, the Fed jumped into action and thanks to the Fed cutting interest rates to near 0% in 2020, that effectively took risk out of the market. Investors responded as you would guess—they frantically bid up all the risky areas of the market. “Why not? The Fed has our back!” was the reasoning.

  Shaky stocks like Peloton (PTON) and Zoom (ZM) zoomed. Zoom did so well that shares of ZOOM also rallied even though it was the wrong ticker. That was the thinking at the time.

  Not only that, but areas like Crypto and NFTs soared. Once the Fed started to raise rates, then the high-risk rally got undone. It’s not over. Even today, shares of Tesla (TSLA) fell to another 52-week low.

  A little over a year ago, Tesla was going for $414 per share. Today it got down to $105 per share. The losses are so bad that Elon Musk became the first person to lose $200 billion. It’s the greatest loss of fortune of anyone in history. (Don’t worry about Elon, he still has plenty left.)

  Our Buy List vs. the S&P 500

  Let’s look at some market numbers for 2022. Last year, the S&P 500 lost 19.44%. If we include dividends, then the index was down 18.11%. Our 2022 Buy List was down 10.42%. Including dividends, we were down 9.28%.

  If there’s a silver lining to 2022, it’s that the selling was largely concentrated away from the sectors of the market that we prefer. Just by looking at the stats, you can see how much better safe stocks did last year.

  For the year, the S&P 500 Growth Index (all these numbers are with divs) was down by 29.41%. The S&P 500 Value Index lost only 5.22%. The S&P 500 High Beta Index was down by 20.31% while the S&P 500 Low Vol Index lost 4.59%. The S&P 500 High Dividend Index fell only 1.11%. Safety was in last year.

  S&P divides the S&P 500 into 11 different sectors. Here’s how the sectors performed last year.

  

  Energy was the big winner. Both Exxon (XOM) and Chevron (CVX) are poised to make a combined profit of $100 billion this year.

  I generally steer clear of making economic predictions, but I’m going to make a few qualified exceptions. The first is that I think it’s very likely the U.S. economy will enter a mild recession this year. The timing may take longer than people think, but that is the safe assumption.

  By no means do I encourage investors to cut and run. In fact, times like these are often very good times to invest. That’s what bear markets are good for. I’m most concerned about the weakening housing market. Unfortunately, the housing market always finds itself placed between the Federal Reserve and the economy. When the Fed fights off inflation, the housing sector is collateral damage. That’s what’s happening right now.

  From Reuters a few days ago:

  U.S. single-family homebuilding tumbled to a 2-1/2 year low in November and permits for future construction plunged as higher mortgage rates continued to depress housing market activity.

  The dour report from the Commerce Department on Tuesday followed on the heels of news on Monday that confidence among homebuilders plummeted for a record 12th month in December. The housing market has borne the brunt of the Federal Reserve’s fastest interest rate-hiking cycle since the 1980s as the U.S. central bank wages war against inflation.

  I also expect the U.S. dollar to lose some steam this year. The greenback has had a good run from early 2021 until a few months ago, but now the European and American economies are out of sync. Our friends across the pond are still hiking and the Fed could be looking to cut rates before the end of the year. In fact, the dollar has already started to pull back since November. A weaker dollar could help cushion the blow of any weaker growth we may face.

  Stock Focus: Dollar General

  Speaking of the dollar, that reminds me of this week’s stock which is Dollar General (DG). This has been a remarkably successful company and it has a remarkably simple business model. You can get basic items at a discount.

  I came close to adding DG to this year’s Buy List as a good replacement for Ross Stores (ROST). What troubled me was its recent earnings report which showed that Dollar General still has supply chain issues. Still, this is a very good company, and it may be worth a closer look.

  First, let’s look at how successful DG has been. In 2009, the company IPO’d at $21 per share. Last March, it got to an all-time high of $262 per share. That works out to a return of more than 21% per year for over a decade.

  

  There are now more 18,000 locations across the United States. Dollar General says it has more brick-and-mortar locations than any other retailer in the country. The company was founded in Kentucky in 1939. Even today, the company has a strong southern focus. There are currently more stores in Mississippi than in New York.

  Dollar General didn’t get the present name until 1955. The company IPO’d for the first time in 1968. It was later taken private in 2007, slimmed down and then IPO’d again. The company now has a market value of $55 billion.

  A few years ago, the company was part of the great Dollar Bidding War of 2014. This involved Dollar General, Dollar Tree and Family Dollar. Dollar General offered nearly $10 billion to buy Family Dollar. The bid was rejected, and Dollar Tree agreed to merge with Dollar General. Honestly, I’m glad Dollar General lost.

  It wasn’t a total loss. Dollar General picked up Dollar Express which was a spinoff from the Family Dollar-Dollar Tree deal.

  Dollar General works hard to get the lowest possible prices for its customers. DG’s operating margin runs about 10%. This business is all about cost control. Dollar General is also a good business when consumers are worried about inflation.

  Dollar General currently pays a dividend 55 cents per share. That’s a tiny yield but I expect to see the dividend increased soon.

  Last month, DG reported its fiscal Q3 results. Net sales were up 11.1% to $9.5 billion and same-store sales were up by 6.8%. EPS rose 12% to $2.33 per share.

  The problem was that that was an earnings miss of 20 cents per share. It seems that Dollar General continues to face supply chain issues. This has been a big issue for them. Last year, it helped snap the company’s 31-year run of higher same-store sales.

  Along with the earnings report, Dollar General slashed its Q4 earnings range to $3.15 to $3.30 per share. Wall Street had been expecting $3.66 per share. The stock fell more than 7% on the news.

  I’m going to continue watching Dollar General, but I want to see these problems get behind them before I can consider it a good investment. It’s a great business and it’s a good example of a stock that’s probably not fully valued due to its capacity for growth.

  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 3, 2023
  Eddy Elfenbein, January 3rd, 2023 at 7:02 am

  Germany Open to Seizing Russian Assets to Help Ukraine Rebuild

  Tourism and Manufacturing Fight for the Future of Power in Europe

  Exxon, Chevron Focus on Oil Projects in the Americas

  The Law That Brought Down Mob Bosses Is Being Turned Against the Oil Industry

  Japan’s Business Owners Can’t Find Successors. This Man Is Giving His Away

  Why Japan’s Sudden Shift on Bond Purchases Dealt a Global Jolt

  Here’s (Almost) Everything Wall Street Expects in 2023

  Get Ready for the Richcession

  Biden Caps Two Years of Action on the Economy, With New Challenges Ahead

  Take Warren Buffett’s Advice: Don’t Buy Any Stock in 2023 Unless It Passes This Test

  More Bosses Order Workers Back to the Office as Job Market Shifts

  Wave of Job-Switching Has Employers on a Training Treadmill

  General Electric Set to Spin Off Health Unit—Putting Focus Back on Power Division

  SpaceX Valued at $137 Billion in Latest Funding Round, CNBC Says

  Tesla Car Sales Grow Slower Than Expected, Amplifying Concerns

  Tesla Fined in Korea for Alleged False Advertising

  Elon Musk Has Lost a Bigger Fortune than Anyone in History

  How Bankman-Fried Negotiated His Way Out of Jail

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• Morning News: January 2, 2023
  Eddy Elfenbein, January 2nd, 2023 at 7:01 am

  Lula Is Back in Brazil, Promising Prosperity Amid Global Economic Pain

  Russia’s War on Ukraine Worsens Global Starvation

  IMF Chief Georgieva Warns of ‘Tough Year’ for World Economy

  ECB’s Nagel Says More Action Needed to Curb Price Expectations

  Yen Starts Year on Front Foot as Traders Eye Dollar Cliff Edge

  Why China’s Economy Faces a Perilous Road to Recovery

  ‘OK, Mexico, Save Me’: After China, This Is Where Globalization May Lead

  Canada Is Banning Some Foreigners from Buying Property After Home Prices Surged

  Soaring Costs Threaten U.S. Offshore-Wind Buildout

  Shift to EVs Triggers Biggest Auto-Factory Building Boom in Decades

  Startups End a Bruising 2022, Stare Down Another Challenging Year

  The Year Big Tech Stocks Fell From Glory

  U.S. Pours Money Into Chips, but Even Soaring Spending Has Limits

  What TikTok Told Us About the Economy in 2022

  Future Consumption Will Make the Prosperous Present Seem Deprived by Comparison

  Dubai’s Alcohol Gambit

  Can Southwest Airlines Buy Back Its Customers’ Love?

  Troubles at Sam Bankman-Fried’s Alameda Began Well Before Crypto Crash

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