Archive for February, 2023

• Morning News: February 17, 2023
  Eddy Elfenbein, February 17th, 2023 at 7:02 am

  Cash Crisis Hits Nigeria Cocoa Exports in Fresh Blow to World Supply

  ‘Boring is the New Sexy’ as UK’s Stock Index Closes Above 8,000 for the First Time

  Americans Have Nearly $1 Trillion in Credit Card Debt

  U.S. Households Lifting Economy After Being Stung by Inflation Last Year

  The Uneasy Dance Between the Markets and the Fed

  Why a Strong Economy Is Making Stock Investors Jittery

  BofA Says Says Hard Landing to Hit Stocks in Second Half

  The S&P 500 Is The Most Popular And Overpriced Benchmark In The World

  Lesser-Known Hedge Fund Boss Joins Ranks of Best Paid With 193% Gain

  Star Banker’s Disappearance Unnerves China’s Business Elite

  Crypto Fugitive Do Kwon Tapped Hoard of 10,000 Bitcoin Via Swiss Bank, SEC Says

  Susan Wojcicki, YouTube’s Longtime C.E.O., Says She Will Step Down

  The Extraordinary Exit of the Women of Silicon Valley

  Wall Street Brings Its Financial Engineering to English Football

  Microsoft Defends New Bing, Says AI Chatbot Upgrade Is Work in Progress

  Why China Didn’t Invent ChatGPT

  In a Violent America, Safety Becomes a Sales Pitch

  Barnes & Noble Takes Page From Amazon With $40-a-Year Membership Program

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• Morning News: February 16, 2023
  Eddy Elfenbein, February 16th, 2023 at 7:04 am

  The World’s War Machine Is Running Low on Ammunition

  ‘The World’s Largest Construction Site’: The Race Is On to Rebuild Ukraine

  China Hits Back at US with Sanctions on Lockheed, Raytheon

  Tesla’s Growing Competition in China Goes Beyond Just EVs

  A Tiny Puerto Rican Port Is Turning Into a Test Lab for Trade Fluidity

  Lael Brainard’s Fed Departure Could Leave Immediate Imprint on Inflation Fight

  US Rates May Be Heading Higher Than Wall Street or the Fed Think

  C.B.O. Warns of Possible Default Between July and September

  The U.S. Debt Ceiling and Markets: Gauging the Fallout

  This Is What Happens If the US Actually Hits the Debt Ceiling

  U.S. Retail Sales Rebounded Sharply in January

  The Retail C.E.O. Pipeline Is Running Dry

  A $6 Trillion Bond Wall Revives an Arcane Corner of Wall Street

  SEC Proposes Rule That Could Squeeze Crypto Platforms

  Crypto Investors Had Their Funds Frozen. Now They Might Have to Pay Taxes Too

  Fear Made John McAfee Rich. It Also Ruined Him

  From Math Camp to Handcuffs: FTX’s Downfall Was an Arc of Brotherhood and Betrayal

  America’s Priciest Neighborhoods Are Changing as the Ultra-Rich Move to Florida

  Magic: The Gathering Becomes a Billion-Dollar Brand for Toymaker Hasbro

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• Morning News: February 15, 2023
  Eddy Elfenbein, February 15th, 2023 at 7:04 am

  U.K. Inflation Eases to 10.1 Percent, but Food Prices Push Higher

  Ray Dalio Says China’s Winning Trade War With US, But a Clash Is Avoidable

  ASML Says Ex-Employee in China Misappropriated Chip Data

  Europe’s Energy Aid Tab Nears €770 Billion, Close to EU Covid Response

  Central Bankers in Bunkers Keep Ukraine’s War Economy Afloat

  A Big Breakup at the Federal Trade Commission

  Biden’s I.R.S. Nominee Will Be Grilled About $80 Billion Overhaul

  What Is Pushing the National Debt to Its Limit?

  As Lawmakers Spar Over Social Security, Its Costs Are Rising Fast

  El-Erian, Rogoff Say It’s Too Late to Fix Too-Low Inflation Target

  Mortgage Demand Drops as Interest Rates Bounce Higher

  The Outlook for Home Buyers This Spring: Not Terrible

  Goldman Says Consumer-Facing Credit Cards Never Became ‘Meaningful’ Part of Strategy

  Carmakers Are Pushing Autonomous Tech. This Engineer Wants Limits.

  Tesla to Open Some Superchargers to Other Vehicles, White House Says

  Health Startups Offer Diabetes Drugs Like Ozempic for Weight Loss With Little Oversight

  Netflix Shuns Live Sports but Embraces Sports Documentaries

  Black Women Are Banding Together to Leave America Behind. Here’s Why

  Poor, Busy Millennials Are Doing the Midlife Crisis Differently

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• CWS Market Review – February 14, 2023
  Eddy Elfenbein, February 14th, 2023 at 7:23 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.”)

  January Inflation Was Slightly Higher Than Expected

  Today was the day of the big inflation report, and numbers came in slightly higher than expected. This morning, the government said that inflation rose by 0.5% in January. Economists had been expecting an increase of 0.4%. Over the last 12 months, inflation has increased by 6.4%. That was 0.2% above expectations.

  The 12-month inflation rate ending in January was a teeny tiny bit lower than the 12-month rate for December. That means we can technically say that year-over-year inflation has declined for seven months in a row. Inflation peaked last June at 9.1%.

  

  The core rate, which excludes food and energy prices, rose by 0.4% in January. That was 0.1% higher than expected. Over the last 12 months, core inflation is running at 5.6%. While the core rate has been lower than the headline inflation, it’s been tougher to bring down. The 12-month core rate peaked in September at 6.6% and has now declined for four months in a row.

  Rising shelter costs accounted for about half the monthly increase, the Bureau of Labor Statistics said in the report. The component accounts for more than one-third of the index and rose 0.7% on the month and was up 7.9% from a year ago. The CPI had risen 0.1% in December.

  Energy also was a significant contributor, up 2% and 8.7%, respectively, while food costs rose 0.5% and 10.1%, respectively.

  Rising prices meant a loss in real pay for workers. Average hourly earnings fell 0.2% for the month and were down 1.8% from a year ago, according to a separate BLS report that adjusts wages for inflation.

  The takeaway is that inflation continues to fade, but it’s taking its time. The battle to beat inflation won’t be a quick one.

  Today’s inflation report didn’t have much of an impact on today’s trading. The S&P 500 fell by a minuscule amount. The real action was in the futures pits where traders bet on what the Fed will do. Traders think the Fed will now be more aggressive with its interest rate hikes.

  

  We can look at the price for interest-rate contracts to find the implied probability of what the Fed will do. It doesn’t mean the market is right, but it gives us a sense of what the market is thinking. Until today, the market had been thinking that the Fed was all talk.

  Right now, futures traders still think there’s a very high probability of another 0.25% rate hike next month, but traders also see another 0.25% rate hike coming in May. The odds of a May rate hike are now up to 85%.

  After that, it starts to get interesting. Thanks to today’s inflation report, traders now expect an additional rate hike in June. One month ago, the implied odds of a 0.25% rate hike in June were 6%. Now those odds are 55%. That’s all due to today’s report. Going out a few months, traders think there will be a rate cut by December. Previously, the market had been expecting two rate cuts before the end of the year.

  In plain English, today’s inflation report gives Jerome Powell and his friends at the Fed more cover to keep raising interest rates. The idea that the economy is about to tip over into a recession seems just a tad less likely. Or it may happen, but not quite so soon. A few months ago, Wall Street was expecting the Fed to pivot. Now, not so much.

  Here’s a look at the complete Treasury yield curve. I plotted every single outstanding U.S. Treasury which is over 300 securities. Note how after a short-term increase, interest rates are expected to fall rapidly.

  

  The International Monetary Fund just raised its estimate for U.S. economic growth this year to 1.4%. That’s not a lot, but it’s better than a recession.

  What’s interesting is that many stock markets around the world are outpacing the U.S. market. Some are doing it by a lot. From 2008 to last year, the American stock market was the place to be. That came to an end last October. Since then, stock markets in countries such as Poland and Hungary have soared. Even China is doing well amid its lockdowns.

  This Has Been a Crummy Earnings Season

  We’re now heading into the closing part of Q4 earnings season. Frankly, this has been a disappointing season. Jonathan Golub, who is the Chief U.S. Equity Strategist at Credit Suisse, said that excluding recessions, this has been the worst earnings season in 24 years.

  So far, 69% of companies have reported results. Of those, 69% have beaten estimates. That’s below the five-year average of 77%. It’s weaker than that considering how much analysts lowered their estimates prior to earnings season.

  Overall, 69% of the companies in the S&P 500 have reported actual results for Q4 2022 to date. Of these companies, 69% have reported actual EPS above estimates, which is below the percentage of 70% at the end of last week, below the 5-year average of 77%, and below the 10-year average of 73%.

  Earnings are coming in at 1.1% higher than estimates. That’s not that good. The five-year average is 8.6%. Q4 earnings are tracking a decline of 4.9% compared with Q4 2021. If that holds up, it will be the first overall earnings decline since Q3 2020.

  So far, 63% of the earnings reports have beaten their revenues estimates. That’s below the five-year rate of 69%. The S&P 500 is on track to report revenue growth of 4.6% compared with Q4 2020.

  The overall picture is that revenues are slightly higher while earnings are slightly lower. That means that profit margins are under pressure. That often happens late in an economic cycle. Wall Street expects earnings to decline for Q1 and the entire year.

  As we discussed before, on Wall Street, stocks are expected to beat expectations. Some companies are experts at guiding Wall Street analysts to believe that earnings will be a few pennies per share less than where they really are. This lets companies pretend that they beat expectations when that’s not really the case.

  John Butters with FactSet noticed something interesting about this earnings season. Companies that have beaten expectations are getting a larger bump than normal while companies that miss expectations are getting a smaller ping than normal.

  It’s as if Wall Street is onto the analysts this time. As a result, traders are taking the earnings misses in stride.

  I should point out that our Buy List is having a much better performance. Of our 16 earnings reports so far, 14 beat estimates, one missed and one met expectations.

  Stock Focus: Investors Title

  I like to use this space to tell you about stocks that few people know about. I figure that it’s not hard to find someone to tell you what they think about Tesla or Facebook. Not many people will let you know about U.S. Lime and Minerals (USLM). Well, I’m happy to do that. (By the way, USLM hit another new 52-week high yesterday.)

  This week, we’re going to look at Investors Title (ITIC). As you might guess, ITIC is a title insurance company based in Chapel Hill, NC. Title insurance protects homeowners against competing claims for their property. It’s not a very big outfit. ITIC only has about 500 employees and a market cap of $300 million. Over the last 33 years, ITIC has returned 4,800%. I suppose it’s a good business when homeowners are forced by law to buy it.

  Would you like to guess how many analysts follow ITIC? If you’ve been around here, you probably know the answer. Zero. Not a single analyst bothers to follow this stock.

  

  Another neat aspect of ITIC is that it occasionally pays out special dividends Sometimes these have been quite large. The current regular dividend is 46 cents per share. Last year, ITIC paid out a special dividend of $3 per share. In 2021, it was $18 per share. In the three years prior to that, ITIC paid out dividends of $15, $8 and $11 per share. This is on top of the regular dividend.

  Here’s an interesting historical tidbit for you: Title insurance played an important role in the history of our two greatest presidents. In the 1750s, Lord Fairfax, the only peer living in North America, asked a young man named George Washington (a distant relative) to survey some of his land in the western part of Virginia. Fairfax owned some five million acres. Earlier, the Virginia House of Burgesses tried to do what governments like to do, claim some of his land for itself.

  About 60 years later, and not that far away, a Virginia-born farmer named Thomas Lincoln bought a small farm in Kentucky. At this time, this was frontier country. He built a log cabin there and soon, he and his wife had a son. Then along came a man with a competing claim to the farm and the court ruled against the Lincoln family. They had to move and the legal costs were a great hardship to the young family. They were able to lease another farm and soon, the same things happened again.

  Thomas Lincoln was fed up with Kentucky and moved to Indiana which had recently been surveyed by the Federal government, so land claims were more secure. Shortly after the family got in Indiana, Thomas’ wife Sarah died. The whole episode left a great impression on Abraham Lincoln, and it may have led him to study surveying and the law.

  This morning, Investors Title reported Q4 earnings of $3.97 per share. That’s terrible compared with one year ago, but that’s due to the Fed and the housing market. Real estate is cyclical. Quarterly revenues were down 28%. For the year, ITIC made $12.59 per share.

  ITIC is a tough stock to own when rates are rising, but once you sense the Fed will soon start cutting, ITIC could be a very attractive buy.

  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 to learn more about the stocks on our Buy List, please sign up for our premium service. It’s $20 per month, or $200 per an entire year.

• Morning News: February14, 2023
  Eddy Elfenbein, February 14th, 2023 at 7:03 am

  Lael Brainard Set to Lead White House National Economic Council

  Kazuo Ueda, Tapped as Bank of Japan Chief, Is Seen as Pragmatic Insider

  Packed With Tourists, Japan Returns to Economic Growth

  TikTok’s Talks With U.S. Have an Unofficial Player: China

  Beijing Urges Rural Officials to Hire Humans—Not Machines

  Inside the Gray Market Keeping Cisco Tech in Stock in Russia

  Russia’s Grip on Nuclear-Power Trade Is Only Getting Stronger

  EU Lawmakers Back Deal to Ban New Combustion-Engine Cars by 2035

  New Cars Are Only for the Rich Now as Automakers Rake In Profits

  Ford Will Build a U.S. Battery Factory With Technology From China

  Ferrari Heir Races Onto World’s Richest List With 400% Stock Boom

  What Layoffs? Top Wall Street Traders Score Giant Paydays

  The Countries With the Longest — and Shortest — Retirements

  Food Prices Weigh on Seniors’ Savings, Health and Even Social Ties

  Air India to Buy 250 Planes from Airbus as It Transforms Under Tata

  Coca-Cola Revenue Rises in Fourth Quarter, Fueled by Higher Prices

  How Nelson Peltz and Disney’s Marvel Chief Teamed Up in Proxy Fight

  Bed Bath & Beyond’s Tough Challenge: Shutting Stores Without Paying a Fortune

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• Stocks Up Ahead of Tomorrow’s CPI
  Eddy Elfenbein, February 13th, 2023 at 12:20 pm

  The CPI report comes out tomorrow. The recent trend has been favorable so it will be interesting to see if that continues. Wall Street expects January inflation to come in at 0.5% and the core rate to be 0.4%.

  Tomorrow’s CPI report will have a slightly different methodology. The categories’ “weights” will be redone and based off spending data from 2021. Owners equivalent rent will now be a little over 25%.

  The stock market is up 0.93% at noon today. Once again, the High Beta stocks are leading the Low Volatility names.

  Last week was the worst week for stocks this year. I wouldn’t be surprised to see some pushback this week. We’re in the latter half of earnings season but there are still many reports left to see. Microsoft and Meta are having good days. Both stocks are up over 3%.

  The U.S. shot down its fourth balloon, or whatever it is. The U.S. and China may be meeting later this week at the Munich Security Conference.

  Jack Henry & Associates (JKHY), a stock I like to follow, raised its dividend today by 7% to 52 cents per share. This is its 34th consecutive dividend increase.

• Morning News: February 13, 2023
  Eddy Elfenbein, February 13th, 2023 at 7:09 am

  EU Is Set to Propose New Sanctions on Russian Tech and Vehicles

  Ukraine’s Naftogaz Faces Opposition From Creditor Group on Latest Restructuring Plan

  The US ‘Domain Awareness Gap’ Goes Way Beyond Balloons

  Japan Says Sayonara to Idea of Central Banker as Rescue Hero

  Inflation Is Falling, and Where It Lands Depends on These Three Things

  Hard or Soft Landing? Some Economists See Neither if Growth Accelerates

  Super Bowl XXI v. Super Bowl LVII: A Reminder That Today’s ‘Inflation’ Quite Simply Isn’t Inflation

  Deutsche Bank Probe Says Employees Deliberately Mis-Sold Derivatives

  India’s Adani Tries to Calm Investors as Market Rout Continues

  Remote Work Is Costing Manhattan More Than $12 Billion a Year

  Beyond Silicon Valley, Spending on Technology Is Resilient

  Happiness or Success? Salesforce’s Marc Benioff Doesn’t Want to Choose

  From Apple to VW, CEOs Gradually Returning to China After Its Reopening

  Chevron Weighs Extending CEO Mike Wirth Past Mandatory Retirement Age

  Ferrari CEO Moves Fast Like Elon Musk While Forging Own Path on EVs

  De Beers Diamond Deal Threatened as Botswana Says It’s Ready to Walk Away

  ‘There’s No Spring Break Here’: Florida’s Gulf Coast Fights to Rebound After Hurricane Ian

  Young, in Love and Figuring Out How to Talk About Money

  Celia Cruz Will Be First Afro-Latina to Appear on the U.S. Quarter

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• Morning News: February 10, 2023
  Eddy Elfenbein, February 10th, 2023 at 7:04 am

  U.K. Economy Sputters and Barely Avoids a Recession

  Russian Central Bank Holds Key Rate at 7.5%, Gives Hawkish Signal

  Russia Retaliates for Sanctions By Announcing Oil Output Cut

  Oil Prices Rise on Talk of Russian Output Cut

  ‘Who Is Kazuo Ueda?’ Rings Out Across Global Trading Floors

  U.S. Poised to Further Tighten Technology Exports to China After Balloon Incident

  U.S. Government Borrowing Costs Rise as Debt Ceiling Fuels Partisan Clash

  Adani Crisis Deepens with Moody’s Downgrades and Index Weighting Cuts

  Layoffs and Shutdowns Hit Biotech Industry in U-Turn

  Apple Avoids Job Cuts Because It Didn’t Overhire Like Google and Amazon

  A Waitlist of 60,000: Why Women Are Flocking to This Members-Only Club

  Elon Musk’s First 100 Days at Twitter Defined by Rapid Change and Challenges

  Activist Disney Investor Ends Battle for Board Seat

  Robert Iger Shakes Up Disney’s Entertainment Operations, Rethinks Hulu Ownership

  A Prince Bets His Family’s Money on a Nightmare Real Estate Deal

  Brazil’s Richest Man Loses Billions as His M&A Machine Breaks Down

  Floodgates Open for Beer Ads During Super Bowl

  How M&M’s How M&M’s ‘Trendjacked’ the Super Bowl

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• Morning News: February 9, 2023
  Eddy Elfenbein, February 9th, 2023 at 7:06 am

  U.S.-China Tensions Are High. So Is Commerce Between the Nations.

  U.S. Aims to Curtail Financial Ties With China

  Where Can Europe Get the Gas to Fill Its Reserves This Summer?

  Finance Chiefs Are Optimistic Any Recession Will Be Short, but Challenges Remain

  No More “Deutsche Boerse, Who?”: CEO Receiving M&A Pitches

  The Little Research Firm That Took On India’s Richest Man

  Credit’s Steep Rally Is Worrying Once-Bullish Money Managers

  Credit Suisse Trading Collapses as Global Ambitions Fade

  Robinhood Accidentally Sold Short on a Meme Stock and Lost $57 Million

  As Big Tech’s Growth and Innovation Slow, Its Market Dominance Endures

  Bing (Yes, Bing) Just Made Search Interesting Again

  Disinformation Researchers Raise Alarms About A.I. Chatbots

  Pfizer, Novartis, Merck Executives Say They Are Hunting for Deals Again

  Disney to Cut 7,000 Jobs as Bob Iger Seeks $5.5 Billion in Savings

  Mattel Earnings Plunge as Sales Fell 22% in Holiday Period

  Higher Prices Hit Demand for Unilever’s Soap and Ice Cream

  PepsiCo Earnings Beat Expectations as Price Hikes Boost Snack and Beverage Sales

  ‘She Won’t Be Manageable’ They Said. Now She’s in Charge.

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• Morning News: February 8, 2023
  Eddy Elfenbein, February 8th, 2023 at 7:05 am

  China’s Bid to Improve Food Production? Giant Towers of Pigs

  Joe Biden Pushes Economic Gains, Jousts With GOP in State of the Union Speech

  Half of Americans Say They’re Worse Off, Most Since 2009

  Fed’s Jerome Powell Braces for Longer Inflation Fight Amid Hiring Surge

  Bull Case on a Stock Crash Sees End of Fed Gifts to One Percent

  Wall Street Veteran Explains Why He’s Still All-In on US Housing

  The Prophet of Urban Doom Says New York Still Has a Chance

  Strong Dollar Still Rattles U.S. Multinational Corporate Earnings

  BP, in a Reversal, Says It Will Produce More Oil and Gas

  Wind Turbine Giant Says It Has a Solution That Will Keep Blades Out of Landfills

  CVS Agrees to Buy Oak Street Health in $10.6 Billion Deal

  A Tech Race Begins as Microsoft Adds A.I. to Its Search Engine

  Apple Expands Testing of ‘Buy Now, Pay Later’ Service to Retail Employees

  TikTok’s Secret Sauce Poses Challenge for U.S. Oversight, Researchers Say

  SocGen Reports 64% Slide in Annual Profits but Beats Market Expectations

  Uber Reports Record Revenue as It Defies the Economic Downturn

  Disney’s Earnings, Reorganization Represent Early Test for CEO Robert Iger

  Bed Bath & Beyond Leads Meme-Stock Plunge as AMC and GameStop Also Tumble

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