Archive for June, 2023

• Morning News: June 20, 2023
  Eddy Elfenbein, June 20th, 2023 at 7:04 am

  China Cuts Key Interest Rates, Hoping to Kick-Start Flagging Economy

  ECB’s Muller Warns Wage Increases Could Delay Slowdown in Core Inflation

  Macron’s Paris Summit Seeks New Life for Global Finance Agenda

  What is the ‘Bridgetown Initiative’ Asking For at Paris Financial Summit?

  Rate Cut Bets Build in Bond Markets From Australia to Sweden

  Powell Faces Tricky Task of Explaining Rate Pause in Congress

  Today’s Rate Hikes Threaten to Push Up Tomorrow’s Housing Costs

  Hedging Failure Exposes Private Equity to Interest-Rate Surge

  UBS to Face Penalties Over Credit Suisse’s Archegos Fiasco

  World’s Biggest Offshore Center Backs Effort to Fight Corporate-Tax Avoidance

  Masayoshi Son Ends Seven-Month Silence to Make Case for SoftBank’s Future

  New Land Grab by Oil Giants Is Deep Underground

  A Job With a Fair Salary? What Pay Transparency Laws Are Revealing

  Return to Office Enters the Desperation Phase

  Inside China’s Underground Market for High-End Nvidia AI Chips

  Intel Spends $33 Billion in Germany in Landmark Expansion

  Biggest Plane Deal in History: Airbus Clinches Massive Order from India’s IndiGo

  Boeing, Airbus and the Battle for the Perfect Plane

  Jack Ma’s Lieutenants Return to Oversee Tough Alibaba Reboot

  Carlos Ghosn Sues Nissan for $1 Billion in Damages

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• Morning News: June 19, 2023
  Eddy Elfenbein, June 19th, 2023 at 8:09 am

  Why It Seems Everything We Knew About the Global Economy Is No Longer True

  Global Trade Needs Some Help as China Stumbles

  These Businesses Are Getting Hit Hard by China’s Faltering Economic Recovery

  Latest China Test for Western Firms: Consumers Switching to Homegrown Labels

  While Yuan Struggles Other China Proxies Are Beginning to Soar

  Mass Immigration Experiment Gives Canada an Edge in Global Race for Labor

  Global Tax Mess Awaits U.S. Companies, and Congress Isn’t Helping

  This Incredible Chart Shows the Close Relationship Between the S&P 500 and Fed Liquidity

  JPMorgan Strategists Say Stocks Face Risks From Stalling Growth

  Ermotti Suggests ‘Massive Downsizing’ Might Come to Credit Suisse’s Investment Bank

  SVB Securities to Be Acquired in Management Buyout

  Warren Buffett Raises Stake in Five Japanese Trading Houses

  Where Housing Prices Have Crashed and Billions in Wealth Have Vanished

  Lots of Hiring, but Not So Much Working

  AI Could Change the Future of Yogurt — And Turn Danone Around

  He Went After Crypto Companies. Then Someone Came After Him.

  The Space Industry Is Taking Off. Space Law Is Still a Mystery

  Florida Is Losing Its Affordability Edge After Drawing a Flood of New Arrivals

  Celebrities Use AI to Take Control of Their Own Images

  Talk of a U.S. TikTok Ban Is Shaking Up the Creator Economy

  MoviePass Swears It Won’t Do That Again

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• Morning News: June 16, 2023
  Eddy Elfenbein, June 16th, 2023 at 7:02 am

  Africa’s Richest City Is Crumbling Under Chaos and Corruption

  Saudi Arabia Arrives in Paris, Shopping for Deals

  Ueda Holds Stimulus as BOJ Side Steps Tightening Wave for Now

  The Global Economy Looks Like It’s Out of Sync

  A Bull or a Bear Market? It Doesn’t Matter

  Private Credit’s Quiet, Unstoppable Rise Comes With Unknown Risk

  Student-Loan Repayments Are Coming Back. Retailers Are in for a Big Shock

  Retailers Are Trying to Fix Their Supply-Chain Forecasts

  Who’s to Blame for All Those Hidden Fees? We Are

  Forget TikTok, AI Is the Latest Obsession in Congress

  Venture Capital’s AI-Run Lettuce Farms Are Starting to Go Bust

  Teamsters Will Likely Authorize a UPS Strike Friday

  There’s No Uber or Lyft. There Is a Communal Tesla

  Why Toyota Would Put a Fake Stick Shift and Fake Engine Noises in an Electric Car

  Micron Invests Another $600 Million in China Despite Partial Sales Ban

  When a Huawei Bid Turned Into a Hunt for a Corporate Mole

  A $1.7 Billion Opioid Settlement Is at Risk of Falling Apart

  Amazon’s Freevee Embraces the Judy-Verse

  New Grads Have No Idea How to Behave in the Office. Help Is on the Way

  Why Did Washington Fall So Hard for the Bankman-Fried Brothers?

  Crispin Odey’s One-Week Downfall Was Decades in the Making

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• Morning News: June 15, 2023
  Eddy Elfenbein, June 15th, 2023 at 7:06 am

  Venezuela Makes Long-Shot Bid to Revive Ruined Economy With Gas

  Russia’s Big Economic Problem: Not Enough Workers

  China Cuts Rates to Prop Up Flagging Recovery

  As Ties to China Turn Toxic, Even Chinese Companies Are Breaking Them

  Goldman’s Biggest Office Beyond New York Attests to India’s Rise

  Lawsuit Seeking $14,729 Tax Refund Could Lead to Corporate Windfall

  After Surging Early in the Year, Retail Spending Could Be Cooling

  The US Is In Its Third Inflation Wave, and Corporate Profits May Be a Major Reason Why

  Powell Indicates at Least Two More Rate Hikes Ahead After Pause

  ‘Do You Even Want Us to Exist?’ A Bank Chief Fights to Survive

  Two Crypto Platforms Halt Withdrawals in Echo of 2022 Woes

  Microsoft’s Sudden AI Dominance Is Scrambling Silicon Valley’s Power Structure

  How A.I. Is Helping Architects Change Workplace Design

  How Nvidia Became ChatGPT’s Brain and Joined the $1 Trillion Club

  Tentative Agreement Ends Worker Slowdowns and Stoppages that Crippled West Coast Ports

  Boeing Supplier’s Labor Standoff Puts 737 Output Hike at Risk

  Cancer Drug Shortages Force Doctors to Ration Vital Medications

  Oregon Town’s Marijuana Boom Yields Envy in Idaho

  The Beyoncé Effect: Sweden’s Inflation Feels the Hit

  Americans Now Think You Need at Least $2.2 Million to be Rich—but Gen Z and Millennials Feel the Wealthiest Despite Cost-of-Living Squeeze

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• Morning News: June 14, 2023
  Eddy Elfenbein, June 14th, 2023 at 7:04 am

  China Opens a New Era of ‘Proactive Easing’ as the Economic Recovery Turns Sour

  Investors Are Putting Big Money Into Japan Again. Here’s Why

  Affordable Housing Woes Paint a ‘Bleak Picture’

  Food Prices Rise Even as Inflation Eases, Straining Consumers’ Budgets

  There’s a Widening Spending Gap Between Retirees and Younger Adults

  The Great Inflation Scare Reaches Its Final Phase

  Ken Griffin Ramps Up Credit Bets, Anticipating US Recession

  Odey Swan Fund Assets Collapsed 37% in Two Days Before Closing

  BlackRock and Brookfield Are Betting Big on Tiny Solar Farms in Chile

  Generative A.I. Can Add $4.4 Trillion in Value to Global Economy, Study Says

  Nvidia Joins $1 Trillion Club, Fueled by AI’s Rise

  Europeans Take a Major Step Toward Regulating A.I.

  Biggest Losers of AI Boom Are Knowledge Workers, McKinsey Says

  Google Risks Break Up as EU Attacks Abuse of Ad Tech Power

  Spotify Takes a Sharp Turn With Its $1 Billion Podcast Division

  Toyota Shares Hit 16-month High as Shareholders Endorse Board, New EV Strategy

  The ‘Taxi Prince’ Is Taking on Uber—and Winning

  Shell Launches New Strategy Courting Investors, Not Activists

  Bud Light Loses Title as Top-Selling U.S. Beer

  Instant Brands, Maker of Instant Pot and Pyrex, Files for Bankruptcy

  Starbucks Union Says Stores Had to Take Down Pride Décor. Company Disagrees

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• CWS Market Review – June 13, 2023
  Eddy Elfenbein, June 13th, 2023 at 7:35 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.”)

  Inflation Falls to a Two-Year Low

  We had some very good inflation news today. For the 12 months ending in May, consumer inflation increased by just 4%. That’s the lowest rate in more than two years.

  Last month, consumer prices rose by just 0.1%. That was in line with expectations. Excluding food and energy, prices rose by 0.4%. That also matched expectations. Over the last 12 months, core inflation increased by 5.3%.

  A 3.6% slide in energy prices helped keep the CPI gain in check for the month. Food prices rose just 0.2%.

  However, a 0.6% increase in shelter prices was the biggest contributor to the increase for the all-items, or headline, CPI reading. Housing-related costs make up about one-third of the index’s weighting.

  Elsewhere, used vehicle prices increased 4.4%, the same as in April, while transportation services were up 0.8%.

  Egg prices fell 13.8% in May for their largest drop in 72 years.

  The headline inflation rate peaked last June at 9.1%. It’s been cut in half since then. I think it’s too early to say that inflation has been defeated. If we were to exclude the last two years, then the current rate of inflation is still near the highest of the past 30 years. Still, this is good news, and it means we’re moving in the right direction.

  What does this mean for us as investors? A few things.

  First, it’s good news because historically stocks don’t perform well under high inflation. In fact, one of the few things that’s worse for stocks than inflation is deflation. What the market truly loves is stable prices.

  

  For businesses, inflation has an unusual impact on the bottom line. Bear in mind that not all earnings are the same. Inflation exacts a heavy toll on asset-heavy businesses. Inflation has an impact similar to putting a magnet near a compass. Everything gets a little screwy. For example, companies with high assets relative to their profits tend to report ersatz earnings.

  At first, inflation gives the illusion of prosperity. Businesses create their products in fewer and more expensive dollars and then sell them for cheaper dollars and more numerous dollars. As an accounting item, the business may appear more profitable, but no wealth has been created.

  Inflation also favors the debtor in favor of the creditor. Again, any benefit is short-lived. In fact, once lenders see the impact of inflation, the ultimate outcome is to price the marginal borrower out of the credit markets.

  Inflation also causes interest rates to rise. That’s bad for stocks for two reasons. One is that it raises the cost of debt. That makes it harder to finance expansion or mergers and acquisitions.

  The other reason is that equity valuations are discounted at a higher rate. That translates to lower earnings multiples. If a one-year Treasury yields 0.17%, as it did three years ago, then buying stocks is a no-brainer. Nowadays the one-year Treasury yields 5.17%. Socking your money away for a small return isn’t for me, but I understand why a lot of folks would be tempted. It’s about as low risk as you can get.

  It’s no surprise that the stock market rallied nicely today after this morning’s inflation report.

  Expect the Fed to Pause Tomorrow

  The Federal Reserve began its two-day meeting today. The policy statement will be released tomorrow at 2 p.m. ET. It seems very likely that the Fed won’t make any changes to interest rates. This will be the first time in 10 meetings that the Fed has decided to forego a rate hike. The current target range for the Federal funds rate is 5% to 5.25%.

  In the futures pits, traders currently place a 96% chance that the Fed will leave interest rates alone tomorrow. That’s up from 79% before the inflation report.

  Traders also think there’s a decent chance that the Fed will hike next month, but they also see that rate hike being taken back before the end of the year. The consensus is that we’re at or very near the peak in the interest rate cycle. I don’t have enough confidence to make a specific prediction about interest rates at the moment, but I think it’s safe to assume that interest rates will likely start to trend lower later this year.

  

  The stock market liked today’s inflation news. The S&P 500 closed higher for the fourth day in a row. This was also the tenth rally in the last 13 trading sessions.

  The S&P 500 reached its bear market low eight months and one day ago. Since then, the index has gained more than 22%. Even after an impressive rally, the stock market is still about 9% below its all-time high from early 2022 (not including inflation). In retrospect, it seems clear that inflation hurt stocks last year. The S&P 500 lost one-quarter of its value in ten months. Once it became clear that inflation was fading, the stock market turned about.

  Some Updates to Recently Featured Stocks

  I want to briefly update you on some stocks we’ve talked about recently. Six weeks ago, I told you that Hingham Institution for Savings (HIFS) was my favorite regional bank. This was during some of the mayhem that plagued the sector earlier this year. A great stock-picking strategy is to find a sound name in an industry that’s getting hammered. Since then, shares of HIFS are up 22%.

  I’ve mentioned United States Lime and Minerals (USLM) several times, and the stock seems to go higher every week. The shares are up more than 30% since I highlighted it for you in January. The stock hit another new 52-week high today. The Q2 earnings report should be out in late July.

  In February, I told you about UFP Technologies (UFPT). The company makes custom packaging for the medical industry. The stock is up 57% since then.

  

  I haven’t had all home runs. In January, I said nice things about Dollar General (DG). It’s important to look at our duds as well. This stock has been a trainwreck since then. I even came close to adding it to our Buy List to replace Ross Stores (ROST).

  To be fair, at the time, I noted some of the issues DG was having. I said I wouldn’t consider adding it until the problems are past them. They’re not. The stock is down 30% in the last four months. I hope to see a rebound here, but I want to see solid evidence first.

  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 more info on our ETF, you can check out the ETF’s website.

• Morning News: June 13, 2023
  Eddy Elfenbein, June 13th, 2023 at 7:05 am

  Putin’s Economic Forum Puts Russia’s Isolation on Display

  China Shifts to Stimulus Mode With Xi’s Options Dwindling

  Saudi Arabia and China Flaunt Growing Ties at Investment Forum

  This El Niño Threatens New Levels of Global Economic Destruction

  $500 Million Climate Fund; Fortescue Touts Africa

  From Mine to Battery: Indonesian Nickel Drives the World’s EV Market

  Robotaxis Are the Wildcard in Push to Decarbonize Transport

  U.S. to Allow South Korean, Taiwan Chip Makers to Keep Operations in China

  Inflation Has Likely Been Cut in Half but Is Still Too High

  Fed Rate Pause Set to Get Support From Moderating Inflation Data

  Fed-Rate Projections Could Rise to Underscore Inflation Anxieties

  JPMorgan’s Foil to the Bonds-Are-Back Crowd Is Sticking to Cash

  What’s Killing Productivity? Some Think It’s the Banks

  Revenge Spending Helped Push Prices Higher. The Trend Is Turning

  The Profit Squeeze Is On

  Breakup of Google Ad-Tech Business Now on Table in Europe, Too

  Elon Musk’s New CEO Linda Yaccarino Issues First Rallying Cry to Employees: ‘Let’s Dig Our Heels in (4 Inches or Flat!) and Build Twitter 2.0 Together’

  Thousands of Reddit Communities Go Dark to Protest Company’s Controversial New Policy

  United Air CEO Sees Pilot Deal Adding Over $8 Billion in Costs

  When Did All the Fun Stuff Go Upscale?

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• Morning News: June 12, 2023
  Eddy Elfenbein, June 12th, 2023 at 7:06 am

  Fueled by Long Credit Binge, China’s Economy Faces Drag From Debt Purge

  Egypt Says India Is Providing Credit Line in Boost to Economy

  Saudi Arabia’s Golf Deal Puts Biden and PGA in Same Awkward Position

  Britain’s Post-Brexit Policy Drift Alarms World’s Executives

  The U.S. Dollar Conquered the World. Is It at Risk of Losing Its Top Spot?

  As the Fed Meets, It Shares an Inflation Problem With the World

  Jerome Powell’s Big Problem Just Got Even More Complicated

  Fed Backs Away From Wages Focus, Bolstering Case for Rate Pause

  UBS Completes Credit Suisse Takeover to Create Bank Titan

  Toyota Boss Faces Pushback Over EV Strategy in Shareholder Vote

  Tesla’s Shrewdest Product Is Proving to Be Its Charging Network

  Can Twitter’s Odd Couple Make It Work? Elon Musk and His New CEO Are About to Find Out

  Silicon Valley Confronts the Idea That the ‘Singularity’ Is Here

  Nasdaq to Acquire Financial-Software Firm Adenza for $10.5 Billion

  WeWork Faces More Turmoil After Its Chief Executive Departs

  This Summer, Lifeguards Have Better Job Prospects Than Office Interns

  The Hottest Thing in Real Estate Is a Loan From Two Years Ago

  Illumina CEO Francis deSouza Resigns Amid Regulatory Hurdles, Icahn Proxy Fight

  What I Learned About ‘Woke’ Capital and Milton Friedman at the University of Chicago

  What Happened In 1971? It’s a Question Everyone Should Ask

  Sam Bankman-Fried’s Risky Japan Trade Seeded a Crypto Empire

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• Morning News: June 9, 2023
  Eddy Elfenbein, June 9th, 2023 at 7:03 am

  China, Its Economy Flagging, Prods Consumers to Save Less and Spend More

  China’s Inflation Problem? It Has None

  It’s Time to Buy Japan

  Erdogan Names First Republic’s Ex-Exec as Central Bank Head

  UBS, Swiss Government Seal $10 Billion Loss Guarantee Deal

  Credit Suisse Puts Up China Brokerage Venture for Sale

  Bidenomics and Its Contradictions

  Fed Seen Ending Its 15-Month Hiking Campaign in Economist Survey

  Wall Street Economists Are Increasingly Less Worried About a 2023 Recession

  Binance Halts Trading in Dollars on Its U.S. Exchange

  A New Crypto Banking System Arises Under the Shadow of a Regulatory Crackdown

  Middle-Income Buyers Face the Most Severe Housing Shortage

  What All the Single Ladies (and Men) Say About the Economy

  More Startups Throw in the Towel, Unable to Raise Money for Their Ideas

  America Is Going Through an Oil Boom – and This Time It’s Different

  GM Will Join Tesla’s EV Charging Network in Step Closer to US Industry Standard

  Humans Are Biased. Generative AI Is Even Worse

  Meta Reveals Twitter Competitor It Plans to Launch as Stand-Alone App

  How Hasbro Plans to Revive Its Toy Business

  Energy Drinks Are Surging. So Are Their Caffeine Levels

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

  Goldman Sachs Expected the Turkish Lira to Plunge Over 3 Months. It Happened in Just 3 Days

  Inflation Drags Eurozone Economy Into Recession

  One of Europe’s Poorest Nations Weighs Tax Revamp to Exit Crisis

  Russia, Oman Sign Agreement to Avoid Double Taxation

  Bank of Canada Lifts Rates to 22-Year High, Ending Four-Month Pause

  Treasury’s $1 Trillion Debt Deluge Threatens Market Calm

  Bonds Everywhere Suffer as Rate-Hike Fears Swamp Traders

  A $1 Trillion Borrowing Binge Looms After Debt Limit Standoff

  Binance Money Trail Reveals $70 Billion Flowing Through Silvergate, Signature

  Vessel Buildup Grows at West Coast Ports as Maritime Supply Chain Begins to Break, Echoing Covid Chaos

  Soaring EV Sales Could Still Leave World Short on Emissions Goal

  America’s Long, Tortured Journey to Build EV Batteries

  U.S. Struggles to Turn Steel Imports ‘Green’ With Tariffs

  New A.I. Chatbot Tutors Could Upend Student Learning

  GameStop Shares Fall as It Terminates CEO and Ryan Cohen Becomes Executive Chairman

  Google Ramps Up Return-to-Office Push by Using In-Person Attendance as Part of Employee Performance Reviews

  Does CNN’s Turmoil Mean There’s No Room on Cable for Independent News?

  Billionaires’ Row Was Built for the World’s Wealthiest. Has It Lived Up to Its Name?

  The Great Billionaire Takeover of European Soccer

  All About the Deep-Pocketed Saudi Wealth Fund That Rocked Golf

  How the PGA Tour and LIV Golf Fought Each Other Into a Merger

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