Archive for July, 2023

• Morning News: July 31, 2023
  Eddy Elfenbein, July 31st, 2023 at 7:05 am

  China Is Trying to Make Its Gloomy Consumers Spend More

  Why China’s Miracle Growth Story May Be Coming to an End

  Russia Takes Its Ukraine Information War Into Video Games

  A Spending Boom Fuels Russia’s Wartime Economy, Raising Bubble Fears

  Why One Country Is Struggling to Break Away From Russian Gas

  Extreme Heat and Aging Power Grids Are a Deadly Combination

  A Record $90 Billion in Ship Orders Loom Over Boom-Bust Industry

  Asia’s Richest Families Fuel Race for Lucrative Finance Jobs

  Traders Brace for $102 Billion Wave of Treasury Bond Sales

  Why the Drivers of Lower Inflation Matter

  Clock on the Fed’s ‘Soft Landing’ May Already Be Ticking

  Why the FTC’s Lina Khan Is Taking on Big Tech, Even if It Means Losing

  Lots of US Homeowners Want to Move. They Just Have Nowhere to Go

  Has America’s Air Travel Boom Peaked?

  Elon Musk’s Unmatched Power in the Stars

  Walmart Buys Tiger Global’s Flipkart Stake for $1.4 Billion

  After $700 Million U.S. Bailout, Trucking Firm Is Shutting Down

  Ford Realizes Customers Can’t Quit Hybrids

  Is It an E-Bike, or a Motorcycle for Children?

  China-Founded Rivals Shein and Temu Ramp Up War for American Shoppers

  That Cool New Bookstore? It’s a Barnes & Noble

  The Psychedelics Stock Universe Is Shrinking, Despite the Hype

  Be sure to follow me on Twitter.

• Morning News: July 28, 2023
  Eddy Elfenbein, July 28th, 2023 at 7:03 am

  China’s Push to Expand BRICS Membership Falters

  Europe Avoids China’s Belt and Road Forum, Keeping a Distance From Xi and Putin

  Europe Vowed to Make Russia Pay for the War. It’s Not That Easy

  Global Bonds Slide on Surprise Bank of Japan Move

  He Held Up a Bank to Get His Own Money

  Social Security’s Next Cost-of-Living Raise Is Forecast Around 3%

  Wall St. Pessimists Are Getting Used to Being Wrong

  Why ‘Soft Landing’ Optimists Shouldn’t Celebrate Just Yet

  $2 Billion Default Followed Warnings to Everyone but Investors

  What Fed Hikes? Much of America’s Consumer Debt Is Still Riding Ultralow Interest Rates

  The Extreme Solutions That Can Fix Climate Change

  Exxon and Chevron Stalk More Shale Deals as Profits Dip

  Volkswagen Seeks to Reclaim China Crown in Deal With EV-Maker XPeng

  Ford Raises Profit Forecast Despite Steeper EV Losses

  5 Ways That Buying a Car Has Drastically Changed

  Biogen to Buy Reata for $7.3 Billion in Rare-Disease Expansion

  Aided by A.I. Language Models, Google’s Robots Are Getting Smart

  P&G Earnings Show Its Pricing Power Endures

  The Former Banker Gambling on FanDuel’s American Dream

  Adidas Plans Sale of Second Yeezy Batch to Eat Into Stockpile

  Wanted: Turnaround Artist to Revive Tired Clothing Brand. Apparel Experience Optional

  Be sure to follow me on Twitter.

• Morning News: July 27, 2023
  Eddy Elfenbein, July 27th, 2023 at 7:05 am

  How Bad Is China’s Economy? Millions of Young People Are Unemployed and Disillusioned

  The Skyrocketing Toll of the Billion-Dollar Climate Disaster

  Biden’s ‘Made in America’ Pledge Collides With His Climate Goals

  An American Energy Giant Sees Israel as a Springboard to Europe

  Shell and TotalEnergies Profits Cut in Half by Lower Oil Prices

  Federal Reserve Raises Interest Rates to 22-Year High

  GDP Data Set to Reinforce Fed View the US Will Avoid Recession

  The Economy Has Defied Expectations. Here’s What to Focus On in the GDP Data

  Stock Pickers Are Missing Out on Tech Boom Thanks to 80-Year-Old Rules

  A Brexit Champion’s Feud With His Elite Bank Brings a C.E.O. Down

  A Beach Club Dinner and Jamie Dimon’s Touch: How PacWest Was Rescued

  European Commercial Property Deals Drop 58% to Lowest Since 2010

  Hamptons Luxury Bidding Wars Hit Record High Even as Prices Sag

  Florida’s Flood of New Wealth Boosts High-Speed Train Bonds

  Warren and Graham Team Up to Take on Big Tech

  Microsoft Faces European Antitrust Investigation Over Bundling of Teams Software

  Netflix Reworks Microsoft Pact, Lowers Ad Prices in Bid for Growth

  Researchers Poke Holes in Safety Controls of ChatGPT and Other Chatbots

  AI in Hollywood Has Gone From Contract Sticking Point to Existential Crisis

  Tesla Owners Have Soured on Elon Musk, But Still Love Their Model 3s

  McDonald’s Sales, Profit Beat Estimates as Diners Flock to Chain

  More Income for the Supreme Court: Million-Dollar Book Deals

  Be sure to follow me on Twitter.

• Morning News: July 26, 2023
  Eddy Elfenbein, July 26th, 2023 at 7:05 am

  Subsidy Wars Heat Up With US Allies Forced to Pay Up or Lose Out

  How Financial Crises Shaped the Federal Reserve

  Powell Has Stopped Handing Gifts to Wall Street on Fed Day

  Private Equity Finally Gets a Piece of the Banking Crisis

  Deutsche Bank’s Rising Costs Take Shine Off Debt Trading Beat

  Elon Musk the Banker Wants to Take On Dimon Where Google Failed

  Banc of California Agrees to Buy PacWest as Regional Lenders Seek Strength Together

  Indiana and Midwest Take Top Slots in WSJ/Realtor.com Housing Index

  Thirsty Data Centers Are Making Hot Summers Even Scarier

  San Francisco’s Office Demand Surges, Largely Thanks to AI Companies

  Microsoft, Alphabet Earnings Lay Bare the AI Hype. Why Patience Is Needed

  The Luxury Home Market Confronts Its New Reality: Not Enough Buyers and Sellers

  UPS Blinked, Teamsters Leader Says, Clearing Way for Labor Deal

  AT&T Tops Profit, Cash Flow Estimate as Customer Growth Dips

  Samsung to Launch New Galaxy Z Fold, Flip Phones Amid Slow Adoption So Far

  Elon Musk’s Rebranded Twitter Cuts Ad Prices

  How Jack Ma’s Ant Group Is Inching Toward IPO Reboot

  Boeing’s Quarterly Results Top Expectations as Airplane Deliveries Pick Up Pace

  Coca-Cola Earnings, Sales Beat Street Forecasts As Drinks Maker Follows PepsiCo With Price Hikes

  Joe Lewis, Billionaire Owner of Tottenham Hotspur, Charged with Insider Trading

  Be sure to follow me on Twitter.

• Morning News: July 25, 2023
  Eddy Elfenbein, July 25th, 2023 at 7:07 am

  How America Drives Gun Exports and Fuels Violence Around the World

  Russia Strikes Danube Port, Escalating Attacks on Ukraine Grain Routes

  The Little Known Metals Giant that Rules a Global Market

  Warren Buffett Lifts Fossil Fuel Bets

  China’s New Central Banker Once Fixed a Crisis. He May Need to Again

  I.R.S. Halts Surprise Visits to Homes and Businesses

  Clash of Fed Doves and Hawks Over Rates Deepens

  Sensing End of Fed Hikes, Some Investors Return to Dividend Stocks

  FDIC Scolds Banks for Manipulating Deposit Data

  UBS Is Fined Nearly $400 Million in Credit Suisse’s Archegos Mess

  The World Tied $3.5 Trillion-Plus of Debt to Inflation. The Costs Are Now Adding Up

  How to Fight Inflation When Consumers Think Home Prices Can Only Go Up

  Tech Firms Once Powered New York’s Economy. Now They’re Scaling Back

  GE Boosts Outlook on Aerospace Gains, Rebound in Renewables

  Slow Battery Production Crimps G.M.’s Electric Vehicle Rollout

  Musk Explains Why He’s Dumping Twitter Name and Iconic Logo

  TikTok’s Next Plan for U.S. Dominance: Selling Made-in-China Goods

  A Soap Maker Cracks the Code to ‘Made in America’

  Unilever Says Inflation Has Peaked as Sales Growth Rises

  At Spotify, Podcast Cuts and Higher Music Royalties Deepen Losses

  ‘Barbenheimer’ Weekend Was a Real Team Effort

  Parents Hire $4,000 Sorority Consultants to Help Daughters Dress and Impress During Rush

  Be sure to follow me on Twitter.

• Morning News: July 24, 2023
  Eddy Elfenbein, July 24th, 2023 at 7:05 am

  China Holds Off on Major Stimulus as It Signals Property Easing

  Housing-Market Rebound Poses Challenge for Fed’s Inflation Fight

  Why the Fed Isn’t Ready to Declare Victory on Inflation

  It’s Taylor Swift’s Economy, and We’re All Living in It

  The Great M&A Slump Is Shaking Up Giants of Investment Banking

  What Is the ‘Basel III Endgame’ and Why Are Banks Worked Up About It?

  Wall Street Is Grappling With Crypto’s Trillion-Dollar Custody Question

  OpenAI’s Sam Altman Launches Worldcoin Crypto Project

  Why Businesses Can’t Stop Asking for Tips

  Big Pharma Bets Big on China

  Drugmakers Are ‘Throwing the Kitchen Sink’ to Halt Medicare Price Negotiations

  Apple Aims to Keep iPhone Shipments Steady Despite 2023 Turmoil

  Musk Makes Fan-Created ‘X’ Twitter’s New Logo in Abrupt Change

  Tesla Is Lapping Germany’s Automakers in the Global EV Race

  Why GE Shares Are Hotter Than Apple, Meta or Tesla

  AT&T, Verizon Investors Have More Than Lead Cables to Worry About

  3M’s Dark Chapter Deepens as CEO Faces Beaten Down Investors

  How a Mexican Lager Quietly Rose to Become America’s Best-Selling Beer

  At Hotel Spas, CBD Oil Nets 900% Markups—and Guests Pay Happily

  ‘Barbie’ Box Office to the World: The Pandemic Is Officially Over

  Be sure to follow me on Twitter.

• Morning News: July 21, 2023
  Eddy Elfenbein, July 21st, 2023 at 7:03 am

  Africa’s Most-Developed Nation Is on the Brink of Chaos

  Russia Boosts Rates as Ukraine War Costs Mount

  Ukraine to Seize Russian-Controlled Bank in Bid to Curb Moscow’s Influence

  Why Is Switzerland — of All Places — Importing So Much Cheese?

  Untangling the U.S. From China’s Economy Is Messy

  America’s Rise as an Energy Export Powerhouse Hinges on One Town

  Americans Feel Better About the Economy. Should We Believe Them?

  US Recession Becomes Closer Call as Economists Rethink Forecasts

  Billionaire Sternlicht Sees ‘Category 5 Hurricane’ Spurred by Fed Rate Hikes

  UPS Strike Would Deal Blow to Inflation Fight, Supply Chain

  Microsoft-Activision Antitrust Win Raises M&A Revival Hopes

  Sergey Brin Is Back in the Trenches at Google

  Threads User Engagement Continues to Drop, Adding Urgency for New Features

  Lawmakers Challenge Ford and Chinese Battery Partner Over Forced Labor

  Your C.F.O., a ‘Fraction’ of the Time

  With Hollywood on Strike, a Bright Spot in New York’s Economy Goes Dark

  Searching for Someone to Deliver a Hollywood Ending

  She Was the Oppenheimer of Barbie. Her Invention Blew Up.

  Tour de France Cycling Boom Helps French Family Firm Make Half a Billion Euros

  Latest Wild FTX Allegations Include Plan to Buy Island of Nauru to Survive Cataclysm

  Be sure to follow me on Twitter.

• Morning News: July 20, 2023
  Eddy Elfenbein, July 20th, 2023 at 7:05 am

  Wheat Soars After US Warns of Explosives at Ukrainian Sea Ports

  Brazil’s All-Powerful Sugar Industry Is Souring the Country on EVs

  Why Heat Waves Are Deepening China’s Addiction to Coal

  A $15 Billion Oil Debt Spawns a Black Market in Mexican Fixers

  The Biggest Winners in America’s Climate Law: Foreign Companies

  TSMC Delays Start of First Arizona Chip Factory, Citing Worker Shortage

  Could the Recession in the Distance Be Just a Mirage?

  Selloffs, Inequality, China Tension: Here Are the Next Big Risks

  The Hiring Boom Is Hiding a Recession Signal

  Fed Wants Paychecks to Hit Bank Accounts in a Flash

  Fed Seen Hiking Final Time to a 22-Year Peak in Economist Survey

  ‘Passport King’ Builds Quant Trading Fortune

  Blackstone’s $1 Trillion Triumph Is Muted by Deal Slowdown

  Apollo to Launch Private Fund in Asset-Based Financing Buildout

  KeyCorp Second-Quarter Profit Halves on Higher Loan Loss Provisions

  SAIC, Audi Reach Agreement on Electric Vehicle Cooperation

  Netflix Password-Sharing Crackdown Delivers Jolt of New Subscriber Growth

  Not Even Tom Cruise Can Charm China’s Moviegoers Into Seeing Hollywood Films

  How TV Writing Became a Dead-End Job

  Adidas and Ye’s Secret Battle Over a $100 Million Marketing Fund

  Inside the Private Writings of Caroline Ellison, Star Witness in the FTX Case

  Be sure to follow me on Twitter.

• Morning News: July 19, 2023
  Eddy Elfenbein, July 19th, 2023 at 7:06 am

  U.K. Inflation Rate Slows to 7.9 Percent, as Price Pressures Ease

  Markets Cheer U.K. Inflation Slowdown but Pain Remains for Households

  U.S. Rate Rises Hit the Yen Hard, but Now It’s Staging a Comeback

  A $500 Billion Corporate-Debt Storm Builds Over Global Economy

  High-Tech Subsidy Wars Widen Global Divide

  In London, New York and Paris, a Giant Office Bet Is Going Wrong

  Private Equity Titans Tap Sovereign Wealth to Get Deals Done

  Biden’s Anti-Trust Team Isn’t Backing Down From a Fight

  Goldman Sachs Profit Tumbles on Real Estate Hits, Banking Slump

  Morgan Stanley Moves 200 Tech Experts From China on Data Law

  Wall Street Gets New ETF Offering 100% Downside Protection

  Tech Stocks, Meme Stocks, Crypto: Investors Are Feeling Bold Again

  Big Tech Stocks Are About to Be Tested, and So Is the Whole Market

  Americans Aren’t Rebuilding Their Savings Fast Enough

  Meta Unveils a More Powerful A.I. and Isn’t Fretting Over Who Uses It

  Microsoft and Activision Blizzard Still Committed to $75 Billion Merger

  Carvana Soars After Reaching Debt Restructuring Deal

  Homeowners Don’t Want to Sell, So Home Builders Are Booming

  WeightWatchers Is Gambling Everything on Obesity Drugs

  Taco Bell Wins ‘Taco Tuesday’ Trademark Dispute with Rival Chain

  Kim Kardashian’s Skims Is Now Worth $4 Billion

  Be sure to follow me on Twitter.

• CWS Market Review – July 18, 2023
  Eddy Elfenbein, July 18th, 2023 at 6:23 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.”)

  China’s Economy Misses Expectations

  On Tuesday, the Dow Jones Industrial Average rose for its seventh day in a row. This is the index’s longest winning streak since 2021. Across those seven days, the index added more than 1,200 points. One of the old sayings on Wall Street is that good markets tend to build on themselves.

  There’s some truth to this. Bespoke Investment Group said that this year was the 23rd year since 1945 that the S&P 500 rallied more than 10% during the first half of the year. Of those 22 previous times, 18 saw gains in the second half of the year. The median gain for the back half of the year was 10%.

  Of the 55 years when the Dow lost ground or gained less than 10% in the first half of the year, the median second half performance was a gain of just 3.5%. Of course, we’re barely halfway through the year and a lot could happen between now and December 31.

  

  Lately, the big concern hasn’t been about our economy. Instead, the worry is about China’s economy. Yesterday, the Chinese government said that its economy grew at a slower-than-expected rate for the second quarter. This was a bit of a shock. Analysts had been expecting an increase of 7.3%. Instead, it grew by 6.3%.

  That number sounds healthier than it really is because it’s compared against a very weak number from a year ago when China was still locked down during Covid.

  China’s sour news poses a novel issue for Americans. Many countries around the world have become used to having problems in their economies due to the U.S. economy having problems of its own. For Americans, however, this spillover effect is a new phenomenon. The idea that we can be doing everything right and yet some policy mistake in China redounds on us is rather new. We’re now just dealing with what everyone else has had to contend with.

  The problems in China may get worse. The unemployment rate for people aged 16 to 23 is 21.3%. That’s a new record. The unemployment rate for people in cities was 5.2% in June. Earlier this year, China set a growth target for this year of 5%. That may have been overly optimistic.

  A few months ago, China relaxed its Covid controls and that helped the economy get an initial boost, but that boost has clearly faded. In fact, the government recently said that China had 0% inflation for June. For the most part, the government has shied away from doing a large-scale stimulus program. It appears that shoppers in China are wary of buying more.

  Many countries around the world depend heavily on growth in China to keep their own economies afloat. Plus, many jobs in developed nations have been outsourced to China.

  The fear is that slower growth from China could help push the U.S. economy into recession, and this is happening at the same time the Federal Reserve is trying to kill off inflation. This could put the Fed in a tight spot with a need to cut rates at the same time it wants to fight inflation. Treasury Secretary Janet Yellen said that problems in China could impact the U.S. economy but not enough to push us into a recession. We’ll see.

  A lot of observers are hoping for a soft landing in the U.S., but weaker growth from China could make that more difficult. It’s not a major problem yet for the U.S. but it could become one soon.

  This is coming at the same time as earnings season starts. All in all, I think this will be a fairly mediocre earnings season for Wall Street. Some good and some bad, but it easily could have been a lot worse. For this earnings season, Wall Street expects a 9% drop in profits. If that’s right, then Q2 will be the worst quarter for GDP growth since Q2 2020.

  We already have some early numbers. So far, 79.3% of reports have beaten their earnings estimates and 73.3% have beaten their revenues estimates. A total of 62.1% have beaten on both. That’s not bad, but it’s still early.

  The major weak spot is Energy. That’s not a surprise. That sector is on pace to post an earnings drop of 48.59%. On the plus side, Consumer Discretionary looks to see earnings growth of 20%.

  This earnings season is on track to be the third quarter in a row with an earnings decline. The silver lining is that Q2 will likely be the earnings trough.

  Here are some key stats I got from John Butters at FactSet. Quarterly earnings growth for the S&P 500 has exceeded estimates 37 times in the last 40 quarters. Over the last ten years, the average earnings beat has been 6.4%. An average of 73% of companies have topped estimates. In other words, you’re expected to beat expectations. Over the past four quarters, earnings have beaten estimates by “only” 3.2%.

  On Thursday, Abbott Laboratories (ABT) will be our first Buy List stock to report this earnings season. Three months ago, ABT topped earnings and the stock jumped 8% in one day. This time, Wall Street expects ABT to report earnings of $1.05 per share. My numbers say it will be closer to $1.10 per share. ABT is a very good company.

  The U.S. Dollar Tumbles

  One area of concern lately has been the slumping U.S. dollar. There’s been a lot of scaremongering about the “pending collapse” of the dollar for a long time. In fact, the dollar already gave us a bearish head fake a few months ago. I use these words cautiously, but this time may really be different.

  With investors betting that the Fed’s rate hike cycle is coming to an end, and with possible rate cuts not too far off, this leaves the dollar in a tight spot. Bear in mind that rate cycles tend to last a few years rather than a few weeks. Traders see the Fed starting to cut rates in March of next year.

  Currency traders aren’t wasting any time. The U.S. dollar is currently going through its worst drop since November and is now at its lowest level in more than a year. Not only is the dollar weak, but it may stay weak for some time. The recent drop has also helped spark gains in oil and gold.

  The Fed meets again next week and will almost certainly raise interest rates by 0.25%, but what about after that? The outlook gets murkier, but the Fed may stay on the sidelines for several months.

  The fear is that there could be a mismatch between Fed policy and the European Central Bank. For example, if the Fed calls off its inflation battle at the same time the ECB is hiking, that could lead to a dollar rout. I doubt it will happen, but it’s not an unreasonable fear.

  Here’s a very ugly chart of the dollar versus the euro:

  

  It’s hard to avoid the simple fact that the dollar is probably overvalued. Bloomberg notes that the real effective exchange rate for the Japanese yen is at its lowest point in decades.

  We may be witnessing an unwinding of the “carry trade.” This refers to a strategy of borrowing in a low-yield currency like the yen and buying a higher-yielding one like the dollar. So far in 2023, this has been a no-brainer move but it may be coming to an end.

  The yen-dollar is only one such pairing. Investors have also been playing the carry trade with emerging market currencies.

  On Tuesday, we got the retail sales report for June. This is an important report because if shoppers are in a good mood, then the economy will likely do well. Unfortunately, shoppers were a little sluggish last month.

  For June, retail sales rose by 0.2%. That’s not adjusted for inflation. Economists had been expecting an increase of 0.5%. The rate for May was revised to 0.5%. Consumer spending makes up roughly two-thirds of the economy.

  Consumer spending tends to be tied to the strength of the labor market. The June payroll figure, while still positive, came in well below the figure for May. Gary Alexander reminds me that the Conference Board said earlier this year that a recession in the coming 12 months was 99% certain. The same group recently reported that their June Consumer Confidence survey turned positive for the first time since January of 2022.

  Interestingly, Goldman Sachs just cut its odds of a recession happening over the next 12 months from 25% to 20%. I’m ready to christen 2023 “the year of the recession that never came.” We’ll know more on July 27 when the government releases its initial estimates for Q2 GDP growth.

  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.