Archive for August, 2023

• Morning News: August 21, 2023
  Eddy Elfenbein, August 21st, 2023 at 7:02 am

  China Central Bank Cuts Key Interest Rate on Bank Lending

  Run It Cold: Why Xi Jinping Is Letting China’s Economy Flail

  As China Falls Into Deflation, the Mood Turns Dark

  China Is on Edge as Fallout From Its Real Estate Crisis Spreads

  Chinese E-Commerce Giants Pivot to Selling Inexpensive Goods

  JPMorgan Sees Japan’s Threshold for Yen Intervention at Around 150 Yen per Dollar

  The Unbearable Nothingness of Yield Curve Inversion

  Why the Era of Historically Low Interest Rates Could Be Over

  The Fed Can’t Celebrate at Jackson Hole Just Yet

  New York and California Each Lost $1 Trillion When Financial Firms Moved South

  Why PayPal’s Stablecoin Is Likely to Succeed Where Facebook’s Libra Failed

  Arm Listing Set to Be Turning Point for IPO Market, SoftBank

  Bond Bulls at JPMorgan, Allianz Keep Piling Into a Bet Gone Bad

  Wall Street All-Stars Including Weinstein, Ackman Bid for Hedge Fund

  Borrowers With $39 Billion in Student Loans Finally See Relief

  Retailers Are Fleeing Downtown San Francisco. IKEA Is Moving In

  The US Mall Is Not Dying

  Cargill Tests 123-Foot-Tall Sails in Effort to Slash Fuel Burn

  Kraft Heinz Sees a $25 Billion Opportunity—in Schools

  Meta’s Threads App to Launch Web Version as Rivalry With X Enters New Stage

  Elon Musk Admitted X ‘Might Fail’—then the Social Network Accidentally Removed Swathes of Historic Content, Including Ellen’s Oscars Selfie that Broke Twitter

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• Morning News: August 18, 2023
  Eddy Elfenbein, August 18th, 2023 at 6:29 am

  How Brexit Failed England’s Premier Fishing Town

  How Geopolitics Is Complicating the Move to Clean Energy

  Biden’s Big Green Push Is Driving Enormous Growth

  A Sickly Ruble Reveals What Putin Will Not

  Turkish Inflation Outlook at Its Worst in 21 Years on Weak Lira

  Top US Firms From Apple to Intel Decry India PC Import Curbs

  ‘Peak China’ (Post-Dynasty Version)

  China’s Hidden Financial Dangers Erupt With Shadow Bank Crisis

  Evergrande Seeks US Court Nod for $32 Billion Debt Overhaul as China Economic Fears Mount

  Investors Fear China’s ‘Lehman Moment’ Is Looming

  Bitcoin Plunge Spurs Liquidations as SpaceX’s Token Sale Weighs

  Billionaire Steve Cohen Fights a $10 Million Tax Bill to Derail an IRS Plan

  Hawaii Fires Turn a Safe Investment into a Big Risk

  Hawaii Explores Moratorium on Outsiders Buying Lahaina Properties

  Why Child-Care Prices Are Rising at Nearly Twice the Overall Inflation Rate

  For Single Women in China, Owning a Home Is a New Form of Resistance

  China’s Abandoned, Obsolete Electric Cars Are Piling Up in Cities

  The EV Startup Worth More Than GM Had Troubled U.S. Rollout

  Ford Swings at Supercars With New $300,000 Mustang GTD

  America’s Obsession With Weight-Loss Drugs Is Affecting the Economy of Denmark

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• Morning News: August 17, 2023
  Eddy Elfenbein, August 17th, 2023 at 7:06 am

  Milei Promises Argentina Can Be Saved With Libertarian Economics

  China Told State Banks to Escalate Yuan Intervention

  Some Fed Officials Are Turning Cautious about Raising Rates Too High

  With Investors on Edge, Fed Minutes Take on New Urgency

  Global Yields March to 15-Year Highs as Rate-Hike Worries Build

  Goldman Sachs Blames Zero-Day Options for Fueling S&P 500 Selloff

  The Legendary, Wildly Profitable QQQ Fund Makes No Money for Its Owner

  ‘Don’t You Remember Me?’ The Crypto Hell on the Other Side of a Spam Text

  More Cyber Companies Announce Layoffs

  How a Small Group of Firms Changed the Math for Insuring Against Natural Disasters

  The Trillions of Dollars Forgotten When Tracking the Energy Transition

  U.S. Plans New Tariffs on Food-Can Metal From China, Germany and Canada

  How U.S. Steel Became an Acquisition Target

  US Housing Affordability Hits Worst Point in Nearly Four Decades

  The Golden Girls Approach: Buying Homes Together Amid High Prices

  Almost Half of Americans See Automation Replacing Their Jobs

  The Desperate Hunt for the A.I. Boom’s Most Indispensable Prize

  BAE Systems Snaps Up Ball Corp’s Aerospace Arm for About $5.55 Billion

  Walmart’s Sales and Profits Rise, Fueled by Consumers Looking for Deals

  Already Time to Hit the Brakes on VinFast

  Nike, Adidas Bet Big on World Cup Football Shirts and Merch

  LinkedIn is Uniquely Positioned to Benefit from Twitter’s Meltdown–and Disgruntled X Users are Offering Microsoft a Blueprint for Social Media Supremacy

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

  U.K. Inflation Eases to 6.8% as Energy Prices Fall

  Argentina Vote Shock Leaves Investors Dreading the Next Default

  Lebanon Freezes Accounts of Former Central Bank Governor

  China Asks Some Funds to Avoid Selling Stocks as Markets Sink

  Zhongrong Trust’s Missed Payments Trigger Fears Among Chinese Investors

  China Scuttles a $5.4 Billion Microchip Deal Led by U.S. Giant Intel

  The U.S. Is Turning Away From Its Biggest Scientific Partner at a Precarious Time

  Vital Natural Gas Is Being Stashed in Caverns Beneath War-Torn Ukraine

  Race to Control Electric-Vehicle Supply Chains Leads to Africa

  A BRICS Currency Replacing the Dollar is a ‘Ridiculous’ Idea, Says the Top Economist Who Named the Group—Unless China and India Become Allies

  I.R.S. Says Cash Influx Has Made Agency Bigger and More Digital

  Coinbase Gets NFA Approval to Offer Crypto Futures

  Goldman CEO’s Most Loyal Deputy Is Tested by Mutinous Partners

  Brookfield Chases Rivals for Private Equity’s New Money-Spinner

  Billionaire Charlie Ergen Conjures M&A Magic to Save His Empire

  Dubai Leapfrogs Lisbon as Best Destination for Globetrotting Executives

  A Vietnamese Electric Carmaker is Now Worth More Than Volkswagen and Ford

  High-Potency Pot Market Worth Billions Draws Regulator Scrutiny

  Estée Lauder’s Big Bet on China Is Looking Not So Pretty

  Target Sales Are Punished by Pride Month Backlash

  Forget the Office Gym. Welcome to the Gym Office

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• CWS Market Review – August 15, 2023
  Eddy Elfenbein, August 15th, 2023 at 6:33 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.”)

  July Retail Sales Rose 0.7%

  We had some good news this morning regarding consumer health. The Commerce Department said that retail sales rose by a seasonally-adjusted rate of 0.7% last month. Expectations were for an increase of 0.4%. The figure for June was revised higher by 0.3%, and May was revised upward by 0.1%.

  

  It’s hard to have a recession when people are out there shopping!

  If we exclude autos, then July’s sales were up by 1%. Bear in mind that these numbers are not adjusted for inflation. Here are some details.

  July’s numbers were boosted by a 1.9% jump in spending at online retailers, while sporting goods and related stores increased 1.5% and food service and drinking places rose 1.4%.

  On the downside, furniture sales slumped 1.8% and electronics and appliance stores reported a 1.3% drop. Gas station sales rose just 0.4% on the month despite rising prices at the pump.

  The report adds to the narrative that the U.S. economy may be able to avoid a much-predicted recession brought on by a series of Federal Reserve interest rate hikes aimed at controlling inflation.

  These numbers are important to watch because consumer spending accounts for roughly two-thirds of the U.S. economy which is now $27 trillion.

  The Federal Reserve doesn’t meet again for another month, but the emerging conventional wisdom is that the Fed will pause again and hold interest rates at 5.25% to 5.50%. Short-term rates are at their highest level in more than 20 years.

  The outlook for the economy has changed a great deal over the last few months. Not too long ago, markets were expecting the Fed to have started cutting rates by now. What a difference a few months can make.

  After September, the futures market thinks there’s a one-in-three chance that the Fed will hike again at its November meeting. Frankly, I’m skeptical but if the data changes, then it’s a strong possibility.

  Over the last 12 months, retail sales have increased by 3.2%. That sounds impressive until you realize that that’s the same rate of inflation. Another report today said that import prices increased by 0.4% last month. That was double expectations.

  Earlier today, the Atlanta Fed’s GDPNow forecast for Q3 GDP growth jumped to 5.0%. That’s up from 4.1% from last week. That’s a very strong number.

  Obviously, this is just a model and we’re only halfway through Q3. Looking at the details, consumer spending added 3% to Q3 GDP growth, and the change in inventories added 1.17%.

  That’s very impressive and it’s more evidence that the most widely-expected recession in decades is still taking its sweet time. A lot of well-paid economists were very, very wrong.

  Argentina’s Fed Hikes Rates to 118%

  In the United States, people are worried about high interest rates. Since March 2022, the Federal Reserve has increased interest rates 11 times to a range of 5.25% to 5.50%. That’s (finally) higher than the rate of inflation.

  But that’s nothing compared with our friends in Argentina. Their central bank just hiked rates by 21% to 118%. The country is on the brink of its sixth recession in the last decade.

  Here’s a look at the peso versus the dollar. Notice the jump at the end.

  

  This is due to the fallout of Sunday’s stunning primary win by Javier Milei, a libertarian economist. Milei won 30% of the vote in the presidential primary which was far more than expected.

  I should explain that Milei isn’t exactly your typical presidential candidate. Milei isn’t merely a small-government conservative; he’s a full-throated anarcho-capitalist. Two of his dogs are named Milton and Murray, in honor of Friedman and Rothbard.

  I don’t want to give you the impression that Milei is somehow odd or unusual. For example, he wants to legalize the selling of organs and children. He also refuses to comb his hair. Additionally, he’s a tantric sex instructor. After that, things frankly start to get a little odd.

  Still, none of this held back voters. Milei won by far the largest share of the vote. This is only the first round of voting. Any candidate who got more than 1.5% will be able to compete in the next round in October. There may also be a runoff in November. Still, it’s obvious that Milei is the leading contender.

  The real story here is less Milei’s triumph, though that is important, and more that things are so bad that voters are willing to give politicians outside the mainstream, like Milei, a hearing. This is when you find out that outside the mainstream is now the mainstream. Of course, we’ve had similar outcomes in our elections.

  For a land of such beauty and promise, Argentina seems to go from one self-induced crisis to the next. Yet it’s that frustration that’s driving Milei’s popularity. You think 9% inflation is bad in America? It’s projected to hit 140% in Argentina. In the last decade, Argentina has had five recessions and a sixth may soon be here.

  I bring this up not to discuss politics, but I do want to focus on an important dynamic, and that’s how the reaction of financial markets impacts policy. The worry is that a Milei win will cause investors to flee Argentina. Argentina’s bond and currency markets are in freefall.

  That happened in France after Mitterrand’s stunning socialist victory in 1981. A lot of French money quickly found a new home in New York.

  Liz Truss faced a similar crisis last year, leading her to resign after just seven weeks as U.K. Prime Minister.

  In the 1990s, James Carville famously said, “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.” He’s right.

  Argentina’s central bank responded to Milei’s showing by devaluing the peso by nearly 18%. The bank said it would hold the peso at 350 to the U.S. dollar until October. The central bank also hiked interest rates by 21% to 118%.

  If he wins, Milei said he wants to cut taxes and implement large spending cuts. He also wants to ditch the central bank and “dollarize” the economy. Milei claims that replacing the peso with the dollar would help calm inflation.

  A Milei presidency could have a major impact on global commodity markets. Of course, Argentina is famous for its beef, but it’s also the world’s fastest-growing lithium producer.

  Milei won big in the country’s farm belt, and he’s promised to take the axe to farm taxes. That could make Argentina’s agricultural sector more competitive. The country also has major deposits of copper and shale oil.

  There are 15 Argentina-based stocks that trade on the U.S. exchanges. Most of the companies are financial or energy stocks, with a few utilities. These stocks had a rough day on Monday. Banco Macro and Grupo Financiero Galicia were both down over 6%. Grupo Supervielle was down over 7%.

  I’m far from an expert on Argentine politics, but I would take Milei’s showing as a sign of how fed up voters are with business as usual. I’m skeptical that he can get so much of his program passed. Still, it’s another indication that voters aren’t happy with high inflation and corruption.

  If he wins, Milei will be able to go as far as the bond and currency markets let him. They can intimidate everybody.

  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: August 15, 2023
  Eddy Elfenbein, August 15th, 2023 at 7:03 am

  Roaring Back From Pandemic, Japan’s Economy Grows at 6% Rate

  Taiwan’s Election Is All About War

  Argentine Shops Hit With 20% Overnight Price Hike After Election

  Uganda Cuts Rate for First Time in Two Years on Easing Inflation

  Russia’s Emergency Rate Hike Fails to Lift Ruble After Crash

  China Slashes Rates, Suspends Youth Jobless Data as Economy Signals Sharper Downturn

  The Fed’s Interest-Rate Debate Is Shifting

  How (Many) Economists Missed the Big Disinflation

  Binance Files for Protective Order Against SEC

  FDIC to Propose Comprehensive Changes to Regional US Bank Living Wills

  Fitch Warns It May Be Forced to Downgrade Multiple Banks, Including JPMorgan

  Steve Schwarzman Is Pushing Blackstone Growth to Get its Act Together

  Suncor Energy’s Quarterly Profit Halves on Lower Oil and Gas Prices

  Home Depot Beats Earnings Estimates, But Sales Slide As Consumers Pull Back on Big-Ticket Buys

  Target’s Struggles Are Only Getting Worse

  Streaming Prices Are Up Nearly 25% in a Year. That’s Part of the Plan

  Using a Credit Card? At These Restaurants It’ll Cost You.

  More Americans Are Ending Up Homeless—at a Record Rate

  Serve a Drink, Then Save a Life: This Is Restaurant Work During the Opioid Epidemic

  The Airport Is an Increasingly Dangerous Place to Work

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• Morning News: August 14, 2023
  Eddy Elfenbein, August 14th, 2023 at 7:07 am

  The Economic Losers in the New World Order

  Russia’s Ruble Hits a 17-Month Low to the Dollar as the Ukraine War Bites

  Yen Breaches 145 Mark Against the Dollar, Prompting Expectations of BOJ Intervention

  China Finance Giant’s Missed Payments Alarm Regulators, Markets

  China’s Worsening Economy Is Hurting Corporate America

  After Pulling Inflation Down, Gasoline and Food Threaten to Nudge It Up

  The Fed Is Playing a Waiting Game to Try to Avoid a Recession

  Binance Shows Why Your Fears of Fed ‘Tightness’ Are Unfounded

  Yellen Warns of Risks of Over-Concentration of Clean Energy Supply Chains

  US Steel Shares Soar After It Rejects $7.25 Billion Cliffs Bid

  Texas Oil Executives Net $122 Million in Bankruptcy-to-Exxon Journey

  Two Towns, Two Factories: How a $500 Billion Boom Exposes American Failures

  San Francisco Prices Are Sinking, and Property Owners Want a Tax Cut

  Can San Francisco Save Itself From the Doom Loop?

  Private Equity Firms Are Slow to Sell Holdings Amid Higher Rates

  Carl Icahn Should Be Sailing Into the Sunset. Instead, He’s Scrambling to Save His Empire

  iPhone Maker Foxconn Beats Expectations. Apple Stock Edges Higher

  The $900,000 AI Job Is Here

  The Dream Was Universal Access to Knowledge. The Result Was a Fiasco

  Everyone Has An Idea For How to Fix Disney. Does Bob Iger?

  Banned in Kuwait, ‘Barbie’ Sparks Delight, and Anger, in Saudi Arabia

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• Morning News: August 11, 2023
  Eddy Elfenbein, August 11th, 2023 at 7:05 am

  Turkey Finally Stamps Out Credit Oddity as Hikes Lift Loan Rates

  Meloni-Style Capitalism is Reshaping Corporate Italy

  Adani Ports Auditor Deloitte to Resign After Flagging Concerns

  Biden Calls China’s Economy a ‘Ticking Time Bomb’

  Interest Rates on Loans Hit 790% in Latin America’s Big Fintech Shakeout

  U.K. Economy Grows Weakly

  New U.K. Alcohol Taxes Cut Beer Costs In Pubs, But Other Drink Prices Will Rise

  Hard Landing Is Here for Trade, Roiling World Export Champs

  CFOs Are More Optimistic on Side-Stepping a Recession

  UBS Ends Taxpayer Backstop Granted for Credit Suisse Rescue

  Consulting Firms Are Paying Undergrads $25,000 to Do Nothing

  Regulators Give Green Light to Driverless Taxis in San Francisco

  UPS Pay Hikes for Package Handlers Raise Pressure on FedEx

  Airline Passengers Will Be Forced to Pay for $5 Trillion Carbon Cleanup

  Before Joining Federal Safety Program, Freight Railroads Push to Change It

  Goldman’s C.E.O. Is Stuck, Without a Clear Lifeline

  Outrage as Chinese Real Estate Giant Wobbles and Its Stock Dives

  The Summer Women Flexed Their Spending Power

  Diamonds Are on Sale. They Won’t Be Forever

  Amazon Cuts Dozens of House Brands as It Battles Costs, Regulators

  Colleges Spend Like There’s No Tomorrow. ‘These Places Are Just Devouring Money.’

  Paul Krugman on AI, Superconductors, and Why Alien Invasions Are Inflationary

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

  ECB Is on Back Foot and For Once It’s Down to Germany

  Turkey Inflation: Erdogan’s Policy U-Turn Tests Patience

  US Set to Unveil Long-Awaited Crackdown on Real Estate Money Laundering

  The US Is Pushing Guns on a Country It Labels Violent and Corrupt

  Biden Orders Ban on New Investments in China’s Sensitive High-Tech Industries

  Lessons From a Law Firm’s Decision to Leave China

  China Relies on U.S., Allies for Hundreds of Products

  Heat, War and Trade Protections Raise Uncertainty for Food Prices

  How Long Will Companies Keep Raising Prices on Consumer Goods?

  What to Watch in July’s CPI Report: Why an Uptick in Annual Inflation Might Not Worry the Fed

  US Consumer Prices Data Set to Show ‘Wave of Disinflation’

  Moody’s Warning on US Banks a Wake-Up Call for Sanguine Investors

  In Wall Street’s Hottest CEO Race, Morgan Stanley Hopes for Drama-Free Handoff

  WeWork’s ‘Going Concern’ Language Shows the Office Culture of the 2010s Is Dead—Even If the Office Provider Survives Into the Hybrid Era

  Is the Airbnb Dream Dead?

  For Disney, Streaming Losses and TV’s Decline are a One-Two Punch

  Disney to Launch Cheaper Ad-Supported Service in UK

  Studios Are Raking in Profits While Actors and Writers Are on Strike

  Retailers Say Organized Theft Is Biting Into Profits, but Internal Issues May Really Be to Blame

  The $1.4 Billion Corporate Sponsorship Hole in the Women’s World Cup

  Lyft to Expand Its Ad Business as New CEO Eyes a Turnaround

  Coach Owner Creates US Luxury Giant with $8.5 Billion Deal for Michael Kors Parent

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• Morning News: August 9, 2023
  Eddy Elfenbein, August 9th, 2023 at 6:47 am

  China Slides Into Deflation as Consumer, Factory Prices Drop

  China Sprints Ahead in Race to Modernize Global Money Flows

  U.S. to Ban Some Investments in China

  Japanese Carmakers See Next Few Years as Fight for Survival in China

  Another Chinese Property Giant Teeters, Raising Worries About the Economy

  Why Germany’s Property Sector is in the Dumps

  First Scorched, Then Soaked: Weather Whiplash Confounds Farmers

  First American City to Tame Inflation Owes Its Success to Affordable Housing

  Bond Traders Prepare to Brave ‘Painful’ Yield Curve Bets as Rate Hikes Slow

  Moody’s Says US Banks Are Still Strong Despite Downgrades

  The Reality of ESG Is Messier Than the Stark Politics Around It

  Total Household Debt Reaches $17.06 Trillion in Q2 2023; Credit Card Debt Exceeds $1 Trillion

  How to Catch Pandemic Fraud? Prosecutors Try Novel Methods

  WeWork’s ‘Substantial Doubt’ About Its Future Marks a Stunning Fall

  For Younger Workers, Job Hopping Has Lost Its Stigma. Should It?

  Amazon Is in Talks to Become Anchor Investor in Arm IPO

  At This Point, Zoom Could Use Another Pandemic

  Ford Shuts Down in Brazil, and China’s Top EV Maker Comes to the Rescue

  The Weight-Loss Drug Frenzy Is Outrunning the Company Behind It

  ESPN Is Getting Into Sports Betting With Penn Entertainment

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