Archive for September, 2023

• Morning News: September 6, 2023
  Eddy Elfenbein, September 6th, 2023 at 7:06 am

  Speeding Up Green Transition Would Make It Cheaper Too – ECB

  Saudi Cuts Send World Diesel Prices Soaring

  $100 Oil? What a Price Spike Could Mean for Markets and Geopolitics

  Thieves Target ‘Liquid Gold’ as Olive Oil Prices Soar

  Pork Industry Grapples With Whiplash of Shifting Regulations

  India’s Moment Has Arrived, and Modi Wants a New Global Order

  Bank of Canada Poised to Hold Rates at 5% But Threaten More Hikes

  Fed Set to Double Its Economic Growth Forecast After Strong US Data

  KKR’s McVey Boosts Economic Outlook, Recommends Investors Buy Real Assets

  Rising Rents Are Hitting American Suburbs Hardest

  China Bans iPhone Use for Government Officials at Work

  In Its First Monopoly Trial of Modern Internet Era, U.S. Sets Sights on Google

  Google Turns to a Steady Old Hand to Fight Antitrust Charges

  Roku Cutting 10% of Staff to Rein In Rising Expenses

  Elon Musk Borrowed $1 Billion From SpaceX in Same Month of Twitter Acquisition

  Disney’s Wildest Ride: Iger, Chapek and the Making of an Epic Succession Mess

  Disney Lures Sports Fans to Hulu+ With ESPN Pulled From Charter

  ESPN Bets Big on Pat McAfee, an F-Bomb-Throwing YouTube Star

  Warner Bros. Cuts Profit Outlook as Hollywood Strikes Drag On

  Powered by A.I., Company Aims to Make Selling Easier for Retailers

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• CWS Market Review – September 5, 2023
  Eddy Elfenbein, September 5th, 2023 at 8:09 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.”)

  This Is the Tough Time of Year for Stocks

  I hope you had a relaxing weekend. Traditionally, Labor Day Weekend marks a big change for stock returns.

  A few years ago, I took the entire 127-year history of the Dow Jones Industrial Average and broke down how the index performs for each day of the year. That’s about 35,000 daily figures.

  This is what the average year has looked like for the Dow. The index starts at 100 on January 1.

  

  What I found is that historically, the Dow has reached a peak on September 6, shortly after Labor Day, and it’s fallen an average of 2.21% by October 29.

  A drop of 2.21% may not sound like much, but it’s an unusually large drop when combining 127 years’ worth of data. That’s more than one-quarter of the Dow’s average annual gain.

  Historically, the summer has been a very good time for stocks. From June 27 to September 6, the Dow has gained an average of 3.76%. That means that nearly half of the Dow’s annual gain has come over just 71 calendar days.

  I want to stress that I don’t put a great deal of faith in these type of calendar effects. I would never make an investing decision based on one, but I do find them interesting. It seems very reasonable that summer has traditionally been good for stocks and that once the first hint of autumn comes, traders walk back some of those easy gains. This year, Wall Street had a good run from mid-March until late July, but investors may be growing more cautious. Speaking of growing caution, let’s look at last week’s job report.

  The Economy Created 187,000 Jobs Last Month

  On Friday, the government reported that the U.S. economy created 187,000 net new jobs last month. While that’s higher than Wall Street’s consensus for 170,000 jobs, it did mark the third month in a row of sub-200,000 jobs. On top of that, the jobs numbers for June and July were revised lower. June was lowered by 30,000 and July was lowered by 80,000.

  Before reading too much into this, I should caution you that the jobs numbers for August can be tricky. It’s a difficult month to track new jobs. As a result, the revisions to the August numbers can be unusually high. For example, two years ago, the August jobs number was eventually doubled from the initial report. With econ data, it’s more important to look at the overall trends.

  

  For August, the unemployment rate rose to 3.8% which is the highest in 18 months. I also like to look at the “U-6” rate which is a broader measure of joblessness. For August, the U-6 rate rose by 0.4% to 7.1%. It’s now at its highest level since May 2022.

  One good sign is that the labor force participation rate rose to 62.8%. That’s the highest in more than three years. In plain English, it means that more people are out there looking for jobs. Once you stop looking, the government stops counting you as unemployed.

  Perhaps the most important figure is wages. For August, average hourly earnings increased by 0.2%. That was below expectations of 0.3%. Over the last year, average hourly earnings are up by 4.3%. Wall Street had been expecting 4.4%. Hours worked rose slightly to 34.4. This is important because higher earnings generally means more revenue for business.

  Here are some details:

  “The U.S. labor market continues to come back to earth but from a very high peak,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “The labor market was sprinting last year and now it’s getting closer to a marathon pace. A slowdown is welcome; it’s the only way to go the distance.”

  Healthcare showed the biggest gain by sector, adding 71,000. Other leaders were leisure and hospitality (40,000), social assistance (26,000), and construction (22,000).

  Transportation and warehousing lost 34,000, likely due to the Yellow trucking bankruptcy, and information declined by 15,000.

  There could be some cracks showing in the labor market. Last week’s job openings report showed a decline of nearly nine million job openings in July. There are still 1.5 jobs for every unemployed person.

  Last week, the Q2 GDP report was revised a bit lower to 2.1%. The day after the GDP report, we also got the personal income and spending data. For July, personal income increased by 0.2%. That was 0.1% below expectations. Personal spending increased by 0.8%. That beat expectations by 0.1%.

  The PCE Price Index, which is the Fed’s preferred measure of inflation, rose by 0.2% in July. Over the last 12 months, the PCE has increased by 3.3%. The core PCE is up by 4.2%.

  The Federal Reserve meets again in two weeks. I expect the Fed to pause again at this coming meeting, but the following meeting, in early November, is a different story. There’s a chance that the Fed will raise rates again, but it’s far from certain. In fact, it’s not out of bounds for the Fed to be finished with its rate hikes for this cycle. Goldman Sachs thinks so.

  Traders currently place the odds of a pause in November at 59%. One week ago, the odds were at 65%.

  I’m not ready to say that the Fed is done with its hikes just yet, but we’ll soon get more data. The next important date is Wednesday, September 13 when the next inflation report is due out. If we’re not at the end of the Fed’s rate cycle, then we’re getting very close. That’s good news for investors.

  Looking at the Sahm Rule

  The economist Claudia Sahm is known as the inventor of the “Sahm Rule” which tells us if we’re in a recession or not.

  The rule is simple but the reasoning behind it is very clever. The idea is that if the unemployment rate rises by a little, then it’s likely to rise by a lot.

  This is a smart insight because it recognizes that economic cycles tend to reinforce each other. For example, a recession may lead to corporate layoffs. Those layoffs lead to decreased consumer spending. In turn, that leads to lower profits, and so on. In other words, a recession leads to a recession and a recovery builds on a recovery.

  This is also why it’s been very hard for the Fed to engineer soft landings.

  Best of all, the Sahm Rule is easy to calculate. It says we’re in a recession when the rolling three-month average for unemployment is 0.5% or more higher than the rolling three-month low over the last 12 months.

  

  The rolling three-month average for unemployment reached 3.5% four months in a row (January through April). This means that the Sahm Rule would be triggered if the unemployment rate averages 4.0% for over a three-month period. This is why I took notice when last week’s report said that unemployment increased from 3.5% to 3.8%.

  The math is easy. If we have an unemployment rate of 4.2% in September and October, then the Sahm Rule says we’re in a recession. Currently, the Sahm Rule is at 0.13%. Goldman Sachs just lowered its odds of a recession sometime in the next 12 months to 15%. This is the third time in three months that Goldman has lowered its recession odds.

  To be clear, I agree that a recession right now is very unlikely. Also, this economy has proven to be far more resilient than a lot of experts thought.

  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: September 5, 2023
  Eddy Elfenbein, September 5th, 2023 at 7:07 am

  Gulf Royal’s $1.5 Trillion Empire Draws Bankers and Billionaires

  China’s Country Garden Narrowly Avoids Default

  Argentina, in Dollar Love Affair, Agonizes Over Divorcing the Peso

  European Asset Managers Reject Plans for Tighter Liquidity Rules

  US Banks Hold $3.3 Trillion Cash Amid Banking Crisis, Slowdown Worries

  Rising Demand for Fed Bank Lending Program Not a Sign of Stress

  Goldman Cuts US Recession Chances to 15% on Improved Inflation

  How Slowing Inflation Can Hit Corporate Profits

  Crypto Market-Making Profit Margins Sink 30%

  A $700 Million Bonanza for the Winners of Crypto’s Collapse: Lawyers

  SoftBank’s Arm Seeks to Raise Up to $4.87 Billion in Anticipated IPO

  What Huawei’s Comeback Says About US-China Tech War

  Mercedes CEO Changes Tune on China as ‘Economic Wonder’ Stalls

  In EV Transition, German Carmakers Lag Behind Tesla and China

  Housing Market Inventory Is So Scarce That Builders Will Be in the Driver’s Seat for Years to Come, Says KB Home’s CEO

  Why the U.S. Labor Movement Is So Popular But Union Membership Is Dwindling

  Return-to-Office Is a $1.3 Trillion Problem Few Have Figured Out

  OpenAI CEO Sam Altman First Person to Get Indonesian Golden Visa

  Messi Drives Jump in Apple TV+ and MLS Subscriptions

  Tyson Foods Couldn’t Produce Enough Chicken. Now It Has Too Much

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• Morning News: September 4, 2023
  Eddy Elfenbein, September 4th, 2023 at 7:08 am

  Money and Politics Put World’s Biggest Climate Deal at Risk

  Russia Says It Will Not Let Foreign Banks Exit the Market Easily — Unless They Unfreeze Russian Assets

  Xi’s Unexplained G-20 Snub Erodes Image as Global Statesman

  Huawei Teardown Shows Chip Breakthrough in Blow to US Sanctions

  China’s Biggest Homebuilder Reels as Economy Slows

  Faced With Evolving Threats, U.S. Navy Struggles to Change

  US Stock Investors’ Complacency is Worrying, JPMorgan Strategists Warn

  The Discredited Phillips Curve Cannot Be Discredited Enough

  Inside a Sales Army Turning a Tax Break Into a Modern-Day Gold Rush

  Arm IPO Expectations Tempered by Reality as Roadshow Kicks Off

  Diamond Prices Are in Free Fall in One Key Corner of the Market

  India Steps Up Coal Use to Stop Outages Triggered by Unusually Dry Weather

  Warren Buffett’s Green Cash Washes Over Coal Country

  J&J’s $40 Billion Split-Off Sets Stage for Pharma, Medical Tech Expansion

  The Ground-Floor Window Into What’s Ailing Downtowns

  Where in the World Are People Back in the Office?

  A Summer of Strikes

  Labor Could Be Detroit’s Next Big Disruption

  Electric Cars Power China’s Economic Hopes as Internet Titans Take a Back Seat

  Mercedes Bets on Range Boost in Swipe at Tesla’s EV Lead

  Apple Is Set to Embrace an iPhone Charger Change It Didn’t Want

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• Morning News: September 1, 2023
  Eddy Elfenbein, September 1st, 2023 at 7:02 am

  New Rising Stars Are Powering Gulf’s $50 Billion Spending Spree

  India Is Losing a Green-Energy Subsidy Race

  World’s Biggest Interest Rate Cuts Are Chile’s Prize for Taming Inflation

  China Ramps Up Campaign to Boost Fragile Economy, Currency

  The US, Allies See Opportunity and Risk in China’s Slowing Economy

  Fed Officials Will Parse Jobs Numbers to Assess Economy’s Momentum

  Summer Spending Surge Shows Consumers Driving Economic Growth

  Rates Are Up. We’re Just Starting to Feel the Heat

  US Stocks Still Face Hard Landing Risks, Bank of America Says

  NFTs, Once Hyped as the Next Big Thing, Now Face ‘Worst Moment’

  Wall Street Moguls Win Important Backer in Their Fight Over Hedge Fund Sale

  Jon Corzine’s Critics Want Him Banned From Futures Trading

  Wall Street Gets Tough on Return-to-Office Laggards

  US Hiring to Slow Again Amid Writers Strike, Yellow Bankruptcy

  5 Things CFOs Should Know About Generative AI

  Billionaires’ Secretive Plan to Build a New City Is Backfiring

  Tesla Refreshes Model 3 and Slashes Prices of Top-End Cars

  Walgreens Chief Executive Roz Brewer Steps Down

  New Boozy Drinks Blur Lines Between Kid and Adult Beverages

  People Are More Generous Than You May Think

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