Archive for October, 2023

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

  Oil Surges as Israel Conflict Reignites Middle East Volatility

  Israel Shekel Slumps Despite $45 Billion Central Bank Pledge

  Russia’s Economy Is Increasingly Structured Around Its War in Ukraine

  U.S. Probe of Russia-Sanctions Busting Focuses on Major Oil Trader

  BlackRock’s Hildebrand Wants IMF to Address New Economic Reality

  Africa Is Front and Center at IMF as US-China Rivalry Heats Up

  Burundi President Replaces Central Bank Governor After 14 Months

  China’s Rich Entrust Total Strangers to Sneak Cash Out of the Country

  The Free-Money Experiment Is Over

  Harvard Professor Goldin Awarded Economics Nobel Prize for Pay-Gap Work

  Amid Strikes, One Question: Are Employers Miscalculating?

  10-Year Treasuries Aren’t An ‘Important’ Asset, They’re a Consequence

  The Wager That Betting Can Change the World

  Big-Company Bankruptcies Hang Over Economy

  US Wealth, Income Concentration Resume Upwards Climb in Post-Pandemic Era

  The U.S. Economy’s Secret Weapon: Seniors With Money to Spend

  How Beyoncé and Taylor Swift Struck a New Kind of Movie Deal

  Home Depot Tracked a Crime Ring and Found an Unusual Suspect

  The Stunning Boom and Bust of a Tax-Refund King

  Zombie Viruses Are Waking Up After 50,000 Years as Planet Warms

  GSK Partners With Zhifei to Boost Shingles Vaccine Availability in China

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• Morning News: October 6, 2023
  Eddy Elfenbein, October 6th, 2023 at 7:04 am

  Russia Lifts Diesel-Export Ban That Battered Global Markets

  Exxon in Talks to Buy Shale Driller Pioneer Natural in What Could Be 2023’s Biggest Deal

  Chevron Labor Dispute Flares Up Again in Australia

  New Shein Executive Aims to Expand Supply Chain Outside China

  China Is Becoming a No-Go Zone for Executives

  The IMF’s $43 Billion Argentina Problem Is About to Get Worse

  Rates Are Jumping on Wall Street. What Will It Do to Housing and the Economy?

  The 5% Bond Market Means Pain Is Heading Everyone’s Way

  Corporate America Is Ignoring Jay Powell and Bingeing on Debt

  Why Are Investors So Jittery?

  Finance CEOs Who Have Stuck It Out for 11 Years Are Eyeing Exit

  America Has a Bankruptcy Problem

  September Jobs Report May Be Last Good One Before Sharp Slowdown

  How to Protect Your Retirement From Nagging Inflation

  Between a Rock and a ‘Hard’ Insurance Market

  Tesla Cuts Model 3, Y Prices in US After Quarterly Sales Dip

  The Birkenstock IPO Is Coming. Nobody Mention Crocs.

  New This Holiday Season: Discounts on Shipping Packages

  Philips Shares Fall 7% After U.S. Drug Regulator Deals Fresh Blow to Sleep Device Recall

  PGA-LIV Deal Faces Delay Over Antitrust, Players Demand Stake

  Down With Efficiency! (When We Get Around to It.)

  Confessions of a Pop-Tarts Taste Tester

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• Morning News: October 5, 2023
  Eddy Elfenbein, October 5th, 2023 at 7:06 am

  Pakistan Considers Long-Term LNG Deal as Domestic Output Slides

  Oil Extends Plunge as Brent Falls Below $85 on Demand Worries

  High Gas Prices Reek of Low Cigarette Sales

  Diesel Prices Could Keep Inflation High

  McCarthy’s Ouster Raises Likelihood of a Government Shutdown

  Fed’s Bid to Avoid Recession Tested by Yields Nearing 20-Year Highs

  Only an Equities Crash Can Rescue the Bond Market, Barclays Says

  Traders from Moore Capital Are Spinning Out $3 Billion Hedge Fund to Wager on Inflation

  Rising Interest Rates Mean Deficits Finally Matter

  The Economics of ‘Free Stuff’ Is That There’s No Free Stuff

  They Dredged the Mississippi River for Trade. Now a Water Crisis Looms

  America’s Factory Boom Brings Billion-Dollar Projects to Tiny Towns

  New U.A.W. Chief Has a Nonnegotiable Demand: Eat the Rich

  In This City, the Right to Own a Car Starts at $76,000. And That Doesn’t Include the Car

  China’s E.V. Threat: A Carmaker That Loses $35,000 a Car

  A Start-Up’s Alternative to Uber: Employing Its Own Drivers

  Relocation Concerns Slow Hiring of New Tech Leaders

  ‘This Is a False Advertisement’: X Ads Are Being Challenged by Reader Context

  Ozempic Is Making People Buy Less Food, Walmart Says

  French Train Maker Alstom Slumps After Cash Flow Warning

  Caroline Ellison Is One of the Only People Who Knows ‘Truth’ Behind SBF’s Fall

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• Morning News: October 4, 2023
  Eddy Elfenbein, October 4th, 2023 at 7:07 am

  Fraud Is Forcing Global Trade to Fix Its Paper Problem

  Oil Prices Edge Lower Ahead of Supply Data as Saudis Affirm Extension of Production Cut

  Japan Keeps Yen Traders Guessing Over Whether It Intervened

  ECB Interest Rate Hikes May Be Over, Centeno Says

  Bond Selloff Threatens Hopes for Soft Landing

  Investors Eye Profit Rebound After Yearlong Earnings Recession

  A ‘Shadow’ Lending Market in the U.S., Funded by Insurance Premiums

  Every Generation Makes Money Mistakes. Here’s What They Are

  Chaos in Washington Adds to Market Jitters

  McCarthy Exit Means More Turmoil Before New US Shutdown Fight

  Why 8% Mortgage Rates Aren’t Crazy

  As Student Loan Payments Resume, Biden Cancels $9 Billion in Debt

  Kaiser Workers Launch Largest Health Care Strike in US History

  America’s High EV Costs Are Driving Buyers to Hybrids

  Amazon Used Secret ‘Project Nessie’ Algorithm to Raise Prices

  SAS Stock Dives 95% as Restructuring Announced

  How Dodgy Spare Parts Got Into Jet Engines, Leaving Airlines Scrambling

  F.C.C. Issues First Fine Over Space Junk Rule

  Spotify Gave Subscribers Music and Podcasts. Next: Audiobooks

  Netflix Plans to Raise Prices After Actors Strike Ends

  Hollywood Ignored Tyler Perry, So He Built His Own Empire

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• CWS Market Review – October 3, 2023
  Eddy Elfenbein, October 3rd, 2023 at 7:41 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.”)

  The Stock Market Continues to Drift Lower

  Wall Street is still in a cranky mood, and the culprit is higher interest rates. There appears to be an emerging consensus that the Federal Reserve will hold interest rates “higher for longer.”

  Wall Street doesn’t like that. Last week, the S&P 500 closed out its first losing quarter since Q3 of last year. The index continued to fall today. The S&P 500 closed at its lowest level since June. The Dow is now down for the year.

  The S&P 500 has already dropped below its 50-day moving average and it’s not too far from breaking below its 200-day moving average. The index has traded above its 200-DMA without stopping for six straight months. Falling below moving averages is often an omen of bad things to come.

  

  What’s next? All eyes are focused on Friday’s jobs report. So far, the labor market has remained calm, but any weakness could convince the bears that they’ve been right.

  For August, the economy created 187,000 net new jobs. That was higher than both June and July, and the unemployment rate rose from 3.5% to 3.8%. For this Friday, Wall Street expects to see 170,000 net new jobs created for September and it expects the unemployment rate to fall to 3.7%.

  However, the number I’ll be watching most closely is average hourly earnings. The consensus on Wall Street is for earnings to rise by 0.3%. Workers have been getting paid more but that’s mostly keeping with inflation. That’s probably part of the reason why we’ve seen organized labor activity recently.

  I won’t make a prediction for Friday’s report, but I will note that other labor reports have been pretty good. For example, the initial jobless claims report is near a seven-month low. On Tuesday, the Bureau of Labor Statistics said that job openings increased in August from 8.9 million to 9.6 million.

  I was also impressed by Monday’s ISM Manufacturing Index. This report comes out on the first business day of the month. Monday’s report came in at 49.0. Any number above 50 means the factory sector of the economy is growing, and any number below 50 means it’s contracting.

  This was the 11th month in a row of contraction, but it wasn’t by much. Monday’s report was the highest in 10 months.

  Despite those selected positive notes, Wall Street seems to be very worried.

  As grumpy as the stock market has been, the bond market is even grumpier. On Tuesday, the yield on the 10-year Treasury reached its highest level since 2007.

  

  The yield on the 10-year got as high as 4.781% while the 30-year reached 4.874%, also the highest since 2007. A little over three years ago, the 10-year yield was going for just 0.5%.

  Rising interest rates are bad for stocks for two major reasons. One is that interest expense is an important part of a company’s income statement. If it costs more to borrow money, companies will do less of it. It also costs more to refinance existing debt.

  The other reason is that higher yields provide stronger competition for investors’ money. The one-year Treasury is going for 5.5%. Sure, it’s not for me, but I certainly can understand investors who’d prefer to make an easy 5.5% for one year than deal with the frenzy of stock market volatility. That 5.5% works out to more than 1,800 Dow points over the coming year, and it’s basically risk-free. What we want to look at isn’t so much the absolute level of interest rates but rather, their direction. Lower yields are good for stocks and higher yields are dangerous.

  What’s interesting is that “real” yields, meaning after inflation, are rising as well. Since May 11, the yield on the 10-year TIPs, the inflation-adjusted security, has increased by 1%. It’s not just an inflation story (but that is a big problem).

  The two-year yield is often considered to be the maturity that is most sensitive to the Fed’s interest-rate policy. The two-year yield recently rose to 5.129%.

  The Federal Reserve doesn’t meet for another month, but the interest rate “hawks” have gotten a little stronger. The futures market still indicates that the Fed will pause at its next meeting, but the dissenters are growing. One week ago, the odds of a 0.25% rate hike in November were just 16%. Now they’re at 30%.

  This week, Raphael Bostic, head of the Atlanta Fed, said he can see interest rates at the current range of 5.25% to 5.5% well into next year.

  He’s not alone. Loretta Mester, the president of the Cleveland Fed, said rates could be held higher “for some time.” The next CPI report will be out on Thursday, October 12.

  I’ve also been struck by how many conservative stocks have been getting squeezed by this market. For example, utility stocks are lagging badly. Check out this chart of the S&P 500 versus the S&P 500 Utility ETF:

  

  Related to this is that growth stocks have been holding up much better than value stocks have this year. I’m not sure that can last for much longer. If the broader economy starts to get shaky, that will help the relative performance of many defensive stocks.

  The Boring Stock Portfolio

  In his book, One Up on Wall Street, Peter Lynch extolled the virtues of investing in boring stocks. There are many stocks that are very good businesses, but they really don’t do anything interesting. As such, investors tend to overlook them.

  Just because the sector isn’t interesting doesn’t mean it’s not important, or unprofitable. These are companies that are rarely mentioned on TV.

  There’s a group of boring stocks that I like to follow. Here’s a sample of some good but very dull stocks.

  American Water Works (AWK) is a nice, dull stock. AWK is a public utility that provides water to 1,700 communities across 24 states. Water is a good business to be in. No town wants to be another Flint, Michigan water disaster.

  American Water “owns 80 surface water treatment plants, 480 groundwater treatment plants, 160 wastewater treatment plants, 52,500 miles of pipes, 1,100 groundwater wells, 1,700 pumping stations, 1,300 water storage facilities, and 76 dams.”

  Amphenol (APH) is a former Buy List stock. The company makes electronic and fiber optic connectors. Bor-ing. Over the last 31 years, it’s up more than 42,000%.

  

  Many people assume that Clorox (CLX) is a brand that’s owned by some larger multinational. No so. Clorox owns Clorox. The company also owns Pine-Sol and Liquid-Plumr. Clorox was founded in 1913.

  Cummins (CMI) is an engine company but it’s so much more. The company makes diesel and natural gas engines, plus electric and hybrid powertrains. It’s also engaged in filtration and power generation. Cummins employs more than 70,000 people around the world.

  Donaldson (DCI) is a filtration company. It makes air filters for several different sectors. Another former Buy List stock.

  Eaton (ETN) is a power management company that’s based in Dublin, Ireland. The company has been listed on the NYSE for 100 years. Only 32 companies have been listed that long.

  Graco (GGG) makes fluid-handling systems. Snore. Over the last 30 years, it’s only up 20,000%.

  Illinois Tool Works (ITW) “produces engineered fasteners and components, equipment and consumable systems, and specialty products.” Yes, it’s based in Illinois.

  Public Storage (PSA) is the largest self-storage real estate investment trust (REIT) in the United States. There are currently more than 2,600 Public Storage locations around the world. PSA has relatively few employees. The lots are automated so customers can access their units at any time.

  The company does a lot more than just provide the space. They also provide a broad range of services for their clients. PSA offers insurance and packing products. The company also had a subsidiary that provides boxes and truck rentals.

  Sysco (SYY) is a major supplier to restaurants and dining facilities. The company has 600,000 clients.

  WD-40 (WDFC) is like Clorox. Many people assume it’s a brand owned by a larger company. Nope, WD-40 is owned by WD-40.

  Most every homeowner is familiar with WD-40. The lubricant spray is instantly recognizable by its yellow and blue label. Some folks at the firm were working on a Water Displacement formula. The first 39 tries failed, but #40 worked and the name was born.

  Did you know WD-40 can soften leather? It can also clean tile and erase crayon. It can even unstick Legos.

  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: October 3, 2023
  Eddy Elfenbein, October 3rd, 2023 at 7:06 am

  OPEC+ Shows No Sign of Easing Oil Squeeze as Ministers Meet

  US Supreme Court to Hear Case Targeting Consumer Financial Watchdog

  The Fed Seeks to Up Its Influencer Status

  Fed’s Mester Says One More Rate Hike May Be Needed This Year

  Wall Street Thinks America’s Homes Are Overvalued

  Americans’ Growing Reluctance to Quit Their Jobs, in Five Charts

  A Plot to Oust the House Speaker Hits Weary Investors

  ‘Dumb Money’ Exposes the Baffling Allure of Bad Investment Advice

  Can AI Beat the Market? Wall Street Is Desperate to Try

  J.P. Morgan Growth Equity and Index Ventures Back Logistics Payment Platform Loop

  Brookfield Raises $12 Billion for Flagship Private Equity Fund

  Zoom’s Ex-CMO Will Now Pitch Hybrid Work as CEO of Video-Tech Firm Neat

  Meta Explores Charge for Ad-Free Instagram and Facebook. Its Model Is Under Threat

  From $26 Billion to Bust: Sam Bankman Fried’s Astonishing Rise and Fall

  U.S. Car Sales Expected to Increase Again in the Third Quarter

  China Is Suffering a Brain Drain. The U.S. Isn’t Exploiting It

  A Rural Michigan Town Is the Latest Battleground in the U.S.-China Fight

  China Evergrande Shares Soar as Trade Resumes Amid Police Probe

  Key Taiwan Tech Firms Helping Huawei With China Chip Plants

  Rare Look Inside TikTok Parent’s Finances Shows Slowing Revenue Growth

  Tiger Woods-Backed Golf League Signs Sponsorship Deal with SoFi

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• Morning News: October 2, 2023
  Eddy Elfenbein, October 2nd, 2023 at 7:06 am

  Does China’s Property Bust Make a Financial Crisis Inevitable?

  China’s Precarious Economy Signals More Support Is Needed

  BOJ to Buy Additional Bonds to Curb Rise in Sovereign Yields

  Kenya’s Stock Market Becomes World’s Worst Performer

  Why a US Recession Is Still Likely — and Coming Soon

  Will Companies Keep Their Pandemic-Era Gains? It Depends

  Higher Rates Starting to Hit US Profits, Goldman Strategists Warn

  Wall Street’s Most Hated Regulator Faces a Fundamental Threat

  Severe Crash Is Coming for US Office Properties, Investors Say

  With Banks Offering 5% Returns, Financial Advisers Fight Irrelevance

  Americans Are Still Spending Like There’s No Tomorrow

  Why Consumers Are Mad About Inflation Even Though It Has Fallen

  Birkenstock Attracts Norwegian Wealth Fund to $1.6 Billion IPO

  Vaccine Breakthrough Behind Pfizer, Moderna Shots Wins Nobel

  Aging Trees Show a Crisis Looms for the World’s Everything Oil

  The Secret Behind the First $1 Billion Green Hydrogen Startup

  Rivian’s Quest to Build the Ultimate Truck Burns Through Billions

  Crypto Goes on Trial, as Sam Bankman-Fried Faces His Reckoning

  Who’s Rooting Hardest for a Sam Bankman-Fried Conviction? The Crypto Industry

  Airbnb Is Fundamentally Broken, Its CEO Says. He Plans to Fix It.

  Peak TV Is Over. A Different Hollywood Is Coming

  Longtime Union Leader Steps Fully Into Hollywood’s Spotlight

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