Archive for November, 2023

• Morning News: November 20, 2023
  Eddy Elfenbein, November 20th, 2023 at 7:03 am

  Milei Opens a New Era: What Comes Next in Argentina Policymaking

  China Drafts List of 50 Property Firms Eligible for Funding

  Trudeau’s Spending Plans Are Squeezed by Soaring Debt Payments

  UK Convenes Wall Street Titans at Royal Palaces to Woo Investment

  Fed Increasingly Turning to Anecdotes to Make Sense of Economy

  The White House May Condemn Musk, but the Government Is Addicted to Him

  Bayer’s Investment Case Seen Shaken by Double Whammy

  US Securities Regulator Signals It May Curb Climate Rule Ambitions

  This Coal Giant Now Wants to Get Out of Coal

  NRG Energy CEO Exits Amid Board Shakeup

  Pritzker Chases Every Federal Dollar With New $1 Billion EPA Bid

  How to Boost EV Sales? Pay Drivers to Turn in Old Polluting Cars

  ‘Lost Time for No Reason:’ How Driverless Taxis Are Stressing Cities

  Kyle Vogt Resigns as CEO of GM’s Driverless-Car Unit Cruise

  Talks to Bring Sam Altman Back to OpenAI Stretch Through Weekend

  Microsoft Ends Weekend of OpenAI Drama With Coup of Its Own

  A 30-Year Trap: The Problem With America’s Weird Mortgages

  More Americans on Ozempic Means Smaller Plates at Thanksgiving

  Black Friday, Cyber Monday Spending Projected to Hit New High

  Shakira Reaches Deal with Spanish Prosecutors on First Day of Tax Fraud Trial

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• Morning News: November 17, 2023
  Eddy Elfenbein, November 17th, 2023 at 7:04 am

  Oil Collapses Into Bear Market as Robust Supply Pressures OPEC+

  China Wants to Bulldoze Old Neighborhoods to Revive the Economy

  ECB’s Lagarde Says Europe Needs Single Market Watchdog in Push for Capital Union

  France Makes Case for Paris to Host New EU Dirty Money Watchdog

  US Consumer Watchdog Hands Wall Street Rare Win With Big Tech Crackdown

  Biden Signs Bill Averting Shutdown, Teeing Up 2024 Budget Battle

  Powell’s Fed Sticks Together in Fight Against Inflation Despite Differences

  Treasury Yields Dive as Oil Craters, Economy Softens

  Where Have All the Foreign Buyers Gone for U.S. Treasury Debt?

  Active ETF Boom Is Mostly a Mirage as Stockpicking Fades Away

  Wall Street Bosses Turn to AI to Help Write Performance Reviews

  Swedish Dockworkers Are Refusing To Unload Teslas At Ports In Broad Boycott Move

  Union Workers Back Contract Deals at 3 Big Automakers

  Are Americans Falling Out of Love With EVs?

  The Share of Americans Who Are Mortgage-Free Is at an All-Time High

  Congrats, Your House Made You Rich. Now Sell It.

  Companies Hesitate on Specialized Industry Clouds

  When Huawei Shocked America With a Smartphone

  Apple Plans to Make It Easier to Text Between iPhones and Androids

  Gap Is Righting the Ship With Old Navy

  This Thanksgiving, Full Planes to Go With Full Plates

  These People Are Responsible for Thanksgiving’s Most Polarizing Food

  The Estée Lauder Family Built a Beauty Empire. A Succession Rift Threatens It

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• Morning News: November 16, 2023
  Eddy Elfenbein, November 16th, 2023 at 7:06 am

  Pandas, Ping-Pong and Profits: Chinese Leader Woos U.S. CEOs

  Musk-Xi Meeting Shows Tight Relationship China Has With Tesla

  Alibaba Nixes Cloud Spinoff After US Blocks AI Chips From China

  Covid’s Biggest Economic Winner Is Running Out of Steam

  While All Inflation Feels Bad, Housing Inflation Is the Worst

  The Global Fight Against Inflation Has Turned a Corner

  EU Banks May Face Major Hit If They Need to Sell Bonds -Lagarde

  Systematic Hedge Funds Pummeled in Post-U.S. CPI Stocks Rally – Goldman Sachs

  Lina Khan Has a Warning for the World of Private Equity

  A Secretive Hedge Fund Tycoon Is the World’s Greatest Shipwreck Hunter

  How R.F.K. Jr. Has Turned His Public Crusades Into a Private Windfall

  The Pentagon’s Deadly Secret: It Makes Money From Bullets Used in Mass Shootings

  ‘Everything’s Locked Up’: Shoppers Turn to Amazon as Big-Box Retailers Combat Theft

  Walmart Shares Retreat on Wary Earnings Outlook For Year

  G.M.’s Contract Deal With U.A.W. Faces Surprisingly Stiff Opposition

  Starbucks Unionized Baristas’ Strike Coincides With Red Cup Giveaway

  Chicken Finger Craze Fuels $7.6 Billion Fortune for Raising Cane’s Founder

  McDonald’s Growing Appetite for Fashion

  Guinness Maker’s Morning After Offers Little Reassurance

  Breaking Down Your Thanksgiving Costs

  GrainCorp Holds Dividend Despite 34% Fall in Annual Profit

  Stop Corporatizing My Students

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• Morning News: November 15, 2023
  Eddy Elfenbein, November 15th, 2023 at 7:03 am

  A Global Hunt for Water Profit Risks Draining Cities Dry

  Ethiopia to Suspend Debt Service, Plans to Restructure Eurobond

  Japan’s Economy Shrinks for First Time in Three Quarters

  Biden, Xi Eye Economic and Military Thaw in High-Stakes Meeting

  U.K. Inflation Slows to 4.6 Percent, Lowest in Two Years

  An Optimistic Inflation Report Reduces Pressure on the Fed to Raise Rates

  The Elusive Soft Landing Is Coming Into View

  The Inflation Rally Goes Global

  House Approves Spending Plan, Easing Risk of Government Shutdown

  Carson Block, Nate Anderson Become SEC Tipsters for Cash Payouts

  Ken Griffin Sees Miami Possibly Replacing NYC as Finance Capital

  Wall Street Is Tapping Women, Minority-Owned Banks For Billion-Dollar Bond Deals

  Schonfeld Ends Millennium Partnership Talks, Secures Billions Elsewhere

  What to Watch in the Retail Report: Is Spending Cooling as Holidays Arrive?

  At REI, a Progressive Company Warns That Unionization Is Bad for Vibes

  So Thieves Nabbed Your Catalytic Converter. Here’s Where It Ended Up

  Goodyear to Explore Strategic Alternatives for Chemical Business, Dunlop Brand

  Target Sales Slump as Shoppers Pull Back

  How David Zaslav Blew Up Hollywood

  Aristocrat Leisure Raises Dividend After FY Profit Jumps 53%

  Young and Rich: China’s Scions Set to Inherit $120 Billion in Wealth Transfer

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• CWS Market Review – November 14, 2023
  Eddy Elfenbein, November 14th, 2023 at 6:38 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.”)

  Stocks Soar on Soft Inflation Report

  Finally, some good inflation news!

  This morning, the government said that inflation was unchanged last month. That was 0.1% below expectations. Not surprisingly, the report was helped by falling energy prices. Over the last year, inflation is running at 3.2%.

  This is a very good report. Bear in mind that inflation was running very hot in September (+0.4%), so this report is a nice change of pace.

  The inflation story isn’t just about energy prices. The core rate, which excludes food and energy, rose by only 0.2% last month. That was also 0.1% below expectations. Over the last year, core inflation is up by 4%. That’s the slowest 12-month rate in over two years.

  Here’s a look at the monthly seasonally-adjusted core rate. My apologies for the econ jargon, but this way, you can really see how the threat of inflation has faded over the last year:

  

  Here are some details:

  The flat reading on headline CPI came as energy prices declined 2.5% for the month, offsetting a 0.3% increase in the food index. It was the slowest monthly pace since July 2022.

  Shelter costs, a key component in the index, rose 0.3% in October, half the gain in September as the year-over-year increase eased to 6.7%. Within the category, owners equivalent rent, which gauges what property owners could command for rent, increased 0.4%. A subcategory that includes hotel and motel pricing dropped 2.9%. 0.4% for September.

  (…)

  Vehicle costs, which had been a key inflation component during the spike in 2021-22, fell on the month. New vehicle prices declined 0.1%, while used vehicle prices were off 0.8% and were down 7.1% from a year ago.

  Airfares, another closely watched component, declined 0.9% and are off 13.2% annually. Motor vehicle insurance, however, saw a 1.9% increase and was up 19.2% from a year ago.

  Wall Street celebrated as it now looks like the Federal Reserve won’t be raising rates anymore this cycle.

  In Wall Street’s mind, there’s nothing better than lower interest rates. On Tuesday, the S&P 500 rallied for the tenth time in the last 12 sessions. For the day, the index gained 1.9%. The S&P 500 is already up 7.2% in November and the month isn’t quite halfway over.

  Futures traders think there’s only a 0.2% chance the Fed will hike next month. One month ago, the odds for a December rate hike were at 30%. Traders think there’s a 0.2% chance it will hike in January. By May, the market says there’s a 65% chance that the Fed will start cutting rates.

  On our Buy List, Trex (TREX) was up more than 7.5% today. The deck-maker recently beat earnings and raised guidance. Celanese (CE) rallied 6.7% on Tuesday, and Polaris (PII) was up close to 6%.

  

  Tuesday’s market was heavily concentrated on higher-risk areas of the market. On days like today, I like to look at the spread between the S&P 500 Low Volatility Index and the S&P 500 High Beta Index. On Tuesday, High Beta gained 4.45% while Low Vol gained 1.24%.

  What’s going on? I think a lot of investors mistakenly believe that the promise of lower rates will lead us back to the glory days of 2020-2021. That’s when rates were at 0% and the government was spending money to boost the economy. The Fed effectively took risk out of the investing equation and high-risk areas soared.

  As I look at the stock market and inflation numbers, I can’t help wondering how overly complicated the game appears. Perhaps it’s as easy as leaving the market when inflation hits 7% and then coming back in when it drops below 7%. That’s an easy rule that’s pretty much worked perfectly. You can see it in this chart. The black line is the rate of inflation and it follows the left scale. The S&P 500 is the blue line and it follows the right scale.

  

  The earnings numbers for Q3 are almost all in. It looks like the S&P 500 will report earnings growth of 4.1%. What about for Q4, which is already halfway done? Analysts are expecting Q4 earnings growth of just 3.2%.

  But after that, things are expected to improve. Analysts expect earnings growth to improve to 6.7% for Q1, and 10.5% for Q2. FactSet notes that while these projects are down since September, they’re still above the results for Q3. In other words, not only is Corporate America still profitable, but earnings growth is accelerating.

  The fastest-growing sectors are projected to be Communication Services (19.9%), Consumer Discretionary (16.5%) and Information Technology (15.2%). The stocks that are expected to contribute the most to earnings growth for Q1 are Nvidia, Amazon, Meta Platforms and Alphabet. Without these four, the S&P 500 would have earnings growth of 3.2%. With them, it’s 6.7%.

  Stock Focus: Simulations Plus (SLP)

  I’ve been a fan of Simulations Plus (SLP) for some time now. It’s a neat company that’s not well known. SLP’s market cap is just over $725 million and only three analysts follow it. The stock rallied 5.2% today. Incidentally, today was also SLP’s Investor Day.

  Simulations Plus makes software that lets drug companies simulate tests of their products in the virtual world before using any human or animal test subjects. That’s a major cost-saver for drug companies.

  Simulations Plus helps streamline the R&D process by making it faster and more efficient. Not only is this cost effective, but it also helps drug companies in dealing with time-consuming regulatory hurdles.

  In fact, there are times when the results from SLP’s products have allowed companies to waive clinical studies. The cost savings are substantial. This means drug companies don’t have to deal with the time and expense of recruiting test subjects and analyzing test results.

  By using SLP’s software, drug companies can experiment with many variables like fine-tuning dosage amounts. Companies can also see potential harmful side effects. Another important factor is that companies can identify treatments that have no benefits.

  In healthcare, cost control is a major issue. That’s why SLP’s products are in heavy demand. A great business to buy is one that helps other companies control their costs.

  In many ways, I think what Simulations Plus does for pharmaceutical researchers is closely akin to what Ansys (ANSS) does for engineers. By sitting at a computer, an employee can efficiently iron out a lot of kinks before experimenting in the real world. Simulations Plus is also branching out from their core customer base of drug companies. They work with consumer products companies to see the side effects of things like pesticides.

  

  Unfortunately, the shares have not performed well over the past few years. That could make it a compelling buy.

  Simulations Plus recently reported its fiscal-Q4 earnings. For the quarter, SLP’s revenues increased 33% to $15.6 million. The company’s gross profit grew 35% to $12.3 million.

  For the quarter, the company earned 18 cents per share. That matched Wall Street’s consensus although I don’t know if three analysts count as a consensus. The stock dropped 15% after the report.

  For all of last year, SLP’s revenue grew 11% to $59.6 million, and earnings increased from 60 cents to 67 cents per share.

  For the new fiscal year, SLP sees revenues ranging between $66 million and $69 million. That works out to a growth rate of 10% to 15%. For earnings, SLP sees profits ranging between 66 cents and 68 cents per share. I’m particularly impressed that SLP can maintain gross margins that are nearly 80%. Simulations Plus pays out a small quarterly dividend of six cents per share.

  As much as I like this business, valuation is still a concern. Going by SLP’s latest guidance, the shares are going for 50 times forward earnings. That a lot for any stock.

  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: November 14, 2023
  Eddy Elfenbein, November 14th, 2023 at 7:04 am

  Argentina’s Election Isn’t Just High Stakes for Argentina — But for China, Too

  China Mulls $137 Billion of New Funds to Aid Housing Market

  The Rise and Fall of the World’s Most Successful Joint Venture

  Why Xi Can No Longer Brag About the Chinese Economy

  Elon Musk and Jane Fraser Among CEOs Wooing Xi Jinping

  US Inflation Report to Keep Fed Leaning Toward More Rate Hikes

  US Bank Regulators to be Grilled by Congress on Capital Hike Plan

  UBS Predicts Tricky Start to 2024 for Emerging Market Assets

  UBS Climate Change’s $150 Billion Hit to the U.S. Economy

  How Wall Street Makes Millions Selling Car Loans Customers Can’t Repay

  Bankers Brace for Smaller Bonuses With No Relief Seen Next Year

  CEOs Aren’t Hearing A Lot of ‘Great Quarter, Guys’ This Earnings Season

  With Interest Rates Above 9%, Small Businesses Slam the Brakes

  Rolex, Patek Prices Hit Fresh Two-Year Lows: Subdial Index

  Facing Financial Ruin as Costs Soar for Elder Care

  How Microsoft’s Legal Legacy Shapes the Antitrust Case Against Google

  What Google Argued to Defend Itself in Landmark Antitrust Trial

  Glencore Wins Teck Coal Business, Paving Way for Its Own Split

  Fisker Shares Fall More Than 10% After EV Startup Cuts Production Target

  Home Depot Sales, Earnings Fall but Top Analyst Estimates

  Insider Co-Founder Henry Blodget Steps Down as CEO Amid Strategy Shift

  Can Tequila Really Go Global? This Booze Boss Is Giving It a Shot

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• Morning News: November 13, 2023
  Eddy Elfenbein, November 13th, 2023 at 7:03 am

  Italy Faces Barriers to Obtain About €90 Billion in EU Funds

  Greece Starts Process to Sell 20% Stake in National Bank

  Indian Students Flock to US Colleges, Offsetting Drop From China

  What’s at Stake in the Biden-Xi Meeting

  What It Took to Get Biden and Xi to the Table

  Goldman Sachs, Morgan Stanley Diverge on Fed Rate-Cut Forecasts

  Morgan Stanley Sees Bullish Opportunities for US Assets in 2024

  Talent Agency CAA and Michael Klein Launch Sports and Media Investment Bank

  Inside Wall Street’s Scramble After ICBC Hack

  Mint, the Budgeting App, Is Going Away. Here Are Some Alternatives

  Health Insurance Is About to Boost US Inflation

  Vermont May Be the Face of a Long-Term U.S. Labor Shortage

  The Low-Wage Pay Surge Is Over, Threatening the Consumer Boom

  Home Depot and Lowe’s Face Slump From Higher Rates and Housing Prices

  The ‘Georgists’ Are Out There, and They Want to Tax Your Land

  Los Angeles Mansion Owners Test $150,000 Rents as Sales Slump

  China’s Spending on Green Energy Is Causing a Global Glut

  Polluting Industries Say the Cost of Cleaner Air Is Too High

  Electricity Use Booms in Texas, a Harbinger for the Country

  Exxon Makes Lithium Play in Long-Term Bet on EV Demand

  The Diamond World Takes Radical Steps to Stop a Pricing Plunge

  Novo Shares Rise After Wegovy Demonstrates Heart Benefit in Trial

  Target Tries to Find Its Mark After Year of Misfires

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

  China Is Making Too Much Stuff—and Other Countries Are Worried

  India’s Factory Output Slows in September on Weak Demand

  Delhi Could Use Artificial Rain to Subdue World’s Most Toxic Air

  How Power Companies Profited From Italy’s Covid Lockdown

  U.K. Economy Stagnates as High Interest Rates Take Toll

  RBA Revises Up Near-Term Inflation Forecasts, Warns Inflation More Persistent

  Even if the Fed Stays on Hold, Jerome Powell Is Keeping His Options Open

  US Bond Funds Rack Up Biggest Weekly Inflow In Three Months

  IRS Announces New Income Tax Brackets for 2024

  Citigroup Resumes Retail Banking Sale in Poland – Bank Handlowy CEO

  Mark Mobius Plans to Step Back From Mobius Capital Partners

  It’s Boom Times for Startups Trying to Electrify Aviation

  Personalized A.I. Agents Are Here. Is the World Ready for Them?

  Man vs. Musk: A Whistleblower Creates Headaches for Tesla

  Amazon’s New Approach to Selling Enterprise Software? In-Person Demos

  Apple Agrees to $25 Million Settlement with US Over Hiring of Immigrants

  Sleep Number’s ‘Drastic Miss’ Resulted in Drastic Marketing Measures

  Las Vegas Strike Averted as Wynn Resorts Rounds Out Labor Deals

  An Opioid-Like Drink Is Masquerading As a Wholesome Alcohol Alternative

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• Morning News: November 9, 2023
  Eddy Elfenbein, November 9th, 2023 at 7:04 am

  ‘No One Is Safe From Climate Change’ After Hottest 12 Months Ever Recorded

  Why Are Oil Prices Falling While War Rages in the Middle East?

  Rage Against Copper Producer Roils Markets, Panama Government

  The $2 Million Coal Mine That Might Hold a $37 Billion Treasure

  The Electric-Car Era Needs a Lot of Really Big Trees

  Heat Pump Installations Slow, Impeding Biden’s Climate Goals

  China’s Consumer Deflation Returns as Recovery Remains Fragile

  ‘Dark Matter’ Bond Metric Mesmerizes Wall Street and Washington

  Austan Goolsbee Says Fed Will Need to Monitor Risks of Overshooting on Rates

  Citadel’s Ken Griffin Says High Inflation Will Last for Decades

  Apple Risks $14 Billion Tax Bill in Setback at Top EU Court

  A Man, a Van, a Plan: Twitch CEO Seeks to Charm Angry Streamers

  US Veterans Got a Mortgage Break. Now They’re Losing Their Homes

  SoftBank Posts $6.2 Billion Loss After WeWork Bankruptcy

  WeWork’s Bankruptcy Tests Claims of a Co-Working Revolution

  How Work From Home Has Reshaped What Americans Buy

  New Ozempic Rival Is About to Make Your Weight Loss Drugs Cheaper

  Disney Is in Trouble. Bob Iger Has 5 Big Problems to Solve

  Disney Wears Its New Look Well

  Hollywood Studios, Actors Tentatively Agree to New Contract

  Getting Hollywood Back Up and Running Won’t Be Easy

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• Morning News: November 8, 2023
  Eddy Elfenbein, November 8th, 2023 at 7:04 am

  Russian Banks Could Make Record Profits in 2023

  Russia to Keep Grain Export Quota High After Another Bumper Crop

  How Nestle Factories Keep Running in a Country Torn by Putin’s War

  War, Inflation and Hints of Optimism Dominate New Economy Forum

  Fed Governor Lisa Cook Says Worsening Geopolitical Tensions Pose Market Risk

  Why the Fed Shouldn’t Get Credit for the Fall in Inflation

  Private Equity Showers Junior Staff With Rewards to Retain Talent

  EV Market’s Surge Toward $57 Trillion Sparks Global Flashpoints

  A New Law Supercharged Electric Car Manufacturing, but Not Sales

  Rivian Plans to Make More EV Trucks, SUVs in 2023

  California Ranks First in Climate-Friendly Transportation Investments

  Biogen Lowers 2023 Earnings Guidance on Costs of Reata Purchase

  Gilead Sciences Results Beat Estimates

  Robinhood Misses Q3 Revenue Estimates on Muted Trading Activity

  Meta to Require Political Advertisers to Disclose Use of A.I.

  In Regulating A.I., We May Be Doing Too Much. And Too Little

  Seeking to Land Punches on Amazon, the FTC Is Punching Itself

  WeWork Is Bankrupt—And SoftBank’s Losses Are $14 Billion and Counting

  Mark Zuckerberg Taps the Strengths of WhatsApp

  Rockstar Plans to Announce Much Anticipated ‘Grand Theft Auto VI’

  A ‘Zelda’ Movie Could Mint Money for Nintendo

  The City That Learned to Be Proud That It SUX

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