Archive for November, 2023

• CWS Market Review – November 7, 2023
  Eddy Elfenbein, November 7th, 2023 at 10:25 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.”)

  Seven Up Days in a Row

  The stock market is suddenly hot again. The S&P 500 rose for its seventh day in a row today. This is the longest winning streak in two years. Over those seven days, the index has gained 6.3%. The S&P 500 is now above its 50- and 200-day moving averages.

  

  Six-day rallies are pretty common but getting to a seventh up day has historically been a challenge for the market.

  I urge investors to remain skeptical of sharp upticks in a bear market. The stock market loves to fool investors by convincing us that things are safe. Then, once we take the bait, we get slammed by another downdraft.

  Interestingly, economically cyclical stocks have been lagging during this mini bull run. In particular, materials, energy and industrial stocks have not joined in the fun. That usually happens when the economy is weak or perceived to be losing strength.

  Here’s an interesting chart. This shows the S&P 500 (black) compared with the S&P 500 Industrials (blue) and S&P 500 Materials (green).
  

  Notice how the two cyclical sectors have lagged the S&P 500, and it’s gotten worse in recent days. These rotations typically end once the Fed starts lowering rates. That may not be too far away.

  Clorox Soars on Earnings Beat

  Last week, I highlighted Clorox (CLX) for you. I told you that it was about to report earnings after the close on Wednesday.

  In the earnings report, the company said it made 49 cents per share for its fiscal Q1. That was a massive earnings beat.

  Wall Street had been expecting Clorox to report a loss of 22 cents per share. The company was hit with a nasty cyberattack which scared investors. Its business was hit hard but it will survive.

  On Thursday, the stock soared as much as 11% during the trading day before closing with a gain of 6.6%. Clorox has continued to rally since then. On Friday, Monday and today, Clorox gained another 7.7% combined. Add it all up and that’s a 14.9% gain in just four trading days.

  

  Clorox slashed its full-year earnings guidance to a range of $4.30 to $4.80 per share. The old range was $5.60 to $5.90 per share. That stings, but Clorox will move on and remain profitable.

  I wish I could take credit for having predicted the big gain for Clorox, but that’s not accurate. Instead, I told you to steer clear of Clorox and to wait and see if the company has addressed its problems. Again, the key is to determine how fixable a company’s problems are. With Clorox, the problems seem to be fixable.

  So I won’t take credit for the big gain, but I will stand by the strategy of waiting for good stocks to falter. It’s not hard, but it requires patience and discipline. Clorox is about as blue as a blue chip can get. It’s raised its dividend for 21 straight years.

  An analyst at Citigroup said, “Clorox’s reduced FY24 guidance looks conservative, and that it expects Clorox to fully recover from the cyberattack by the end of FY25, adding that a 30% selloff since August makes the stock compelling.” I agree.

  WeBroke

  Of course, just because a stock is down doesn’t mean it’s cheap. It only means that it’s less expensive than it was before. That brings me to the sad story of WeWork (WE), the office space-sharing company. WeWork filed for bankruptcy today. That wasn’t unexpected.

  The WeWork story is almost comically inept. Apple TV made a miniseries about it with Anne Hathaway and Jared Leto.

  Few companies have gone from superstars to bust in such a short time. At one point, WeWork was worth $47 billion. The company tried to go public, but the offering was canceled.

  

  It filed “sloppy” filing documents. In its S-1 document, WeWork wrote, “We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness.”

  I’m not kidding you. It really says that.

  WeWork eventually went public in 2021. The company’s CEO, Adam Neumann, received a lot of attention for his unorthodox management style. Two years ago, WeWork was going for $400 per share. Before trading in WeWork was halted, it got down to 85 cents.

  WeWork was a celebrated tech startup, but in reality, it was a real estate company that got tangled up in too many expensive lease agreements. The company rented office space, then retrofitted it and subleased it to startups and freelancers. At one point, WeWork was the largest tenant in Manhattan.

  As long as interest rates were low, the idea worked. Once rates started to rise, then things changed. Soon, the company hemorrhaged money. A few months ago, it announced a 1-for-40 reverse stock split. The stock is down 98% in this year alone. So much for the world’s consciousness.

  Not a Great Jobs Report

  Last Friday, we got the October jobs report from the Labor Department. According to the government, the U.S. economy created 150,000 net new jobs last month. That was below expectations for 170,000 new jobs, and the gain was nearly half the gain we had in September.

  The unemployment rate increased to 3.9%. That’s its highest level since January 2022. Here’s a look at the unemployment rate. Note that historically, when the unemployment rate goes up by a little, there’s a good chance that it will go up by a lot.

  

  The broader U-6 unemployment rate increased to 7.2%. The labor force participation rate declined slightly to 62.7%.

  Right now, the most important stat is wages, and that’s not looking very good. Last month, average hourly earnings rose by 0.2%. That was 0.1% less than expected. Over the last year, average hourly earnings are up 4.1%. Unfortunately, inflation has taken a large bite of that.

  From a sector standpoint, health care led with 58,000 new jobs. Other leading gainers included government (51,000), construction (23,000) and social assistance (19,000). Leisure and hospitality, which has been a top job gainer, added 19,000 as well.

  Manufacturing posted a loss of 35,000, all but 2,000 of which came because of the auto strikes. Transportation and warehousing saw a decline of 12,000 while information-related industries lost 9,000.

  The important takeaway from this report is that it will take some heat off the Federal Reserve. The futures market currently thinks there’s less than a 10% chance that the Fed will hike next month. How things have changed! One month ago, the odds were at 36%. Futures traders now think the odds are in favor of the Fed cutting rates in less than six months. If that’s right, we could be in store for a sector rotation soon.

  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 7, 2023
  Eddy Elfenbein, November 7th, 2023 at 7:02 am

  China’s Exports Tumble Again in Fresh Sign of Economic Trouble

  China’s Banks and Property Sector Threaten a Growing Economy

  UK Government to Focus on Curbing Inflation, Not Boosting Spending – King’s Speech

  UK Antitrust Regulator to Take on Big Tech with New Legal Power

  Australia Thought It Was Done Raising Interest Rates. It Wasn’t.

  Fed’s Neel Kashkari Not Convinced Rate Hikes Are Over

  Wall Street Bosses See Financial Dangers Everywhere

  How Goldman Sachs Is Navigating A More Turbulent World

  Private Equity Courts a Growing Class of Mini-Millionaires

  UBS Group Swings to Net Loss as Credit Suisse Costs Weigh

  WeWork Goes Bankrupt, Signs Pact With Creditors to Cut Debt

  SoftBank Makes Another Bet on WeWork, Hoping Landlords Will Too

  Uber Posts Revenue That Misses Estimates on Accounting Change

  More Laid-Off Workers Got Severance During the Pandemic, But That’s Over Now

  Lavish Tax Credits and Trade Protections Lure Solar Firms to U.S.

  Saudi Aramco Profit Falls on Lower Oil Prices, Volumes

  The Fuel of the Future May Rely on Developing Oilier Soybeans

  EV Makers Turn to Discounts to Combat Waning Demand

  Russians Lose Taste for Suddenly Pricey Dubai Property

  In Uruguay, a Tax Haven With Lots of Beaches and Little Crime

  X CEO Linda Yaccarino Leans on TV Roots to Bring Back Jittery Advertisers

  Elon Musk’s Brain Implant Startup Is About to Start Cutting

  Hungry (but Not for Human Contact), Americans Head for the Drive-Through

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

  How Russia Games Oil Sanctions for Big Profits

  More Semiconductors, Less Housing: China’s New Economic Plan

  China’s First Deficit in Foreign Investment Signals West’s ‘De-Risking’ Pressure

  Treasury Secretary Yellen to Hold Economic Talks With Chinese Counterpart

  South Korea Stocks Surge More Than 5% for Best Session Since March 2020 After Short-Selling Ban

  Voters Aren’t Believing in Bidenomics

  Biden Awards $16.4 Billion for Northeast Corridor Rail Upgrades

  SEC Rule to Speed Trades Puts $1 Trillion of ETFs at Risk

  Hedge Funds Catapulted Treasury Shorts to Record at Wrong Time

  BlackRock’s Boivin Says High Rates Still a Threat to Stock Rally

  Brookfield Raises $26 Billion on Oaktree, Infra Fund Strength

  Warring Billionaires, a Rogue Employee, a Divorce: One Hedge Fund’s Tale of Woe

  Why Banks Are Suddenly Closing Down Customer Accounts

  EY Lays Out U.S. Governance Overhauls After Failed Split

  CapVest to Buy Industrial Chemicals Firm Recochem From H.I.G.

  Tech Start-Ups Try to Sell a Cautious Pentagon on A.I.

  Big Pharma Wants to Use AI to Increase Diversity in Clinical Trials

  AI Pioneer Kai-Fu Lee Builds $1 Billion Startup in Eight Months

  German Giants Pour Over $500 Million Into AI Startup Aleph Alpha

  Legislators Aim to Help Celebrities and Consumers Fight Deepfake Scam Ads

  Another Google Antitrust Battle Reaches Court in Epic Games Case

  Google Play Trial to Test Alphabet’s App Marketplace Power

  Job Action Against Tesla Puts Sweden’s Unions in Spotlight

  The Workers Who Make Your Clothes Want Higher Pay. Who Should Pony Up?

  The New Headache for Bosses: Employees Aren’t Quitting

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• Morning News: November 3, 2023
  Eddy Elfenbein, November 3rd, 2023 at 7:02 am

  Panama Canal Traffic Is Being Throttled by Climate Change Impact

  Maersk Slumps After Forecasting Weak Global Trade Until 2026

  China Foreign Investment Gauge Turns Negative For First Time

  In the Long Run, Investing Is All About the Economy*

  US Money Market Funds Draw Biggest Weekly Inflow in Seven Months

  Ruin: Money, Ego & Deception at FTX

  Sam Bankman-Fried Convicted of Fraud in Stunning FTX Crash

  Cathie Wood Says Bitcoin Is ‘Digital Gold’ as Deflation Hedge

  Buffett’s Berkshire Poised for Boost as Rates Burnish Cash Pile

  Macquarie’s First-Half Profit Falls, to Launch Up to A $2 Billion Buyback

  US October Jobs Report to Mark End of Blowout Payroll Gains

  UAW’s Fain Sees ‘Ugly’ Labor Strife Ahead at Ford Battery Plants

  How ‘Salts’ Get Into Labor Movements

  Apple’s Disappointing Outlook Spotlights Growing China Woes

  Walgreens Is Cancelling Corporate Bonuses as Big Pharmacies Face Increasing Difficulties

  Junk Food’s $30 Billion Opening Is India’s Next Health Crisis

  Restaurant Brands Revenue Disappoints Wall Street as Burger King Same-Store Sales Miss Estimates

  Shoppers Keep Splurging on Little Luxuries Like Starbucks, Fried Chicken

  Americans Are Walking 36% Less Since Covid

  Fall Auctions Woo Rich Bargain Hunters With $2.5 Billion in Art

  N.F.L., on Lookout for Growth, Finds Open Arms in Germany

  Why the Jet Stream Is Helping Some International Flights Arrive Early

  A Giant Leap for the Leap Second. Is Humankind Ready?

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• Morning News: November 2, 2023
  Eddy Elfenbein, November 2nd, 2023 at 7:04 am

  These Five Countries Are Key Economic ‘Connectors’ in a Fragmenting World

  Powell Hints Fed Is Done With Hikes in Pivot Cheered by Markets

  How Higher Rates for Longer Can Be Good News for the Economy

  Finance Chiefs Take Measured Approach to Using Real-Time Payments

  Private Equity Makes Loan Payments With More Debt to Keep Cash

  Jamie Dimon Warns Texas to Stop Pushing Anti-Business Bond Laws

  Billionaire Targeted by Hindenburg Emerges Richer and Unbowed

  The US Housing Market Has Become an Impossible Mess

  China Is Winning in Solar Power, but Its Coal Use Is Raising Alarms

  Adani’s Coal-Power Arm Posts 847% Jump in Profit on High Demand

  Shell Launches $3.5 Billion Buyback After Earnings Rose on Higher Energy Prices

  Why You Might Get Cheap Gas for Christmas

  Foxconn Makes Your iPhone. Now It Wants to Make Your Electric Car

  Palantir Surges After AI Demand Powers Record Quarterly Profit

  Moderna Reports $3.6 Billion Loss on Covid Supply Writedowns

  Novo Nordisk’s Earnings Surge on Frenzy for Obesity Drugs

  The UAW Beat Detroit. Tesla Will Be a Different Beast

  No Nation in the World Is Buying More Planes Than India. Here’s Why

  Shipping Startup Flexport Is in Crisis Mode Heading Into the Holiday Season

  Shein Turns to Western Executives to Become Even More Global

  Bankrupt and Loving It: Welcome to the Lucrative World of Undead Brands

  Six Flags, Cedar Fair to Merge in $8 Billion Theme Park Deal

  Disney Says It Will Take Full Control of Hulu

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• Morning News: November 1, 2023
  Eddy Elfenbein, November 1st, 2023 at 7:04 am

  Drought Saps the Panama Canal, Disrupting Global Trade

  A World Desperate for Sugar Sees It Pile Up in Brazilian Ports

  Oil-Merger Mania Threatens Crude’s Liquidity as Hedgers Vanish

  Jobs, Rib-Eyes and Worries: How Exxon’s Giant Oil Discovery Is Transforming Guyana

  BP Becomes Unique Among Oil Majors With an Analyst Sell Rating

  The Economy Is Great. Why Are Americans in Such a Rotten Mood?

  Fed’s ‘Hawkish Pause’ to Keep Option to Hike

  Republican US Senator Presses Fed Officials on Bond-Buying Policies

  World’s Safest Market Becomes a Magnet for Big Investors

  Druckenmiller Says He Has ‘Massive’ Bullish Bets on 2-Year Notes

  Private Equity’s Slump Propels a Firm That’s Ready to Offer Cash

  How Does the World’s Largest Hedge Fund Really Make Its Money?

  Warnings on Weak Demand Are Piling Up This Earnings Season

  Black Men’s Historic Labor Gains Unravel as Fed Fights Inflation

  They Propelled China’s Rise. Now They Have Nothing to Fall Back On

  WeWork Shares Sink After Report It Plans to File for Bankruptcy

  Chipotle’s Labor Costs Are Rising. Customers Will See It in Pricing

  Real Estate Industry Takes Fresh Hit With Verdict on Commissions

  Harris to Announce Steps to Curb Risks of A.I.

  He Left Boeing. Now He’s the Jet Maker’s Most Important Person

  Orsted Books $4 Billion Impairments, Walks Away From Two US Offshore Projects

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