Archive for March, 2024

• Morning News: March 6, 2024
  Eddy Elfenbein, March 6th, 2024 at 7:04 am

  Startups Beckon for Women Seeking Equality in Japan

  South Korea Inflation Reaccelerates, Backing BOK’s Hawkish Stance

  What’s the ‘Korea Discount’ and Why Is It a Problem?

  A Window Into Chinese Government Has Now Slammed Shut

  Morgan Stanley Cuts 9% of China Fund Unit Staff Amid Market Rout

  Australia’s Economy Continues to Slow as Rates, Costs Crush Confidence

  Germany’s Trade Surplus Widened in January

  US Regulators Expected to Significantly Reduce Basel Capital Burden

  Gold Steady After Surging to Record on Rate-Cut Bets, Haven Bids

  Crypto’s $800 Billion Rally Widens Beyond Record-Setting Bitcoin

  What’s Behind Record Highs for Gold and Bitcoin?

  Bitcoin’s Wild Price Booms and Busts Are Going to Continue Forever

  Yes, Even Cookie Monster Is Upset About ‘Shrinkflation’

  There’s a New Financial Crisis Brewing in Uninsurable US Homes

  Nvidia Is the Latest Shiny Object to Spur Stocks to New Heights

  Reddit’s IPO Success Hinges on Infamously Unruly User Base

  Why Elon Musk Has It In for Sam Altman

  OpenAI Fires Back at Musk Allegations With Trove of Emails

  Cyberattack Paralyzes the Largest U.S. Health Care Payment System

  ‘Exit Scam’ – Hackers That Hit UnitedHealth Pull Disappearing Act

  Moderna Looks to Pare R&D Spending Even as It Pivots From Covid Vaccines

  Flexible Hours Come to the Factory: A Look Inside Land O’Lakes’ Plant

  Newsom Donor to Boost Pay at His Panera Franchises After Bill Controversy

  Oscar Mayer Debuts Vegan Hot Dog With Help From Bezos-Backed Startup

  $1,780 to Spend the Night in a ‘Cocoon’? Hotels Are Betting on Sleep Tourism

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• CWS Market Review – March 5, 2024
  Eddy Elfenbein, March 5th, 2024 at 6:40 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.”)

  Beware the Reversals of March

  In recent years, March has been the time for dramatic market turnarounds. Sometimes, March has welcomed major high points while other times, it’s been lows; but whatever the direction, this has been the time of year for them.

  Why March? Beats me. Perhaps the coming of spring gives new hope to those who’ve been on the wrong end of the market for so long.

  I’ll give you a few examples. Probably the biggest was the Great Tech Bubble which peaked in March 2000. The Nasdaq Composite closed at 5,048 on March 10, 2000.

  This was the top of a blistering rally. In the previous 18 months, the index had soared 250%. The good times didn’t last. One year later, the Nasdaq was down 60%. Within two-and-a-half years, the Nasdaq was off by more than 75%. Anyone heard from Pets-dot-com lately?

  The bear market low of 2002-03 is up for some debate. That’s because the market low officially came in October 2002. However, the stock market put on a nice 19% rally over the next four weeks…before it collapsed again.

  

  Some analysts will claim that a rally of that size qualifies as a new bull market. Frankly, I’m agnostic on these points, but the S&P 500 reached another major low on March 11, 2003, right at the start of the Iraq War. The market low came exactly three years and one day after the Tech Bubble popped.

  The Financial Crisis of 2007-08 is an interesting case because it took some time before the size of the damage was fully realized. The stock market peaked in October 2007 before it gradually eroded, and that erosion soon turned into an avalanche.

  The closing low for the S&P 500 came on March 10, 2009 at 676.53. In terms of pure valuation, that may stand out as a multi-decade low. Adjusted for inflation, the Dow Jones Industrial Average was where it was 43 years before. Everyone, it seemed, hated Wall Street. If you recall, this was the time Jim Cramer went on Jon Stewart’s show. Like the others, this was also a great time to buy.

  Then there’s the Covid bear market. That was an extremely dramatic market and again, March was the turning point. I’ve never seen a market so panicked. In March 2020, the S&P 500 had two of its six worst days in history, and it had two of its ten best days in history. In 13 trading days, the S&P 500 lost close to 30%. The S&P 500 finally reached its closing low of 2,237.40 on March 23, 2020.

  Of course, that was also a great time to buy (thanks to extraordinary efforts from the Federal Reserve). In less than 17 months, the S&P 500 doubled, and it’s up another 14% from there.

  It’s interesting to see how the market emerges from whatever chaos we face. On Wall Street, we refer to market drops as being “corrections” but from a long-term perspective, those drops are really the errors.

  There’s an old saying on Wall Street that “bull markets go up the staircase while bear markets jump out the window.” That’s very true and you can really see the impact by looking at the long term.

  Permit me a brief thought experiment. Think of investing as a roulette wheel with very unusual rules. You spin the wheel once a year, and you face two possible payoffs. You have either an 85% chance of making 15% on your investment next year, or you have a 15% chance of losing 20%.

  I made up those numbers, but it’s close to what investors actually see. The long-term payoff is close to 10% but the key is that you have to keep playing through those 20% drawdown years. In fact, the odds are high that in an investing lifetime, you’ll almost certainly see two bad years within a five-year span.

  The other part of this thought experiment is that bull markets can seem, to a rational observer, unusually hot. After all, the market is performing at a 50% faster rate than its long-term average, and that can happen for several years. This causes too many investors to jump ship too soon, and that’s a big mistake.

  One of my favorite quotes from Peter Lynch is, “Far more money has been lost by investors’ preparing for corrections, or trying to anticipate corrections, than has been lost in the corrections themselves.”

  Target to Start Membership Program

  Shares of Target (TGT) got a nice 12% boost today after the retailer said it’s going to start a paid membership program next month. Of course, this is exactly what other retailers like Amazon and Walmart do. I’m curious what took Target so long. Amazon Prime is a smash hit, and Walmart said that Walmart+ has been doing very well.

  The new service will be called Target Circle 360. The service “will include unlimited free same-day delivery for orders over $35 in as little as one hour with no delivery fees and free two-day shipping, along with other perks.”

  The initial price will be $49 per year, but it will bump up to $99 per year after the initial promotion ends on May 18.

  I’ve been following Target recently and the retailer appears to be at a turning point. There are still a lot of problems at Target, but for the first time in a long time, the company may be a worthwhile investment.

  The shares had not been performing very well versus the overall market until late last year.

  

  Then in November, Target released an encouraging, but not great, earnings report. I don’t want to overstate the case because Target still has problems. For Q3, same-store sales fell by 4.9%. Retail is a tough game, and it’s especially hard if your sales are falling. Retail is all about managing your inventory efficiently and getting the lowest price to your customer.

  Still, the company said in November that it had improved its efficiency and was managing its inventory better. For its fiscal Q3, Target made $2.10 per share which was well ahead of the consensus for $1.48 per share. After the November report came out, the stock jumped 17% in one day.

  Today, Target reported its fiscal-Q4 earnings, which covers the important holiday shopping season. Once again, Target didn’t have great news to report but it was a lot better than was feared. Same-store sales fell 4.4%. That was the third drop in a row. For the first time since 2016, Target’s annual sales fell.

  For earnings, Target made $2.98 per share for its Q4. That was much better than Wall Street’s consensus for $2.42 per share. Target’s own range for earnings was $1.90 to $2.60 per share. Quarterly revenue hit $31.92 billion which was $90 million better than consensus.

  For Q1, the current quarter, Target sees same-store sales falling by 3% to 5%, and earnings ranging between $1.70 and $2.10 per share. For the full-year, Target expects same-store sales to be flat to -2%, and full-year earnings coming in between $8.60 and $9.60 per share. That’s not great, but it could have been much worse.

  Turnaround plays are tough. I generally avoid them. The issue is that investors need to figure out which is a fixable problem and which is not, because once a company loses its competitive edge, it’s very difficult to get it back. I’m pleased to see the progress at Target but the company still has to do more.

  JetBlue and Spirit Call Off Merger Plans

  JetBlue (JBLU) and Spirit Airlines (SAVE) finally ditched their plans for a $3.8 billion merger. The Biden administration fought to stop the deal, claiming it would harm consumers. In January, a federal judge sided with the administration and blocked the deal.

  The two airlines had been looking to appeal the decision but have now agreed to part ways. JetBlue now owes Spirit a breakup fee of $69 million and $400 million to Spirit’s shareholders. I’ll be honest—Jet Blue shareholders dodged a big bullet with this one.

  

  Despite the payment, Spirit is in very rough shape. They weren’t pursuing this deal because they wanted to but because they had to. In the chart above, notice how badly shares of SAVE got punished after the judge’s decision in January.

  Spirit is a mess. The airline has a massive debt load, and they haven’t turned a quarterly profit since Covid. The airline is projected to lose money this year and next year as well. Perhaps someone else will buy them. Frontier (ULCC) had been kicking the tires, but they were eventually outbid by JetBlue.

  I bet Frontier or someone else could get a good deal, but taking on Spirit won’t be easy. The DOJ will almost certainly challenge any deal.

  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: March 5, 2024
  Eddy Elfenbein, March 5th, 2024 at 7:03 am

  China Sets GDP Goal That Needs Policy Support ‘From All Fronts’

  China’s Weak Energy Target Exposes Growth Dilemma

  Singapore Has Taylor Swift to Itself This Week, and the Neighbors Are Complaining

  Britain Isn’t Such a Basket Case Anymore, at Least to Investors

  Bitcoin’s Market Value Touches Record as Token’s Price Nears All-Time High

  Brighter Economic Mood Isn’t Translating Into Support for Biden

  US Banks Far More Exposed than Europeans to Property Crunch, Says Morgan Stanley

  Bank Runs Spooked Regulators. Now a Clampdown Is Coming

  NYCB Ballooned Despite Real Estate Warnings in Years Before Fall

  Biden to Launch Joint FTC-DOJ Task Force to Crack Down on ‘Unfair and Illegal Pricing’

  Biden to Finalize Rule to Cap Credit Card Late Fees at $8

  JPMorgan Joins France’s Payments Network CB to Skirt Visa, Mastercard

  Immigration Rage Drowns Out the US Labor Market’s Need for Workers

  Business Is Booming for DEI Lawyers as Corporate America Asks ‘What’s Legal?’

  Seoul Semiconductor Files Patent Lawsuit Against Amazon With European Court

  Apple on Collision Course With EU as New Digital Markets Act Kicks In

  Apple’s iPhone Woes in China Deepen With a 24% Sales Plunge

  AMD Hits US Roadblock in Selling AI Chip Tailored for China

  Nio Loses Another $2.9 Billion as China’s EV Battle Intensifies

  Former Twitter Executives Sue Elon Musk for More Than $128 Million in Severance

  JetBlue and Spirit Call Off Their $3.8 Billion Merger

  Simply Paused or Permanently Sunk? The Kroger-Albertsons Merger Has Hit a Major Snag

  Macy’s ‘Is Melting Away’: Activist Investor Brings $6.6 Billion Bid to Buyout Battle

  Target Sales Fall for First Time Since 2016

  Book Startup Pitches Authors a Novel Deal: $0 Up Front, Bigger Profits

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• Morning News: March 4, 2024
  Eddy Elfenbein, March 4th, 2024 at 7:05 am

  Russia’s Backdoor for Battlefield Goods From China: Central Asia

  OPEC+ Will Soon Confront a Tougher Oil-Market Test

  US Funding Bill Blocks China from Buying Oil from Strategic Petroleum Reserve

  Red Sea Conflict Threatens Key Internet Cables

  Beijing Is Expected to Unveil GDP Target Around 5% — A Goal Now Harder to Achieve

  Rich Countries Are Becoming Addicted to Cheap Labor

  Higher Interest Rates Drag Swiss National Bank to $3.6 Billion Loss

  Looming Event Risk Can’t Stop Nikkei Topping 40,000

  Judge’s Ruling Sets Back Law Meant to Fight Money Laundering

  America Blew Almost $2 Trillion. Make It Stop

  Does Interest Rate Pain Explain the Consumer Sentiment Gap?

  Wall Street’s DEI Retreat Has Officially Begun

  Private Equity’s Green Star Started It All With a Database

  JPMorgan’s AI-Aided Cashflow Model Can Cut Manual Work by 90%

  Humanoid Robots at Amazon Provide Glimpse of an Automated Workplace

  Forced to Change: Tech Giants Bow to Global Onslaught of Rules

  Apple Hit With €1.8 Billion EU Fine Over App Store Rules

  Nvidia Leaps Aramco to Be World’s Third Most-Valuable Company

  Companies Are Juggling More Software Vendors Than Ever. It Isn’t Easy

  Railroad Workers Were Ready to Strike. Now They’re Fighting to Save Their CEO

  It’s Me, Hi, I’m the Problem. I’m 33

  The ZIP Code Shift: Why Many Americans No Longer Live Where They Work

  Ohio Fines CVS $1.5 Million Over Safety and Staffing Issues

  Vista Outdoor Rejects $2.9 Billion Takeover Offer From MNC Capital

  From Rock to Rap, Artists Are Doubling Down on Videogames to Reach New Listeners

  Why Prices of the World’s Most Expensive Handbags Keep Rising

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• Morning News: March 1, 2024
  Eddy Elfenbein, March 1st, 2024 at 7:02 am

  Finally, Some Good News at the W.T.O.

  The Monaco Royals Whose Deals Have Brought Peril to the Palace Doors

  India’s Blowout GDP Based on Data Distortion That Masks Slowdown

  China’s Wobbly Start to the New Year

  Xi’s One-Man Rule Over China’s Economy Is Spurring Unrest

  Ukraine Drafts Crucial Farm Workers in Desperate Rush to Bolster Military

  Yellen Says Russia Assets No Substitute on Ukraine Aid

  Eurozone Inflation, at 2.6%, Continues to Ease

  Thomas Jordan: The Technocrat Central Banker Who Made the Big Decisions

  Congress Approves Interim Funds to Avert US Government Shutdown

  US Money Market Funds See Big Inflows Ahead of Inflation Data

  A Fed Held Hostage by Data Is Asking for Trouble

  The U.S. Economy Is Surpassing Expectations. Immigration Is One Reason

  NYCB Flags Weaknesses in Loan Oversight and Names New CEO

  Bankers Sick of the NYC Commute Are Fueling a Boom in a Mini Greenwich

  Big Tech’s Boom Has Strategists Scrambling to Keep Up With Rally

  Court Weighs Whose Freedom of Speech Is at Risk in Content Moderation Fight

  Elon Musk Sues OpenAI, Altman for Breaching Firm’s Founding Mission

  Tesla Stands to Earn Billions of Dollars a Year by Opening U.S. Charging Stations to Drivers of Ford and Other EVs

  Shrinkflation 101: The Economics of Smaller Groceries

  Developers Got Backing for Affordable Housing. Then the Neighborhood Found Out

  Global CO2 Emissions Hit Record High in 2023, IEA Says

  Disney Heirs Line Up Against Activist Investors

  Kuehne + Nagel Shares Tumble After Earnings Fall Short of Expectations

  Daimler Truck Expects 2024 Adjusted Earnings in Line With Previous Year; Raises Dividend

  Pearson’s Pretax Profit Rises; Extends Share Buyback Plan by GBP200 Million

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