Archive for April, 2024

• Morning News: April 18, 2024
  Eddy Elfenbein, April 18th, 2024 at 7:02 am

  The Pentagon Wants to Give Defense Startups a Chance

  The White House Has a New Trade Weapon Against China

  Basel Chair Urges Banks to Fully Implement Capital Rules as Soon as Possible

  New Fed Outlook Leaves World Edgy on Currencies

  Vanguard Warns 10-Year Treasury Yields Risk Jump Back to 5%

  Blackstone Credit and Retail Lines Drive Narrow Profit Beat

  Ally Financial’s Quarterly Profit Tumbles on Higher Provisions

  Companies Belly Up to Cash Buffet, in Five Charts

  Private Equity’s Titans Are Told to Cough Up Their Own Cash

  Billionaires Selling Cheap Stuff Get Richer From Inflation Pain

  China Reports Steady Youth Unemployment as Data Paints Mixed Economic Picture

  Congress Ramps Up the Pressure on TikTok

  How an Obscure Chinese Real Estate Start-Up Paved the Way to TikTok

  EU March Car Sales Recorded Biggest Drop in 16 Months

  For Tesla, India Represents Big Promise—and Some Peril

  Musk Apologizes for ‘Incorrectly Low’ Tesla Severance Packages

  AI Chips Drive Growth at TSMC

  Nvidia, Chip Stocks Drop Into Correction as Rate Bets Shift

  Morgan Stanley Flips From EBay’s Biggest Bear to Top Bull on AI

  Copper Market Grapples With a Crucial Question

  What Really Happens When You Trade In an iPhone at the Apple Store

  EasyJet Expects Narrower Loss Amid Strong Summer Demand

  Taking Account of Rising Health Care Costs

  Ozempic ‘Oops’ Babies Spark Debate About Weight-Loss Shot Use as Fertility Drugs

  Why the World of Chocolate Is in Crisis

  Be sure to follow me on Twitter.

• Morning News: April 17, 2024
  Eddy Elfenbein, April 17th, 2024 at 7:07 am

  For Multinationals, Africa’s Allure Is Fading

  Aging Copper Mines Are Turning Into Money Pits Despite Demand

  Biden Seeks Higher Tariffs on Chinese Steel, Aluminum to Support US Firms

  Biden Confronts Tough Choice Over Venezuela Oil Sanctions

  NBA Legend Rick Fox’s Next Act: Green Concrete Entrepreneur

  BlackRock’s Aggressive Hunt for Growth in Saudi Arabia

  Singapore Exports Slump More Than Expected

  Japan’s Exports Extend Run of Growth to Fourth Straight Month

  World Faces Woeful Outlook of Stunted Potential

  The Global Turn Away From Free-Market Policies Worries Economists

  Inflation in U.K. Slows to 3.2%, Lowest in More Than 2 Years

  Where Are Growth, Inflation and Interest Rates Headed? We Asked the Economists

  Higher-for-Longer Is Pushing Dollar Power to Limit

  If Index Funds Were Politically Motivated, They Wouldn’t Be Index Funds

  U.S. Bancorp Trims Lending-Income Outlook Amid Deposit Pressures

  Bankers Hit With Millions in Breakup Fees for Ditching New Jobs

  Layoff Whiplash Scars Workers Who Find New Jobs Only to Lose Them

  Volkswagen Aims for Lower EV Costs With New Production Platform in China

  VW Workers in Tennessee Start Vote on U.A.W., Testing Union Ambitions

  Tesla Asks Investors to Approve Musk’s $56 Billion Pay Again

  Singapore’s Steep Car Prices Propel SoftBank’s Unicorn Carro Toward IPO

  ASML Orders Plunge as Chipmakers Pause High-End Gear Purchases

  Microsoft’s AI Copilot Is Starting to Automate the Coding Industry

  Aerospace Parts Manufacturer Loar Holdings Aims Up to $2.28 Billion Valuation in US IPO

  Boeing’s Quality Complaints Mount as Another Whistleblower Comes Forward

  From NPR to NBC, Newsrooms Test Management’s Tolerance for Dissent

  The Paris Olympics’ One Sure Thing: Cyberattacks

  Taylor Swift and Beyoncé Avoided a Collision on the Charts. (Again.)

  Taylor Swift Sells a Rainbow of Vinyl Albums. Fans Keep Buying Them

  Superyacht Sales Plunge as Wait Times Rise, Russian Oligarchs Drop Out of the Market

  Be sure to follow me on Twitter.

• CWS Market Review – April 16, 2024
  Eddy Elfenbein, April 16th, 2024 at 6:23 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 is finally showing some cracks. Yesterday, the Dow soared more than 400 points during the day only to close lower by 248 points. The S&P 500 slipped another 0.21% today. The index finished the day at its lowest level since February 21.

  On Monday, the S&P 500 also closed below its 50-day moving average (the blue line). That snapped a streak of 110 days, which is one of the longest such streaks in the last 30 years. (In the mid-1990s, the S&P 500 was trading above its 50-DMA for more than a year.)

  

  Dropping below the 50-DMA can be an omen for a poor or a sluggish market. Not only is Wall Street still rattled by last week’s inflation report but the escalating tensions in the Middle East are also weighing on investors.

  To be frank, the recent stock market hasn’t been that volatile. The VIX, which is the volatility index, rose from less than 15 on Thursday to more than 19.5 during the day on Tuesday. It’s just that the previous five months have been unusually calm, so any change from that pattern seems unusually jarring.

  We’ve gotten our first batch of Q1 earnings reports. Bank of America (BAC) said its earnings dropped 18%, and it missed estimates by one penny per share. Johnson & Johnson (JNJ) beat by seven cents per share, but the stock hit a new 52-week low. Goldman Sachs (GS) had a strong quarter as its profits rose 28%. Trump Media (DJT) lost 39% in the last week.

  A few weeks ago, I mentioned how defensive stocks had been particularly weak. Today was a good example of defensive stocks doing well. In particular, staples and healthcare stocks were up the most, or in many cases, down the least.

  Retail Sales Jump 0.7%

  The economic news continues to be favorable. Shoppers are in a buying mood. On Monday, the Commerce Department said that retail sales rose by 0.7% last month.

  That was a pleasant surprise. Wall Street had been expecting a gain of only 0.3%. Also, the number for February was revised higher to a gain of 0.9%.

  This tells us that despite stubborn inflation, higher prices haven’t kept shoppers from the malls. Over the last year, retail sales increased by 4% while inflation was up by 3.5%.

  

  If we don’t count cars, then retail sales increased by 1.1% last month. That more than doubled Wall Street’s estimates for a gain of 0.5%. It’s true that higher gasoline prices helped drive higher retail sales, but the largest increase came from online sales, which were up by 2.7%. These numbers are important to watch because consumers make up about 70% of the economy.

  The Atlanta Fed’s GDP model increased its estimate for Q1 GDP growth from 2.4% to 2.9%. The model now expects real personal consumption expenditures (PCE) to rise by 3.5%. That’s quite good. The government’s initial report on Q1 GDP growth will be out on April 25. The initial report will be updated two more times.

  On Tuesday, the Federal Reserve said that industrial production increased by 0.4% last month. That’s good to see because this data series hasn’t done much over the past two years. Last month, manufacturing increased by 0.5%. If we don’t count autos, then factory output was up by 0.3%.

  Thanks to the positive economic news, that’s altering the markets’ take on the Fed and the course for interest rates. According to the most recent trading in the futures market, there’s a 65% chance that the Fed’s first rate cut will come in September, and there’s a 51% chance that it will be the Fed’s only rate cut this year.

  Earlier today, Fed Chair Jerome Powell conceded that there’s been “a lack of further progress” with regard to inflation. Powell indicated that rate cuts may not be coming so soon. This is a noticeable change from the Fed’s stance of only a few weeks ago.

  One effect of higher interest rates is that the US dollar has been getting stronger in recent days. The dollar is also being helped by increased international tensions. When investors get nervous, they go to areas of stability. According to Bloomberg, the greenback is having its best run in over a year.

  Until now, investors had assumed that most of the world’s major central banks would cut rates similarly, so therefore, the impact would be negligible. Now that doesn’t appear to be the case.

  Tesla to Cut 10% of its Workforce

  Something on Wall Street that still surprises me is how quickly a stock can go, in Wall Street’s eyes, from doing nothing wrong to doing nothing right.

  I say this in the wake of Monday’s news that Tesla (TSLA) will be laying off more than 10% of its global workforce. The electric vehicle leader is facing the reality of slower sales growth. In Q1, Tesla delivered 387,000 vehicles. That’s down 8.5% from last year.

  Companies like Tesla are always a challenge for value-oriented investors because embryonic industries are often long on potential but meager with results. How can an investor properly value a stock that’s trading at 100 times trailing earnings but that could be the next Microsoft (MSFT)? It’s a tough question, and I don’t know the answer. I will concede that non-traditional companies should be valued in non-traditional ways.

  That’s certainly true for Tesla, but now we’re talking about a company that’s richly valued but may not be growing so quickly. Tesla’s profit margins have consistently eroded. Tesla has also experienced several senior executives leaving the company.

  Elon Musk said, “About every 5 years, we need to reorganize and streamline the company for the next phase of growth.” The last time they cut 10% of the workforce was two years ago.

  You can see how badly Tesla has lagged the overall market.

  

  Musk is apparently pushing the company hard in the direction of fully-autonomous vehicles. The goal is to unveil a robotaxi sometime this summer. Meanwhile, other car companies are scaling back their EV plans, while hybrid sales are as strong as ever.

  These kinds of stocks are often referred to as lottery investments meaning that investors know that 90% of these investments will go nowhere but that a big home run will more than make up for the losses.

  Let’s say that forty years ago, you decided that computers were the future. You decided to invest in what most experts believed were the top contenders in the field. That probably would have led you to invest in IBM, Cray and DEC. Lancaster Colony (LANC) would have been a far better investment. They make croutons.

  My point is that even if you’re right in your thesis, you can be wrong in your delivery.

  Stock Focus: IES Holdings (IESC)

  As long-time readers know, one of my favorite hobbies is to highlight high-quality companies that are practically unfollowed by Wall Street. I’m often asked how to find these stocks, but that’s hard to answer because they’re, by definition, not well known.

  Recently, I came across IES Holdings (IESC), which I have to confess I was unfamiliar with. I’m glad I know it now. Twelve years ago, it was going for $1.75 per share. Now it’s at $120. Still, not a single analyst covers it.

  IESC has done so well that the S&P 500 looks like a flat line in comparison.

  

  According to Wikipedia, IESC “provides infrastructure services including electrical, communications, low-voltage, network, AV, and security alarm systems to the residential, industrial and commercial markets.”

  IESC isn’t some microcap. The company has 8,300 employees and a market value of $2.4 billion. The company was founded in 1997 and it’s based in Houston.

  For the most recent fiscal year (ending in September), IESC made $4.71 per share. IESC’s next earnings report will probably be out in early May, but I can’t say what Wall Street’s consensus is since there isn’t one.

  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: April 16, 2024
  Eddy Elfenbein, April 16th, 2024 at 7:02 am

  A $10 Billion Copper Mine Is Now Sitting Idle in the Jungle

  Gold Is Shining ‘Bright Like a Diamond’ and Could Hit $3,000, Says Citi

  Oil Prices Rise as China’s Q1 Economic Growth Beats Expectations

  The Architect of EU’s Carbon Market Says It’s Time to Allow Imported Credits

  China Extends Clean-Tech Dominance Over US Despite Biden’s IRA

  China and the EU Risk Slow-Walking Down a Path to a Trade War

  Germany’s Leader Walks a Fine Line in China

  Why Germany Can’t Break Up With China

  Diverging Fed-ECB Policy Outlook Widens U.S.-German Yield Differential

  Why US and China Compete for Influence With Pacific Island Nations

  Rate Cuts Are the Direction of Travel, BOE’s Lombardelli Says

  Dollar Heads for Best Run in a Year as Fed Seen Delaying Cuts

  Remember ‘There Is No Alternative?’ Now There Is

  Bitcoin is About to Hit an Event Called the Halving — and It May Spark a Huge Rally

  BofA Beats Estimates for Trading and Profit Even as Costs Soar

  Morgan Stanley’s Profit Rises as Investment Banking Rebounds

  A Slimmer Goldman Sachs Posts Hefty Jump in Profit

  PNC Profit Falls 21% Amid Weaker Interest Income

  UnitedHealth Beats Profit Estimates Despite Hack Impact

  J&J Profit Beats Estimates as Pharma Sales Edge Out Street

  Microsoft Makes High-Stakes Play in Tech Cold War With Emirati A.I. Deal

  How Washington Played A.I. Matchmaker

  Cities Use AI to Help Ambulances and Firetrucks Arrive Faster

  Tesla Is Running Out of Time to Deliver on Self-Driving Promises

  Trump’s Truth Social Stake Shrinks by $3 Billion After Stock Tanks

  Cool Comes to the Humble Produce Aisle

  Dr. Martens Shares Tumble as Bootmaker Warns of Tough Year

  The Shadow Swiftie Economy Booms With Bootleg Bracelets and $1,150 Bodysuits

  Sweltering Lagos Has 25 Million People and Zero Free Public Beaches

  Be sure to follow me on Twitter.

• Morning News: April 15, 2024
  Eddy Elfenbein, April 15th, 2024 at 7:08 am

  On Himalayan Hillsides Grows Japan’s Cold, Hard Cash

  Azerbaijan Seeks to Settle Climate Finance Fights at COP29

  Arming Ukraine Turns Soviet Tank Refitter Into a Billionaire

  Escaping the Aeschylus Trap in the Middle East

  Gold Holds Below Record Despite Iran’s Strike Against Israel

  Oil Markets Shrug Off Iran’s Attack on Israel

  Big Oil Companies Warm to Biden After Years of Bad Blood

  The Economic Costs of New Protectionism Are Starting to Pile Up

  A Resilient Global Economy Masks Growing Debt and Inequality

  Dollar’s Rally Supercharged by Diverging US Rate Outlook

  Why Better Times (and Big Raises) Haven’t Cured the Inflation Hangover

  A Huge Number of Homeowners Have Mortgage Rates Too Good to Give Up

  Goldman’s Wall Street Machine Revs Up Driving Surprise Profit Surge

  Why Everyone in Finance Is Getting Ripped

  How Electric Utilities Will Handle Booming AI Datacenter Demand

  U.S. Awards Samsung $6.4 Billion to Bolster Semiconductor Production

  Apple Faces Worst iPhone Slump Since Covid as China Rivals Rise

  Microsoft, Beset by Hacks, Grapples With Problem Years in the Making

  Hybrids Extend Lead Over EVs in Green Vehicle Race

  Waymo, Cruise and Zoox Inch Forward Ahead of Tesla Joining Robotaxi Race

  Tesla to Cut Over 10% of Workforce in Global Retrenchment

  Trucking Oversupply Is Weighing on Carriers’ Earnings Outlooks

  Paris Has Plan B If Seine Olympic Parade Too Risky, Macron Says

  Chinese Company Under Congressional Scrutiny Makes Key U.S. Drugs

  Americans Are Spending Billions on Drugs That Don’t Work

  Heinz Hot Pink ‘Barbiecue’ Sauce Is Coming to Grills This Month

  Be sure to follow me on Twitter.

• Morning News: April 12, 2024
  Eddy Elfenbein, April 12th, 2024 at 7:03 am

  China Exports Rise as Trade Tensions Mount

  A Crumbling Metro Reveals Failed Promise of China’s Billions in Africa

  Swiss Women Open Litigation ‘Floodgates’ in New Era for Net Zero

  IEA Expects Global Oil-Demand Growth to Slow Further in 2025

  India Car Sales Jump With Demand for Electric, SUVs Behind Rise

  India’s Top Traders Are Raking In Million-Dollar Salaries

  Bernanke Urges BOE to Give Market Clearer Guidance on Rate Path

  JPMorgan Shares Fall After NII Miss, Higher Expense Guidance

  JPMorgan’s Dimon Warns of ‘Unsettling’ Pressures as Bank Reports Earnings

  Biden Cancels $7 Billion in Student Debt in Election-Year Push

  Inflation Comes for the Housing Market

  Enjoy Cheaper Rent While You Can. It Won’t Last

  US Navy’s New Warship Is Plagued by Worker Turnover

  Immigrants in Maine Are Filling a Labor Gap. It May Be a Prelude for the U.S.

  Companies Reconsider Research Spending With Tax Deal Held Up in Senate

  A Chip Fab Business Grows in Brooklyn

  Energy-Guzzling AI Is Also the Future of Energy Savings

  Cathie Wood Muscles Into ChatGPT Boom With New OpenAI Stake

  Europe’s A.I. ‘Champion’ Sets Sights on Tech Giants in U.S.

  Apple Plans to Overhaul Entire Mac Line With AI-Focused M4 Chips

  AI Products Still Rely on Humans to Fill the Performance Gaps

  Chinese AI Mogul’s Wife Admits to $21 Million of Secret Trades

  Another Boeing Whistleblower Says He Faced Retaliation for Reporting ‘Shortcuts’

  Prosecutors Say Ohtani’s Interpreter Stole $16 Million From Star

  Despite the Watch World’s Secrecy, Data Services Expand

  Be sure to follow me on Twitter.

• Morning News: April 11, 2024
  Eddy Elfenbein, April 11th, 2024 at 7:04 am

  Asia Economies to Keep Growing Despite China Slowdown, Other Headwinds, ADB Says

  US Ramps Up Ties With Japan, Philippines to Counter China at Sea

  Russia Destroys Largest Power Plant in Ukraine’s Kyiv Region

  Oil Rally Is Driving Texas Gas Prices Below Zero

  The Airline Industry’s Biggest Climate Challenge: A Lack of Clean Fuel

  Lufthansa Halts Tehran Flights After U.S. Warns of Imminent Attack on Israel by Iran

  Cocoa’s Surge Is Drawing Africa’s Farmers Back to the Bean

  Why Nigeria’s Currency Rebounded and What It Means for the Economy

  WTO’s Forecasts for Global Trade Are Clouded by Political Uncertainty

  Global Watchdog Welcomes Reform Proposals for Swiss Banking

  Swiss Banking Plan Leaves ‘Relieved’ UBS Out of Immediate Firing Line

  Soft Landing or No Landing? Fed’s Economic Picture Gets Complicated

  Fed Rate Cuts Are Now a Matter of If, Not Just When

  Bond Traders Are Preparing for a 5% Yield, No Rate Cut World

  Tax Deadline Is Pivotal for Funding Markets, Fed’s Balance Sheet

  Is the Boom-and-Bust Business Cycle Dead?

  ‘I Cannot Afford to Live’: Gen Z is Full of Financial Angst Despite Inheriting A Golden Job Market

  The Hidden Costs of Homeownership Are Skyrocketing

  UnitedHealth Chair, Executives Sold $102 Million in Stock Before US Probe Became Public

  Goldman’s Carey Halio Set to Replace Berlinski as Treasurer

  Donald Trump’s Stock Has Lost More Than Half Its Value Since Going Public

  Publicis Flags Tech Rebound as Revenue Growth Beats Expectations

  ‘Made for Advertising’ Websites Are the Marketing Industry’s Latest Messy Situation

  Meta’s Ad Woes May Push Marketers to Move Their Messages Elsewhere

  Spotify to Let Users Play DJ, Competing With Remixes on TikTok

  Uniqlo Owner Raises Profit Forecast After First-Half Profit Rose on Overseas Growth

  Givaudan Posts Higher Sales Amid Strong Momentum

  Now Arriving at an Airport Lounge Near You: Peloton Bikes, Nap Pods and Caviar Service

  Be sure to follow me on Twitter.

• Morning News: April 10, 2024
  Eddy Elfenbein, April 10th, 2024 at 7:03 am

  Fitch Cuts China Outlook to Negative on Steady Rise in Debt

  Germany Passed its First Chinese Test—This One Is Trickier

  EU Shifts Attention to Industry in Push to Deliver Green Targets

  Egypt’s Gas Shortfall Will Shake Up Sleepy Markets

  $200 Billion of M&A Wasn’t Enough in US Oil Patch

  The Politics of a Steel Deal Hangs Over Biden’s Japan Summit

  How the US Steel Takeover Became About Biden and Swing States

  BOJ Will Consider Policy Change If Weak Yen Causes Inflation Overshoot

  Price of Gold, Seen as Hedge Against Inflation, Soars to New Heights

  Why the Frog Has Yet to Be Boiled by High Rates

  March Inflation Data to Prolong Drama Around Fed Rate-Cut Timing

  Why March CPI Looms So Large for the Fed

  As US Bank Profits Drop, Focus Shifts to Interest Income Outlook

  Why ‘Tokenizing’ Assets Is Turning Banks On to Crypto

  Barred Morgan Stanley Banker Joins Firm That Got His Trading Leaks

  U.S. Postal Service Proposes Raising Stamp Prices Again

  US Weighs Ban on Charging Homebuyers for Lender Title Insurance

  Where Does the Best Innovation Happen? Not in Stand-Alone Labs, Some Companies Say

  Apple’s India iPhone Output Hits $14 Billion in China Shift

  Jack Ma Praises Alibaba’s Leadership, Restructuring in Rare Memo

  Musk’s Undisclosed Starlink Costs Undercut Profitability Claims

  US, Japan to Announce Plans to Send Japanese Astronaut to Moon

  Toyota Aims to Beat Hyundai and Ford With Its All-New 4Runner

  Chinese EV Maker XPeng Makes Inroads in Hong Kong, Macau

  Norfolk Southern Settles Derailment Suit for $600 Million

  Decaf Is the Hottest Thing in Coffee Right Now

  Starbucks Is Designing Quieter Stores to Make Sure It Gets Your Order Right

  Puma Hones Focus on Speed in Olympic Battle with Adidas and Nike

  Blizzard and NetEase Settle Their Beef, Returning Warcraft to China

  Roblox Users Battle Tornadoes and Raise Pets. Will They Watch Ads, Too?

  Be sure to follow me on Twitter.

• CWS Market Review – April 9, 2024
  Eddy Elfenbein, April 9th, 2024 at 5:31 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.”)

  Maybe the Fed won’t be cutting rates!

  It’s hard to say for certain, but on Wall Street, doubts have started to creep in about what the Fed will do with interest rates.

  For months, Wall Street had assumed that the Federal Reserve would jump in and cut interest rates. The Fed admitted it as well. Lower interest rates, quite naturally, would help the stock and housing markets. The line of reasoning was simple: “Why not cut? Inflation’s fading away.”

  Now it looks like the economy is stronger than expected, and inflationary indicators are running hot. The prices of gold and silver, for example, have rallied. The price for oil has also moved up. In fact, Mark Zandi, an influential economist with Moody’s, said that higher oil prices is the “most serious” threat to the economy. That’s not supposed to happen when inflation has been defeated.

  What’s the market thinking? Check out the five-year “breakeven rate:”

  

  This is the market’s bet for what inflation will do over the coming five years. Notice how the breakeven rate has gone up since the start of this year. This is getting hard to ignore.

  Now some Fed officials are hinting that rate cuts may not be as generous as assumed. Neel Kashkari, the head of the Minneapolis Fed, said the Fed could delay in cutting rates. Lorie Logan, the President of the Dallas Fed, said it might be too soon to cut rates. Not to be outdone, Jamie Dimon, the top banana at JPMorgan, said interest rates could eventually rise to 8%.

  The problem for Wall Street is that so much of the recent rally was predicated on the idea of lower rates. It’s as if the stock market was told it got a bonus, and it quickly ran out and spent all the money before the bonus appeared in its bank account. Now it’s being told that the bonus may be canceled.

  Even subtly, the stock market appears to be getting nervous. I’ve noticed that a few times recently, the stock market has been unable to hold onto early-day gains. Until recently, the bears were easily scared away. Now they’re able to push back and reverse morning rallies.

  It’s interesting to note that growth stocks (in red) strongly led the market (blue) from the start of this year until two months ago. Since then, growth stocks have largely performed in line with the overall market, perhaps slightly trailing.

  

  The Fed admitted that it sees itself cutting rates three times this year. Now, many traders think we’ll only get one or two cuts this year. There’s a growing number of people who think we won’t get any cuts this year.

  The futures market currently thinks there’s a 60% chance that the Fed will cut rates by 0.25% in June and a 75% chance that it will come by July. Traders see only two rate cuts over the next seven months. That recession that was promised to us seems to be taking its time.

  The Economy Created 303,000 New Jobs in March

  Last Friday, the government reported that the U.S. economy created 303,000 net new jobs last month. That was an impressive number. Economists on Wall Street had been expecting a gain of only 200,000. Also, the unemployment rate ticked down 0.1% to 3.8%, and the labor force participation rate increased by 0.2% to 62.7%.

  But there were some concerning stats in the report. For example, the jobs gain for February was revised lower to 270,000. Also, the broader U-6 rate was unchanged at 7.3%. The revision for January was an increase of 27,000 to 256,000, but that’s still below the initial estimate of 353,000. I’m also suspicious when too many of the new jobs are in government.

  Growth came from many of the usual sectors that have powered gains in recent months. Health care led with 72,000, followed by government (71,000), leisure and hospitality (49,000), and construction (39,000). Retail trade contributed 18,000 while the “other services” category added 16,000.

  I was particularly interested to hear the number for wages. For March, average hourly earnings increased by 0.3% which matched expectations. Over the last year, average hourly earnings are up by 4.1%. That’s not bad, but it needs to be better.

  

  Workers have seen that the rate of earnings growth has slowed down considerably (see above). To be clear, wages are increasing but at a slower rate.

  However, the household survey, which is used to calculate the unemployment rate, posted an even more robust gain in March, up 498,000, more than absorbing the 469,000 increase in the civilian labor force level.

  Gains tilted heavily to part-time workers in the household survey. Full-time workers fell by 6,000, while part-timers increased by 691,000. Multiple job holders rose by 217,000, to 5.2% of the total employment level.

  The next inflation report is due out tomorrow. The last report showed that headline inflation increased by 0.4% in February, and the year-over-year rate is running at 3.2%. The core rate also rose by 0.4%, and it’s up by 3.8% over the past year. For tomorrow’s report, Wall Street expects to see both the core and headline rates increase by 0.3%.

  Why Shorting Is a Very Tough Game

  Two weeks ago, Trump Media (DJT) started publicly trading. The company merged with Digital World Acquisition Corp., a publicly traded shell company.

  By any rational measure of value, Trump Media is wildly overpriced. The company currently has a market value of $5 billion even though it had total revenue last year of $4.1 million. That’s probably equivalent to a few 7-11 stores.

  For the year, the company lost $58 million. On its first day of trading, DJT nearly hit $80 per share, but lately, it’s around $37 per share. I bring this to your attention not for any political reason but to show you how dramatic Wall Street can be.

  

  Trump Media is currently the most expensive stock to short, meaning to bet against. In fact, it’s the most expensive to short by far. If you want to borrow shares of DJT to sell them short, you’d have to pay financing costs that run at an annualized rate of 750% to 900%. That compares with the average stock to finance at 0.71%.

  This means that if you took a short position in DJT, you’d have to pay about $1 per day in financing costs. According to CNBC, “to break even on a new trade after one month, a short seller would have to see the share price of Trump Media drop by more than $30.”

  I use this as a lesson that on Wall Street, even if you’re right, you can be wrong. The folks shorting DJT are betting on a sudden collapse. Even if the company turns out to be terrible, it could be a long, painful death. In fact, that’s what happens to many stocks.

  I generally steer clear of shorting stocks. To be sure, it’s not hard to find stocks that are overpriced. But with a short, you’re making a few bets and only one is that the stock is too high. You also need to get your timing right. You need to see folks convinced that you were right all along. That’s not so easy.

  Bear in mind that with a heavily shorted stock also runs the risk of a short squeeze. That happens when a widely-shorted stock starts to rise. Investors who are losing money then cover their short which pushes the shares even higher.

  That can spark a cycle of ever higher prices, which essentially happened with Game Stop (GME) three years ago. Shares of GME rose from $5 to $87 in just 10 trading days. Now it’s at $11.

  This is one of the many reasons why I prefer the long-only approach with no margin. Even if I’m wrong, time is on my side.

  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: April 9, 2024
  Eddy Elfenbein, April 9th, 2024 at 7:07 am

  Mexico’s Billionaires Piled Up Riches as AMLO Raged Against Them

  Iran’s Better, Stealthier Drones Are Remaking Global Warfare

  Biden, Kishida to Strengthen Defense Alliance With Eye on China

  BOJ Is Said to Mull Raising Inflation View on Strong Pay Deals

  How Japan Is Trying to Rebuild Its Chip Industry

  German Business Is Tangled in Red Tape

  Meloni Officials See Italy’s Debt Rising as Growth Holds Up

  Meet ZiG, Zimbabwe’s Latest Shot at a Stable Currency

  UBS Weighs Credit Suisse China Stake Swap with Beijing Government

  Banks Made Big Climate Promises. A New Study Doubts They Work

  Chevron Exits Myanmar With Withdrawal From Natural Gas Project

  HSBC Takes $1 Billion Hit from Argentina Sale as Asia Pivot Continues

  Bain Capital Raises $429 Million with Axis Bank Stake Sale, Source Says

  Bullard Says Three Fed Rate Cuts This Year Is ‘Base Case’

  Higher for Longer After All? Investors See Fed Rates Falling More Slowly

  Jamie Dimon Issues an Economic Warning

  How ‘Shareholder Value’ Became a Wall Street Mantra

  Utah’s Tech Hub Powers America’s Hottest Job Market

  Google Shows AI Model Is Enterprise-Ready After Gemini Mishaps

  Tesla Has Built a Charging Business to Be Taken Seriously

  Water-Guzzling Chipmaker TSMC and Drought-Plagued Arizona Are an Unlikely Pair, But Officials Say Phoenix’s Water Supply Can Handle Booming Production

  Pfizer to Seek Wider Use of RSV Shot After Trial in Young Adults

  Blackstone Nears Buyout of Skin-Care Company L’Occitane

  Neutrogena Is Closing Its Los Angeles Office and Laying Off Staff

  NCAA Women’s Basketball Final Draws Record 18.7 Million Viewers

  Paramount Faces a Mountain of Distrust

  Be sure to follow me on Twitter.