Archive for May, 2024

• Morning News: May 8, 2024
  Eddy Elfenbein, May 8th, 2024 at 7:03 am

  Sweden’s Central Bank Cuts Key Rate as Europe Moves Ahead of the Fed

  BOJ Governor Says Early Rate Hike Possible if Prices Rise Faster Than Expected

  Profits Are Booming—and That’s Shielding the Economy

  JPMorgan Limits Segantii Exposure Amid Insider-Trading Case

  FTX Has Billions More Than Needed to Pay Bankruptcy Victims

  Hedge Fund Tycoon Loses Ruling Over $40 Million WWII Shipwreck Treasure

  Americans Are Racking Up ‘Phantom Debt’ That Wall Street Can’t Track

  Rents May Be Last Tamed in Inflation Fight

  Billions in Chips Grants Are Expected to Fuel Industry Growth

  Apple’s China iPhone Shipments Soar 12% in March After Discounts

  Google’s Pixel Leaves Little Room to Breathe for Sony Phones

  TikTok’s Legal Bet on the First Amendment

  South Africa Moots New Coal-Plant Closure to Secure $2.6 Billion

  The Company Preaching America’s Nuclear Revival

  EU’s von der Leyen: China Must Be Stopped from Flooding EV Market

  South Korea Plans $7 Billion Push to Pivot EV Battery Industry Away From China

  Will Tesla’s EV Charging Slowdown Supercharge Competitors?

  Companies Are Balking at the High Costs of Running Electric Trucks

  Toyota Motor Projects Annual Profit Drop, Announces Share Buyback

  Activist Investor Seeks to Force Out Norfolk Southern’s Management

  Uber Bookings Miss on Early Holidays, Weak Regional Demand

  Shopify Reports Higher Revenue, Sees Growth Slowing

  Neutrogena Lost Dermatologists and Missed Out on the $42 Billion Beauty Boom

  How Uniqlo’s ‘Millennial Birkin’ Is Beating Designer Bags

  Premier League Strikes Deal With Fanatics on Trading Cards

  Refinery29’s New Owner Plans to Cover Sports, Buy More Media Companies

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• CWS Market Review – May 7, 2024
  Eddy Elfenbein, May 7th, 2024 at 8:19 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.”)

  It’s still early, but so far, May is looking a lot better than April. The S&P 500 has rallied for the last four days in a row. On Tuesday, the index briefly stuck its head above 5,200. More importantly, the S&P 500 has overtaken its 50-day moving average. That comes after 15 straight days of closing below it. Still, I’m not convinced that the coast is clear.

  

  What makes me say that? On Friday, the government reported that the U.S. economy created 175,000 net new jobs last month. That’s a decent figure but it was well below expectations. Economists had been expecting a gain of 240,000. Also, the unemployment rate ticked up to 3.9%. That’s still low, but it’s the highest in over two years.

  Oddly enough, the immediate impact of the jobs report has been positive—not because it’s good news itself but because it could push forward the Fed’s plans to cut rates, and that would be good for the market.

  In other words, bad news is good news because it may spur the Fed to action. I realize that may sound odd, but welcome to Planet Wall Street.

  In the jobs report, I was particularly disappointed to see that average hourly earnings increased by only 0.2% for April. That needs to improve. Over the past year, average hourly earnings are up 3.9%. Both numbers were 0.1% below expectations. These are crucial numbers for Wall Street because it may signal that consumers are close to being tapped out.

  Here’s a look at the year-over-year increase in average hourly earnings. Notice how it’s increased but the rate of increase has consistently fallen.

  

  The government also calculates a broader unemployment rate, called the U-6 rate, which includes “discouraged” workers. For April, the U-6 rate rose to 7.4% which is the highest since November 2021. The labor force participation rate stayed the same at 62.7%.

  We’re also seeing more part-time workers shift to fulltime. Last month, the number of fulltime workers increased by 949,000 while part-time workers dropped by 914,000.

  Here are some details about jobs growth in different sectors:

  Consistent with recent trends, health care led job creation, with a 56,000 increase.

  Other sectors showing significant rises included social assistance (31,000), transportation and warehousing (22,000), and retail (20,000). Construction added 9,000 positions while government, which had shown solid gains in recent months, was up just 8,000 after averaging 55,000 over the previous 12 months.

  The recent gains had been heavily tilted to government and healthcare jobs. I’d like to see those gains broaden out.

  Moses Sternstein points out that the jobs market isn’t so much growing as it’s “closing in the gaps.” The number of jobs that need to be done has stayed roughly the same but the number of people available to fill those jobs has been fewer than expected. As a result, job gains are modest while the unemployment rate is low. One effect of this has been higher wages for low-end workers.

  That’s part of the reason why we’ve seen an imbalance in inflation. Services like haircuts have been hit hard by inflation while goods like new TVs haven’t moved that much. It all comes down to how much the product is dependent on labor costs.

  So where does this put the Fed? That’s hard to say, but the futures market now thinks the first Fed rate cut will come in September. Prior to the jobs report, we were looking at a cut in November. There’s also a slight chance of another rate cut before the end of the year. Any rate cuts are good for stocks and that’s probably why the market has rallied the last few days.

  We’re still in Q1 earnings season. Overall, the results have been quite good but only relative to expectations. Q1 earnings growth is currently tracking at 5.31%. That’s up from 2.99% one month ago.

  So far, 77.4% of companies have beaten Wall Street’s earnings estimates while 59.1% have beaten on sales. A little more than half have beaten on both.

  Stay tuned for next Wednesday, May 15. That’s when we’ll get the CPI report for April. There hasn’t been much improvement here in several months.

  Apple’s Massive $110 Billion Share Buyback

  Last week, Apple’s (AAPL) board of directors made news by announcing a new $110 billion share buyback plan. That’s an astounding amount of money. Of the ten largest share buyback announcements of all time, Apple owns six of them.

  The plans also raised some questions about how a company ought to use its excess cash. Is a buyback plan the best thing to do with shareholders’ money? Is Apple no longer an innovation giant, or has it become a high-cash-flow value stock?

  

  I have some thoughts about this. Ideally, I’d prefer to see a company pay out cash dividends. Apple increased its dividend by one penny to 25 cents per share. The best thing about this is that it gives shareholders the option of using their dividend payment to buy more shares, which is effectively what the buyback does automatically.

  I also fear when a company holds too much cash. This often leads to unwise acquisitions. This is known as the Bladder Theory of Corporate Finance.

  I have no problem with the idea of share buybacks, but I think they’re often abused. For example, too often share buybacks merely use shareholder money to buy an overpriced stock. This is what happened at Cisco (CSCO) for many years.

  I also don’t like it when companies offer large stock options to their senior executives but share buybacks tend to mask how much money is at stake.

  Here I have to give Apple credit. The company has gradually reduced the number of shares outstanding. In fact, over the past year, Apple’s profit declined but its earnings-per-share increased slightly thanks to fewer outstanding shares. According to MarketWatch, over the last 10 years, Apple has reduced its share count by 37%.

  If you’re going to do a buyback, that’s the way to do it.

  IES Holdings Revisit

  Three weeks ago, I told you about IES Holdings (IESC). This is one of those great companies with an impressive track record that’s virtually ignored by Wall Street. Since 2012, it’s up 90-fold. Literally, IESC isn’t followed by a single analyst on Wall Street.

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

  

  In the newsletter, I wrote: 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.” Well, on Friday, IESC released its earnings report, and it was a good one.

  For its fiscal Q2, IESC’s revenues rose by 24% and its operating income was up 146%. Q2 earnings rose from $1.07 per share last year to $2.29 per share for this year. IESC has $106 million in cash and not a dime of debt. During Friday’s trading, shares of IESC jumped 18%. In two weeks, IESC gained 50%.

  I certainly can’t take credit for predicting that would happen, but it does show you that there are plenty of good stocks to own that aren’t part of the Magnificent Seven.

  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: May 7, 2024
  Eddy Elfenbein, May 7th, 2024 at 7:04 am

  What India’s Addition to JPMorgan’s Bond Index Means

  Chris Dixon’s Campaign to Overhaul Crypto’s Grifty Reputation

  Revolut Launches UK Crypto Exchange as Digital Assets Recover

  Behind Nigeria’s Arrest of Binance Employee, Claims of a Bribe Request

  Wall Street Bonuses to Rise this Year as Deals Return

  High-Tech Trading Firms Race to Grab Bond Market Turf

  The Big Questions Hanging Over a Blackstone Fund

  UBS Returns to Profit as CEO Ermotti Affirms Buyback Plans

  Insider Trading Allegations Hit Asia’s ‘Block-Trade King’ for Global Banks

  OpenAI Releases ‘Deepfake’ Detector to Disinformation Researchers

  Amazon to Invest $9 Billion in Singapore Cloud Infrastructure

  LMR Partners Adds US Oil Strategy in Commodities Push

  Saudi Aramco Net Income Falls on Declining Crude Oil Volumes

  China’s Solar Panel Giants Say Prices Are Near the Bottom

  Third Point’s Loeb Says AI Will Boost Texas Power Producer Vistra

  A New Kind of Power Company Will Put a Battery in Every Home

  Tesla Autopilot Probe Escalates With US Regulator’s Data Demands

  Apple Needs to Move the iPad Beyond the Toddler Stage

  Disney Beats on Profit, Raises Outlook Despite Revenue Miss

  Instacart, Uber Join Forces to Add Uber Eats to Instacart App

  Let’s All Take a Deep Breath About China

  China’s New Love of Coffee Is Coming for Yours

  How the US Drives Gun Exports and Fuels Violence Around the World

  Taylor Swift Draws Five Times as Many US Luxury Travelers as the Olympics

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• Morning News: May 6, 2024
  Eddy Elfenbein, May 6th, 2024 at 7:03 am

  Oil Climbs as Gaza Tensions Rise, Saudi Arabia Hikes Prices

  Global Gas Glut to Be Delayed by Another Year

  Russia’s War Economy Starves Crucial Oil Industry of Manpower

  Xi And Macron Meet to Confront Trade Tensions

  China Is Buying Gold Like There’s No Tomorrow

  Global Housing Shortages Are Crushing Immigration-Fueled Growth

  What It’s Like to Be a Regional Fed President On the Road

  At $2 Million Per Minute, Treasuries Mint Cash Like Never Before

  Lamborghini Bros No More: Crypto Is Creating a New Wealth Effect

  Bill Gross Is the Bond King, But Diversification Is Emperor

  Italy’s White-Collar Mafia is Making a Business Killing

  Credit Suisse’s Last CEO Koerner to Leave UBS in Coming Weeks

  JPMorgan’s Top China TMT Banker Crystal Zhu Said to Join Morgan Stanley

  Buffett Praises Apple After Trimming It, Drops Paramount Stake

  Elon Musk Is Astonished By Warren Buffett’s Berkshire Hathaway Amassing As Much Cash As Tesla CEO’s Wealth: ‘Wow’

  The Oracle of Omaha warns about AI: What Buffett said at Berkshire

  How Bad Is A.I. for the Climate?

  Tensions Rise in Silicon Valley Over Sales of Start-Up Stocks

  Qualcomm’s Smartphone Future Looks Brighter With AI

  China Makes Cheap Electric Vehicles. Why Can’t American Shoppers Buy Them?

  Li Auto Shares Gain on Strong L6 Orders

  Boeing’s Big Space Test: Using Starliner to Ferry NASA Astronauts

  Australia’s Qantas to Pay $79 Million to Settle ‘Ghost Flights’ Case

  How Online Shopping Is Saving the Bricks-and-Mortar Store

  Target Is Taking Its Popular In-House Apparel Brand Abroad

  Howard Schultz Urges Starbucks to Fix its U.S. Business

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• Morning News: May 3, 2024
  Eddy Elfenbein, May 3rd, 2024 at 7:03 am

  Problems Mount for Group of Seven’s Price Cap on Russian Oil

  Oil Companies Expand Offshore Drilling, Pointing to Energy Needs

  Biden, BP and the High-Stakes Sequel to Deepwater Horizon

  Drought to Deluge: Eastern Africa Bears Brunt of Climate Change

  A Billionaire Wanted to Save 1 Trillion Trees by 2030. It’s Not Going Great

  Geopolitics Takes a Central Role in Supply Chains

  The Treasurys Market Is Getting Squeezed From All Sides

  Traders Pull Forward First Full Fed Rate Cut to November Ahead of Jobs

  The April Jobs Report

  HSBC Has No Plans to Dispose of Further Businesses, Chairman Says

  ‘Your Fund Is Under Attack’: BlackRock Fights to Repel Saba Raid

  What Will Warren Buffett Bet on Next?

  Even the World’s Most-Envied Retirement Plan Is Falling Short

  Calls to Divest From Israel Put Students and Donors on Collision Course

  Utah Lights An Innovative Path To Matching Benefits With Work Realities

  Carvana Father-Son Duo Make $11 Billion in 3,000% Stock Rebound

  Google, Meta and Microsoft Apparently Didn’t Get the ‘Monopoly’ Memo

  Google Employees Tune Out Antitrust Threat as Trial Comes to a Head

  Apple Rallies on Upbeat Forecast, Record-Setting Buyback

  Boeing’s Latest Trouble Is a Jet Part Caught Up in Russia Sanctions

  Sony, Apollo Propose $26 Billion Deal for Paramount Global

  Startups Go to Hollywood: AI Movies Aren’t Just a Gimmick Anymore

  The Rise of Food Robots Butchering Cows and Packing Veg

  Starbucks Is Running Out of Americans to Drink Its Expensive Coffee

  Jean Paul Gaultier Owner Puig Shares Rise on First Day of Trading

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• Morning News: May 2, 2024
  Eddy Elfenbein, May 2nd, 2024 at 7:07 am

  Australia’s Trade Surplus Narrows as Households Defy High Rates

  China’s Climate Envoy Has an Economic Case to Make in Washington

  Biden Calls Ally Japan ‘Xenophobic’ Along With China, Russia

  Japan Likely Spent About $23 Billion in Latest Yen Intervention

  Powell Keeps Rate Cuts on Table But Leaves Timing Less Certain

  You Can’t Call Jerome Powell a Big Teaser

  What Will It Take for the Fed to Lower Rates?

  In Jamie Dimon’s America, the Stock Market Has Already Voted

  Wall Street Seizes Opportunity to Gut SEC Trading Surveillance

  The State of Crypto Is Anything But Strong

  Why Banks These Days Are So Excited About Being Boring

  Blackstone Taps Vast Source of Cash in $1 Trillion Credit Push

  NYSE-Parent ICE’s Profit Rises on Record Surge in Energy Market Volatility

  Strongest U.S. Challenge to Big Tech’s Power Nears Climax in Google Trial

  The Judge Deciding Google’s Fate

  Why Megacorporations Shouldn’t Overestimate Their Monopoly Power

  Musk’s Starlink Persists in Unauthorized Areas Despite Shutdown Warnings

  Huawei Secretly Backs US Research, Awarding Millions in Prizes

  Intel Bets $28 Billion Comeback on High=Tech US Chip Designs

  BYD’s First-Quarter Story Is in The Margins

  Apple’s Earnings Come With a Low Bar and Big Buyback Hopes

  Shell Beats Forecasts on Gas-Trading Resilience; Launches $3.5 Billion Buyback

  Moderna Posts Quarterly Sales Beat, Smaller Loss than Expected

  Novo Nordisk Hikes Guidance as Weight-Loss Drug Sales Surge. Why the Stock’s Falling

  Peloton CEO McCarthy to Step Down; Firm to Cut 15% of Workforce

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• Morning News: May 1, 2024
  Eddy Elfenbein, May 1st, 2024 at 7:05 am

  South Korea’s Export Growth Accelerated in April

  Australia’s Manufacturing PMI Shows Signs of Recovery

  Fed to Signal Delay of Interest-Rate Cuts

  The Fed Won’t Climb Down Yet. Others Can’t Wait

  Banks Rent Rivals’ Balance Sheets to Skirt Capital Rules

  NYCB’s Results Are Better Than Worst Fears After Rocky Quarter

  Wanted: Megabank Chief Willing to Work for Half Pay

  Barclays Begins Implementing Job Cuts Across Investment Bank

  He Lost $36 Billion in a Week. Now Bill Hwang Is Fighting to Avoid Prison

  Binance Crypto Founder Zhao Sentenced to Four Months in Prison

  Bulgarian Distrust of Russia Simmers Over a Black Sea Oil Terminal

  Coal Is Proving to Be a Tough Habit to Kick

  BP Bets Big, Again, On the Gulf of Mexico

  A Yeast-Like Bacteria Can Cut Carbon Emissions While Creating Sustainable Aviation Fuel and Sneakers

  How Sewage Is Helping Along the Energy Transition

  China’s Electric Cars Keep Improving, a Worry for Rivals Elsewhere

  Tesla Axes Supercharger Team in Blow to Broader EV Market

  Will GM Regret Kicking Apple CarPlay off the Dashboard?

  Elon Musk vs. Jeff Bezos Is America’s New Moon Race

  The Ozempic Effect: How a Weight Loss Wonder Drug Gobbled Up an Entire Economy

  CVS Tumbles as Rising Medical Costs Hit Profit Forecast

  J&J Advances $6.475 Billion Settlement of Talc Cancer Lawsuits

  AI Is Helping Automate One of the World’s Most Gruesome Jobs

  KFC Owner’s Sales Fall for First Time Since 2020

  Starbucks Posts First Sales Drop Since 2020 During Global Pullback

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