Archive for June, 2024

• Morning News: June 5, 2024
  Eddy Elfenbein, June 5th, 2024 at 7:06 am

  Colombian Companies Face Energy Crunch as Gas Reserves Plunge

  India’s Dysfunctional Power System Is a Threat to the Next Five Years

  Biden Says Trump Left Him ‘No Choice’ as He Moves to Seal Border

  Australia’s Economy Barely Registers Pulse in First Quarter

  China Caixin PMI Signals Fastest Services Activity Growth in 10 Months

  Europe Has Fallen Behind the U.S. and China. Can It Catch Up?

  U.S. and Europe Are on the Same Economic Track After All

  Europe’s Fed Problem

  E.C.B. Is Likely to Leapfrog the Fed on Interest Rate Cuts

  Bond Traders Pile Into Fresh Bets on Faster Pace of Fed Cuts

  New Texas Stock Exchange Takes Aim at New York’s Dominance

  Private Equity’s Latest Move to Gin Up Cash: Borrowing Against Its Stock Holdings

  Elliott Pushes SoftBank to Buy Back Shares After Taking Stake

  Can Bill Ackman Cash In on His Growing Fame?

  Goldman Family Office Clients Eye Exotic Puts as Election Hedge

  The New ‘White Fortress’ Cities of the American South

  A Year and $2 Trillion Later, Nvidia Stock Remains Irresistible

  OpenAI Insiders Warn of a ‘Reckless’ Race for Dominance

  SAP to Acquire WalkMe in $1.5 Billion Deal

  Amazon Drone Delivery Plans Move a Small Step Forward

  China Is No Longer an Open Road for German Carmakers

  The Case Against Elon Musk’s $46 Billion Pay Deal

  Dollar Tree Considering Sale, Spinoff of Family Dollar Unit

  McDonald’s Chicken ‘Big Mac’ Trademark Axed in EU

  Judge Cuts Bayer $2.25 Billion Roundup Verdict to $400 Million

  Baseball Star Ohtani’s Ex-Interpreter Pleads Guilty to Bank Fraud

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• CWS Market Review – June 4, 2024
  Eddy Elfenbein, June 4th, 2024 at 5:18 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.”)

  Trading Glitch Rocks Wall Street

  Yesterday, shares of Berkshire Hathaway (BRK-A) dropped 99.97%. I realize this news may have given some of you a panic attack, but I’m happy to report that the stock was the victim of a trading glitch.

  Fortunately, the glitch was quickly repaired, and the stock is back to its normal range. Yesterday, the NYSE sent out a message declaring “all systems are currently operational.”

  Whew! Here’s a High-Low-Close chart you don’t see every day:

  

  That’s good news that everything’s back to normal, but still, how exactly does this happen? In an instant, one of the largest companies on Wall Street was trading at less than one-three-thousandths of its correct price. We’re talking about hundreds of billions of dollars vanishing in an instant. It wasn’t just Berkshire either. The trading glitch impacted a few dozen stocks.

  The NYSE busted all trades for Berkshire between 9:50 am ET and 9:51 am ET. The exchange confirmed that it wasn’t a cyberattack, but that makes it even more worrisome. At least with a cyberattack, we know there’s an enemy. With this, we don’t know. The NYSE claimed it was a “technical issue” and it caused trading halts in about 40 NYSE-listed stocks.

  It didn’t take long for a blame game to get started. The trading glitch was apparently due to a problem with the trading bands, meaning the triggering prices that can instigate a trading halt. The NYSE said they don’t control that but rather, it’s due to Consolidated Tape Association’s (CTA) Security Information Processor (SIP).

  The CTA said this happened during a software update. They were able to use a backup system that runs on different software. Trading on the Nasdaq wasn’t impacted.

  It gets even stranger because this glitch comes at the same time that Wall Street is moving to one-day settlement, otherwise known as T+1. That these changes happened at the same time appears to be a coincidence, but some traders aren’t buying the NYSE’s story:

  Joe Saluzzi, co-founder of Themis Trading, told CNN that the NYSE’s explanation is hard to square with the bizarre trades that hit the tape.

  “I’m not buying that explanation. That doesn’t make any sense to me,” said Saluzzi, a market structure expert and author of “Broken Markets.”

  Trading data provided by Refinitiv shows that Berkshire Hathaway changed hands at $620,700 as of 9:44:32 on Monday morning. And then, without any explanation, the stock crashed to just $185.10.

  “All of a sudden, there was a $185 print. But there was nothing to take it down level by level, which you would expect to see,” said Saluzzi. “It makes no sense.”

  What’s especially troubling is that this is the third trading disruption in the past week. On Thursday, there was no live pricing for the S&P 500 for more than an hour.

  This isn’t the first time Wall Street has been the victim of computers and big data. In fact, getting fast, accurate pricing has been an important driver in the technology behind markets.

  The Rothschilds famously used carrier pigeons to get the news from Europe that Napoleon had been defeated at Waterloo. It’s a great story but it’s most likely a myth.

  In the 1860s, the first ticker-tape machines came about. In 1869, Thomas Edison developed his own version when he was just 22. (Edison didn’t precisely invent the ticker tape as is sometimes claimed, but he added important improvements.) The inexpensive tape soon became part of American culture when heroes were feted with ticker-tape parades.

  At the same time as the first ticker-tape machines, engineers had laid a trans-Atlantic cable. Now, information could be transmitted quickly between London and New York. One of the first uses for the cable was transmitting financial prices. This was so important that even today, the Dollar/Pound exchange rate is known as “cable.”

  The Titanic had a wireless radio on board and passengers could place stock trades from the comfort of first class.

  In the go-go 1960s, trading volume surged, and the back offices couldn’t handle the flood of orders. Clerks had to stay long after closing to properly settle all the trades. For several months, the NYSE was closed on Wednesdays so the back-office people could catch up.

  Some firms started to buy these newfangled computers, but they were expensive and hard to use. The back-office work was so unyielding that organized crime moved in and looted hundreds of millions of dollars.

  In 1969 and 1970, trading volume plunged, and one-sixth of brokerages either merged or went out of business. The industry responded, and in 1971, the National Association of Securities Dealers started the Nasdaq and in 1975, the NYSE finally ditched fixed commissions.

  Wall Street has always been a place of technological innovation. As we learned this week, that change isn’t always so smooth.

  The Upcoming Jobs Report for June

  The next test for the stock market will come this Friday with the May jobs report. While the unemployment rate has been below 4% for several months, the pace of new job creation has slowed. Earlier today, the Bureau of Labor Statistics said that in April, the number of job openings fell to 8.1 million.

  For Friday, Wall Street expects to see job gains of 190,000. That would be an increase over April’s gain of 175,000. Wall Street also expects the unemployment rate to stay at 3.9% and for average hourly earnings to increase by 0.3%.

  Yesterday, the ISM Manufacturing report for May was 48.7. That was below expectations of 49.6. The Census Bureau said that construction spending fell by 0.1% in April.

  I doubt the jobs report will have a major impact on the Fed. The FOMC meets again next week and it’s very unlikely that they’ll raise interest rates. The earliest a rate cut would come is probably September.

  In last week’s issue, I talked about how Growth stocks have been outpacing Value stocks. Nice timing. Right after I said, Value went on to cream Growth for two days in a row.

  Each day, trading usually leans one way or the other regarding Growth versus Value. Lately, however, the market has very strongly leaned in one direction or the other. Value has had several false starts in the last year, but this latest bit of outperformance could last for some time.

  Stock Focus: Oil-Dri Corporation (ODC)

  Here’s a neat one. Are you familiar with Oil-Dri Corporation of America (ODC)?

  Don’t worry, you’re not alone. Based in Chicago, Oil-Dri is leading maker of “specialty sorbent products for the pet care, animal health and nutrition, fluids purification, agricultural ingredients, sports field, industrial and automotive markets. Oil-Dri’s largest principal product is cat litter.”

  Within the United States, Oil-Dri is the leading manufacturer of lightweight cat litter in units and the largest producer of private label coarse litter in both units and dollars.

  Oil-Dri has 884 employees and a market value of $610 million. Last year, the company had revenues of $413 million and net income of $28 million. Oil-Dri has increased its dividend each year for the past 20 years.

  The stock has been a huge winner. In 2002, ODC was going for less than $6 per share. Today it’s at $83 per share. Including the dividend, the stock has soundly beaten the market. Since late 2000, the S&P 500 Total Return Index is up 481% but ODC (with divs) is up 2,486%.

  

  Did I mention this was kitty litter?

  Given the success of Oil-Dri, you might guess that lots of Wall Street analysts follow it. Or, if you’ve been a reader of mine for any amount of time, then you probably know: Oil-Dri isn’t followed by a single Wall Street analyst.

  Who knew kitty litter could be so profitable?

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

• Morning News: June 4, 2024
  Eddy Elfenbein, June 4th, 2024 at 7:01 am

  Norway Gas Scare Puts European Market on Edge

  Moving to Renewables Will Mean Using Less Energy Overall

  India Stocks Post Biggest Loss in Four Years on Tight Vote

  The Dollar Is at Its Strongest Since the 1980s. Can It Last?

  Wall Street Is Having Trouble Getting ‘Too Excited’ About the US Economy

  Global Bond Rally Wavers With Jobs Data Next Hurdle for Fed Path

  Trading Glitch Sends Some Shares on a Wild Ride

  NYSE Fixes Issue That Showed 99% Drops, Triggered Trading Halts

  Short Sellers in Danger of Extinction After Crushing Stock Gains

  Deutsche Bank Ties Up with Bitpanda in ‘Cautious’ Crypto Shift

  Swiss Financial Regulator Wants to Be Able to Name and Shame Banks

  Majority of Middle-Class Americans Say They Struggle Financially

  As China’s Internet Disappears, ‘We Lose Parts of Our Collective Memory’

  The Goal for China’s Chip Giant: Cut Out the U.S.

  Nvidia’s Pitch in AI Chips Holds Echoes of Apple and iPhones

  Intel CEO Fires Back at Nvidia in Battle for AI Chip Leadership

  Roaring Kitty’s Reddit Post on GameStop Signals a $289 Million Paper Fortune

  Car Deals Vanished During the Pandemic. They’re Coming Back

  Electric Cars Are Suddenly Becoming Affordable

  Tesla China’s Sales Rose in May Amid EV Demand Recovery

  Japanese Officials Inspect Toyota Headquarters Over Safety Certification Scandal

  Maersk Lifts Guidance Again on Surging Freight Rates

  Costco Hot Dogs Have Cost $1.50 Since the 1980s. Here’s Why Prices Aren’t Changing

  How Birkenstock Became an Improbable Luxury Empire

  British American Tobacco Backs Guidance, But Expects Weaker First Half on U.S. Softness

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• Morning News: June 3, 2024
  Eddy Elfenbein, June 3rd, 2024 at 7:05 am

  OPEC+ Says Goodbye to Its $100-a-Barrel Oil Quest

  OPEC+ Oil Deal’s Real Winner Once Again Is the UAE

  Why Saudi Aramco Stock Is a Tough Sell on Wall Street

  Abnormally Dry Canada Taps U.S. Energy, Reversing Usual Flow

  It’s Crunchtime for a New Generation of Climate Startups

  Cost Pressures Cast Shadow Over Asia’s Fledgling Manufacturing Recovery

  Krugman Says China Is ‘Bizarrely Unwilling’ to Boost Demand

  India Stocks Hit Record, Rupee Gains as Polls Predict Modi Win

  Mexican Peso Extends Loss to 2% After Landslide Election Win

  Cut Rates – Then What? Five Questions for the ECB

  Digital Bank Monzo Posts First Full Year of Profit After More Than Doubling Revenue

  The Budget Geeks Who Helped Solve an American Economic Puzzle

  Mnuchin Chases Wall Street Glory With His War Chest of Foreign Money

  Private Credit, Wall Street’s Hottest Trade, Has an Ugly Moment

  Pershing Square Sells 10% Stake for $1.05 Billion Ahead of IPO

  GameStop Shares Double as Gill Post Shows $116 Million Bet

  Crypto Bull MicroStrategy and Its Founder to Pay $40 Million in Tax Fraud Lawsuit

  How Billionaires Bought 70% of Detroit’s Offices and Transformed the City

  The U.S. Gave Chip Makers Billions. Now Comes the Hard Part

  Nvidia and AMD Square Off in Fight to Take Control of AI

  Apple, Samsung Focus on AI Misses the Mark for Smartphone Buyers

  Waves of Chinese Electric Vehicles Are Pouring Into Brazil

  Toyota and Other Japanese Carmakers Say They Mishandled Safety Tests

  Atos Assessing Two Revised Rescue Bids

  Becton Dickinson to Acquire Edwards Lifesciences’ Unit for $4.2 Billion in Cash

  Waste Management Near Deal to Buy Stericycle

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