Archive for July, 2024

• Morning News: July 9, 2024
  Eddy Elfenbein, July 9th, 2024 at 7:02 am

  Biden and Macron’s Domestic Turmoil May Overshadow NATO Summit

  Political Gridlock Will Raise the Economic Stakes in France

  Biden Pushes Back Against Big Donors

  Britain’s Non-Dom Population Rose 7% Ahead of Tax Revamp Plans

  Asset Managers Are Snubbing UK’s ESG Labels, Morningstar Says

  A Wall Street Law Firm Wants to Define Consequences of Israel Protests

  Russia’s Crude Shipments Drop by the Most Since Ukraine Invasion

  BP to Book Up to $2 Billion Impairment, Warns of Lower Refining Margins

  Solar Firm Gets Millions in US Tax Credits Despite Chinese Labor Questions

  Chinese EV Giant BYD to Build $1 Billion Plant in Turkey

  Hurricane Beryl Makes a Mockery of Texas Climate Deniers

  China Updates Its Monetary Toolkit

  EU Watchdog Warns of Data ‘Black Holes’ Amid Efforts to Uncover Shadow Bank Risk

  What Happens When Your Bank Isn’t Really a Bank and Your Money Disappears?

  How to Invest During a High Interest Rate Era

  A ‘Triple-Whammy’ Threat is Building for U.S. Stock Investors, Strategist Warns

  Mutual Funds See Win in Fight to Blunt SEC ‘Swing Pricing’ Plan

  Pershing Square Starts IPO Roadshow for US Closed-End Fund

  Bobby Jain’s Complex Hedge Fund Debut Spawns Fans and Doubters

  OECD Expects Cooling Jobs Markets, But Continued Recovery In Real Wages

  Singapore’s CEO Hell Camps Teach Value of Teamwork and Resilience

  Seeing Workplace Misery, They Offer Company

  At SpaceX, Elon Musk’s Own Brand of Cancel Culture Is Thriving

  Generic-Viagra Safety Called Into Doubt After False Data Found by FDA

  Music Catalog Giant Hipgnosis Is Sold, and Merck Mercuriadis Exits

  A Diminished Hollywood Welcomes a New Mogul

  America’s Biggest Nonalcoholic Beer Brand Doubles Its Valuation

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• Morning News: July 8, 2024
  Eddy Elfenbein, July 8th, 2024 at 7:06 am

  Hong Kong’s Commercial Property Deals Fell to Lowest Since 2008

  The Yen Is Plunging. So Is Japan’s Defense Budget

  France Suddenly in Gridlock After Surprise Election Result

  French Gridlock Makes UK Stability Look Even Better

  Crushing Debts Await Europe’s New Leaders

  BOE’s Haskel Warns of Inflation, Signals Vote for Rates Hold

  Biden’s Wall Street Donors Are Increasingly ‘Concerned’

  Investors Chart Possible Moves as Pressure Mounts on Biden

  Post-Covid-19 Higher Prices Have Donald Trump’s Fingerprints All Over Them

  Powell to Face Fed Critics in Congress on High Rates, Bank Rules

  Big Bond Bet Favored by Citi, JPMorgan Gets Boost Before CPI

  The Rich Investor Club Is Getting Crowded

  How Stocks Became the Game That Record Numbers of Americans Are Playing

  Old School FX Traders Are Being Replaced By Algos With Names Like Viper

  ‘Nuclear’ Jury Verdicts Rise Alongside American Anger

  Fight Against Misinformation Suffers Defeat on Multiple Fronts

  Microsoft Orders China Staff to Use iPhones for Work and Drop Android

  Thousands of Samsung Workers Walk Out for Three-Day Strike

  Artificial Intelligence Boom Lifts Paychecks for CIOs

  Lilly Agrees to Buy US Biotech Morphic in $3.2 Billion Deal

  Foreign Carmakers Fight to Survive in China as Market Share Dwindles

  China Allows Robotaxis Without Operators in Shanghai

  Air Travel Demand Is Breaking Records. Airline Profits Are Not

  Boeing to Plead Guilty to Fraud for Violating Deal Over 737 Max Crashes

  Paramount Agrees to Skydance Deal, Ending Redstone Era

  Meet David Ellison, Paramount’s Future Boss and Hollywood’s Newest Mogul

  College Credit for Working Your Job? Walmart and McDonald’s Are Trying It

  Carlsberg to Buy Soft Drink Maker Britvic for $4.23 Billion

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• Morning News: July 5, 2024
  Eddy Elfenbein, July 5th, 2024 at 7:03 am

  Saudi Crude Shipments Plummet to Pandemic-Era Levels

  Canada Approves Glencore-Led Deal for Teck Coal Assets

  Shell to Take Up to $2 Billion Impairment Hit, Expects Weaker Gas Trading

  Turkey Poised for $1 Billion EV Plant Deal With China’s BYD

  Political Unrest Worldwide Is Fueled by High Prices and Huge Debts

  Politicians Usually Moderate When in Power. Britain’s Starmer Could Be Different

  Starmer Vows Quick Action to Fix Britain in First Speech as Prime Minister

  Marine Le Pen Betrays Her Past to Capture a Bigger Prize: France

  At a Key Juncture, Biden Again Gambles on ABC’s George Stephanopoulos

  One Obstacle for Trump’s Promises: This Isn’t the 2016 Economy

  Fed Officials Keep an Eye Out for Cracks in the Job Market

  US Jobs Report to Show a Substantial Slowdown in Hiring in June

  Investors Bet on Rate Cuts as Recent Data Suggests Slowdown

  Bonds Are Boring Again. But Political Turmoil Could Change That

  China’s Central Bank Borrows ‘Hundreds of Billions’ of Yuan in Government Bonds

  Bitcoin Falls to Lowest Since February as Fears of Sales Persist

  Japan’s GPIF Loses Status as World’s Biggest Pension Fund

  Goldman and Citi Predict More Gains for Nvidia Supplier Hynix After 90% Rally

  Samsung Electronics Expects Surge in Second-Quarter Profit

  Musk’s X Risks Fine as EU Steps Up Crackdown on Big Tech

  Europe’s Cheap Airline Stocks Fail to Get a Peak Season Boost

  Amazon Takes a Page From Temu’s Bargain Playbook

  Saks’ Online CEO Says Amazon to Help ‘Future-Proof’ Neiman Deal

  Gen Z Discovers Costco, Sam’s Club and the Joy of Buying Groceries in Bulk

  Peter Thiel’s Pro-Doping Olympics Alternative Seeks to Raise $300 Million

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• Morning News: July 4, 2024
  Eddy Elfenbein, July 4th, 2024 at 8:35 am

  Australia’s Nuclear Debate Is a Costly Distraction

  Fight Over Seabed Agency Leadership Turns Nasty

  Bird Flu Is Latest Wild Card for Dairy Farmers

  Europe Tells China’s Carmakers: Get Ready to Pay Tariffs

  Putin Pushes New China-Aligned Security Order to Challenge US

  How Raiffeisen’s Bet on Russia Took It to the Brink

  What an Independence Day for Biden and Britain

  Democrats’ Economic Message Was Always a Hard Sell. Now It Has a Wounded Salesman

  The Biggest Political Risk to Markets May Lie in Japan

  Swiss Price Regulator Puts UBS Under Observation

  UK’s Barclays to Sell German Consumer Finance Business

  Dublin Office Market Shows Early Signs of Revival

  US Jobs Report to Show a Substantial Slowdown in Hiring in June

  Apartments Could Be the Next Real Estate Business to Struggle

  Judge Backs Challenge to F.T.C.’s Noncompete Ban, at Least for Now

  For All the Fear of Black Swans, the Stock Market is Acting Roughly the Same

  US Money-Market Fund Assets Rise to Record $6.15 Trillion

  The Bigger Economic Meaning of Willie Mays In the Army

  Meta’s Threads Seeks Relevancy to Become True Rival to Musk’s X

  Ericsson Intends to Book $1.1 Billion Charge for Latest Quarter

  Paramount and Skydance Near Merger Deal

  Saks Owner Nears $2.65 Billion Neiman Deal With Amazon Help

  Investor Group Raises Macy’s Buyout Offer, Again

  Want an Iced Coffee? Brands Want You to Make Your Own

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• Morning News: July 3, 2024
  Eddy Elfenbein, July 3rd, 2024 at 6:50 am

  China’s Investment Bankers Join the Communist Party as Morale (and Paychecks) Shrink

  US Allies Allege China Is Developing Attack Drones for Russia

  How China and Russia Compete, and Cooperate, in Central Asia

  World Stocks Rise on Rate Cut Bets, Yen Flounders at 38-Year Lows

  High-Tech Cash: Japan Launches Banknotes with Hologram Portraits

  Hedge Fund’s Secret Adani Short Revealed in Blow-by-Blow Account

  Macron’s Rivals Say They’ll Fix France’s Economy, but Economists Are Skeptical

  Sweden’s Riksbank Sees Scope for Three Interest Rate Cuts With Inflation Near Target

  Powell Welcomes Recent Data But Fed Needs More Confidence to Cut

  Markets Are Raining on Biden’s Fourth of July

  America’s Divided Summer Economy Is Coming to an Airport or Hotel Near You

  Home Affordability in the US Sinks to Lowest Point Since 2007

  Student Loan Borrowers Owe $1.6 Trillion. Nearly Half Aren’t Paying

  The Jiggle Is Up: Bosses Bust Workers Who Fake Computer Activity

  How Microsoft and Nvidia Bet Correctly to Leapfrog Apple

  Pentagon Has a Huawei Dilemma Congress Doesn’t Want to Solve

  Investors Pour $27.1 Billion Into A.I. Start-Ups, Defying a Downturn

  GSK to Buy CureVac’s Covid-19, Flu Vaccine Rights for Up to $1.56 Billion

  Philips’ Second-Biggest Investor Raises Stake After Apnea Deal

  Ex-Goldman Banker Reported to US Authorities for Junk Carbon Offsets

  Jim Ratcliffe’s Ineos Puts Electric SUV Plan on Back Burner

  Tesla Deliveries Slump but Not as Much as Feared

  GE Appliances Spins Stronger Sales from Supply Chain Overhaul

  Vodafone-Three to Sell Spectrum to VMO2 If UK Merger Is Approved

  Skydance Media Reaches Preliminary Paramount Merger Agreement

  Dragons and Sex Are Now a $610 Million Business Sweeping Publishing

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• CWS Market Review – July 2, 2024
  Eddy Elfenbein, July 2nd, 2024 at 5:51 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.”)

  Wall Street Wraps Up an Historic First Half

  On Friday, the stock market closed out a very good June along with a very good first half of 2024. The S&P 500 gained 14.48% for the first half of this year. Including dividends, the index was up 15.29%. This makes 2024 one of the best starts to an election year in the last century.

  The S&P 500 closed today at another all-time high.

  

  Historically, this has been a good time for stocks. From June 27 to July 17, the S&P 500 has gained an average of 1.97%. That’s a good amount for an average of 70 years.

  The market was up again yesterday. The stock market has a nice habit of starting out the second half of the year on a good note. Here’s a remarkable stat via Ryan Detrick: the S&P 500 has been higher on the first trading day of July for 14 years in a row, and for 18 out of the last 19. I should also remind you that that the S&P 500 still hasn’t posted a daily drop of more than 0.75% since April.

  As I’ve mentioned many times, this year has been a tale of two markets. Growth stocks have done very well, but value stocks are only up modestly. For the first half of this year, the S&P 500 Growth ETF (SPYG) gained 23.54% while the S&P 500 Value ETF (SPYV) was up 5.69%.

  Monday’s trading saw another wide gap between growth and value. Alas, what’s been going on is still happening, only more so.

  I don’t want to give the impression that value stocks have done poorly. Quite the opposite. Value has done well in historical terms. The problem is that a small number of stocks have distorted the whole market. If we were to take Nvidia out of the S&P 500, then the index would still be up close to 11% this year. If we were to exclude the entire Mag 7, then the S&P 500 would be up 6% this year. On average, that’s not bad.

  The Rate Cuts That Never Came

  The important point to understand is that the driver of this two-tiered market is interest rates. Or, to be more specific, it’s the interest rate cuts that never came. A little over a year ago, in May 2023, the yield on the two-year Treasury fell to 3.75%. That’s a good indication of how widely rate cuts were expected. Well, they never came. Instead, the two-year currently yields about 4.7%.

  Years from now, investors will look at a chart of interest rates for the last year and wonder what the big deal was. Nothing changed! We’ve nearly gone a full year without any changes to interest rates. While this is superficially accurate, it eludes the fact that nearly everyone thought the Fed would be madly cutting by now. Instead, it hasn’t done any.

  The reason that interest rates haven’t changed is that inflation is still a problem. True, inflation is not as severe as it was two years ago, but inflation is still above the Federal Reserve’s target.

  On Friday, the Commerce Department said that the Core PCE Price Index rose by just 0.1% last month. This is an important number to watch because it’s the Federal Reserve’s preferred measure of inflation. The reason to favor the PCE is that it’s a “broader inflation measure and accounts for changes in consumer behavior, such as substituting their purchases when prices rise.”

  Over the past year, the Core PCE Price Index is up by 2.6%. That’s the lowest year-over-year rate in three years. The non-core rate, which includes food and energy, was flat last month. Both numbers matched Wall Street’s expectations.

  

  The good inflation news hasn’t gone unnoticed. Earlier today, Federal Reserve Chair Jay Powell said he’s encouraged by the inflation numbers, but he wants to see more evidence that inflation is under control before the Fed acts.

  Powell said that the last two inflation reports “suggest that we are getting back on a disinflationary path.” That’s unusually optimistic language from a Fed chair. Bear in mind, central bankers are paid to look dour and concerned.

  Powell was asked if the Fed is going to raise rates in September. He elegantly sidestepped the question, but he said the Fed will be focused on more data. The Fed meets again at the end of this month, and you can forget about any rate hikes, but there’s a good chance we’ll see one in September. Futures traders currently think there’s a 70% chance that the Fed will cut in September. They see two cuts before the end of this year.

  Manufacturing Has Declined 19 Out of 20 Months

  Ideally the Fed can raise interest rates without damaging the economy. However, the evidence suggests that won’t happen. We’re getting some small signs that the economy may be getting stretched thin. I don’t want to overstate this, but there are some concerning signs.

  On Monday, for example, the latest ISM Manufacturing Index said that the factory sector of the economy contracted. For June, the ISM Manufacturing Index was 48.5 which is down a tad from 48.7 in May.

  From Reuters:

  Manufacturing is being pressured by higher interest rates and softening demand for goods, though business investment has largely held up.

  “We expect the manufacturing sector to remain weak over the next couple of quarters,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. “The retreat in corporate bond yields since late last year … seems to have provided some support to investment spending, but not enough to get manufacturing growing again. A much more significant loosening in financial conditions is required to change that.”

  The ISM Manufacturing Index has been below 50, meaning it’s contracting, 19 times in the last 20 months.

  We’re also seeing some signs of weakness in the labor market. For example, the number of job openings per each unemployed person has fallen sharply over the past few months. Tuesday’s JOLTS report showed 1.2 job openings for each unemployed person. Two years ago, the ratio peaked at 2.0. Also, the “quick rate” has fallen. That suggests that workers are less optimistic that they can easily find a new job.

  

  The next big test for the market will come this Friday when the government releases the June jobs report. Wall Street is cautious. The consensus is that the economy added 200,000 net new jobs last month and that the unemployment rate stayed at 4%.

  Stock Focus: Constellation Software

  Yesterday was Canada Day so in honor of our friends in the north, I wanted to feature a Canadian stock this week that’s not well-known south of the border. The company is Constellation Software (CSU.TO) of Toronto. The ticker symbol is CSU, and it trades on the Toronto Stock Exchange.

  Officially, Constellation Software describes itself as a diversified software company, and that’s accurate, but the company is also like a publicly-traded venture capital firm that buys up smaller software companies. It’s hard to find a company that’s grown that consistently for that long.

  Most of Constellation’s purchases are small. Since the company was founded 30 years ago, it’s bought up more than 500 companies. I can’t think of a company that’s been such an astute investor.

  Constellation had its IPO in 2006, and it’s been a big success since then. Since then, the stock has gained 26,800%.

  

  Constellation is run by Mark Leonard who prefers to keep a low profile—a very low profile. Outside of his shareholder letters, there’s not much info on him.

  What we do know is that Leonard tries to keep Constellation very decentralized. He prefers to have small business units. The company aims to buy niche businesses and it owns them for a long time.

  Leonard is a fan of Illinois Tool Works (ITW) because that company has been able break down larger acquisitions into smaller business units.

  Constellation is currently followed by five analysts. For 2025, the consensus expects Constellation to earn $136.89CDN per share. That means the shares are going for 29 times earnings.

  That’s all for now. The stock market will be closed at 1 p.m. ET on July 3, and it will be closed all day on July 4 for Independence Day. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

• Morning News: July 2, 2024
  Eddy Elfenbein, July 2nd, 2024 at 7:10 am

  China’s Plastics Glut Risks Souring Trade Ties

  Global Shipping Strains Seen Extending Into Second Half

  Euro Zone Inflation Eases to 2.5% as Core Print Misses Estimate

  Services Inflation Stays Strong in Eurozone, Complicating Rate-Cut Policy

  Morgan Stanley’s Explosive Call on Interest Rates if Trump Wins

  US Labor Market Shows Signs of Losing Steam, Putting the Fed on Alert

  HSBC Curbs Hiring, Reins In Banker Travel in Cost-Cutting Push

  US Auto Sales Set to Slow Amid Higher Rates, Dealer Cyberattack

  New York City’s Apartment Shortage Is Set to Get Even Worse

  ‘Upflation’ Is the Latest Retail Trend Driving Up Prices for US Consumers

  Microsoft AI Deal With UAE’s G42 at Risk Over National Security Fears

  A.I. Begins Ushering In an Age of Killer Robots

  China and U.S. Both Eye Breakthrough EV Technology

  China EV Sales Rallied in June on Policy, Price Cuts

  Polestar Plans Cuts as EV Tariffs, Price Pressure Deepen Loss

  Boeing Calls Time on the Great American Outsourcing

  Shell Pauses Construction at Netherlands Biofuels Facility

  Japan’s Game Makers Are Bracing for Survival Brawl

  US Inks Vaccine Deal With Moderna as Bird Flu Threat Looms

  The Fried Chicken Sandwich Wars Are More Cutthroat Than Ever Before

  Wegovy Outspends TV Advertisers in June Ahead of More Weight-Loss Competition

  Barry Diller Explores Bid to Take Control of Paramount

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

  China Dangled Rebates to Lure People to Spend. It’s Not Enough

  Why China’s Central Bank Could Become More Like the Fed

  Large Japanese Manufacturers Sentiment Improves Amid Rate-Hike Expectations

  France Haunts ECB as Lagarde Returns to Sintra

  Hedge-Fund Whales Rocking Latin America Are Exposed in Mexico

  Rising Government Debt Threatens Financial Stability, Inflation, BIS Says

  24-Hour Stock Trading Is Booming – and Wall Street Is Rattled

  Monetarism Didn’t Discredit the Phillips Curve, Rather It Mirrors It

  BlackRock Buys Preqin for $3.2 Billion in Private Data Push

  UBS Completes Merger of Swiss Business with Credit Suisse

  Wall Street Law Firms Are in a Poaching Frenzy. Kind of Like the N.B.A.

  Jailhouse Correspondence Gives Bernie Madoff the ‘Final Word’

  US Supreme Court to Rule In Case Involving Debit Card ‘Swipe Fees’

  Why Cheap Toilet Paper Sets Off Alarm Bells Among Some Investors

  Meta’s Pay or Consent Model in Crosshairs for Breaching EU Tech Rules

  Tech Industry Wants to Lock Up Nuclear Power for AI

  Boeing’s Fraud Charge, Spirit Deal Show Scale of Growing Crisis

  The Once-Dominant Rocket Maker Trying to Catch Up to Musk’s SpaceX

  Tesla Is Running Out of Excuses for Its Prolonged Sales Slump

  Atos Strikes Agreement on Financial Rescue Terms

  Chewy Surges After Keith Gill Discloses $245 Million Stake

  Claure Bets on AI Startup K Health at $900 Million Valuation

  Signs of Life Appear in TV Show Purchases

  Brooke Shields Has Worn Many Hats. Now She’s a Labor Boss

  Chicken Soup for the Soul Entertainment Files for Bankruptcy

  Fast-Food Giants Go to Battle Over Value Meals

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