Archive for November, 2024

• Morning News: November 14, 2024
  Eddy Elfenbein, November 14th, 2024 at 7:03 am

  Euro Likely to Fall Further on ECB-Fed Divergence

  Why the Dollar Keeps Getting Stronger

  Dollar’s Enduring Appeal on Show in China’s Sovereign Bond Sale

  Lula’s Embrace of Xi Sets Up a Clash Over Trump’s China Policy

  Global Oil Market Faces a Million-Barrel Glut Next Year, the IEA Says

  EIB to Unveil €500 Million in Bank Guarantees for Clean Tech

  Trump Threatens ESG Investing That Thrived in His First Term

  Kugler Says Fed Must Focus on Both Inflation and Jobs Goals

  Inflation Needs Subtlety Right Now. It’s Getting Trump

  Wall Street Bankers Temper Optimism A Week After Trump Victory

  Crypto Industry Pushes for Policy Sea Change After Trump Victory

  What Can Musk’s Department of Government Efficiency Actually Do?

  Private Equity Finds Yet Another Way to Keep the Money Coming In

  Brookfield Corp. Profit Climbs as Wealth Unit Boosts Results

  CEOs Think Silence Will Save Them From Trump. They’re Wrong.

  What Would a Matt Gaetz Justice Department Mean for Business?

  Meta’s Week of Setbacks Suggests Tough Times Ahead

  Homeland Security Department to Release New A.I. Guidance

  Siemens Profit Tops Forecasts as Data-Center Demand Offsets Automation Woes

  Disney Profit Beats Expectations as Movies, Streaming Gain

  Disney Paints a Rosy Picture for Coming Years

  The Fight for 7-Eleven Isn’t Just About Money

  Capri, Tapestry Scrap Merger After FTC Wins Blocking Order

  Arnault Son Climbs LVMH’s Top Ranks in Further Leadership Reshuffle

  JD.com Profit, Revenue Rise as Consumer Sentiment Improves

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• Morning News: November 13, 2024
  Eddy Elfenbein, November 13th, 2024 at 7:05 am

  Countries Are Pledging Money They Don’t Control at COP29

  Microsoft and Royal Bank of Canada Bet on New Approach to Carbon Cleanup

  North Dakota Wants Your Carbon, But Not Your Climate Science

  Copper Smelters Battered by Tight Supply and Weakening Demand

  RWE Plans $1.6 Billion Buyback Due to Expected U.S., Europe Project Delays

  Pro-Government Economists Blame Central Bank for Plunging Russia Into ‘Stagflation’

  Gamblers Pay 400% Loan Rates to Fund Betting Frenzy in Brazil

  Trump’s Contempt Is China’s Gain in Latin America

  Trump Picks Musk, Ramaswamy for Government Efficiency Effort

  Mr. Musk Goes to Washington — With a $2 Trillion Agenda

  Powell Says US Inflation Views Are Anchored — Are They?

  Fed’s Waller Says Central Bank Should Limit Its Role in Payment Systems

  Republicans See a Better Economic Outlook. Now It’s Democrats Who Don’t.

  Crypto Industry Lobbies Trump and His Allies to Capitalize on Election Wins

  US CPI to Show Another Firm Reading, Leaving Fed Path Up in Air

  Citadel Warns Recruiters: Don’t Pitch Fake Jobs

  Klarna Readies US IPO With Valuation Recovering From Plunge

  Europe’s Tech Startups Staggered by Lilium, Northvolt ‘Disaster’

  Mizuho Financial Group to Buy 15% of Rakuten Card for $1 Billion

  Swiggy Delivers 17% Surge in Debut as Investors Bet on Indian Quick Commerce

  Tesla’s Meme-Like Stock Surge Leaves Wall Street Feeling Wary

  7-Eleven Owner Considers Going Private in Japan’s Biggest $58 Billion Buyout

  Spirit Air Nears Bankruptcy That Would Wipe Out Shareholders

  Inside VW and Rivian’s $5.8 Billion Bet to Rescue Each Other

  Sports League Platform Volo to Grow Via M&A With Bluestone Stake

  The Streaming Wars Didn’t Kill the Little Guys. In Fact, They’re Thriving.

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• CWS Market Review – November 12, 2024
  Eddy Elfenbein, November 12th, 2024 at 6:20 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.”)

  On Monday, the stock market rallied to another new high. This was the S&P 500’s first ever close above 6,000 and it was the index’s 51st record high this year. The S&P 500 closed a bit lower today which snapped a five-day winning streak. Over those five days, the index gained a little over 5%.

  

  For some context, the S&P 500 first closed above 600 on November 17, 1995. The index first closed above 60 on July 7, 1959.

  We can even go back to a few days in 1932 when the S&P 500 closed below 6, but there’s a footnote attached to that stat. That would be the last time the index closed below 6, but we can’t say when the first time was because that day preceded the lifespan of the S&P 500. Still, a 1,000-fold gain in 92 years is impressive.

  The Trump Trade Takes Over Wall Street

  We now know what the “Trump Trade” is, but it may not last long. The Trump Trade is the market rewarding cyclicals, especially domestic manufacturers. That tends to skew towards small-cap stocks and the little guys have been very popular in recent days. The Russell 2000 ETF (IWM) is already up more than 10% this month.

  The bond market reacted swiftly. The yield on the 10-year Treasury jumped 16 basis points to close at 4.42%, although the yield has backed down after the past few days.

  I’ve been impressed by how some cyclical stocks have responded. That often happens at the same time long-term bond yields rise. For example, the S&P 500 Industrials ETF (XLI) has performed well. Financial stocks have also done well. The S&P 500 Financials ETF (XLF) rallied more than 6% on Wednesday and continued to go higher after that.

  A good example of rallying financials comes from our Buy List. On Tuesday, shares of Farmer Mac (AGM) rallied more than 6% thanks to a good earnings report. Then on Wednesday, the day after the election, Farmer Mac ran up another 10%. The shares reached their highest point since this summer. The stock had been cheap for a long time, but the market seemed to only realize it all at once.

  How about the rally in Bitcoin? President-Elect Trump promised to be a crypto-friendly president. He even talked about having a bitcoin strategic reserve. On election day, Bitcoin rose 9%, and it gained another 10% over the weekend.

  Bitcoin is getting very close to $90,000. Two years ago, it was at $17,000. So far this month, Bitcoin has gained 28%, and November isn’t even half over.

  By the way, in September, former NBA great Scottie Pippen made a deadly accurate prediction about the price of Bitcoin.

  Satoshi Nakamoto visited me in my dream last night and predicted that #Bitcoin would be at $84,650 on November 5, 2024. Not financial advice.

  — Scottie Pippen (@ScottiePippen) September 3, 2024

  If you feel that you need to invest in Bitcoin, I’ll simply add that Bitcoin has had several major pullbacks in its short history.

  Wall Street Braces for Tomorrow’s CPI Report

  Now that Wall Street is past the election, the next big test for the market comes tomorrow morning when the October CPI report is released.

  I’ll be honest, this report has some folks scared. The inflation data has mostly been getting better, but a bad report could unravel a lot of market narratives.

  For September, the Consumer Price Index increased by 0.18%. That almost matched the 0.15% increase we had in July, and the 0.19% increase we had in August. The last five reports have all come in less than 0.2%.

  For September, the 12-month rate reached 2.4% which was more than expected. Still, that’s a lot better than March when the 12-month rate hit 3.5%, and it’s far better than the peak of 9.1% reached in June 2022. Inflation has been improving, but it’s happened slowly.

  

  The “core rate,” which excludes food and energy prices, hasn’t fared as well. For September, core inflation increased by 0.3%. That was the highest since March. In September, the 12-month core rate reached 3.3%.

  The Fed meets again in five weeks, and there appears to be some doubt whether the Fed will cut rates again. Futures traders currently think there’s a 55% chance that the Fed will cut and a 45% chance that they’ll hold steady.

  I suspect that a cut is probably coming next month but the number of cuts for next year may be in doubt. In September, Wall Street thought the Fed would have interest rates at 3% by this June. Now they think the Fed will be at 4% by June. I wouldn’t be surprised if we only see two more rate cuts next year.

  Fed Chairman Jerome Powell was recently asked if he would resign if President-Elect Trump wanted him to. He gave a one word reply: “No.”

  I noticed that Home Depot (HD) raised its sales guidance today. Last quarter, ending in late October, same-store sales fell 1.3%. Those beat expectations, and it was HD’s best sales performance in nearly two years. That says a lot when your best quarterly growth of the last seven quarters was still a drop.

  I like to keep an eye on Home Depot’s fortunes because it’s a good barometer for the health of the home improvement sector. HD said it now expects to see comparable store sales fall by 2.5% for this year. That’s not great, but it’s better than the previous guidance for a drop of 3% to 4%.

  Home Depot saw a pickup in demand for seasonal items and supplies for certain outdoor projects, some of which was related to hurricanes that have struck the US in recent months. Warm weather also helped with sales of products like grills, Chief Financial Officer Richard McPhail said in an interview Tuesday.

  Home Depot said it anticipates some hurricane-related sales during the current quarter. Generators, lumber and clean-up products typically sell well during weather events.

  Home Depot’s business can be particularly sensitive to the Fed’s policies since consumers often use debt to finance their home improvement projections. HD said that sales of garden and paint products increased but lumber and plumbing came in below expectations.

  

  Home Depot is one of the first major big box retailers to report earnings. Soon we’ll get reports from companies like Target, Walmart and Lowe’s. These companies could be looking at a strong holiday shopping season.

  Shares of Tyson Foods (TSN) got a nice bump today after the food company said it beat earnings. At one point, TSN was up more than 12% in today’s trading. It was the best-performing stock in the S&P 500 today.

  This is interesting to see because Tyson is a good company, but the stock price had not done well. Tyson now sees its operating profit rising by 22% this year. That’s more than Wall Street had expected.

  Demand for chicken, Tyson’s second-largest source of revenue, has improved as consumers look for cheaper alternatives to beef. Plunging prices for corn and soybeans also made it cheaper to feed animals, while a series of factory shutdowns and other measures boosted cost savings.

  Last quarter, Tyson’s chicken business made up 70% of its sales while beef was a money loser. For its fiscal Q4, Tyson made 92 cents per share. The consensus on Wall Street had been for earnings of 69 cents per share.

  Over the last five years, the S&P 500 has nearly doubled but TSN is down by two-thirds. Even after today’s rally, shares of TSN still yield a healthy 3.3%. Tyson’s been down so long, it’s hard for me to see this as a bargain, but with more quarters like this last one, Tyson would be a compelling buy.

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

  – Eddy

• Morning News: November 12, 2024
  Eddy Elfenbein, November 12th, 2024 at 7:05 am

  Alibaba, JD Tout Singles’ Day Highs While China Economy Sags

  Hong Kong’s Tycoons Are Selling Trophy Homes at Fire Sale Prices

  South Korea State Think Tank Cuts Growth Forecasts

  Gloomy Russia Billionaires See Little to Cheer in Trump’s Win

  EU’s Kallas Backs Tapping Russian Assets Directly to Aid Kyiv

  Europe Braces for Trump: ‘Worst Economic Nightmare Has Come True’

  Europe Must Not Be ‘Unprepared’ For Trade War, ECB’s Rehn Says

  A Guide to Trump’s Tariff Plans: Expect High Drama and a Bumpy Rollout

  Trump’s Tariffs Could Deal a Blow to Mexico’s Car Factories

  Powell Doesn’t Fear Trump. He Also Can’t Contain Him.

  The Wall Street CEO Raising His Hand to Run Trump’s Economy

  Bonuses Set to Grow Across Wall Street for First Time Since 2021

  Bitcoin Nears $90,000 as Crypto Market Exceeds Pandemic-Era Peak

  The 1928 Rally Was Just Like This One

  SoftBank Back in Profit on Tech Investment Gains

  Visa Teams Up with Affirm to Launch Card for Flexible Payments in US

  Musk’s AI Nightmares Could Blunt Trump’s Tech Ambitions

  OPEC Trims Demand Forecast for Fourth Straight Month

  The World’s Best Hope to Beat Climate Change Is Vanishing

  Shell Wins Appeal Against Landmark Carbon-Emissions Ruling

  Exxon CEO Pushes Back on Trump’s Anti-Climate Change Agenda

  Home Depot Raises Outlook as Hurricanes Spur Demand for Repairs

  Tyson Forecasts Higher Earnings in 2025 on Chicken Turnaround

  Shopify Surges After Third Quarter Revenue Beats Estimates

  A Decade Into the Digitialization of Mobility, Winners and Losers Emerge

  Airlines Hate ‘Skiplagging.’ Meet the Man Who Helps Travelers Pull It Off.

  AstraZeneca Raises Outlook, Plans U.S. Investment

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• Morning News: November 11, 2024
  Eddy Elfenbein, November 11th, 2024 at 7:05 am

  ADB Increases Climate Finance After US, Japan Give World’s First Sovereign Guarantees

  Trump Win Upends the Fight for Climate Cash at COP29

  Trump Will Bury ESG, But It Was Already Dead

  China Nears Record $1 Trillion Trade Surplus as Trump Returns

  As Trump Threatens a Wider Trade War, the U.S. Confronts a Changed China

  How Trump Divides Chinese Who Aspire to Democracy

  Here’s What Trump’s Return Means for US Sanctions Policy

  The White House Will Be Shedding Its Union Label

  Mortgage Rates Fell, Then Rose. What Comes Next?

  Trump Expected to Narrow Treasury Chief Options by Week’s End

  If Trump Tries to Fire Powell, Fed Chair Is Ready for a Legal Fight

  Bond Market on Risky Path as Traders Regroup From Wild Week

  Bitcoin Soars Above $82,000 as Trump Win Boosts Crypto Prospects

  Wall Street Math Wizards Are Decoding Private-Market Returns

  Hedge-Funds Hit by ‘Arbageddon’ Sense Brighter Future After Trump Win

  Hedge Funds Shorting Tesla Just Lost More Than $5 Billion

  Carvana Delivers Agony and Ecstasy for Hedge Funds

  Cathie Wood Predicts Trump’s White House Return Will Ignite Reagan-Era Economic Boom Through Deregulation And Tax Cuts: ‘Likely To Turbocharge The US Economy’

  FTX Sues Binance, Ex-CEO Zhao Seeking $1.8 Billion Clawback

  Harris Tech VC Boosters Seek the Industry Silver Lining in Her Loss

  Adnoc Gas Expects Earnings Boost From Rising Gas Demand

  Resolute Mining CEO, Two Other Employees Detained by Officials in Mali

  Continental Posts Higher Profit as Cost Cuts Offset Sales Pressure

  Talabat Eyes IPO That May Value It More Than Delivery Hero

  A New Streaming Customer Emerges: the Subscription Pauser

  Buying Shoes at Macy’s Isn’t Fun. Its New CEO Is Trying to Change That.

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• Morning News: November 8, 2024
  Eddy Elfenbein, November 8th, 2024 at 7:04 am

  Brazil Inflation Speeds Further Above Target as Rates Go Higher

  Japan Finance Minister Issues Fresh Warning After Yen’s Tumble

  EU Is Looking at Ramping Up Ukraine Aid If Trump Pulls the Plug

  PBOC Signals Greater Resolve on Dovish Policy, Ample Liquidity

  China Unveils $1.4 Trillion Debt Swap, Saves Stimulus for Trump

  Investors Dial Back ‘Trump Trades’ as Policy Questions Remain

  Trump Is Stuck With the Fed’s Powell. Will He Make Peace?

  Forget a Soft Landing. The Fed’s Biggest Challenge May Be Trump.

  Powell Signals Readiness to Defy Trump in Defense of Fed

  What a Second Trump Term Could Mean for Your Money

  Even at a Time Like This, Slow and Steady Works in the Stock Market

  US Banks to Gain from Looser Capital, Merger Policies Under Trump

  The Wall Street Leaders Who Could Play a Role in Trump’s New Administration

  Trump Plans to Dismantle Biden’s Climate Law. It Won’t Be Easy

  Trump’s ‘Drill, Baby, Drill’ Cuts Two Ways for Oil Companies

  Why Trump Faces a Losing Tech War Against China

  Big Tech’s Appetite to Resist Trump Appears Weaker This Time Around

  Companies Brace for the Return of Trump’s Old Trade Gripes

  Boeing CEO Says Furloughed Workers Will Be Paid for Lost Time

  Tesla Begins Offering Cybertruck Leases Starting at $999 a Month

  Amazon Is Looking to Revamp Its Grocery Delivery

  Steven Madden C.E.O. Says It Is Moving Production Out of China

  Trump’s Win Cemented It: New Media Is Leaving the Old Guard Behind

  Audacious Bet on High-End Liquor Mints Indian Billionaire

  Cartier Owner Richemont’s Sales Fall as Luxury’s China Woes Linger

  Has Luxury Lost Its Shine?

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

  Bahamas Raises Alarm on Lack of Cash to Survive Fast-Warming World

  Russian Central Bank Blames Labour Shortages, Not High Rates, for Investment Slowdown

  Germany’s Looming Snap Vote Throws Wrench Into Energy Goals

  German Trade Surplus Shrinks as Trump Tariffs Loom

  Bank of England Cuts Interest Rates, but Warns of Sticky Inflation

  Brazil’s Oil Production Expected to Disappoint

  Xi Calls for Closer Ties With Malaysia on New Energy, AI

  ‘The King Is Back:’ Binance Billionaire CZ Plots Life After Prison

  Trump Comeback Means Reckoning for China as It Draws Up Stimulus

  Jerome Powell Is Back in Trump’s World and About to Feel the Heat

  What Trump’s Win Means for Fed Independence

  How the Trump Whale Correctly Called the Election

  A Guns, Not Butter World Will Mean Higher Inflation

  Why Trump’s Plan to Escalate Tariffs Has So Many Haters

  JPMorgan CEO Dimon to Remain at Bank and Has No Plans to Join Trump Administration

  Tech Giants Face a Familiar Uncertainty With Trump

  Before the Election, Tech C.E.O.s Were Quietly Courting Trump

  Trump-Musk Partnership Puts New Spin on Value of X

  Canada Shuts TikTok’s Offices Over National Security Risks

  Qualcomm, Arm Results Show Phone Industry Making Uneven Comeback

  Wendy’s Bets on Palantir AI to Keep Up With $1 Frosty Demand

  Warner Bros. Boosts Streaming Subscribers on International Push

  1-800-Flowers Founder Says Speedy Election Call Saved Christmas

  Nissan Plans 9,000 Job Cuts, Slashes Guidance After Loss

  FedEx and UPS Locked in Price War to Lure Small Businesses

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

  Lighter Winds Boost Reliance on Gas Power in Europe

  German Factory Orders Jump, Raising Hopes of End of Manufacturing Slump

  Kenyan Leader’s Economic Adviser Cautions Against More IMF Aid

  Malaysia Central Bank Keeps Policy Rate on Hold

  What Links Have Trump and His Allies Maintained with Oil-Rich Gulf States?

  Trump’s Populism Is Unleashed After Resounding White House Comeback

  Trump Sequel Poised to Shake Up Global Energy Markets

  Xi Is Better Prepared for Trump Even as 60% Tariffs Risk Chaos

  Elon Musk Wins Big With Trump Bet

  Stocks Jump After Trump Clinches Election Win

  From Dollar to Stocks, Trump Trade Erupts Across Markets

  Bitcoin Surges to Record as Crypto Investors Cheer Trump Win

  Trump Team Revokes Election Party Access for Some Journalists

  What Trump’s Win Means for the Economy

  Fed Readies a Rate Cut and Faces These Four Questions

  UniCredit Raises Profit, Distribution Outlook After Solid Quarter

  Arm’s 90% Rally Shines Spotlight on High Multiple, Low Growth

  Boeing Shows Why Squeezing Workers Is Reckless

  US Mortgage Rates Rise Again, With Recent Jump Most in Two Years

  College Is Actually Getting More Affordable

  What Everyone Gets Wrong About Luxury Handbags

  Toyota’s Bet on Hybrids Looks Even Better Under Trump

  Startupbootcamp, Tycoon Plan $250 Million Africa Startup Fund

  New Starbucks CEO Scouted Cafes Before Taking Over: What He’s Tackling First

  Novo Nordisk’s Wegovy Weight-Loss Drug Sales Beat Forecast, Shares Jump

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• CWS Market Review – November 5, 2024
  Eddy Elfenbein, November 5th, 2024 at 6:10 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.”)

  Don’t Let Politics Interfere with Your Investing

  It’s Election Day in America, and I’ll give you my biannual warning not to let politics cloud your investing judgement. I see this far too often.

  Just because we may watch the market closely and debate what happens, and just because we follow politics closely and debate what happens doesn’t mean the market cares one wit about politics. It doesn’t. Thinking it does misunderstands how the market works and how the government works.

  A simple lesson is to look at long-term stock charts and see if you can pinpoint election dates. You probably can’t. Or even better, try it on a country whose politics you may not be familiar with. See if you can spot when their elections were. It’s not so easy.

  

  Yet too often, investors ignore the fundamentals of investing (have patience, don’t panic, exercise discipline), and they let their political beliefs interfere where they don’t belong.

  I’ll give you two examples, and I’ll be bipartisan. In the wake of the 2016 election, Paul Krugman wrote, “If the question is when markets will recover, a first-pass answer is never.”

  You may want to try a second pass, Paul. Boy, was he wrong. The markets did very well during the Trump years. Before Covid came along, the S&P 500 gained 60%, and Krugman is a Nobel Prize winner! He’s way smarter than me, and even he fell prey to the temptation of confusing his ballot with his portfolio.

  Michael Boskin is another smart guy. He was chairman of George Bush’s Council of Economic Advisors. In March 2009, he penned an article in the Wall Street Journal titled “Obama’s Radicalism Is Killing the Dow.” The piece was published on almost the exact low. The market soared for years afterward. Boskin wasn’t just wrong – it’s hard to be wronger.

  I don’t mean to poke fun at Krugman and Boskin. Quite the opposite. The question is, why do such intelligent people come to hold such poor investment opinions? The answer is that they let their emotions cloud their judgment. With investing, it’s always important to be unemotional and to focus on the important things.

  The Economy Created 12,000 Jobs Last Month

  Just before Election Day, we got some lousy jobs news. On Friday, the government said that only 12,000 net new jobs were created last month. That was far below Wall Street’s consensus estimate of 100,000. That’s the smallest monthly jobs gain in four years.

  

  What happened? The hurricanes certainly played a role, as did the Boeing strike. The BLS estimates that the Boeing strike caused the loss of 44,000 jobs. Last month was a very unusual month. The BLS said that the response rate to its survey was the lowest in 30 years.

  The details of the report are not encouraging. For example, the jobs numbers for August and September were revised lower by 112,000, and the manufacturing sector lost 46,000 jobs last month. It’s even more worrisome when you consider that most of the new jobs are in the government sector.

  The unemployment rate held at 4.1% which matched expectations. The broader U-6 rate was 7.7%. There were some bright spots. Average hourly earnings rose by 0.4% which was above estimates. That’s good to see.

  Here are some more details:

  Health care and government again led job creation, respectively adding 52,000 and 40,000 positions. Several sectors, though, saw job losses.

  In addition to the expected pullback in manufacturing, temporary help services saw a drop of 49,000. The category is sometimes seen as a proxy for underlying job strength and has seen a decline of 577,000 since March 2022, the BLS said.

  Another leading sector, leisure and hospitality, saw a drop of 4,000, while retail trade and transportation and warehousing also reported modest declines.

  Friday’s report probably didn’t shake the Fed off its policy path. The central bank meets again this week, and it’s almost certain that they’ll lower rates by 0.25% again. In fact, we can expect another rate cut next month. After that, things are a little cloudy. For 2025, traders see the Fed cutting rates another three times.

  The next big test for Wall Street comes next Wednesday, November 13 when the government will release the October CPI report. The headline inflation rate has improved but I want to see a better number for the “core rate.” It’s too early to declare victory against inflation.

  Nvidia Replaces Intel in the DJIA

  There was another interesting market news item from last week. On Friday, the folks at Dow Jones said they’re kicking Intel (INTC) out of the Dow Jones Industrial Average, and Nvidia (NVDA) will be taking its place. The switch will take place on November 8.

  This is the kind of news item that isn’t so important in itself, but it confirms a long-term trend already in place. Shares of Nvidia are up 130% this year while Intel has been cut in half. The AI Revolution has finally come to the Dow.

  The DJIA used to have a lot of heavy-industry stocks, but it has become more tech-focused in recent years. In February, they added Amazon to the DJIA. Apple, Microsoft and Cisco are already members. Being invited to join the Dow is Wall Street’s version of being a “made man.” It says you’ve arrived. Nvidia probably helped itself earlier this year when it announced a 10-for-1 split. The company just passed Apple to become the most valuable company in the world.

  There’s an important distinction between the S&P 500 and the DJIA. The S&P 500 is weighted by market value, but the DJIA is price-weighted. To calculate the Dow, you simply add up all the share prices and adjust it by a divisor. Roughly speaking, every $1 in share price of a Dow stock works out to about 6.5 Dow points. Size doesn’t matter.

  Why do people even pay attention to the Dow? I’m not sure. I guess that it’s been around since 1896. The S&P 500 is by far the better index, but it only goes back to 1957 when it was expanded to 500 stocks.

  As Intel headed lower, it became a very minor portion of the DJIA. Intel is currently worth 130 points in an index near 42,000. What makes Intel interesting is that it was added to the Dow 25 years to the day earlier than the day its deletion was announced. In 1999, Intel was as hot as a stock could be. Not long before, CEO Andrew Grove made the cover of Time magazine.

  Shortly after it was added, Intel strongly outperformed the DJIA, but that didn’t last long. In the last few years in particular, Intel (in black) badly lagged the index (in blue).

  

  The index-keepers have made some bad calls in the past. In 1939, IBM was taken out of the index, and it wasn’t added back until 1979. Over those 40 years, IBM was a huge winner. The index would be much higher today if it weren’t for those missing four decades.

  Changes to the index have become more common. Between 1939 and 1976, the Dow only made two rounds of changes to the index. In 1956, one stock was added, and one was deleted. In 1956, four were added and four deleted in 1959. That’s just five stocks in 37 years.

  There were two changes to the Dow this time. Dow Inc. (DOW), the chemical company, will be replaced by Sherwin Williams (SHW), which was on our Buy List for many years. Apple’s market value is about 100 times that of Dow Inc. There are no more basic materials stocks left in the Dow. As the economy changes, so does the DJIA.

  Buffett’s $325 Billion Cash Mountain

  Warren Buffett just released the details of Berkshire Hathaway’s (BRK-A) financial position. At the end of September, Berkshire was sitting on a cash position of $325 billion.

  That’s staggering. It’s up nearly $50 billion over Q2. That’s enough money to buy every single team in the NFL.

  The reason Berkshire has so much cash is that Buffett has been selling recently. In particular, Buffett has been dumping shares of Apple (AAPL) and Bank of America (BAC).

  Buffett has been gradually paring back his holdings of Apple. This was the fourth quarter in a row that he trimmed his stake. All told, Berkshire sold $36 billion of stock last quarter.

  Interestingly, Buffett didn’t buy back any Berkshire shares last quarter. These moves could be a signal that Buffett thinks that market is too pricey, or perhaps just Berkshire. Buffett had been buying back lots of shares, and he said he’ll continue to if the price is below Berkshire’s intrinsic value.

  Analyzing Berkshire’s business is difficult because it has businesses that it fully owns along with several minority holdings. According to the earnings report, earnings at Berkshire’s fully-owned businesses were down 6% from last year. That was less than what analysts had been expecting.

  This could be a sign that the Oracle of Omaha thinks the market is simply too high.

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

  – Eddy

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

  China’s Premier Li Projects Confidence in Economic Recovery

  Nuclear Energy’s AI Boom Blew a Fuse—Here’s What Could Happen Next

  Russia’s Oil Fleet and the Floating Armories That Help Keep Profits Flowing

  Shale Turns Up Heat on OPEC as Big Oil Opens Its US Taps

  Can the No. 1 Oil Producer Lead the Way on Climate? The US Is Trying It

  Contraband Whiskey and a Secret Royal Dinner: Wall Street Goes to Riyadh

  Trump Trades Step Into the Twilight Zone

  Wall Street’s Great Election Trades Now Face the Moment of Truth

  How the World Is Prepping for a Trump or Harris Victory

  Cryptocurrency Markets, Promoted by Trump, Brace for Election Volatility

  Trump and Harris Have Ignored a Looming Crisis

  From Tariffs to EVs and Taxes: High Economic Stakes in the US Election

  The Third Candidate in This Election Is the Economy

  U.S. Farmers Brace for New Trump Trade Wars Amid Tariff Threats

  Copycat ETFs Are Infiltrating a ‘Finders Keepers’ Tickers Market

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