Morning News: April 12, 2024
Posted by Eddy Elfenbein on 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

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Morning News: April 11, 2024
Posted by Eddy Elfenbein on 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

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Morning News: April 10, 2024
Posted by Eddy Elfenbein on 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?

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CWS Market Review – April 9, 2024
Posted by Eddy Elfenbein on 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
Posted by Eddy Elfenbein on 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

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Morning News: April 8, 2024
Posted by Eddy Elfenbein on April 8th, 2024 at 5:53 am

Japan Breakeven Inflation Matches Record High Amid Weak Yen

China Maintains Yuan Defense After Currency Nears Red Line

How India Can Take China’s Growth Crown

Yellen Delivers Sharp Message to China Leaders With a Smile

Euro-Zone Companies Expect Wage Increases to Moderate, ECB Says

Euro Zone Investor Morale Hits Two-Year High in April

Turkey Meets Four-Day Work Week With Aksa’s Landmark Decision

The Odds of $100 Oil Are Rising as Supply Shocks Convulse the Market

Zurich Insurance to Halt Coverage of New Fossil-Fuel Exposures

The LSE Losing Giants Like Shell Is a Very Real Threat

Eclipse to Cut US Solar by 30 Gigawatts as Moon Shades Panels

Philippines Central Bank Stands Pat as Inflation Worries Bubble Back Up

Doubts Creep In About a Fed Rate Cut This Year

Traders Favor Two Fed Cuts in 2024 as Treasury Yields Near 4.5%

UBS on the Brink of Switzerland’s ‘Too Big to Fail’ Reckoning

UBS JV to Acquire Credit Suisse Japan Wealth Management Business

Tesla Set to Recover Top Spot in Cathie Wood’s Flagship Fund

Tesla Is Unveiling a Robotaxi. This Is What It’s Worth

Is Corporate America in Denial About Trump?

Steelworkers Push Back Against $14 Billion Deal for U.S. Steel as Vote Looms

TSMC Gets $11.6 Billion in US Grants, Loans for Three Chip Fabs

Kimberly-Clark to Sell PPE Business to Ansell for $640 Million

Jean-Paul Gaultier Owner Puig Aims to Raise $1.35 Billion in Spain IPO

David Ellison Closes In on a Hollywood Prize: Paramount Global

What Chinese Outrage Over ‘3 Body Problem’ Says About China

Everyone Is Rich, No One Is Happy. The Pro Golf Drama Is Back

Can Minor League Baseball Survive Its Real Estate Problems?

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Morning News: April 5, 2024
Posted by Eddy Elfenbein on April 5th, 2024 at 7:03 am

Giving Up China Is Hard, Even for Argentina’s Anarcho-Capitalist

Yellen Chides China Over ‘Coercive’ Moves Against US Firms

China’s Young People Are Giving Up on Saving for Retirement

‘Reglobalization’ to the Rescue?

Rising Oil Prices Reignite Inflation Fears

Copper Miners Glimpse the Future They’ve Long Seen Coming

Gold Bulls Eye More Record Highs Despite Lightning Gains

Ireland’s Sovereign Investment Fund to Divest from Six Israeli Firms

The Sheikh Who Dominates One of the World’s Hottest Stock Markets

The Market May Have Finally Hit a Real Record, But It Could Be a Problem

US Jobs Report Is Set to Show a Slower Pace of Hiring, BE Says

Accounting Firms Rethink Their Ownership Structure

Taiwan Earthquake Raises Stakes for Solution to Chip Dominance

Foxconn Expects Second-Quarter Growth After Higher March Revenue

What Happened to Ships Bound for Baltimore When the Bridge Fell

Who Will Pay for the Baltimore Bridge Collapse?

Want to Invest in SpaceX or Stripe? There’s a Fund for That

AstraZeneca Says Key Lung Cancer Drug Improved Survival

J&J to Buy Shockwave for $13 Billion in Medical Device Play

Tesla Offers Steep Discounts on SUVs Piling Up in Inventory

Ford Slows Its Push Into Electric Vehicles

Tweens Obsessed With Skin Care Drive Brands to Say: Don’t Buy Our Stuff

Apparel Retailer Uniqlo Expands in Texas and California in New Store Push

Eclipse’s Path Is Also Leaving a Trail of High Hotel Prices

Four Seasons’ New Yacht Cruises Come With Record-High Price Tags

Standby Cruising: A New Option for Bargain Seekers

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Morning News: April 4, 2024
Posted by Eddy Elfenbein on April 4th, 2024 at 7:01 am

France Pushes EU for Measures to Re-Balance Trade With China

Europe’s Spy Capital Weighs Crackdown on Intelligence Industry

Why Americans Are Concerned About the Budget Deficit — Again

The Fed Is Wrong About How Low Interest Rates Will Go

Immigration Helps US Jobs Grow Faster Than Powell’s Speed Limit

Winners of 2023 Bank Crisis Are Finding the New Spotlight Harsh

Tiger Woods’ Putter Choice Has Created an Asset Class

The Case Against Crowdfunding in the Work Chat

Goodbye Chairman, Hello Chair. The Gendered Title Is Fading Away

How Far $100 Goes at the Grocery Store After Five Years of Food Inflation

How to Revive a Burned Forest? Rebuild the Tree Supply Chain

Did One Guy Just Stop a Huge Cyberattack?

Fixing Boeing’s Broken Culture Starts With a New Plane

Airlines Desperate for Planes Are Paying Up for Older Models

Airbus’s Stratospheric Drone Business Is Open to IPO, Aalto HAPS Chief Says

NASA Picks 3 Companies to Help Astronauts Drive Around the Moon

Apple Explores Home Robotics as Potential ‘Next Big Thing’ After Car Fizzles

How Hertz’s Bet on Teslas Went Horribly Sideways

Few Stations and $200 to Fill Up: Life on California’s ‘Hydrogen Highway’

Amazon Sellers Plagued by Surge in Scam Returns

Disney CEO’s Headaches Abound Even After Decisive Proxy War Win

Nelson Peltz’s Disney Consolation Prize: A $300 Million Gain

A.L.S. Drug Relyvrio Will Be Taken Off the Market, Its Maker Says

Have the Brands Gone Too Far? Boston Marathoners Think So.

Brands Paid for Ads on Forbes.com. Some Ran on a Copycat Site Instead

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Morning News: April 3, 2024
Posted by Eddy Elfenbein on April 3rd, 2024 at 7:03 am

China’s Service Economy Expands Further, Adding to Signs of Recovery

Milei Races Against Time to Ease Pain Unleashed by Shock Therapy

South Africa Tax Agency to Target ‘Professional Enablers’ of Organized Crime

Inflation Cools in Eurozone, Nearing Central Bank’s Target

Bank of England sets out conditions for ‘digital sandbox’

Canada’s RBC Struggles to Go Green While Financing Oil

Fed Blocks Tough Global Climate-Risk Rules for Wall Street Banks

Exxon’s $60 Billion Fight With Chevron Will Reshape Big Oil

LNG Demand Shift to Developing Nations Is Transforming the Market

US, EU Are Set to Miss a Critical Minerals Agreement This Week

Pimco Boosts Bond Bets That Fed Will Cut Less Than Global Peers

Chase Bank to Let Advertisers Target Customers Based on Spending Data

I’m an Economist. Don’t Worry. Be Happy.

Biden and Corporate America? It’s ‘Complicated.’

The Jobs Numbers Aren’t Adding Up. Immigration Helps Explain Why

10,000 Migrant Crossings a Day Upend the US Presidential Election

Donald Trump’s Lenders of Last Resort: Subprime Auto King and Online Bank

The World’s Richest Person 2024

AI Enthusiasm Hides Little VC Investor Excitement for US Startups

Alibaba Ramps Up Share Buybacks

Archer Sees 2025 Air-Taxi Debut, Setting Up Rivalry With Joby

Tesla Shares Tumble Toward Make-or-Break Level in Latest Wipeout

What Tesla’s Troubles Signal for the E.V. Revolution

Amazon to Remove ‘Just Walk Out’ Checkout Technology at U.S. Grocery Stores

Switching From iPhone to Android Is Easy. It’s the Aftermath That Stings

Disney Moving Closer to Win Over Trian With Vanguard Backing

How Bluey Became a $2 Billion Smash Hit—With an Uncertain Future

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CWS Market Review – April 2, 2024
Posted by Eddy Elfenbein on April 2nd, 2024 at 6:16 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.”)

Over the weekend, I posted what I thought was a harmless joke on Twitter (or X, or whatever we’re supposed to call it these days):

A great way to make passive income is to take $3 million and buy an 8% Treasury bond.

You'll make $20,000 a month just by doing nothing.

— Eddy Elfenbein (@EddyElfenbein) March 30, 2024

Most people who saw my tweet took it as an obvious joke. At last count, the tweet had over 10,000 “likes.” Indeed, it’s hard to parody some of the financial advice you see on TikTok (check out the brilliant @TikTokInvestors for a sample).

However, not everyone saw my tweet as humor. Of course, U.S. Treasuries yield nowhere close to 8%, and most people don’t have a handy three million dollars lying around. This is a reminder of Poe’s Law that any sarcasm, no matter how absurd, will be taken seriously by someone, and those someones were angry at me. Very angry.

You may wonder: how could our meek, humble, dutiful editor ever cause anyone any distress? Alas, it can happen.

My tweet even got a famous Community Note attached to it. They literally fact-checked a joke.

If I were the pedantic type, I’d point out that the Community Note is incorrect because a two-month treasury is a bill, not a bond. Happily, I’m not, so I won’t bother to mention it.

How to Invest $100,000

I’ve always believed that one should try to turn an unpleasant experience unto something positive. Therefore, in today’s issue, I want to show you how you can safely build an income-producing stock portfolio. Unfortunately, it won’t yield 8%, but it can do a good job.

Let’s start with these ten blue chip stocks. Most have long histories of increasing their dividends, and several of them also have above-market dividend yields.

AFLAC (AFL)
Archer-Daniels-Midland (ADM)
Federal Realty (FRT)
Illinois Tool Works (ITW)
Johnson & Johnson (JNJ)
Microsoft (MSFT)
Middlesex Water (MSEX)
Stanley Black & Decker (SWK)
Sysco (SYY)
Target (TGT)

The only exception is Microsoft. I added the tech giant for diversification even though it pays a small dividend.

The point I want to stress is that building a portfolio isn’t simply selecting names you like. I selected these ten because they make for a well-rounded portfolio. A portfolio is a cohesive whole. It all needs to work together. It’s like a baseball lineup. For example, we have retail, consumer, industrials, financials, utilities and REITs. Some will do well when others are lagging.

Also, bear in mind that this is a portfolio designed to produce income. It’s not going to be a fast grower. Go to crypto if you want excitement. This portfolio won’t be exciting, but it should hold up well in rapid bull markets.

My goal with this portfolio is to show you the key concepts in designing a portfolio with a specific goal in mind.

A good portfolio can be well diversified with as few as eight stocks, and it can be poorly diversified with 100 stocks.

Here’s a sample portfolio with our ten names:

I’ve listed each stock’s ticker symbol, total number of shares, Monday’s closing price, dividend per share, the value of each position, projected dividend income and the yield.

I used $100,000 as a sample, but feel free to multiply or divide these positions to satisfy your portfolio needs.

As you can see, this portfolio yields a healthy 2.66% per year, plus these are safe and secure stocks.

Next, I want to show you the power of dividend income. What if we had bought those ten stocks 20 years ago? Here’s how much you would be yielding on those stocks today if you had bought them in April 2004:

It’s odd to think that you would be yielding close to 10% with JNJ, but that’s what it would be based on a 20-year-old original purchase price.

Sure, 20 years is a long holding period, but the important point is that with investing, time is on your side.

Consider this thought exercise. Let’s say there’s a stock that currently yields 0.5%. Many income investors would quickly overlook it.

Let’s also say that this company grows its earnings and dividend consistently by 15% each year. If the valuation stays the same, then the dividend yield is always 0.5, but that’s masking how strong those dividends have been. In reality, the dividend income has strongly aided your returns. That’s why Einstein called compound interest, “the Eighth Wonder of the World.”

ISM Manufacturing Increases to 50.3

I should caution you that the stock market has looked a little weaker in recent days. There’s nothing to be alarmed about. After all, the market has had a strong run over the last five months, so some weariness is to be expected.

The S&P 500 was weak on Monday, and it was down over 1.1% today before it wandered higher this afternoon. So far, the bulls have been able to repulse any bear attacks, but I wonder how much longer that can last.

Tech stocks were especially weak today. The Nasdaq Composite lost nearly 1%. Tesla, which was already the worst-performing stock in the S&P 500 during Q1, lost another 5% today.

Oil rallied to $85 per barrel while the yield on the 10-year Treasury got up to 4.36%. That’s the highest this year.

I wanted to mention yesterday’s impressive ISM Manufacturing for March. The reading increased from 47.8 to 50.3. This is important because any number above 50 means that the factory sector of the economy is expanding. The ISM had been contracting for 16 consecutive months.

I also like to look at the ISM because it’s out fairly quickly. Most economic stats take a while to compute, but the ISM report is usually out on the first working day of each month.

Tuesday’s report on job openings said that openings are largely unchanged at 8.8 million. That report was for February. Over the last year, job openings are down by 11%. Also on Tuesday, the Census Bureau said that construction spending fell by 0.3% in February. Private spending was unchanged, but public spending fell.

The next big test for the market comes this Friday with the March jobs report. Wall Street thinks the U.S. economy created 200,000 new jobs last month. I’ll be curious what the wage numbers are. The consensus on Wall Street is that average hourly earnings increased by 0.3% last month.

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.