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Hot Tips
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May 9, 2024
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Weekly Jobless Claims Hit Nine-Month High at 233,000,
the bitter fruit of persistently high interest rates. New York City public school workers such as bus drivers are allowed to apply for benefits during winter and spring breaks, which tend to boost weekly claims numbers. Claims also picked up in California, Indiana, and Illinois.
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Uber Gets Crushed,
down 15%, posting its worst day since 2022 after bookings missed its forecast. You are seeing that stand-and-deliver type of market from companies right now. If you do not have either strong guidance or a good reason why you missed it, this is a market that is quite punishing. Buy (UBER) on the dip.
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Underwater Home Mortgages are Soaring,
with the South taking the biggest hit. Roughly one in 37 homes are now considered seriously underwater in the US and that share is much higher across a swath of southern states. Nationally, 2.7% of homes carried loan balances at least 25% more than their market value in the first few months of the year. That’s up from 2.6% in the previous quarter. It’s another cost of high rates.
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Online Retail Spending Up 7%,
during the January-April period YOY. Cheaper items are seeing the fastest growth. Consumer discretionary spending has been in focus over the past several months, as sticky inflation has forced shoppers in various categories to trade down to more affordable products. It’s another sign of a modest slow, 1.6% growing economy.
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US Overtakes China as Germany’s Top Trading Partner,
with the Continent mired in a never-ending recession. Germany's trade with the United States - exports and imports combined - totaled 63 billion euros ($68 billion) from January to March, while the figure for China was just under 60 billion euros. In 2023, China was Germany's top trading partner eight years in a row, with volumes reaching 253 billion euros, although that was only a few hundred million ahead of the U.S. German exports to the U.S. have now risen further due to the robust economy there, while both exports to and imports from China have fallen. It explains why Europeans are pouring money into the US stock markets.
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May 7, 2024
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TikTok Sues the US Government,
claiming its first amendment rights have been violated in a ban imposed on Congress. They will probably win. The national security threat posed by millions of dancing teenagers has never been shown. It’s just another talking point for technology-ignorant politicians egged on by Facebook (META) and other competitors. No one ever said the people in Silicon Valley were nice.
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Social Security Trust Fund to Go Broke by 2035,
according to US Treasury estimates. I knew they wouldn’t pay me after 55 years of contributions. Medicare is in less bad shape, not running out until 2036, a five-year extension. Retirees, the baby boomers, and exceeding new contributors, the Gen Xers. Expect your taxes to go up to fill the gap.
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Disney Dives on Earnings Bust,
although streaming broke even versus an expected loss. ESPN is still a big drag, as it has for years. The theme parks are running at full throttle. Disney’s total segment operating income jumped 17% as the company’s entertainment streaming applications — Disney+ and Hulu — turned a profit in the quarter for the first time. When combined with ESPN+, the streaming businesses lost $18 million in the quarter, much narrower than the $659 million loss the division reported a year earlier. Avoid the mouse house (DIS) for now.
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Airbus Scores on Boeing Debacle,
with sales up 13% in Q1. Who is one of the newest customers? Boeing itself, is borrowing planes from the European conglomerate Airbus to fill in on failed deliveries to United Airlines (UAL) and Alaska Airlines (ALK). Avoid (BA) like a new case of Covid.
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Apple Announces New AI Chip,
in the soon-to-be-launched iPad Pro. It will come with an M4 chip with a larger "neural engine," part of the chip specifically designed for the kind of computing required by AI features such as generating text or images. Debuting its latest chip in a tablet rather than its Mac laptops is unusual for Apple, and suggests it is eager to give app makers a head start creating AI-related software ahead of its annual software developer conference next month, analysts said. They’re clearly after the short sellers, like me.
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May 6, 2024
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Berkshire Delivers Blockbuster Earnings
in Q1, thanks to a $9 billion pop in (AAPL) stock last year. Buffet just cut his massive position by 13% and will cut more. Total 2023 profits came in at a mind numbing $93 billion. The company — whose divisions include insurance, the BNSF railroad, an expansive power utility, Brooks running shoes, Dairy Queen and See’s delivered a sharp swing from its $22 billion loss in 2022 because of the bear market. Its vast insurance operations that include Geico car insurance and reinsurance reported $5.3 billion in after-tax earnings for 2023, thanks to steep premium increases which we have all felt. Sell (AAPL), buy (BRK/B).
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Bond Investors are Making a Killing,
with the US Treasury paying out $900 billion in interest in 2023. That’s double the annual cost of the past decade. Remember those coupons? That’s another reason for the Fed o cut rates soon, to lesson this backbreaking burden on the government. After being held hostage by zero-rate policies for almost two decades, US Treasuries are finally reverting back to their traditional role in the economy. Bonds are becoming respectable again after a long winter. Buy (TLT) on dips.
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Amgen Soars on New Weight Loss Drug,
called Maritide, which powered a 12% rally on Friday. That fueled investor concerns about new competition in the rapidly growing weight loss drug industry, sending shares of Novo Nordisk and Eli Lilly lower on Friday. Novo Nordisk’s stock was already under pressure after sales of its blockbuster weight loss injection Wegovy missed analysts’ estimates for the first quarter. Buy (AMGN) on dips.
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Precious Metals Remain Strong
in wake of the soft April Nonfarm Payroll Report on Friday. The report out indicates that the economy is modestly weakening, hiring is slowing, and inflation about to moderate. That has caused interest rates to fall and bond prices to rise, as I expected. That also invites a weaker US dollar and stronger foreign currencies, gold, and silver. (Buy (GLD) and (SLV) on dips.
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China Home Sales Plunge by 47%,
as the real estate crisis deepens, indicating that a recovery may be far off. But when it does bounce back, expect all commodities to hit record highs. Buy (FCX) on dips.
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May 3, 2024
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Nonfarm Payroll Comes in at a Weak 175,000,
in April, the slowest in six months. The headline Unemployment Rate ticked up to 3.9% while wage gains slowed. Friday’s report signaled further evidence that demand for workers is moderating, but the data likely don’t amount to “an unexpected weakening” that Federal Reserve Chair Jerome Powell said iwould warrant a policy response.
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Apple Announced the Worst Earnings in Years,
but also delivered a record $110 billion share buyback, sending shares soaring. Though revenue fell 4.3% to $90.8 billion in the March quarter, that was better than the $90.3 billion predicted by analysts. Avoid (AAPL) as reality will catch up with the share price soon enough.
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Sony and Apollo Mount $26 Billion Bid for Paramount.
Paramount, which is controlled by Shari Redstone, has been weighing a merger proposal from David Ellison, the head of Skydance Media and son of Oracle’s co-founder Larry Ellison. A period of exclusive talks between Paramount’s board and Ellison is scheduled to end Friday. The apple doesn’t fall from the tree. Observe from a great distance.
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Commodity Takeover Wars Heat UP,
as Swiss-based commodity giant Glencore also considers a bid for Anglo-American. Anglo is attractive to its competitors for its prized copper assets in Chile and Peru, a metal used in everything from electric vehicles and power grids to construction, whose demand is expected to rise as the world moves to cleaner energy and wider use of AI. Follow the big money. Buy (FCX) and (COPX) on dips.
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Oil Sees Biggest Drop in Three Months,
as tensions in the Middle East fade. Both benchmarks are set for weekly losses as investors are concerned higher-for-longer interest rates will curb economic growth in the U.S., the world's leading oil consumer, as well as in other parts of the world. Buy (XOM) and (OXY) on dips.
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May 2, 2024
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Fed Says No Hikes, but no Cuts Either,
triggering a 500-point rally in the market. Federal Reserve Chair Jerome Powell said it was unlikely that the central bank’s next move will be a rate hike. The comment spurred a rally for the three major averages, with the Dow surging more than 500 points in its session high. Central bank policymakers kept rates steady at the conclusion of their May meeting, holding at a range of 5.25% to 5.5%. Expect the same next month.
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JOLTS Report for Job Openings Hit Three-Year Low.
US job openings trailed behind estimates for the month of March, the US Bureau of Labor Statistics reported 8.5 million job openings against expectations of 8.7 million. Additionally, the ISM Manufacturing PMI (Purchasing Managers' Index) fell to 49.2 in April; ISM's prices paid index jumped to 60.9. It presages a cool Nonfarm Payroll Report on Friday.
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Demand for Adjustable Rate Loans Soar,
as the 7.25% 30-year fixed sends borrowers fleeing. The share of ARM applications rose to 7.8% of mortgage demand last week, according to the Mortgage Bankers Association. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.29% last week from 7.24% the previous week. The average contract interest rate for 5/1 ARMs decreased to 6.60% from 6.64%. The plan is to pray for lower rates before the first rate reset happens.
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Exxon Cuts Deal with the FTC,
allowing the pioneer deal to go through. Exxon first announced the deal for Pioneer in October, in an all-stock transaction valued at $59.5 billion. Exxon said the acquisition would more than double its production in the Permian Basin. Follow the big money. Buy (XOM) on dips.
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The US Treasury Announced a Bond Buyback Program,
with the first scheduled on May 29. The Treasury's last regular buyback program began in the early 2000s and ended in April 2002. Under the buyback program, the Treasury said it plans to hold weekly "liquidity support" buybacks of up to $2 billion per operation in nominal coupon securities, and up to $500 million per operation in TIPS. Bond bulls don’t get your hopes up. The plan is to simply smooth out what is expected to be very large debt issues throughout 2024.
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