Cover:
-Millennials, born from 1981 to 1996, may be the most economically divided generation in America. Barron's simulated the projected net worth of four hypothetical millennials to illustrate financial ups and downs facing this generation. The simulations also highlighted the role of safety nets in giving some millennials a head start, such as assistance with college, early cash gifts or inheritance, or early access to an investment account. Millennials in the middle of the wealth spectrum held average assets of $103,021 in 2022, surpassing the $58,118 their boomer counterparts had held in 1992, adjusted for inflation. Much of that increase was driven by those with homes, 401(k) retirement plans, or brokerage accounts that benefited from a booming stock market. Covid-era assistance, like child-care tax credits and stimulus checks, helped others chip away at debt or shore up savings. The wealthiest 10% of millennial households saw a 140% increase over the wealth their boomer peers had in 1992, while the poorest 10% came out behind their boomer peers.
Interview:
-Wasatch Global Investors, a Salt Lake City-based asset-management firm, focuses on collaboration as the core of its investment strategy. The firm, which has $29.4B in assets, invests in 20 domestic and international small-cap growth strategies. Analysts and portfolio managers work together throughout the investment process, sharing ideas across strategies. This teamwork creates a deep bench of long-tenured employees. JB Taylor, CEO and portfolio manager at Wasatch, has helmed the Wasatch Core Growth fund since 2000, which has returned an annualized 13.9% in the past 15 years, outperforming the Russell 2000 Growth index's return of 10.9% and peers' return of 11.5%. The fund has an average fee level of 1.17%. The firm's approach to collaboration is based on the idea that multiple people working together will come up with better answers than a single, smart person.
Tech Trader:
-ASML's third-quarter earnings were leaked early, sparking an industrywide panic. The company's weak outlook was due to Moore's Law, a prediction made by semiconductor pioneer Gordon Moore in 1975 that the number of transistors that could be etched into silicon would double every two years. However, this prediction was challenged when tinier transistors ran up against the limits of ultraviolet light wavelengths used to etch them into silicon. ASML, a Dutch-based semiconductor lithography machine manufacturer, invested over six billion euros ($6.49B) in EUV research and development over 17 years. After several false starts, the company was able to harness the tiny wavelengths needed to manufacture high-performance chips used in smartphones, PCs, and data centers. ASML's EUV machines saved Moore's Law, as they generate extreme ultraviolet light using a CO2 laser that fires two separate laser pulses at a fast-moving drop of tin.
The Trader:
-The Dow Jones Industrial Average and S&P 500 index have reached new highs, with analysts referring to the market as "animal spirits." The S&P 500 and Dow rose 0.9% and 1% respectively, marking their sixth consecutive week of gains. The Nasdaq Composite was up 0.8%. Bankers' third-quarter earnings have been primarily focused on investment banking and trading, with revenue up over 20% at big banks in the latest quarter. Goldman Sachs CEO David Solomon and Morgan Stanley Chief Financial Officer Sharon Yeshaya have predicted a multiyear capital markets recovery. Adam Turnquist, chief technical strategist at LPL Financial, notes that the tone of bank earnings calls has taken a positive turn, with the words "economic growth" and "soft landing" being more frequently used than "recession" and "economic slowdown." The latest economic data shows retail sales rising 0.4% in the latest month, and the Federal Reserve appears to be on track to cut interest rates again in November.
-Tech giants Google and Amazon have announced investments in new types of nuclear reactors, signaling a new phase where companies could build new nuclear reactors. This has lifted the stocks of companies that own reactors, including Vistra and Constellation Energy. A separate group of stocks has begun to rise, including Nuscale Power, Oklo, BWX Technologies, GE Vernova, Lightbridge, and Centrus Energy. Amazon will finance the construction of several small nuclear reactors in Washington state and invest in Maryland start-up X-energy. Google's deal with California-based Kairos Power supports the development and construction of several reactors, with financial terms not released. The tech giants are looking for ways to secure power for their data centers, which are consuming more electricity as artificial-intelligence usage grows. Nuclear plants don't emit carbon and operate continuously, unlike solar and wind. The biggest obstacles for nuclear adoption are the long construction time and high costs. The new kind of nuclear plants built by Kairos and X-energy are called small modular reactors (SMRs), which are cheaper and easier to construct.
Features:
-Amazon.com, the largest sponsor of H-1B work permits for skilled foreign workers, is facing an immigration crisis. The company would likely hire more if allowed, and is chronically short of warehouse workers. However, Amazon would face backlash if it pushed for more immigration, as public opinion has hardened on undocumented immigrants. The labor market remains tight, with 1.2 job openings per unemployed person, and immigration ranks as a top issue for voters. The next Congress and Trump or Harris will impact the country's economic growth, labor markets, and the U.S. fiscal deficit. Most companies express their view through groups like the U.S. Chamber of Commerce, which has lobbied Congress to increase work permits for years. Expanding the labor pool with immigrants helps companies by giving them more choices of employees and potentially allowing them to pay less.
-Costco Wholesale has been a strong performer in 2024, with solid earnings and sales growth. The company's shares have gained 35% this year, outperforming the S&P 500's 23% rise. Evercore ISI analyst Greg Melich believes Costco's compounder characteristics should help maintain a premium at the higher end of its historical norm. Four main areas of growth for the company include steady membership growth, market share gains in discretionary categories, advertising, and international expansion. Costco's membership fees have been a steady source of income, helping to pad both its top and bottom lines. The latest fee hike went into effect in September, and the benefits will continue to trickle in over the remaining fiscal year as shoppers renew their memberships at the higher price. Costco's home delivery and haul-away logistics services are giving the retailer a leg-up, which could boost same-store sales growth in the long run. International expansion is another potential area for Costco, with net sales growth at its international warehouses outstripping that of its U.S. counterparts in fiscal 2024, up 9% year over year compared with 4%.
European Trader:
-The European Central Bank (ECB) has lowered interest rates for a second consecutive meeting, following the Federal Reserve's reduction of borrowing costs last month. The key deposit rate was lowered by a quarter point to 3.25%, marking the second time the ECB has cut rates since June. The ECB's decision follows the Federal Reserve's reduction of borrowing costs last month. The inflation rate in Europe has fallen below the ECB's 2% target, reaching its lowest since 2021. The ECB expects economic growth to slow in the second half and remain meager compared to the US rate of expansion. Deutsche Bank expects the ECB to continue lowering rates until about 2.25% in the first half of next year.
Emerging Markets:
-No update
Commodities:
-Oil prices are dropping after the death of Hamas leader Yahya Sinwar, but this does not necessarily mean the war between Israel and Iran has ended. WTI crude oil futures have dropped 2.6% to $68.83, suggesting traders are pricing in an easing of the conflict between Israel, Iran, Hezbollah, Hamas, and other groups. Brent futures were 2.5% lower at $72.61, while WBS00 crude oil futures dropped 2.6% to $68.83. However, the conflict seems to not be ready to end, with Israeli Prime Minister Benjamin Netanyahu stating the "war isn't over," Hezbollah escalating its attacks, and Hamas and Iran's statements indicating continued fighting. If oil prices are not falling due to the Middle East, it could be attributed to China's weaker third-quarter gross-domestic product, which could spill over into global energy markets. Currently, it is best to hope for peace in the Middle East, which could lower oil prices, but be prepared for more violence, which would send them higher.
Streetwise:-(Only in Podcast this week)
-Jack Hough discusses his minimalist investing philosophy, Financial Nudism, which suggests that a successful investor needs quality stocks and bonds, such as index funds. He also discusses the concept of dollar cost averaging, which involves spending regular amounts of money to buy shares in the stock market or index fund. This method helps lower average costs and is more reliable when considering longer time periods. However, Hough warns that investing all cash at once may not be the best option, as you are not a sample size and only have one shot at it. He believes that recovering from a stock market tumble may take an emotional toll, and that investing all cash at once may not be the best option for everyone.