Barron’s Weekend Summary:
Cover Story:
-“In putting our clients’ money to work in companies like Tricolor Auto Group, we’re helping more people gain access to affordable transportation and build a better life,” BlackRock says on its website. Dallas-based Tricolor, which gets its name from the three-toned Mexican flag, is little known outside the Spanish-speaking communities it serves in Texas and California, its biggest markets. But some clients say that being a Tricolor customer hasn’t made their lives any better, noting that just months after buying a vehicle, these fail, causing a cascading series of problems.
Interview:
-This week, Barron’s interviews Ray Dalio. Dalio is stepping down at a time when Bridgewater’s flagship Pure Alpha fund is riding high—it gained more than 22% this year through Oct. 31—but the world is feeling low. After years of loose monetary and fiscal policies and debt-fueled growth, many nations are grappling with rampant inflation, and central bankers are raising interest rates to cool price gains. Higher rates, in turn, have clobbered stock and bond markets, and threaten to tip major economies into recession next year. Meanwhile, in the US, the population is highly polarized, while external conflicts among superpowers threaten to put an end to decades of relative peace.
Tech Trader:
Some of the biggest winners of the midterm elections are the big tech companies. That’s because, in the midst of the election news, California Proposition 30 (a measure that would have raised tax rates on the state’s millionaires to subsidize the purchase of electric cars, shore up the state’s charging infrastructure, and provide some extra cash for firefighting in a state at constant risk of firestorm) was scrapped. Prop 30 was thrashed by a 3-to-2 margin, despite the backing of the Democratic Party, environmentalists, EV advocates, unions, and firefighters.
The Trader:
-Investors finally got the inflation reading they were looking for, and are likely to get a split government for the next two years. That combination propelled stocks to their best weekly showing since June. The S&P ended the week 5.9% higher, closing just below 4,000. The Dow Jones Industrial Average rose 4.1%, and the NASDAQ jumped 8.1% - its best weekly showing since March, and it came during a week when tech news seemed largely negative as META Platforms announced that it would cut 11,000 jobs, the latest in a wave of Silicon Valley layoffs. The best thing Facebook can say for itself now is that it isn’t Twitter.
-Oil prices have been steady in November, holding around $90 per barrel. But, there’s a good chance the calm won’t last. A new set of sanctions from Europe will ratchet up the pressure against Russia and could upend oil markets around the world.
Citi, which has had one of the lowest price targets for oil among the major banks this year, now sees higher prices ahead, with oil averaging $97/bbl in the fourth quarter, and $95 in the first quarter of 2023. Others are eyeing even higher levels, with some options traders making a long shot bet that crude could get to $200 by March 2023. That almost certainly won’t happen—it would take simultaneous supply and demand shocks to do it—but it does show just how much sentiment has shifted.
Features:
-It’s been a tough year for Bumble. Its shares have dropped 34% over the past 12 months, more than two times the S&P 500’s 14% decline. The problems continued this past week when Bumble missed sales expectations for its fiscal third quarter. Bumble has been getting the cold shoulder from investors, who are worried that singles have cooled on its dating apps. The company, though scruffy, remains attractive—and its stock could be just the ticket for investors looking for more than a quick hookup.
-As interest in crypto and crypto exchanges exploded in recent years, more high profile individuals like professional athletes and other entertainment personalities joined financial institutions in investing in FTX. One of those athletes is Tampa Bay Buccaneers quarterback Tom Brady. Just a few months after winning his seventh Super Bowl in 2021, Brady and his then-wife Gisele Bündchen were each given equity stake in FTX, in addition to receiving some crypto. Brady served as an ambassador for the company and Bündchen was FTX’s Environmental & Social Initiatives Advisor. A similar story can be told for Steph Curry of the NBA champion Golden State Warriors, who was made a global ambassador for FTX and also given an equity stake in the company in 2021.
European Trader:
-Italy’s new Prime Minister Giorgia Meloni and her government are facing an economic downturn that could determine trigger a deep recession. The Eurozone’s third-largest economy isn’t alone in battling soaring inflation, an energy crisis, and the region’s highest benchmark interest rate since 2009. However, its huge debt burden poses problems for the newly elected government and for the wider economic stability of Europe. Italy’s debt rose to 150.8% of gross domestic product in 2021, second only to Greece among euro zone countries and one of the largest in the world.
In her first speech to lawmakers, Meloni criticized the European Central Bank’s latest interest-rate hike, saying it could reduce banking credit. The central bank raised Europe’s benchmark rate by 0.75 percentage points late last month and signaled further hikes ahead. The pressure on Meloni eased somewhat as Italy’s economy unexpectedly grew 0.5% in the third quarter, Germany’s 0.3%. But, the growth spurt could be only temporary. “We continue to expect a technical recession to occur at the turn of the year, with Italy remaining particularly vulnerable to the impact of Europe’s energy crisis,” says Loredana Federico, chief economist at UniCredit. With a recession seen as largely inevitable, Italian stocks are best avoided, for the most part.
Emerging Markets:
-Calls for so-called “climate justice”—developed nations helping emerging markets pay for destruction and adaptation—are dominating the annual global green summit known as COP27. The rich world promised $100B/year for this purpose back in 2008, and never delivered. A pilot plan of sorts, the Just Energy Transition Partnership, may give us a clue about the next 14 years. JETPs, as climate insiders call them, target coal-fired power plants, which are the top source of greenhouse gases globally, out-polluting even oil-burning vehicles. They’ve got battle-scarred climate warriors venturing a bit of optimism.
“These JETPs are a really important step forward in emissions reduction in some of the biggest countries of the world,” says Jake Schmidt, director for international climate at the Natural Resources Defense Council.
Commodities:
-Risks to global demand contributed to a decline in copper prices this year. But the value of the industrial metal may have fallen too far, as supplies look to remain tight for another decade or more. Visible copper inventories at exchanges globally continue to fall, following a “yearslong downtrend,” says Robert Ryan, chief commodity and energy strategist at BCA Research. Yet the copper market is also facing a global shortage, he says, with the “biggest impediment” to addressing these physical shortages being a lack of capital expenditure to boost supply. “That’s a chronic problem for copper,” he adds.
Streetwise:
-This week’s Streetwise Podcast Jack Hough looks at crypto-exchanges, and FTX specifically. FTX becomes the latest crypto exchange to bite to dust. Plus, job cuts in tech bleed into other sectors?
-“In putting our clients’ money to work in companies like Tricolor Auto Group, we’re helping more people gain access to affordable transportation and build a better life,” BlackRock says on its website. Dallas-based Tricolor, which gets its name from the three-toned Mexican flag, is little known outside the Spanish-speaking communities it serves in Texas and California, its biggest markets. But some clients say that being a Tricolor customer hasn’t made their lives any better, noting that just months after buying a vehicle, these fail, causing a cascading series of problems.
Interview:
-This week, Barron’s interviews Ray Dalio. Dalio is stepping down at a time when Bridgewater’s flagship Pure Alpha fund is riding high—it gained more than 22% this year through Oct. 31—but the world is feeling low. After years of loose monetary and fiscal policies and debt-fueled growth, many nations are grappling with rampant inflation, and central bankers are raising interest rates to cool price gains. Higher rates, in turn, have clobbered stock and bond markets, and threaten to tip major economies into recession next year. Meanwhile, in the US, the population is highly polarized, while external conflicts among superpowers threaten to put an end to decades of relative peace.
Tech Trader:
Some of the biggest winners of the midterm elections are the big tech companies. That’s because, in the midst of the election news, California Proposition 30 (a measure that would have raised tax rates on the state’s millionaires to subsidize the purchase of electric cars, shore up the state’s charging infrastructure, and provide some extra cash for firefighting in a state at constant risk of firestorm) was scrapped. Prop 30 was thrashed by a 3-to-2 margin, despite the backing of the Democratic Party, environmentalists, EV advocates, unions, and firefighters.
The Trader:
-Investors finally got the inflation reading they were looking for, and are likely to get a split government for the next two years. That combination propelled stocks to their best weekly showing since June. The S&P ended the week 5.9% higher, closing just below 4,000. The Dow Jones Industrial Average rose 4.1%, and the NASDAQ jumped 8.1% - its best weekly showing since March, and it came during a week when tech news seemed largely negative as META Platforms announced that it would cut 11,000 jobs, the latest in a wave of Silicon Valley layoffs. The best thing Facebook can say for itself now is that it isn’t Twitter.
-Oil prices have been steady in November, holding around $90 per barrel. But, there’s a good chance the calm won’t last. A new set of sanctions from Europe will ratchet up the pressure against Russia and could upend oil markets around the world.
Citi, which has had one of the lowest price targets for oil among the major banks this year, now sees higher prices ahead, with oil averaging $97/bbl in the fourth quarter, and $95 in the first quarter of 2023. Others are eyeing even higher levels, with some options traders making a long shot bet that crude could get to $200 by March 2023. That almost certainly won’t happen—it would take simultaneous supply and demand shocks to do it—but it does show just how much sentiment has shifted.
Features:
-It’s been a tough year for Bumble. Its shares have dropped 34% over the past 12 months, more than two times the S&P 500’s 14% decline. The problems continued this past week when Bumble missed sales expectations for its fiscal third quarter. Bumble has been getting the cold shoulder from investors, who are worried that singles have cooled on its dating apps. The company, though scruffy, remains attractive—and its stock could be just the ticket for investors looking for more than a quick hookup.
-As interest in crypto and crypto exchanges exploded in recent years, more high profile individuals like professional athletes and other entertainment personalities joined financial institutions in investing in FTX. One of those athletes is Tampa Bay Buccaneers quarterback Tom Brady. Just a few months after winning his seventh Super Bowl in 2021, Brady and his then-wife Gisele Bündchen were each given equity stake in FTX, in addition to receiving some crypto. Brady served as an ambassador for the company and Bündchen was FTX’s Environmental & Social Initiatives Advisor. A similar story can be told for Steph Curry of the NBA champion Golden State Warriors, who was made a global ambassador for FTX and also given an equity stake in the company in 2021.
European Trader:
-Italy’s new Prime Minister Giorgia Meloni and her government are facing an economic downturn that could determine trigger a deep recession. The Eurozone’s third-largest economy isn’t alone in battling soaring inflation, an energy crisis, and the region’s highest benchmark interest rate since 2009. However, its huge debt burden poses problems for the newly elected government and for the wider economic stability of Europe. Italy’s debt rose to 150.8% of gross domestic product in 2021, second only to Greece among euro zone countries and one of the largest in the world.
In her first speech to lawmakers, Meloni criticized the European Central Bank’s latest interest-rate hike, saying it could reduce banking credit. The central bank raised Europe’s benchmark rate by 0.75 percentage points late last month and signaled further hikes ahead. The pressure on Meloni eased somewhat as Italy’s economy unexpectedly grew 0.5% in the third quarter, Germany’s 0.3%. But, the growth spurt could be only temporary. “We continue to expect a technical recession to occur at the turn of the year, with Italy remaining particularly vulnerable to the impact of Europe’s energy crisis,” says Loredana Federico, chief economist at UniCredit. With a recession seen as largely inevitable, Italian stocks are best avoided, for the most part.
Emerging Markets:
-Calls for so-called “climate justice”—developed nations helping emerging markets pay for destruction and adaptation—are dominating the annual global green summit known as COP27. The rich world promised $100B/year for this purpose back in 2008, and never delivered. A pilot plan of sorts, the Just Energy Transition Partnership, may give us a clue about the next 14 years. JETPs, as climate insiders call them, target coal-fired power plants, which are the top source of greenhouse gases globally, out-polluting even oil-burning vehicles. They’ve got battle-scarred climate warriors venturing a bit of optimism.
“These JETPs are a really important step forward in emissions reduction in some of the biggest countries of the world,” says Jake Schmidt, director for international climate at the Natural Resources Defense Council.
Commodities:
-Risks to global demand contributed to a decline in copper prices this year. But the value of the industrial metal may have fallen too far, as supplies look to remain tight for another decade or more. Visible copper inventories at exchanges globally continue to fall, following a “yearslong downtrend,” says Robert Ryan, chief commodity and energy strategist at BCA Research. Yet the copper market is also facing a global shortage, he says, with the “biggest impediment” to addressing these physical shortages being a lack of capital expenditure to boost supply. “That’s a chronic problem for copper,” he adds.
Streetwise:
-This week’s Streetwise Podcast Jack Hough looks at crypto-exchanges, and FTX specifically. FTX becomes the latest crypto exchange to bite to dust. Plus, job cuts in tech bleed into other sectors?