Author Archives: Michael Murphy

Dear New World Investor: The Fed cut the Fed funds rate a quarter-point (25bps) today, as I expected. They removed language from the September statement that they have “gained greater confidence” that inflation was moving towards their 2% target. Traders have begun to trim bets for another quarter-point cut in December and the number of reductions expected next year. Last Friday’s very weak October payrolls number, +12,000, was far below the +110,000 estimate. It was negatively affected to an unknown degree by hurricanes and strikes, but so was the consensus estimate. In other words, it was a useless number. September...

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Dear New World Investor: It’s been a week of economic news and earnings. The news paints a soft landing picture, although I still think we’ll see a mild recession no matter who wins the election. September Job Openings and Labor Turnover Survey (JOLTS): Job openings fell more than expected from August’s 7.86 million to 7.443 million, the lowest level since January 2021. The August figure was revised down from 8.040 million to 7.86 million. There is is much less tightness in the labor market – just a gentle cooling of labor demand. Wage growth should continue to slow and give...

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Dear New World Investor: Gold and silver showed no sign of slowing their rise this week as investors continue to pour into precious metals. Gold futures touched fresh records on Monday, rising as much as 0.8% to hover near highs of $2,750 per ounce. Silver futures gained more than 3% before paring gains, briefly topping $34 per ounce, the highest level in 12 years. Higher production costs and dwindling reserves mean gold could keep climbing. Increasing costs for labor and materials like tires are eating into margins. Look no further than today’s 14.7% drop in Newmont (NEM) stock, its biggest...

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Dear New World Investor: There now are more assets in passive (index) funds than actively-managed funds. That means winners created by active fund buying keep winning as passive funds buy them and vice-versa. There are real opportunities in (1) identifying potential winners early and (2) identifying potential turnarounds that have been sold off by the passive funds and are just starting to attract active fund investment, c.f., PayPal. Click for larger graphic One reason for the success of passive funds is investor confusion/exhaustion by Wall Street’s clickbait headlines and constant efforts to get them to buy high and sell low....

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Dear New World Investor: Click for larger graphic Except it wasn’t “So-Crates”, as Bill and Ted called him. This quote was crafted by a student, Kenneth John Freeman, for his Cambridge dissertation published in 1907. Freeman did not claim that the passage under analysis was a direct quotation of anyone; instead, he was presenting his own summary of the complaints directed against young people in ancient times. And pretty much ever since. Lately, the big complaints seem to be variations on “they’re always on their phones.” Yes, they are and will be for the next 100 years or so. One...

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Dear New World Investor: Last Friday’s headline Consumer Personal Expenditures Index (CPE) rose 2.2% in August — just two-tenths away from the Fed’s 2% inflation target. That was lower than estimates of 2.3% and down from 2.5% in July. The core CPE excluding food and energy – the Fed’s favorite inflation indicator – was up 2.7% from last year, in line with expectations and up a tenth of a percent from 2.6% in July. It remains above the Fed’s 2% target. The month-over-month increase from July was just 0.1%, compared to expectations for 0.2% and June and July’s 0.2%. The...

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Dear New World Investor: Serious fiscal stimulus in China, stellar Micron earnings, another wave of solid economic data, Powell not backing off from cutting rates, and we get new all-time stock market highs. What could go wrong? Well, Manufacturing continues to weaken as Services continue to expand, and services are over 70% of the US economy these days. The S&P Global Flash Purchasing Managers Index showed a further solid expansion of the service sector contrasted with a second successive month of modestly falling output in the manufacturing sector. Average prices charged for goods and services rose at the fastest rate...

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Dear New World Investor: The Fed! The FED!! THE FED!!! Well, I was wrong and we’re all glad that’s over. For the first time in four years, Fed Chairman Powell cut the Fed funds rate. Instead of the quarter-point cut I expected, he bowed to Wall Street’s demands for a half-point cut to a new range between 4.75% and 5.00%, down from a 23-year high of 5.25% to 5.50% Stocks immediately jumped, giving Wall Street a chance to sell or short before Wednesday’s rug pull that gave traders a chance to reload for today’s rally. The dot plot shows two...

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