Author Archives: Michael Murphy

Dear New World Investor: The headline Consumer Price Index (CPI) for November increased 2.7% year-over-year (YoY), the second consecutive increase in annual inflation – a trend not seen since April, and 0.3% month-over-month (MoM). Both were a slight uptick from October’s 2.6% YoY and 0.2% MoM. It was the largest monthly gain since April. But shelter costs, the largest component of the CPI that accounted for 40% of November’s overall monthly CPI increase, rose just 0.3% from October. This was lower than October’s 0.4% increase. On an annual basis, shelter costs rose 4.7% in November, down from October’s YoY gain...

Read More »

Dear New World Investor: The venerable Dow Jones Industrial Average went over 45,000, the S&P 500 and Nasdaq Composite hit new record highs, and bitcoin cleared $100,000 – so all is right with the world? Well, not quite. Inflation is enough above the Fed’s target and the labor data is not that bad, so the Fed is not going to be in a rush to cut interest rates. I still think the odds slightly favor another quarter-point cut on December 18, but the CME FedWatch shows 70.1% thinking we get the 25 basis point cut and only 29.9% thinking no...

Read More »

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...

Read More »

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...

Read More »

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...

Read More »

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....

Read More »

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...

Read More »

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...

Read More »