Author Archives: Michael Murphy

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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Dear New World Investor: There is an asymmetric opportunity available – relatively low risk for a relatively large reward. It’s relatively low risk because it’s cheap because Wall Street hates it and it’s a lower-risk legal structure. It’s a relatively large reward because – well – Wall Street is wrong. Here’s why. Wall Street thinks commercial real estate is falling apart. Recently, investors in the AAA tranche of $308 million of debt backed by 1740 Broadway in midtown Manhattan received only 74% of their money. Creditors in the five lower tranches were totally wiped out. Numerous Wall Street trader/salesmen had...

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Dear New World Investor: Jackson Hole is a valley and wilderness recreation area in western Wyoming. It’s bordered by the jagged peaks of the Tetons, close to Grand Teton National Park and Yellowstone National Park. It’s home to upscale ski resorts, rustic campsites, dude ranches, and – tomorrow morning at 10:00am EDT – Fed Chairman Powell’s presentation at the Kansas City Fed’s annual bash. Wall Street is 100% convinced the Fed will cut the Fed funds rate at their September 17-18 meeting. About 68% are expecting a quarter-point (25 basis points or bps) cut and 32% expect a half-point cut....

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Dear New World Investor: The July Producer Price Index (PPI) rose only 0.1% month-over-month from June, matching the consensus expectation. PPI was up 2.2% year-over-year, versus 2.7% in June. Core PPI, which excludes food and energy, was flat versus the consensus for +0.2%. It is up 2.4% year-over-year, down from 2.9% in June. Then the headline July Consumer Price Index (CPI) came in at 2.9% year-over-year, the lowest annual reading since spring 2021 and a tick below the 3.0% expectation. It was up 0.2% from June with the badly lagging housing inflation statistics accounting for nearly 90% of the monthly...

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Dear New World Investor: The global sell-off that began late last week on fears about US economic growth continued to start the new week. Japan’s Nikkei slumped 12% overnight on Monday, contributing to a cautious feeling in the US market. The price action in Japanese stocks was related to an unwinding of the yen carry trade following a rapid strengthening in the yen against the dollar. Was the drop overdone? The green top panel of the graphic below shows the percentage of newsletters that are bullish. Two weeks ago, on July 23, 64.20% were bullish. This was one of the...

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Dear New World Investor: Welcome to August! The Fed held the Fed funds rate steady in a range of 5.25%-5.50% and all but announced they will cut in September. They will, too. As leakee-in-chief @NickTimiraos pointed out: * * Policy looks more restrictive now than it did earlier this year. * * The recent inflation news is better than last year’s swift decline because it is more broadly based. * * No tolerance for much labor market softening: “I would not like to see material further cooling in the labor market.” * * A July cut was debated, but there...

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Dear New World Investor: There’s a lot of optimism going into the June quarter earnings season. With the bar set this high, watching how companies perform and, most importantly, how the market reacts will be key. Click for larger graphic h/t @Mayhem4Markets Since I moved Apple and Meta to a Hold on July 3, they and the rest of the Magnificent 7 have been clobbered. There should be a reprieve when they start reporting good earnings in a couple of weeks, but then I expect the relative underperformance to continue for a while. BofA pointed out that history shows the...

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