Author Archives: Michael Murphy

Dear New World Investor: CRISPR is an acronym for Clustered Regularly Interspaced Short Palindromic Repeats. They are DNA sequences found in the genomes of bacteria. These sequences are derived from DNA fragments of killed agents that had previously infected the bacteria. They are used to detect and destroy DNA from similar agents during subsequent infections, providing acquired immunity. Cas9, an acronym for CRISPR-associated protein 9, is an enzyme that uses CRISPR sequences as a guide to recognize and open up specific strands of DNA that are complementary to the CRISPR sequence. CRISPR sequences and Cas9 enzymes together (CRISPR-Cas9) can be...

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Dear New World Investor: Bloomberg said the tailwind from surging immigration would boost March quarter GDP. Click for larger graphic Oops. Real GDP only grew at 1.6%, short of all estimates including the Atlanta Fed’s GDPNow +2.7%. Could it be that housing massive illegal immigration from South America, Asia, and the Middle East in luxury hotels isn’t really good for the economy? Click for larger graphic To be fair, the growth details were better than the headlines, although the inflation data was slightly hotter than I expected. The headline number was mainly driven by weakness in volatile components, especially net...

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Dear New World Investor: On Tuesday, Fed Chairman Powell said inflation is coming down slower than he expected, so it’s “high – but not higher – for longer.” Wall Street did a decent job of panicking the weak hands into selling them some cheap stock as the CNN Fear & Greed Index plunged to its lowest level since November 3. Click for larger graphic h/t @WinfieldSmart But the bond market said: “Whut?” as the 2-year note yield rose a measly two basis points to 4.96% and the 10-yr note yield settled an equally disdainful three basis points higher at 4.66%....

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Dear New World Investor: Is the economy hot or not…and does the Fed care? The answer is that it is stronger than the Fed expected, but they don’t directly care. What they care about is inflation and unemployment – those are their two mandates. Inflation We got the March Consumer Price Index (CPI) inflation report, which is not the Fed’s preferred measure of inflation. They have repeatedly said that they look at the core Personal Consumption Expenditures Index (PCI) to get to their 2% target. The next PCE announcement comes April 26, before the May 1 Fed meeting. March’s CPI...

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Dear New World Investor: Wall Street wants you to focus on how many times the Fed will cut rates this year even though economic data is coming in stronger than they expected. Almost every brokerage firm expects a quarter-point cut at the June 12 Fed meeting, followed by two or three cuts through the end of the year. After all, Fed Chairman Powell has telegraphed rate cuts are coming since his pivot late last year. I have a two-part different view. First, Powell really is “data-dependent.” so he will wait until he sees at least early signs of weakness before...

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Dear New World Investor: The headline February Consumer Price Index was +3.2% year-over-year. a skotch higher than the +3.1% expected and the +3.1% in January. The lagging shelter component accounted for about two-thirds of the increase. The month-over-month CPI was +0.4%, right on the consensus but a tenth above January’s 0.3%. The core CPI excluding food and energy was +3.8%, a bit lower than January’s 3.9% but just above the 3.7% consensus. The month-over-month core also was +0.4%, right on the consensus but a tenth over January’s 0.3%. All in all, it was an unsurprising report that should keep the...

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Dear New World Investor: Stocks hit new highs as Chairman Powell told Congress the central bank is in no hurry to ease policy, though he said rate cuts are likely to come this year. I’m still doubtful, although I think a mild recession will start this year. It takes the National Bureau of Economic Research about a year after a recession starts to call it. That delay will give the Fed enough cover to not cut unless the recession spirals into something much bigger than I’m expecting. The labor markets are slowly weakening. January’s Job Openings and Labor Turnover Survey...

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