March 6, 2025
What You Need to Know Today:
Tariff trial ballon on how much and who will get hit?
Today the Washington Post reported that President-elect Donald Trump’s aides are exploring tariff plans that would amount to paring back–the Post’s characterization–the tariff plans that candidate Trump proposed on the campaign trail.
President-elect Trump immediately hit back on social media saying the Post story was made up and there were no such sources from his team.
Special Report: Welcome to the new age of catastrophe capitalism–Part One, what capital markets will look like
Let’s talk today about the changes that global climate change is creating in our capital markets and on the very structure of current capitalism. Part One of this Special Report will look at the nature of the changes. Part Two, later this week, will look at specific implications for your portfolio. Hurricanes Helene and Milton are the perfect case study for the coming changes in capital markets and capitalism.
CPI core inflation ticks upward; 25 basis point cut in November now consensus
Today, both the headline and the core CPI, which excludes food and energy, came in 0.1 percentage point higher than forecast for the month, with a month to month 0.2% increase in the headline index and a 0.3% rise for the core.On an annual basis, the headline index rose 2.4% in September, slightly less than the 2.5% in August. The core inflation rate, the more important number to the Federal Reserve, accelerated for the first time in one and a half years, to 3.3% from 3.2%. Weekly initial claims for unemployment also came out today, Thursday, October 10, and showed a much-bigger-than-expected increase of 258,000, against the median forecast for 230,000. Together the two reports almost cemented the odds of a 25 basis point cut in interest rates when the Fed meets on November 7.
Adding VMC as the third pick to my Special Report “10 new stock ideas for an old rally
Here’s what I wrote today when I added Vulcan Materials to my Special Report “10 new stock ideas for a old rally.”
Today I made my first 2 Harris picks in my Special Report on election stock winners
Today I added 2 Harris picks to my prior 3 Trump picks.
Of course, neither candidate is taking about the soaring budget deficit
The federal budget deficit swelled to $1.8 trillion in the fiscal year that ended in September, the Congressional Budget Office warned today, Tuesday, October 8. In the recently concluded fiscal 2024 year interest payments on the debt reached $950 billion, larger than the size of the Pentagon budget. As of Friday, the United States had accumulated a public debt of $35.7 trillion.
Special Report: 10 Great Growth Stocks that Are Getting Greater–today my 6th pick Danaher
GREATER Growth Stock Pick #6: Danaher (DHR). Danaher is a smart (that’s key) serial acquirer–and asset divester–in the life sciences space. And that makes this stock very interesting in an environment where small, young life sciences companies might be looking for help/rescue/acquisition because they can’t raise capital in a tough part of the credit cycle. I like Danaher now, as well, because the stock looks to have just about completed its re-rating after a spike in sales during the Covid pandemic led to over enthusiasm about the stock.
Live Market Report (20 minute delay)
There’s a huge debate on the direction of lithium prices for the rest of 2023
Spot lithium carbonate prices (for battery-grade lithium) in China are up 92% from a 19-month low in April. So now what?
Adding Generac as a short-term trade to my Volatility Portfolio
I’ve got major questions about Generac’s (GNRC) long-term growth. The company, the dominant player in the market for residential backup electric generators (with about 4 times the market share–or about 75% of the market–of its nearest competitor) faces big questions, in my opinion, about its long-term strategy and its ability to grab significant revenue in the clean energy market where it faces competition from larger companies, more established in the market, such as SolarEdge (SEDG) and Enphase (ENPH). But in the short run? Say, the next two or maybe three (at the outside) months, I say this is a stock that will ride summer storms and heat waves to gains. Especially, if as I project, the company delivers lackluster quarterly earnings when it reports on August 2, but gives very positive guidance for the next quarter or two
Please Watch My New YouTube Video: Quick Pick First Quantum Minerals
This week’s Quick Pick is First Quantum Minerals (FQVL). I’ve talked about copper as an equity kicker in gold mining stocks in a previous video. Barrick, a huge gold producer, is also a significant copper producer and is looking to expand its copper production. The company is currently in “informal talks” with First Quantum Minerals. Year to date, First Quantum Minerals is up 21% and 34% in the last three months, so it definitely shows good short-term momentum. In the long term, copper demand will see tremendous growth in the global climate change economy, including in electric vehicle production. The other benefit here is copper and, of course, gold is a good hedge against inflation which I predict will continue higher than the Federal Reserve and consumers would like for quite some time. Put copper, with its growth potential, together with gold, with its role as an inflation hedge, in one mining stock and you’re starting to look at something good.
Please Watch My New YouTube Video: Inflation Deserves a Bigger Role in Your Portfolio
Inflation deserves a bigger role in your portfolio. This vase of peonies reminds me of my first summer job: picking Japanese beetles off of my uncle’s peonies. He would offer what sounds like a not-so-generous salary of 25 cents per jar of dead beetles. But remember that’s 25 cents in 1960 or so. In thinking about inflation, I researched how much 25 cents in 1960 would be equivalent to today. 25 cents in 1960 amounts to $2.53 a jar. Still not terribly generous, but better. $100 in 1960 would be worth $1009 today, a ten-fold increase due to inflation. The Fed is still at work to stem inflation, but investors should note that there are some prices that the central bank can’t control. Inflation is built into the global climate economy with disruptions in agriculture, and new kinds of energy production (which will require higher costs), supply chain issues, not to mention that climate change is making some previously habitable places uninhabitable. All these problems will lead to extraordinary sources of inflation that are not susceptible to central bank policies. In order to hedge that inflation, make sure your portfolio, especially if it’s a long-term portfolio, has positions in things like gold or copper and lithium which will be in high demand and short supply in the next decade (at least.)
Did a Powell deal with the inflation hawks on a June pause guarantee a a 25 basis point increase in interest rates at the July 26 meeting?
Recently former Treasury Secretary Larry Summers has been saying that the June pause in interest rates and a simultaneous increase in the end of the year DotPlot interest rate projections to 5.6% only makes sense if Fed chair Jerome Powell cut a deal with the central bank’s inflation hawks that guarantees a 25 basis point interest rate increase at the July 26 meeting.
Buying Zimmer Biomet for the long-term 50 Stocks Portfolio tomorrow
I made Zimmer Biomet (ZBH) Pick #6 in my “10 Stocks for Your Core Portfolio.” Tomorrow, June 21, I’ll add it to my long-term 50 Stocks Portfolio.
Please Watch My New YouTube Video: Trend of the Week Which is it? OK Growth in the U.S. or Not Great Growth Globally?
Today’s Trend of the Week is Which is it? OK Growth in the U.S. or Not Great Growth Globally? The U.S. market is rallying and the rally even expand from the narrow nine stocks that have been driving up the indexes. The consensus is the U.S. economy will avoid a recession, the Fed will continue to pause rate hikes, and the U.S. economy as a whole is in decent shape. The problem is that the global economy presents a completely different story with asset values pricing in slowing growth. This shows up most clearly in oil prices, which have been in a downward trend. On June 13, West Texas Intermediate was selling below $70 a barrel, and Brent was down to 74.57. Goldman Sachs has cut its end-of-the-year oil price forecast by about 10%. This cut assumes continued lower demand from China and a supply glut, especially from Russia, as that country produces above agreed-upon caps in an effort to fund its war in Ukraine. If you own oil stocks right now, confirm that the ones in your portfolio can continue to make money at $70 a barrel (at least enough to cover dividends). I’d note the lowest cost source in the United States is in the Permian Basin. Companies like Pioneer National Resources and Devon Energy are focused on production from that region.
Look for end of the quarter “window dressing”/rebalancing wars
I expect the end of the second quarter to be volatile as two contrary trends battle it out to set market direction.
Selling ConocoPhillips tomorrow on increased Russian oil refinery production
I’m holding onto oil stocks that pay big dividends such as Pioneer Natural Resources (PXD), at 11.22%, and Devon Energy (DVN), at 9.06%, but I lightening up on my oil exposure by selling ConocoPhillips (COP) out of my Jubak Picks Portfolio tomorrow, June 20. The stock pays a dividend of just 2.29%.
Please Watch My New YouTube Video: Quick Pick New Era Energy
This week’s Quick Pick is utility NextEra Energy (NEE). NextEra is focused on Florida, a state with a relatively utility-friendly regulatory scheme, and where the company’s Florida Power and Light has 5.8 million customers. NextEra operates a mix of energy sources including seven nuclear plants, 4.6 gigawatts of solar, and, recently, hydrogen as well. That’s a good mix, fortunately, or unfortunately, for this point in the climate crisis. I have owned NEE since November 2020 in my dividend portfolio. The stock price hasn’t moved a lot lately, but if the Fed continues its pause on rate hikes and the economy doesn’t slow further, I think this one will outperform. Right now you get a 2.5% dividend with the possibility of capital appreciation if the company’s alternative energy efforts continue to show growth and when/if the Fed cuts interest rates.
Please Watch My New Video: What about Core Inflation?
What about core inflation? The most recent CPI numbers have been cause for market celebration. For example, here was the headline on Bloomberg: “US Inflation Slows, Giving Room for Fed to Pause Rate Hikes.” But the excitement comes from a focus solely on the headline inflation or the all-items index. The Fed, however, generally bases its decisions on core inflation, which removes energy and food prices from the equation. All item inflation dropped to a 4% annual rate in May, down from 4.9% in April, and was up just .1% month to month. This is great news for consumers as prices start to come down. The bad news is that core inflation is still pretty high, with the May annual rate at 5.3%, above economists’ hopes for 5.2%, and up .4% month to month. One of the main differences in the rate of core and all item numbers is energy. Oil prices around the world are dropping and that’s driving the decrease in the all-items inflation number. The Fed has little control over energy and food prices, which is why its decisions are generally based on core inflation. While the Fed paused rate hikes in June, those increases may not be over if core inflation continues to disappoint.
So you knew that most of this year’s stock market gains came from just a few BIG tech stocks–but did you know the difference was this big?
So how big a difference has market cap weighting made? Remember the market cap weighted S&P 500 is up 14.77% in 2023 as of June 14. And up 12.02% for the last three months. The equal-weighted S&P 500, on the other hand, is up just 4.77% for 2023 as of June 14 and ahead 5.18% for the last three months. To understand what “weighted” and “unweighted” mean read the post
Please Watch My New YouTube Video: China Weaker Than Expected
Today’s Trend of the Week is China Weaker Than Expected. The key part here is “than expected.” In the most recent official government report, Chinese exports were down 7.5% year over year. Economists were expecting a much more modest drop of 0.4%. The semi-annual projections from the World Bank and the OECD (Organization for Economic Cooperation and Development) predicted a slowing for the global economy, but still a relatively positive outlook. However, those projections were based on solid growth from China, which the latest official figures suggest is certainly not a done deal. The World Bank and OECD reports imply that if China’s growth disappoints, world economic growth projections of 1%-2% will be high. At this point, the global economy is leveraged to Chinese economic growth, so if China doesn’t do well, that spreads throughout the world. Low-income countries that cannot pay their debts and are facing higher interest rates are sounding the alarm that they may soon be unable to feed their people. A slowing global economy would essentially amount to a run on low-income countries, which could spread to the rest of the economy. This is a trend to keep an eye on and a good time to make sure your investments are in dollar-denominated assets. (Not that the dollar is in such great shape.)
Please Watch My New YouTube Video: Quick Pick 2-year Treasury Buy Recommendation Follow-Up
Today’s Quick Pick is 2 Year Treasuries Follow-Up. In my last Quick Pick, I said that if the Two-Year Treasury yield got up over 4.5, it’d be a good time to buy. Well, on June 6, the yield on the Two Year Treasury hit 4.58, up 68 basis points in one month. There is still a lot of issuance to come, so you may want to go in at half now and half a little later. From June 2-June 13, the Treasury increased the supply of Treasury Bonds by $131 billion in an effort to rebuild its cash position. They’ll continue to issue more bonds through July to meet their goal of $500 billion. The peak here would be sometime in the next few weeks or in July. The reason to buy the Two Year is it’s very sensitive to the Fed and economic changes. You can get a CD with a 5% yield, but the CD won’t earn you capital appreciation. If rates go down when the Fed stops raising rates, treasury yields may go down, but the bond will go up. Right now, be looking for that peak yield, possibly 4.6 in the coming days and weeks. (After the June 14 Fed meeting the yield on the 2-year Treasury rose to 4.69%, I’d note. Looks good to me here for a half position.)
Fed, as expected, holds interest rate steady–but oh, that jawboning
As expected, the Federal Reserve’s Open Market Committee held the central bank’s benchmark interest rate steady today at 5.0% to 5.25%. But the Fed in its meeting press release and Fed chair Jerome Powell’s press conference stressed that its inflation fight isn’t over. That the market could see another interest rate increase at the July 26 meeting. And that the market should not expect a pivot to interest rate cuts anytime soon.
Please Watch My New YouTube Video: FOMO is Back!
FOMO is back. FOMO (or, fear of missing out), sweeps over the market every so often. And it’s certainly been familiar in the last year or more. Portfolios and investors buy stocks because they’re going up and they don’t want to miss out, even if the stock’s valuation doesn’t really make much sense. Apple recently announced its new VR headset, priced at $3,500 while the competition is closer to $350. The new technology is impressive but whether or not there is a market for this high-priced item is unclear. Kim Forrest, from Bokeh Capital, commented on Bloomberg that “Apple’s valuation hasn’t been compelling for years. You buy it because it mints cash and the gravitational pull of it in the index makes you need to own it to keep up with the markets.” Essentially she says, I don’t like it, but I need it or I’ll miss out on one of the main stocks propping up the S&P 500 at the moment. I’ve talked about the narrow market before and this is another example of core technology companies propping up a sideways market. Investors are flocking to stocks like Apple so they don’t miss out on gains, even though the air between the valuation and price continues to increase. The worry is that FOMO can collapse very suddenly when investors decide they’re no longer willing to pay the high price or we hit a recession.
My 10 Stocks for Your Core Portfolio–with the “whys” for each pick
I think a well-constructed portfolio should resemble an onion. (Yes, to continue the analogy, it may make you cry in the short term, but the end result after cooking time is yummy.) At the center of that onion is a core built of stocks with extremely high, risk-adjusted potential rates of return. These stocks won’t deliver the kind of huge gains you can reap from investing in a risky bet–if everything turns out right for that company and its stock. But neither are they likely to crash and burn because something goes wrong at the company. These core portfolio stocks will drop if the market as a whole heads south, but they will drop less and recover faster. These aren’t buy-and-forget, or hold-forever stocks. They can soar to unreasonable valuations at times and an active investor should take profits at some point of overvaluation. (I did a YouTube video recently (you can find it on any of my sites) on when to sell a very overvalued Nvidia, for example.) And they can trade at big discounts to fair value (which is, of course, when the steely-eyed among us will buy) because management has made a mistake or between the industry in which they do business is slumping, or because the market for the company’s goods and services has taken an unexpected direction. At that point, you’ll need to consider selling or adding to your positions depending on your analysis of how long the damage might last and how bad it is. But the point of this core to your stock portfolio is that these are companies that will deliver index-beating results with relatively small risks. Which will enable you, the investor, to plan how to achieve your financial goals with relatively less worry and uncertainty. So, without further ado, here’s my list of 10 stocks for a core portfolio–with the very important “whys” for each pick.
The Fed’ s political problem just about guarantees a pause to interest rate increases tomorrow
They call it the “headline CPI” for a reason. Today all the headlines I’ve seen tout the drop in headline inflation, the all-items Consumer Price Index, in May to an annual inflation rate of 4.0%. In April the annual inflation rate was 4.9%. The month-to-month rate dropped to an increase of 0.1% from April from 0.4% in April. This is undoubtedly good news on inflation. But, beyond the headline number, the inflation picture wasn’t nearly as rosy. The core CPI, which doesn’t include changes in the prices of food and energy, rose 0.4% in May from April. The annual core inflation rate was 5.3% in May. Economists had expected a 5.2% annual core inflation rate.
Saturday Night Quarterback says, For the week ahead expect…
This week brings potentially market-moving doses of news on inflation and interest rates. First up, inflation. On Tuesday, June 13, the market will get the report on CPI (Consumer Price Index) inflation for May. Economists project that, because of falling gasoline prices in the month, all-items headline CPI will show just a 0.2% increase in month-to-month inflation in May and just a 4.1% year-over-year inflation rate. That would be the lowest annual inflation rate since March 2021. The core rate, however, is expected to climb at an annual 5.3%. And then on Wednesday, the Fed meets on interest rates.
New claims for unemployment rise: jobs market may finally be softening
Initial jobless claims rose by 28,000 to 261,000 in the week ended June 3, which included the Memorial Day holiday, according to the Labor Department, Thursday, June 8. The increase was the biggest since July 2021 and exceeded all forecasts in Bloomberg’s survey of economists. The total number of new applications was the highest since October 2021, suggesting mounting layoff announcements may be starting to translate into job cuts.
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