June 15
Today, the November elections look very close. Policy will become increasingly relevant to stock market performance.
Surprisingly, Trump could win in Virginia. If that were to happen, Trump would win the ball game in a landslide, how about that for mixed metaphors.
https://www.wsj.com/politics/elections/biden-trump-virginia-2024-election-a7dc11ea
Markets and Stocks
The trend is to the upside. I believe that the S&P 500 will be approaching 6,000 by year end. The index is currently trading at around 5,400. But the market is consolidating the recent record highs. I would be cautious with new money.
I expect the biggest technology stocks, including Nvidia, to trade sideways for several weeks.
And I believe that over the next few months, industrials will do well. I really like CAT, DE and ETN.
Importantly, the broad market is attractive given the yield on the 10 year Treasury, about 4.20%. My call is for that yield to fall below 4%.
Low Treasury yields are positive for equities.
Again, I believe that over the next several years the so called Magnificent Seven stocks will do great. Yes, over the long term I do believe in Tesla, not because of EVs but because of Full Self Driving, FSD.
Among less well known technology companies, I am a fan of Dell, HPE, MU, GLW, ARM, ADI and ASML.
Rolls Royce, uranium and NYCB-very high risk, look good.
And I like Sunnova, NOVA, a solar power company. It is summer. It is going to be hot, very hot. And hurricanes will occur. The media will shout about climate change. It is my call that NOVA will benefit from the weather and from the noise. I believe that the stock can double over the next 12 months.
The Indian stock market is white hot.
European markets are not.
European stocks headed for their worst week since October on growing concerns about political turmoil in France.
The Stoxx 600 weakened 0.3% to extend losses since Monday to 1.7%. France’s CAC 40 index slumped 1.4%, weighed down by banking shares such as BNP Paribas SA and Societe Generale SA. The euro fell to its lowest against the dollar since April.
European markets are increasingly anxious after French President Emmanuel Macron announced a snap legislative election following his party’s drubbing in the European Parliament elections. Investors fear a win for Marine Le Pen’s far-right National Rally party, which leads polls by a wide margin, will usher in looser fiscal policies.
The uncertainty has sent the premium France pays on its debt relative to Germany soaring this week, on pace for the biggest move stretching back to the European debt crisis in 2011.
https://www.nytimes.com/2024/06/13/world/europe/france-snap-election-macron.html
France is running a 6% budget deficit. Under EU fiscal rules, France must reduce its deficit to 3%. That will be difficult. The French people are like Americans, they like free stuff from the government but don’t want to pay for it.
Tesla shareholders have reaffirmed a pay award of more than $45 billion for Elon Musk, the chief executive, after it was thrown out in a legal challenge.
The vote result, announced at Tesla’s annual meeting at its headquarters in Austin, Texas, on Thursday, is a strong sign that shareholders still believe in Mr. Musk, and it could persuade the judge who voided the award to reinstate it.
Support for the pay award, made up of stock options, will come as a relief to Mr. Musk’s admirers, who feared that rejection would prompt him to spend less time managing Tesla or even quit. See NYT
https://www.nytimes.com/2024/06/13/business/tesla-shareholder-vote-elon-musk.html
The vote is shareholder democracy in action. If you are dissatisfied with the vote, sell the stock.
When will shelter inflation fall ? Professor N. Gregory Mankiw writes:
The PPI for final demand tracks the CPI less shelter very closely. By both measures, inflation is now very much under control. The problem is that the CPI for shelter is up 5.6 percent, so the overall CPI looks quite hot.
Some would argue that leaving out shelter is misleading because shelter is such a large fraction of the typical household budget. On the other hand, the CPI for shelter is well known to be a lagging indicator of rents by virtue of how it is constructed, and other more current series show no recent inflation in rents. This latter argument puts me in the optimistic camp on inflation.
By the way, I recently made a bet with my friend Larry Ball that the overall CPI from February 2024 to February 2025 will rise by less than 2.5 percent. I am writing the bet here as a sort of contract. We will check back next year.
The bet is for $5. That is in nominal terms. So, in real terms, I get more if I win than Larry gets if he wins.
We shall see.
Economics
From the standpoint of economic efficiency, reducing the corporate tax is good policy. Trump is right on corporate tax policy. He is wrong on tariffs as tax policy.
https://www.nytimes.com/2024/06/13/us/politics/trump-corporate-tax-rate.html
A strong dollar is outstanding policy.
Politics
The CBO will begin to calculate the interest expense effect from changes in fiscal legislation. The U.S. has a deficit spending problem.
https://www.cbo.gov/system/files/2024-06/60277-debt-service.pdf
California is the country’s wealthiest state but its government is progressive; consequently, the state always has budget problems. LOL.
https://www.nytimes.com/2024/06/13/us/california-budget-explainer.html
Supreme Court Upholds Broad Access to Abortion Pill
The justices unanimously rejected a bid to sharply curtail access to a widely available abortion pill, finding that the plaintiffs in the case did not have standing to sue.
Will progressives stop whining about the Court?
The Supreme Court marginally reduced the power of the very progressive NLRB.
The Supreme Court ruled in favor of Starbucks on Thursday in a challenge against a labor ruling by a federal judge, making it more difficult for a key federal agency to intervene when a company is accused of illegally suppressing labor organizing.
Eight justices backed the majority opinion, which was written by Justice Clarence Thomas. Justice Ketanji Brown Jackson wrote a separate opinion that concurred with the overall judgment but dissented on certain points.
Sociology
Music promotes physical activity. Obesity is a national healthcare problem.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9905642/
Addiction is a scourge and a descent into hell for the addicted.
A top executive at Tyson Foods who is a fourth-generation member of the Tyson family business was suspended on Thursday after he was charged with driving while intoxicated, the company said in a statement.
John Randal Tyson, 34, the company’s chief financial officer and a great-grandson of Tyson’s founder, was arrested in Fayetteville, Ark., by the University of Arkansas Police Department and booked at the Washington County jail at about 1:30 a.m. Thursday, jail records show.
It was the second time in less than two years that Mr. Tyson had been charged with an alcohol-related offense.
Mr. Tyson, whose father is Tyson’s chairman, was named the company’s chief financial officer in September 2022. He had been in his position just over a month when he was arrested in November 2022, after a woman called the police to report that she had returned to her home in Fayetteville to find him asleep in her bed, The Arkansas Democrat Gazette reported.
https://www.nytimes.com/2024/06/13/business/john-randal-tyson-foods-arrest.html
Mr. Tyson needs to go behind the wire. Maybe incarceration will modify his neural pathways. Incarceration saved my life.