In his Daily Market Notes report to investors, while commenting on social security benefits, Louis Navellier wrote:
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
You may have noticed that shipping companies consolidated after the crude oil pipeline break in South California was blamed on a containership anchor dragging the pipe 4,000 feet. The alleged containership with the anchor incident has not been identified, but I expect the entire shipping group to rebound strongly due to ongoing supply chain glitches. Like Britain, the U.S. also has an acute shortage of truck drivers, which just exasperates the supply chain bottleneck.
IMF Cut Its Global GDP Forecast
Speaking of port bottlenecks and supply shortages, the International Monetary Fund (IMF) on Tuesday cut its global 2021 GDP forecast to 5.9%. For 2022, the IMF is forecasting 4.9% global GDP growth. The IMF also noted that surging commodity prices have helped boost some emerging economies, but also acknowledged that many developing economies are being left behind as low Covid vaccination rates and higher energy prices impede economic growth.
The order backlog for major economies, like China, Germany and the U.S., remains very high and has been complicated by the Taiwan semiconductor chip shortage. Interestingly, on CNBC Squawk Box on Tuesday, Kyle Bass, who is the founder of Hayman Capital Management, said that it is “Inevitable that Taiwan’s days are numbered.” If China did invade Taiwan, not only do they face a possible military reprisal, but also higher tariffs and sanctions from other countries. So I respectfully disagree with Kyle Bass.
General Motors announced on Tuesday that LG Electronics would reimburse GM for $1.9 billion in manufacturing defects in the Chevy Bolt battery modules from LG plants in South Korea and Michigan. I should add that LG has a massive lithium-ion battery plant in Poland that supplies, Audi, Ford, Jaguar, Mercedes, Porsche and VW, so it appears that these battery problems were unique to GM. I should add that this LG settlement is a big deal, since it was delaying GM’s electric vehicle (EV) transition, so the EV revolution can now continue.
The other interesting development this week is that House Speaker Nancy Pelosi is back from her Vatican visit and suggested that leading Democrats (e.g., Nancy) could slash entire pieces of President Joe Biden’s economic plan, so what remains could be pushed through Congress. Specifically, Speaker Pelosi said in an internal correspondence to House Democrats that “In order to pass both the Build Back Better Act and the Bipartisan Infrastructure Bill on time, it is essential that difficult decisions must be made very soon.” It appears that green energy initiatives remain Pelosi’s top priority and that other priorities, like extended childcare, paid leave and Medicare, would have to be trimmed extensively or eliminated. So expect more Congressional infighting in the next few weeks.
Social Security Benefits Expected To Rise
The news on the inflation front looks bad, but I found many positive tidbits in the details. The Labor Department reported on Wednesday that the Consumer Price Index (CPI) rose 0.4% in September. Food prices rose 0.9% in June, while energy prices rose 1.3%. Excluding food and energy, the core CPI rose 0.2% in September. In the past 12 months, the CPI and core CPI are running at an annual pace of 5.4% and 4%, respectively. I found it interesting that the Labor Department report shows a chart of the CPI increase for the past 13 months to illustrate that the CPI is cooling off since its June surge. Essentially, this Labor Department CPI chart was apparently designed to make the argument that inflation is largely “transitory.” Nonetheless, due to a tight labor market and higher service costs, I expect that inflation will continue to remain elevated for the foreseeable future.
Thanks to high inflation, Social Security benefits are expected to rise 5.9% in 2022, which is the highest annual increase in 40 years. This boost in Social Security benefits should help consumer spending rise next year. Inflation and the port bottlenecks are now nightly news. Although the Biden Administration will try to remind us that Social Security benefits had the largest increase in 40 years, it will be interesting if those benefits can offset the anger that consumers now have over higher food and energy prices.
Heard & Notable
Over the span of five years, tech companies have taken over all of the top 8 spots of the World's Best Employers ranking. In 2017, only half of the top 8 companies were from the tech sector. Alphabet, Microsoft, and Apple - have remained among the top spots of the ranking throughout. Source: Statista