by Louis Navellier
December 20, 2022
Last Tuesday, the Labor Department announced that the Consumer Price Index (CPI) rose only 0.1% in November and 7.1% in the past 12 months. The monthly CPI was lower than the economists’ consensus expectation of 0.3%, and that triggered a massive bond rally that caused Treasury yields to plummet.
The core CPI, excluding food and energy, rose just 0.2% in November and 6.0% in the past 12 months. Energy prices plunged 1.6% in November (as gasoline prices declined 2%), while food prices rose 0.5%. Used vehicle prices declined 2.9% in November and they have now fallen 3.3% in the past year. The CPI component that remains problematic is housing (owners’ equivalent rent), which rose 0.6% in November.
The 10-year Treasury bond yield has declined 80 basis points since late October, while the 2-year Treasury note has declined 55 basis points since early November. As I have said many times, the Fed never fights market rates, so even though the Chairman is warning us of more possible rate increases, I feel they will pause after last Wednesday’s 0.5% rate hike, since they will be in synch with market rates.
On Wednesday, the FOMC statement did not change much from its previous statement in November. However, the Fed lowered its economic growth outlook, which is dovish. Its famous “dot pot,” however, indicates that the Fed funds rate will rise to 5.1%, up from 4.6% back in September, which is hawkish. However, the “dot plot” is not unanimous, and dissension among members has finally materialized with a wide (70 basis points) deviation. The Fed also plans on continuing to reduce its balance sheet.
The Wall Street Journal last week discussed how there is a growing consensus that the Fed will be able to engineer a “soft landing” in 2023, where economic growth slows, but the labor market remains healthy. Furthermore, Treasury Secretary Janet Yellen said on 60 Minutes that inflation would cool in 2023, and she painted a relatively upbeat economic outlook, despite acknowledging the risk of a recession.
On Thursday, the market declined when the Commerce Department announced that November retail sales plunged 0.6%, which was significantly below economists’ consensus estimates of a 0.3% decline. This was the largest monthly decline in 11 months, but retail sales rose 6.5% in the past 12 months. Vehicle sales declined 2.3% in November and other big-ticket items, like furniture, building materials, and electronics, also declined, but excluding gasoline and vehicle sales, retail sales declined by only 0.2%.
Nine of the 13 industries surveyed reported sales declines in November, but sales at bars & restaurants rose 0.9% in November, so at least consumers were “out and about.” However, this was still a very disappointing report, as economists will now revise their fourth-quarter GDP estimates lower.
I should add that the Atlanta Fed revised their fourth-quarter GDP estimate down to a 2.8% annual pace last Thursday after the retail sales report came out below its previous estimate of 3.2% annual growth.
Additionally, the Labor Department on Thursday announced that weekly unemployment claims declined to 211,000, down from a revised 231,000 in the previous week. Continuing unemployment claims rose to 1.671 million, up slightly from a revised 1.672 million in the previous week. Taken together and given the long-term trend, the labor market remains healthy and will not likely impact Fed policy.
The Winter Fuel Market is Tightening Up
Winter officially starts tomorrow, December 21. It is now very cold in much of Europe and the U.S., so natural gas prices are rising. Furthermore, crude oil inventories have plunged in recent weeks, so the decline in crude oil prices for the past several days is expected to be short-lived. However, a glut of gasoline should keep the prices at the pump relatively low until demand picks up in the New Year.
The jury is still out on the G7’s $60 price cap on Russian oil. All I can tell you is that my tanker stocks “gapped” up on Monday, so I suspect crude oil transportation is picking up. The LNG business is also robust, now that a cold front enveloped Europe and natural gas demand is soaring. The easiest way for Russia to get around the G7 $60 price cap is to just sell crude oil to China, India, Saudi Arabia, and the UAE, who can refine the Russian crude and sell it as refined products, like diesel, heating oil, and jet fuel.
Due to the phasing out of COVID lockdowns, China’s refiners have started purchasing more crude oil from Brazil, West Africa, and the Middle East in anticipation of rising demand. Russia has traditionally been a big energy supplier to China, so I expect they will export more crude oil and natural gas to China.
The electric vehicle (EV) industry is still struggling with high battery costs and supply shortages. For those who have followed my struggle with the battery in my family’s Audi e-tron, it is still “dead” with only 23,095 miles and it has now been dead for almost five months, ever since we took it in to be fixed under warranty. Two new battery cells have arrived, so we will see if it accepts a charge. The fact that the older EVs have to have batteries replaced, with long delays, will likely exacerbate the battery shortage.
Due to these and other delays and price increases, some EV firms are now seeking consolidation. Rivian was shunned by Ford after discussing a joint venture and now Rivian has canceled its plans to build vans in Europe with Mercedes-Benz, just three months after that joint venture was announced.
FTX Corruption is Just Beginning to Unwind
FTX founder Sam Bankman-Fried was scheduled to testify before Congress on Tuesday, but he was arrested (to the relief of many members of Congress that accepted money from Sam Bankman-Fried) the day before, so the most interesting Congressional testimony will now be from CNBC’s Kevin O’Leary.
Since CNBC’s Jim Cramer and others on CNBC called Sam Bankman-Fried “the next JP Morgan,” there has been some soul searching on CNBC. Squawk Box hosts were very condescending when Kevin O’Leary appeared, so it will be interesting how he handles questions in front of Congress. Since O’Leary was paid almost $15 million to be a FTX spokesman, he is receiving relentless criticism.
Interestingly, Sam Bankman-Fried has appeared before Congress more than SEC Chairman Gary Gensler in the past 12 months. Since Chairman Gensler taught cryptocurrencies at MIT, I am curious if Sam Bankman-Fried was one of his students. Caroline Ellison, the daughter of the head of MIT’s Economic Department, was the CEO of Alameda Research that apparently sank FTX, but was not a Gensler student, since she attended Stanford. However, Gensler apparently met Caroline Ellison via her father at MIT.
I should add that Caroline Ellison hired the recent former head of SEC Enforcement, Stephanie Avakian, for her defense. The FTX scandal is just beginning, and since Bankman-Fried was the second biggest political donor this election cycle (to #1 George Soros), we’ll see if he gets any special treatment.
When the new leadership of the House takes over in January, Sam Bankman-Fried’s actions to buy influence in Congress will likely be endlessly debated, in part to humiliate some of our elected leaders.
The SEC lawsuit filed against Bankman-Fried accuses him of using client funds to buy influence in Congress. Interestingly, when Bankman-Fried was doing his apology tour after the FTX bankruptcy, he said that the $39 million that he donated to members of Congress was from earnings from Alameda Research. Some of the members of Congress that accepted money from Sam Bankman-Fried have offered to donate that money to charity, but in fact, if the SEC allegations are true, that money should be returned to the bankruptcy court trustee for restitution to clients, not charity, since the money belonged to clients.
Navellier & Associates does not own, Mercedes-Benz or Rivian Automotive (RIVN). Louis Navellier and his family do not own Mercedes-Benz or Rivian Automotive (RIVN) personally.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Inflation and Treasury Rates are Decreasing – But the Fed Seems Blind to Both
Income Mail by Bryan Perry
The Fed Is Right on Course to Overtighten
Growth Mail by Gary Alexander
My Top 10 “Better Business” Books for 2022
Global Mail by Ivan Martchev
The Bond Market Does Not Believe the Fed
Sector Spotlight by Jason Bodner
Invest Like Signalman Jack – Follow a Simple Playbook and Plan
View Full Archive
Read Past Issues Here
CHIEF INVESTMENT OFFICER
Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.
Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.
None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.
Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.
One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.
ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:
- ETF shares may trade above or below their net asset value;
- An active trading market for an ETF’s shares may not develop or be maintained;
- The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
- The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
- Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.
Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.
Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.
This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing firstname.lastname@example.org. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.
FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.
IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades. Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.
Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.
Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.
FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.