by Louis Navellier
April 12, 2022
Have you noticed that it seems to take “forever” to get any new item delivered these days? Due to the war in Ukraine and the resulting sanctions and embargoes – on top of the already-interrupted supply chain, plus a new COVID outbreak in China – global trade is grinding down to a slow-motion “holding” action.
Currently, shipments from Shanghai are down 40%. China’s ongoing COVID restrictions in Shanghai have prevented Tesla from re-opening its manufacturing plant. There are reports of factory workers sleeping at manufacturing plants to keep factories running, but when China is forced to shut down its most productive coastal manufacturing province, there is no doubt that supply chain woes will persist.
As a result of these disruptions, the Purchasing Manufacturing Indices (PMIs) all over the world are at an 18-month low, and Europe is in a recession. Here in the U.S., where big order backlogs persist, we have so far been able to avoid falling into a recession, but with the exception of Tesla, U.S. auto manufacturers posted first-quarter sales declines, due largely to semiconductor chip shortages and other supply chain glitches. In March, U.S. vehicle sales were only 1.25 million, an anemic annual sales rate of 15 million. In the first quarter, GM’s sales declined 20.1%, while Ford’s sales declined 17.1% and Stellantis’ sales dropped 14%. Toyota’s sales declined only 4% last quarter, aided by all the hybrid vehicles it sells.
Interestingly, electric vehicle (EV) sales remain strong, on a percentage basis, and there is a waiting list for most EVs, but U.S. volume sales are anemic: GM only sold 457 EVs in the first quarter, 99 of which were Hummer EVs. Ford sold 6,734 Mach-e’s last quarter, but that is not enough to compete with Tesla. The main reason for these tiny sales figures is an acute shortage of lithium-ion batteries, along with the soaring costs of nickel and cobalt. It will be interesting to see if more U.S. companies follow Rivian and switch to less efficient and cheaper iron-phosphate batteries like Tesla has done at its Shanghai plant.
Frankly, since virtually all U.S.-made EVs, with the exception of Rivian, are betting on lithium-ion batteries, the production outlook looks bleak unless significantly more raw materials can be obtained.
However, that has become much more difficult, since Russia is a major nickel supplier. The bottom line is that the shortage of rare earth metals to build lithium-ion batteries continues to derail the EV revolution.
The Biden Administration is trying to make up the shortfall by invoking the Defense Production Act to ramp up production of these rare earth metals. Although a Presidential declaration would be welcome, the U.S. is not a major nickel producer and does not have the capacity to mine major amounts of cobalt, which comes predominately from the Congo – where children are forced to crawl into dangerous hand-dug 100-foot shafts to extract cobalt. It looks to me like the EV revolution is stalling, unless the U.S. and the rest of the world can find sufficient supplies of both nickel and cobalt for lithium-ion batteries.
In the meantime, The Wall Street Journal reported that the Biden Administration is seeking ways to boost crude oil imports from Canada, even though it has cancelled the Keystone XL pipeline over concerns that it would be shipping crude oil from Alberta’s tar sands. Specifically, the Biden Administration now wants Canada to ship Alberta’s crude oil via rail instead of via existing pipelines, which are near capacity.
Navellier & Associates owns Ford Motor Co (F), and a few accounts own Tesla (TSLA), per client request in managed accounts. We do not own Rivian (RVN), General Motors (GM), Stellantis (STLA) or Toyota Motor Corp (TM). Louis Navellier and his family personally own Ford Motor Co (F) via a Navellier managed account. He does not own Rivian (RVN), Tesla (TSLA), General Motors (GM), Stellantis (STLA) or Toyota Motor Corp (TM).
This is basically driving Canadians nuts, since shipping crude oil on trains is far more dangerous than using pipelines, especially during winter months, when trains can derail as train tracks shrink. In Canada, the memory of the July 2013 Lac-Megantic rail disaster, when 73 crude oil tankers derailed, killing 47 people and effectively destroying the Quebec town of Lac-Megantic, remains painfully in the minds of many Canadians, so they overwhelmingly prefer transporting crude oil via pipelines versus trains.
Today’s Inflation Statistics Will Dominate the News This Week,
After Last Week Delivered Few Key Market Indicators
We go to press the same time the Consumer Price Index (CPI) is released, but last week’s indicators were mixed: First, the Commerce Department announced that factory orders declined 0.5% in February, the first decline in 10 months. Also, January factory orders were revised up to a 1.5% increase from a 1.4% rise first reported. Ongoing supply chain glitches were cited as the primary reason for February’s decline.
Last Tuesday, The Institute of Supply Management (ISM) announced that its non-manufacturing (service) index rose to 58.3 in March, up from 56.5 in February. One strong component was the New Orders index, which rose to 60.1 in March from 56.1 in February. All 17 industries surveyed reported March expansion.
On Wednesday, the Fed released its latest Federal Open Market Committee (FOMC) minutes, which confirmed that the Fed will be reducing its quantitative easing by $95 billion per month, which consists of $60 billion in Treasury securities and $35 billion in agency debt. The FOMC minutes also revealed that the Fed wants to shrink its bloated balance sheet, which has swollen to $9 trillion due to spending to alleviate suffering in the Covid pandemic. The Fed minutes openly acknowledged that it was behind the curve (i.e., trailing market trends) and that 0.5% increments in Fed funds increases may be forthcoming.
On Thursday, the Labor Department announced that new weekly unemployment claims declined to 166,000 in the latest week, compared to a revised 171,000 the previous week. Continuing unemployment claims rose a bit to 1.523 million in the latest week, compared to a revised 1.506 million in the previous week. Economists were expecting 1.302 million in continuing unemployment claims, so this was a negative surprise and likely attributable to new seasonal adjustment formulas. On the positive side, economists were expecting new weekly unemployment claims to come in at 200,000, so 166,000 was a positive surprise. We’re still seeing the lowest weekly unemployment claims in 54 years (since 1968)!
Another piece of good news was that the Atlanta Fed on Friday revised its first-quarter GDP estimate up to 1.1% estimated annual GDP growth, up from 0.9% annual GDP growth previously estimated.
Ironically, despite all this good news, former Fed Governor, Laurence Lindsey, told CNBC, “I think we’re going to have a recession, probably in the next quarter.” Lindsey added that “inflation is eating into consumer spending power, they’re going to have to cut back.” Translated, this means retail sales must exceed inflation in upcoming months, or else “stagflation” will erode the consumer’s purchasing power.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Why Global Growth is Grinding to a Halt
Income Mail by Bryan Perry
Today’s Rate Shock Helps LNG Shine as a “Best Hedge”
Growth Mail by Gary Alexander
Forget March! Beware the “Ides of April”
Global Mail by Ivan Martchev
Is the Fed in “Panic” Mode?
Sector Spotlight by Jason Bodner
When to Sell Great Stocks…? (Perhaps Never)
View Full Archive
Read Past Issues Here
Louis Navellier
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.
Important Disclosures:
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 info@navellier.com. 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.