Category: Finances

DETROIT (AP) — Tesla shareholders voted Thursday to restore CEO Elon Musk’s record $44.9 billion pay package that was thrown out by a Delaware judge earlier this year, sending a strong vote of confidence in his leadership of the electric vehicle maker.
The favorable vote doesn’t necessarily mean that Musk will get the all-stock compensation anytime soon. The package is likely to remain tied up in the Delaware Chancery Court and Supreme Court for months as Tesla tries to overturn the Delaware judge’s rejection.
– Reported by Associated Press

Happy Friday.
The Dow Jones Industrial Average closed above 40,000 for the first time today.
Is the US stock market overvalued? I asked the AI chat bot Chat GPT.
Yes— by a lot, was the answer (with some caveats, see below).

Caveat emptor
– Latin for ‘buyer beware’: the buyer’s responsibility to do due diligence before purchasing a good or service.

I’m happy to report that the inflation rate (over the last quarter) for my favorite breakfast cereals is 0%.

I buy these online, though.
The difference between the online and in-store price can be enormous, at least here in my neck of the woods (neck of the city).

Kellogg’s All Bran: $4.98 online vs. $8.49 in-store (+70%).
McCann’s Steel Cut Oatmeal: $6.98 vs. $13 in-store (+86%).

Another month, another burst of better-than-expected job gains.
Employers added 303,000 jobs in March on a seasonally adjusted basis, the Labor Department reported on Friday, and the unemployment rate fell to 3.8 percent, from 3.9 percent in February. Expectations of a recession among experts, once widespread, are now increasingly rare.
– Talmon Joseph Smith writing for the NY Times

The S&P 500’s (.SPX) forward price-to-earnings ratio— a commonly used metric to value stocks— rose to 20.4 times this week, a level last reached in February 2022, according to LSEG Datastream.
That puts it far above the index’s historic average of 15.7.

It isn’t unusual for valuations to climb along with stock prices, and equities can stay expensive for a long time before returning to more moderate levels. Still, some investors believe the index’s growing multiple has made buying into the broad market a less enticing proposition. The S&P 500 has surged 21% since late October, making new record highs along the way.

It briefly crossed the 5,000 level at the end of Thursday’s session, before closing just below the mark.
– Lewis Krauskopf reporting for Reuters

The Federal Reserve Bank announced today that it is holding the federal funds rate steady.  (The rate  has been 5.25% to 5.5% since last summer.)

NYT Opinion writer Peter Coy points out (see below) that that means— with inflation coming down— that the Fed is actually tightening monetary policy.

The classic example of a soft landing is the monetary tightening conducted under Alan Greenspan in the mid-1990s. In early 1994, the economy was approaching its third year of recovery following the 1990-91 recession. By February 1994, the unemployment rate was falling rapidly, down from 7.8% to 6.6%. CPI inflation sat at 2.8%, and the federal funds rate sat at around 3%. With the economy growing and unemployment shrinking rapidly, the Fed was concerned about a potential pick-up of inflation and decided to raise rates preemptively. During 1994, the Fed raised rates seven times, doubling the federal funds rate from 3% to 6%. It then cut its key interest rate, the federal funds rate, three times in 1995 when it saw the economy softening more than required to keep inflation from rising.
– Sam Boocker and David Wessel writing for Brookings.edu, Sept. 14, 2023

They all turned out to be wrong— those economists and money managers that opined a year ago that we would have a recession here in the United States by now.

The year is almost out, and jobs are still being added to the economy.

The US economy added 336,000 new jobs to payrolls in September: about double what analysts had expected.
The stock market fell at first (the Fed may have to keep hiking interest rates), but by the early afternoon, the stock market decided that the initial sell-off was overdone, and by the end of trading the Dow Jones Industrial Index was up by 288 points (0.87%).

The estimated $1.55 billion Mega Millions jackpot for the Tuesday night drawing is one of the largest in U.S. history.

The odds to win the big prize is about 1 in 302.6 million.
Yes, you could buy 10 tickets and make it 1 in 30.26 million, but you would still be much more likely to be killed by an asteroid (1 in 1.6 million).

Update Tue 8/8: The largest jackpot in Mega Millions history, worth an estimated $1.58 billion, was secured in Florida on Tuesday night.
The winning ticketholder can choose between the massive $1.58 billion jackpot paid in annual payments or a one-time cash option worth an estimated $783.3 million.
The winning numbers were 13, 19, 20, 32, 33, and the gold Mega ball 14.
– From the New York Post.

The Federal Reserve raised the federal funds rate by a quarter percent today, to a range of 5.0-5.25%.

From the Wall Street Journal:
Powell didn’t rule out another rate rise at the central bank’s September meeting, but he emphasized how much the central bank had already done along with the amount of time it can take for monetary policy to cool inflation.
“We’ve come a long way. Inflation repeatedly has proved stronger than we and other forecasters have expected, and at some point that may change,” Powell said. “We have to be ready to follow the data, and given how far we’ve come, we can afford to be a little patient, as well as resolute, as we let this unfold.”
Fed officials have been concerned that underlying price pressures may prove more persistent as a solid labor market allows workers to bargain for higher pay, making it harder to get inflation down further.

Happy Friday.
Apple is worth an eye-popping $3 trillion as of today.
(Microsoft is valued at around $2.5 trillion).

“We feel like we’re getting closer or maybe even there.”
-Federal Reserve Bank Chairman Jerome Powell today, on whether more federal-fund rate increases are in the offing

The Federal Reserve Bank increased the federal-funds rate by another 0.25% today.
(So another message to the consumer to stop borrowing money, and to stop buying stuff that is not really needed.
The average credit card interest rate is now 24.25%, according to Forbes Advisor’s weekly credit card rates report. Inflation here in the States is now at about 5%.)

From the Wall Street Journal:
With the latest increase, the Fed has raised its benchmark federal-funds rate by a cumulative 5 percentage points from near zero in March 2022, the most rapid series of increases since the 1980s. The rate influences other rates throughout the economy, such as on mortgages, credit cards and business loans.

It was a rough week in the US stock market last week, and today went better.
Still, the uncertainty around inflation and a recession in 2023 is not going to be resolved for several more months.

Writes James McIntosh for the Wall Street Journal under a heading ‘Markets History 101: It’s Time to Buy Bonds‘:
Even after their big falls, stocks still look very expensive compared to bonds. The optimism that started this year has faded, but investors continue to bet that long-run inflation will come back under control and profit margins will stay high. And many remain wary of bonds, even as yields approach 4% on the 10-year Treasury and are above 5% on six-month bills.

The central lesson of financial history is that, over the long run, U.S. stocks beat bonds. But buying stocks when they are expensive—at 18 times estimated earnings for the next 12 months, they have rarely been pricier outside the dot-com bubble and the post-pandemic boom—is a recipe for substandard returns.

The largest lottery winnings ever is the Powerball payout of US$2.04 billion recorded just last year on Nov. 7, 2022.
As of today, and for tonight’s drawing, the Mega Millions prize is up to $1.35 billion.

From thelotter.com:
The biggest jackpots in the world, both starting and awarded, belong to US Powerball and Mega Millions.
Both of the lotteries jackpot prizes reset to an estimated US$20 million each time they’re won.
This is larger than many lotteries’ biggest payouts!
The second-biggest starting prize belongs to Europe’s transnational star: The EuroMillions.
The top prize starts at €17 million and can grow with each rollover until it reaches the prize cap.

Update Sat. 1/14:  The second largest jackpot in Mega Millions history was sold in Lebanon, Maine (pop. 6,000) at the Hometown Gas & Grill. The winner hasn’t come forward yet.

Fed officials voted unanimously to lift their benchmark federal-funds rate to a range between 3% and 3.25%, a level last seen in early 2008. Nearly all of them expect to raise rates to between 4% and 4.5% by the end of this year, according to new projections released Wednesday, which would call for sizable rate increases at policy meetings in November and December.
– The Wall Street Journal