ARTICLES

An Alternative To Money Market Funds

November 2023

MARKET OVERVIEW
October is behind us and what a difficult month it was!! For the month of October, the Dow Jones Industrial Average declined by 1.3%, the S&P 500 fell by 2.1% and the Nasdaq dropped by 2.8%. Since peaking on August 1, the markets suffered a true correction.

ECONOMIC SUMMARY
Last Friday’s Nonfarm Payroll Report was a tad disappointing. 150,000 jobs were added in October, below the estimate of 180,000. The figures for August and September were also revised lower by 101,000 jobs. The U-3 unemployment rate clocked in at 3.9% while the U-6 rate was reported as 7.2%. The closely watched Labor Participation Rate dipped slightly to 62.7%. The next jobs report will arrive on December 1.

FEDERAL RESERVE
The Fed met on Oct 31 - Nov 1 and held rates steady at the current 5.25% - 5.50% level. The Fed’s vote was unanimous. Fed Chair Jerome Powell indicated that more hikes may be needed to cool inflation which is trending up again due to higher energy prices and the autoworkers’ strike. The Fed indicated it does not see any rate cuts next year. The Fed’s final scheduled meeting of the year will be held Dec 12-13

STOCKS TO WATCH
The green energy push seems to be running into real resistance around the globe. In America, electric vehicles (EVs) account for about 5% of this year’s auto sales. Hybrids and fuel vehicles (FVs) account for the remaining 95% of the year’s auto sales. So, by a margin of 95-5, consumers prefer FVs over EVs.Meanwhile, both Ford and GM dramatically cut back their planned production of EVs due to disappointing sales. Both GM and Ford expect to lose billions of dollars both this year and in 2024 on the EV business.

Meanwhile, EV maker Rivian (RIVN) loses nearly $33,000 on each vehicle sold, according to a report in Motor Trend magazine. On October 5, RIVN announced the pricing of $1.5 billion in convertible notes. Given the losses RIVN incurs with each vehicle sold, it is hard to see how Rivian can avoid additional  capital raises. Such moves will further dilute existing shareholders.

Leading car rental company Hertz (HTZ) is also dialing back its plans for EVs in its fleet. Back in 2021, Hertz announced it planned to have 25% of its fleet in EVs by 2024. But those plans are rapidly being trimmed. At present, HTZ fleet of EVs is 11% of its full fleet and Hertz is finding this number is too much to bear. During its 3rd quarter conference call, HTZ CEO  Stephen Scherr said that the cost of repairing an EV after an accident is about twice the cost of repairing an FV!! Scherr also noted that at a number of Hertz rental locations, drivers are receiving big discounts to rent an EV due to lack of demand.

My weekly radio show is now on holiday and should return soon on WWPR 1490 AM. My prior radio shows and columns are available on our website (www.amescapmgmt.com).

If you are unhappy with the returns now offered by money market funds feel free to contact us.

Disclaimer

The material contained in this website is for your private information. We are not soliciting any action upon it. The opinions expressed here are our present opinions only. The material is based upon information which we consider to be reliable. No representations are being made that it is accurate and complete and thus should not be relied upon as such. Past performance is neither an indication nor guarantee of future performance.