Raphael Stevens

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    American veterans now receive absurdly generous benefits

    Donald Trump delights in projecting strength, meaning he loves America’s armed forces. During his first term, the president-elect signed legislation to spend more on defence, before proclaiming that he had “accomplished the military”. On the campaign trail, he doubled down, vowing further increases in defence spending and promising to tackle a recruitment shortfall. Yet he also wants to cut government waste, and has hired Elon Musk to lead a Department of Government Efficiency (DOGE). More

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    Why Black Friday sales grow more annoying every year

    When is black Friday? The obvious answer is a literal one. It is the day after Thanksgiving, an American holiday when families gather to gorge on turkey and pumpkin pie, which this year falls on November 29th. Yet Black Friday is not simply a date, it is also an idea. The day traditionally marked the beginning of the festive shopping season, when people would start to stock up on Christmas presents. Today, it is the time of year during which everything goes on sale. And pinpointing when this begins is a much more difficult endeavour. In a bid to find an answer your columnist searched her inbox for the earliest Black Friday discount offered by a retailer. The missive came in early October. More

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    Why exchange-traded funds are a ‘growth engine’ of active management

    ETF Strategist

    ETF Street
    ETF Strategist

    Investors have added money to actively managed exchange-traded funds in recent years, while pulling money from active mutual funds.
    That’s largely because of ETF cost advantages, including lower investment fees and greater tax efficiencies, experts said.

    Images By Tang Ming Tung | Digitalvision | Getty Images

    Actively managed exchange-traded funds are a growing trend in the investment space.
    To that point, investors have pulled money from active mutual funds and sought out actively managed ETFs in recent years. Investors yanked about $2.2 trillion from active mutual funds from 2019 through October 2024, according to Morningstar data. At the same time, they added about $603 billion to active ETFs.

    Active ETFs had positive annual inflows from 2019 through 2023 and are on pace for positive inflows in 2024, according to Morningstar. Meanwhile, active mutual funds lost money in all but one year (2021); they shed $344 billion in the first 10 months of 2024.

    “We see [active ETFs] as the growth engine of active management,” said Bryan Armour, director of passive strategies research for North America at Morningstar. While acknowledg
    “It’s still in the early innings,” he said. “But it’s been a bright spot in an otherwise cloudy market.”
    At a high level, mutual funds and ETFs are similar.
    They are legal structures that hold investor assets. But investors have gravitated toward ETFs in recent years due to cost benefits they generally enjoy relative to mutual funds, experts said.

    Why fees matter

    Fund managers who use active management are actively selecting stocks, bonds or other securities that they expect to outperform a market benchmark.
    This active management generally costs more than passive investing.
    Passive investing, used in index funds, doesn’t require as much hands-on work from money managers, who basically replicate the returns of a market benchmark like the S&P 500 U.S. stock index. Their fees are generally lower as a result.
    Active mutual funds and ETFs had an average asset-weighted expense ratio of 0.59% in 2023, versus 0.11% for index funds, according to Morningstar data.

    More from ETF Strategist:

    Here’s a look at other stories offering insight on ETFs for investors.

    Data shows that active managers tend to perform worse over the long term than their peer index funds, after accounting for fees.
    About 85% of large-cap active mutual funds underperformed the S&P 500 over the past 10 years, for example, according to data from S&P Global.
    As a result, passive funds have attracted more annual investor money than active funds for the past nine years, according to Morningstar.
    “It’s been a rough couple decades for actively managed mutual funds,” said Jared Woodard, an investment and ETF strategist at Bank of America Securities.

    But, for investors who prefer active management — especially in more niche corners of the investment market — active ETFs often have a cost advantage versus active mutual funds, experts said.
    That’s mostly by virtue of lower fees and tax efficiency, experts said.
    ETFs generally carry lower fund fees than mutual fund counterparts, and generate annual tax bills for investors with much less frequency, Armour said.
    In 2023, 4% of ETFs distributed capital gains to investors versus 65% of mutual funds, he said.

    Such cost advantages have helped lift ETFs overall. ETF market share relative to mutual fund assets has more than doubled over the past decade.
    That said, active ETFs represent just 8% of overall ETF assets and 35% of annual ETF inflows, Armour said.
    “They are a tiny portion of active net assets but growing rapidly at a time when active mutual funds have seen pretty significant outflows,” he said. “So, it is a big story.”

    Converting mutual funds to ETFs

    In fact, many money managers have converted their active mutual funds into ETFs, following a 2019 rule from the Securities and Exchange Commission that allowed for such activity, experts said.
    So far, 121 active mutual funds have become active ETFs, according to a Nov. 18 Bank of America Securities research note.
    Such conversions “can stem the tide of outflows and attract new capital,” according to the Bank of America note. “Two years before converting, the average fund saw $150 [million] in outflows. After converting, the average fund gained $500 [million] of inflows.”
    That said, there are caveats for investors.
    For one, investors who want an active ETF are unlikely to have access to one within their workplace retirement plan, Armour said.
    ETFs, unlike mutual funds, are unable to close to new investors, Armour said.
    This may put investors at a disadvantage in ETFs with certain “super niche, concentrated” investment strategies, because money managers may not be able to execute the strategy as well as the ETF gets more investors, he said. More

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    ‘Moana 2’-led Thanksgiving box office could be best in post-pandemic era

    Disney’s “Moana 2” is set to hit theaters Wednesday and generate between $120 million and $150 million in box office receipts in the U.S. and Canada through Sunday.
    It’ll be joined by Universal’s “Wicked” and Paramount’s “Gladiator II,” both in their second week of domestic screenings.
    Box office analysts believe the five-day Thanksgiving weekend, which runs from Wednesday to Sunday, should easily clear $200 million in ticket sales and could even become the second or third-highest Thanksgiving period in cinematic history.

    Auliʻi Cravalho voices Moana in Disney Animation’s “Moana 2.”

    The domestic box office is poised for its biggest Thanksgiving haul since the pandemic thanks to a Polynesian princess, a pair of witches and a revenge-fueled gladiator.
    Disney’s “Moana 2” is set to hit theaters Wednesday and generate between $120 million and $150 million in box office receipts in the U.S. and Canada through Sunday. It’ll be joined by Universal’s “Wicked” and Paramount’s “Gladiator II,” both in their second week of domestic screenings.

    Box office analysts believe the five-day Thanksgiving weekend, which runs from Wednesday to Sunday, should easily clear $200 million in ticket sales and could even become the second- or third-highest Thanksgiving period in cinematic history.
    “The trifecta of ‘Moana 2,’ ‘Wicked,’ and ‘Gladiator II’ is a bona fide perfect storm for movie theaters this Thanksgiving,” said Shawn Robbins, director of analytics at Fandango and founder of Box Office Theory. “The holiday used to regularly see major releases combining for all-audience appeal, but that’s been a challenge for the industry to replicate in the post-pandemic era so far. This year is much different with such a holy trinity of tentpole releases that could anchor some of the biggest all-around box office results the holiday frame has ever seen.”
    The Thanksgiving holiday haul hasn’t topped $200 million since 2019, according to data from Comscore. Currently, the highest-grossing Thanksgiving weekend is 2018’s slate led by “Ralph Breaks the Internet,” “Creed II” and “Fantastic Beasts: The Crimes of Grindelwald,” which combined generated $315 million in ticket sales. The second-highest haul for the holiday period was the $294.2 million secured during the same five-day period in 2013.
    “Thanksgiving is arguably the most important holiday period of the year for movie theaters as it sets the tone for the year-end box office sprint,” said Paul Dergarabedian, senior media analyst at Comscore. “The strength of the final few weeks of the year will determine the total annual box office revenue and its perception as either a win or a loss for the industry.”
    And, Disney could use another animation win.

    After ruling the Thanksgiving box office for years with titles from Pixar and Disney Animation, it’s failed to live up to expectations with its recent string of releases.
    In 2016, “Moana” opened over the Thanksgiving holiday, generating $82.1 million. The following year “Coco” took in $72.9 million during its opening, and then in 2018 “Ralph Breaks the Internet” tallied $84.8 million during its debut over the five-day period. Just before the pandemic in 2019, “Frozen II” added $125 million over the Thanksgiving holiday after opening the week before to over $130 million.
    Meanwhile, “Encanto,” which arrived during the midst of the pandemic, managed to tally $40.6 million in 2021. “Strange World” flopped, having scooped up just $18.9 million during the holiday period in 2022, and “Wish” snared a meager $31.6 million in 2023. No Disney animated film was released over Thanksgiving in 2020.
    “Moana 2” should outperform these post-pandemic releases, however. It arrives in theaters a year after the first film was named the top-streamed film aimed at kids and families. And, audiences came out in droves for Disney and Pixar’s “Inside Out 2” over the summer. “Inside Out 2” opened to $154.2 million domestically and tallied more than $1 billion globally during its full run.
    Disclosure: Comcast is the parent company of NBCUniversal, CNBC and Fandango. NBCUniversal distributed “Wicked.” More

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    Donald Trump selects Kevin Hassett to lead National Economic Council

    President-elect Donald Trump picked Kevin Hassett to lead the National Economic Council.
    The move brings Trump closer to rounding out his economic team, with U.S. trade representative being the last of the key positions left.
    Trump made the announcement in a post on Truth Social.

    White House Council of Economic Advisers Chairman Kevin Hassett addresses reporters during the daily briefing at the White House in Washington, U.S. February 22, 2018.
    Jonathan Ernst | Reuters

    President-elect Donald Trump picked Kevin Hassett to lead the National Economic Council, a role that puts him at the center of the administration’s policy-making discussions from trade to taxes and deregulation.
    The move brings Trump closer to rounding out his economic team, with U.S. trade representative being the last of the key positions left.Trump made the announcement in a post on Truth Social.Trump also tapped attorney Jamieson Greer on Tuesday to serve as the U.S. Trade Representative.

    During Trump’s first administration, Hassett served as the chairman of the Council of Economic Advisers for two years, supporting the Republican’s corporate tax cuts and defending Trump’s punitive tariffs.
    The 62-year-old Hassett also worked with Trump’s son-in-law Jared Kushner on immigration and backed a move to end waivers of sanctions for countries that buy Iranian oil.
    The appointment came as Trump renewed his vow to raise tariffs by an additional 10% on all Chinese goods coming into the U.S. and impose tariffs of 25% on all products from Mexico and Canada. Such a move would end a regional free trade agreement.
    Trump is set to be inaugurated as the next U.S. president on Jan. 20. He cited illegal immigration and illicit drug trade as reasons for the tariffs.
    Hassett previously served as a scholar of fiscal policy at the conservative American Enterprise Institute think tank before Trump nominated him to the White House role in 2017.
    Late last week, Trump signaled his intention to nominate Scott Bessent, founder of hedge fund Key Square Group and a seasoned market pro, as his Treasury secretary. More

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    Databricks closes in on multibillion funding round at $55 billion valuation to help employees cash out

    Databricks is in the middle of a mega funding round, several people familiar with the matter told CNBC. 
    The data analytics and AI company is raising at least $5 billion in cash, pegging its new valuation at $55 billion, according to the sources.
    The software company is already one of Silicon Valley’s most valuable private startups and has been viewed as a potential IPO candidate.
    But this funding round pushes its public debut prospects further down the road, one source told CNBC. 

    Ali Ghodsi, co-founder and chief executive officer of Databricks Inc., speaks during a Bloomberg Technology television interview in San Francisco on Oct. 22, 2019.
    David Paul Morris | Bloomberg | Getty Images

    One of the world’s most valuable private tech companies is raising billions more in cash and is in no rush to go public, sources told CNBC. 
    San Francisco-based Databricks is raising at least another $5 billion in its latest funding round, though it could raise up to $8 billion given the round is ongoing, according to several people familiar with the matter, who asked not to be named because the discussions were private. The latest raise would value the company at $55 billion and could top the largest round of the year, by OpenAI.

    The latest funding is designed to help Databricks employees sell shares, one of the people said. Reducing pressure from employees to cash out also reduces the need for a liquidity event such as an IPO. One source said the funding round makes Databricks’ highly anticipated public debut less urgent. But it could still happen in the back half of next year.
    Databricks was founded in 2013 and sells software that helps enterprises organize data and build their own generative AI products. It uses machine learning to help clients from AT&T to Walgreens parse and make sense of massive troves of data. 
    This equity round could be the largest in a banner year for artificial intelligence funding, when 1 in 3 venture dollars has gone to an AI startup, according to CB Insights. OpenAI holds the record in 2024, raising $6.6 billion in October at a $157 billion valuation.
    Databricks last raised $500 million at a $43 billion valuation. It’s backed by Nvidia, Capital One, Andreessen Horowitz, Baillie Gifford, Fidelity, Insight Partners, Tiger Global and others. 
    The Information first reported that Databricks was raising money.

    The firm has capitalized on the momentum in artificial intelligence. This summer, it acquired MosaicML, a $1.3 billion software startup that focuses on large language models that can churn out natural-sounding text. Databricks told investors earlier this year that annualized revenue would hit $2.4 billion by the midpoint of 2024.
    Its decision to stay private comes as software stocks have struggled to get out of a rut brought on by higher interest rates. Shares of rival Snowflake are down 13% this year. While its fellow software IPO candidates such as Stripe have taken significant haircuts on valuations, Databricks has grown its value while expanding its employee base. 
    CEO Ali Ghodsi said at a conference Nov. 20 that he’s optimizing for the success of Databricks over the next decade or two, not optimizing for an IPO.
    “If we were going to go, the earliest would be, let’s say, mid-next year, or something like that,” Ghodsi said at Newcomer’s Cerebral Valley AI Conference. “So, you know, could happen next year.”
    A Databricks spokesperson declined to comment.
    Correction: OpenAI raised $6.6 billion in October at a $157 billion valuation. A previous version of this article misstated the valuation amount. More

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    Nordstrom tops Wall Street’s earnings expectations, as shoppers buy more clothes and shoes

    Nordstrom beat Wall Street’s revenue expectations and delivered a slightly rosier full-year sales outlook.
    The retailer’s sales growth is notable at a time when discretionary merchandise and the luxury sector have been under pressure.
    Clothing and shoe purchases lifted the company’s performance, with sales of women’s apparel and activewear jumping by double digits year over year.

    A sign marks the location of a Nordstrom store in a shopping mall on March 20, 2024 in Chicago, Illinois. 
    Scott Olson | Getty Images

    Nordstrom on Tuesday beat Wall Street’s quarterly sales expectations, as revenue grew about 4% year over year from shoppers buying clothing, shoes and activewear at both the company’s namesake department store and its off-price chain.
    Yet despite its better-than-expected quarter, the Seattle-based retailer gave only a slightly rosier full-year sales forecast — taking a conservative stance as it gears up for the busiest weeks of the holiday season. The company said it now expects full-year revenue, which includes retail sales and credit card revenue, to range from flat to up 1% for the full year. That compares to its previous range of a 1% decline to 1% growth. However, it stuck by its adjusted earnings outlook for the year of between $1.75 and $2.05 per share. 

    In a news release, CEO Erik Nordstorm said the company’s results show efforts to appeal to selective shoppers are paying off. Sales of women’s apparel and activewear shot up by double digits year over year. Shoes, men’s apparel and kids grew by mid-to-high single digits year over year. 
    Compared with the second quarter, women’s apparel, shoes and men’s apparel sales in the fiscal third quarter also grew sequentially.
    “Our customers have a lot of choices, and our results give us encouragement that we’re on the right path,” he said. “Looking ahead, we’ll continue to improve our shopping experience as we strive to maintain the positive momentum we’ve worked towards all year.”
    On the company’s earnings call, however, he said Nordstrom saw “a noticeable decline in sales trends towards the end of October.” It factored that slowdown into its holiday expectations, he said.
    Here is how Nordstrom did in the three-month period that ended Nov. 2 compared to what Wall Street anticipated, based on a survey of analysts by LSEG:

    Earnings per share: 33 cents adjusted, it was not immediately clear if it was comparable with analysts’ estimates
    Revenue: $3.46 billion vs. $3.35 billion expected

    Nordstrom’s net income for the fiscal third quarter was $46 million, or 27 cents per share, compared with $67 million, or 41 cents per share, in the year-ago period. Revenue rose from $3.32 billion in the year-ago quarter.
    After excluding a charge related to accelerated depreciation of technology, Nordstrom reported adjusted earnings per share of 33 cents.
    Comparable sales increased 4% across Nordstrom’s two brands, its namesake and its off-price chain, Nordstrom Rack. That easily topped analysts’ expectations for 0.7% gains in comparable sales, according to StreetAccount.
    Nordstrom’s sales growth, while modest, is notable at a time when sales of discretionary merchandise and the luxury category have been under pressure. Retailers including Walmart, Best Buy and Target have reported over the past week that customers remain choosy when it comes to buying items that are wants, not needs, and have paid more attention to price. 
    Nordstrom’s sales growth also grew, despite a calendar shift with its Anniversary Sale. In the year-ago quarter, eight days of the sale fell into the three-month period, but only one day fell in the quarter this year. That had a negative impact on net sales of about 1%.
    Macy’s, which postponed its full earnings, said third-quarter sales fell 2.4% and comparable sales for its owned and licensed businesses plus online marketplace dropped 1.3%,
    Nordstrom has leaned on its off-price chain, Nordstrom Rack, to drive both sales growth and new store locations. Yet in the third quarter, the two banners reported similar comparable sales – with the namesake store’s up 4% and Nordstrom Rack up 3.9%.
    So far this year, Nordstrom has opened 23 new Nordstrom Rack stores, which lines up with the company’s plans to open 20 to 25 new Racks per year.
    At the end of the quarter, the company launched store fulfillment for online orders at Nordstrom Rack in over 100 stores across the country, CEO Erik Nordstrom said on the company’s earnings call. He said the company also launched a new feature which allows customers to buy online and pickup in store, at the same stores.
    Digital sales rose 6.4% year over year and in the quarter, e-commerce accounted for about a third of total sales.
    Erik Nordstrom said the company added better search and discovery features to its website and app, which supported online growth in the quarter. He said it also added more items that are under $100 in price and expanded its third-party marketplace business, which now has over 300 sellers.
    Nordstrom’s latest quarterly update comes about two months after Nordstrom’s founding family made a fresh bid to take the company private. According to a filing in September, CEO Erik Nordstrom, President Peter Nordstrom and Mexican retailer El Puerto de Liverpool sent a non-binding letter to form an entity that would buy the chain for $23 per share. 
    Shares of the company have shot up since a Reuters report in March that Nordstrom’s founding family wanted to take the company private. As of Tuesday’s close, the company’s stock has risen 32% so far this year, outpacing the S&P 500’s 26% gains. More

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    Automaker shares fall as Trump threatens 25% tariff on Mexico and Canada

    Automaker shares dropped on Tuesday after President-elect Donald Trump threatened a 25% tariff on goods from Mexico and Canada.
    Companies like General Motors and Stellantis have major manufacturing presences in Mexico and Canada.
    Trump had been expected to renegotiate the regional trade deal he reached during his first term.

    A carrier trailer transports Toyota cars for delivery while queuing at the border customs control to cross into the U.S., at the Otay border crossing in Tijuana, Mexico May 31, 2019.
    Jorge Duenes | REUTERS

    DETROIT – Shares of automakers General Motors and Stellantis fell Tuesday after President-elect Donald Trump threatened to put 25% tariffs on goods imported from Canada and Mexico into the U.S.
    Such tariffs would have a major impact on the global automotive industry, which has used the countries, particularly Mexico, for lower-cost production of vehicles since the North American Free Trade Agreement went into effect in 1994.

    UBS reports the automotive industry is responsible for 26% of imports from Mexico to the U.S., including vehicles and parts, and 12% from Canada.
    Nearly every major automaker operating in the U.S. has factories in Mexico, however GM and Stellantis produce highly profitable full-size pickup trucks there.
    Shares of GM, which has five large assembly plants in the countries that Barclays estimates will produce 1 million vehicles this year, on Tuesday closed down 9% to $54.79 per share.

    Stock chart icon

    Shares of GM, Ford and Stellantis.

    Chrysler parent Stellantis, which has four major plants in the countries, dropped 5.7% to close at $12.61 per share. Shares of Ford Motor, which has less exposure in the countries but does produce vehicles in both, closed down 2.6% to $11.10 per share. Stocks of Toyota Motor, Honda Motor and others with production in Mexico closed down 3% or less.
    Trump announced he intends to levy a 25% tariff on all U.S. imports from Canada and Mexico using an executive order when he is inaugurated on Jan. 20. He also announced plans to raise tariffs by an additional 10% on all Chinese goods coming into the U.S.

    Such tariffs would be more aggressive than what was expected to be Trump’s plan, a renegotiation of the United States-Mexico-Canada Agreement, which he hashed out during his first term to replace the North American Free Trade Agreement. Such a move would end the regional free trade deal.
    Spokespeople for GM and Stellantis declined to comment Tuesday on the potential tariffs. The American Automotive Policy Council, a lobbying group for the two automakers and Ford, did not immediately respond for comment.
    “The obvious fact here is Ford is the most committed to building in America among the major automakers and it’s not that close. We assemble the most vehicles, employ the most America workers and export the most vehicles from America to other markets,” Ford said in an emailed statement.

    Wall Street analysts viewed Trump’s announced tariff plans as a shot across the bow at the countries to create leverage in any upcoming negotiations.
    “Our view is that the threat of tariffs is the instrument Trump would use to extract from other countries the economic and political outcomes that he considers best for America,” BofA Securities’ Carlos Capistran said in a Tuesday note. “We expect Canada and Mexico to show willingness to negotiate on the above issues to avoid tariffs.”
    Barclays’ Dan Levy agreed in an investor note Monday night: “We view [the] announcement as largely negotiation tactics (as seen in 2016), and see such magnitude of tariffs unlikely.”
    Trump and Democrats alike said they believe the trade deal needs to be changed to address potential plans for Chinese manufacturers such as BYD.
    Trump floated several tariff proposals during his campaign, including calling for a more than 200% duty or tax to be levied on imported vehicles from Mexico. He also has threatened, as he did during his first term in office, to increase tariffs on European vehicles.
    – CNBC’s Michael Bloom contributed to this report.

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