🎙️ Core Focus

For decades, Americans have loved their cars — symbols of freedom, a mark of one’s wealth, and materialism, depending on whom you ask.

Americans especially love their trucks, which consistently rank among the country’s most popular vehicles.

💭 Our Chart of the Day shows each state’s most popular car. What’s most well-liked in your state?

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• Inflation continued to normalize in November

• JPMorgan’s fight with a client who lost a $50 million fortune

• Attacks on vessels in Red Sea disrupt global oil trade

All this, and more, in just 5 minutes to read.

CHART OF THE DAY

IN THE NEWS

😅 Inflation Continues to Normalize

Happy CPI day. That’s right, new inflation data is out, and we wouldn’t be worth the keyboards we type this on if we didn’t report on it.

The Consumer Price Index crawled 0.1% higher in November, up 3.1% from a year ago.

• Consumers owe a tip of the cap to energy prices, which dropped 2.3%, underpinning the flat changes in CPI — gas prices fell 6%.

Core focus: In assessing “core” inflation, the Fed prefers to strip out prices for food and energy since they fluctuate more frequently than other important price benchmarks. So-called core CPI rose 0.3% last month, in line with estimates.

Other interesting CPI notes:

Housing prices (as measured by surveys of what homeowners think they could rent their houses for), actual rental costs, and hotel and lodging rates are captured under the “shelter” prices umbrella, comprising about a third of the CPI weighting.

• While shelter pieces moved 0.4% higher and were up 6.5% year-over-year, the inflation rate in this segment has been steadily declining.

Apparel prices fell the most since 2020 — a troubling sign for retailers amid holiday shopping.

Why it matters:

Nothing burger: As the head of rates strategy at BMO Capital Markets put it, “There’s nothing within the details that will immediately impact the Fed’s thinking.”

And the Fed will be doing lots of thinking. In fact, central bank officials started a two-day meeting on Tuesday that will culminate with their next decision on interest rates — nearly everyone expects them to leave things unchanged again.

• Quick aside: No one is cheering for the Fed to keep inflation in line more than baseball star Shohei Ohtani, who opted to defer most of his blockbuster $700 million contract to be paid out between 2034 and 2044. Someone needs to talk to him about the time value of money…

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📉 JPMorgan In Fight Over Client’s Lost $50 Million Fortune

Imagine having a $50 million fortune, only to let professionals manage it, then see it all evaporate.

That’s basically what happened to Peter Doelger, who built a company, sold it, and then invested the proceeds in stocks and oil to beat the market. By age 78, he was worth over $50 million. 

But he was also showing signs of dementia. Then came the losses. 

Bye bye fortune: Doelger and his wife relied on JPMorgan’s advice for managing their portfolio, but they kept losing money. In less than a decade, they went from $50 million to about $1.5 million, prompting them to sell their Boston home and move in with relatives. 

• Now, the high-stakes battle is playing out in Boston Federal court. Will a big financial firm be held responsible if a wealthy client develops dementia and their investments fall over 90%?
  

• The Doelgers are seeking tens of millions of dollars from the country’s biggest bank. The legal battle alone could wipe out their remaining savings.
  

• “We had 100% trust in them that they will manage our assets,” the Doelgers told Bloomberg. “We didn’t expect them to make us a fortune but at least make us comfortable.”

Who’s to blame? Peter, now 86, can’t remember much of what happened. 

In its defense, JPMorgan pointed out that the family wasn’t exactly frugal, splurging on the Boston condo, a $7 million Palm Beach mansion, a Paris apartment, and memberships at four private clubs.

• The bank also said the family signed an agreement in 2015 stating that he wanted to engage in sophisticated, risky bets on oil and gas.
  

• “JPMorgan repeatedly suggested to Mr. Doelger that he diversify and reduce his overall exposure,” the bank said in a statement.
  

• “Mr. Doelger signed an agreement, delivered to Mr. Doelger and his personal attorney, acknowledging that advice and affirming that he was ‘financially knowledgeable and sophisticated’ and ‘fully aware of the concentration risk.’”

Why it matters:

No signs? JPMorgan also said it has policies and procedures for protecting elderly and vulnerable clients, adding that “no one” at the bank saw any signs of his cognitive decline. 

• The case highlights an issue that could become more common as the Baby Boom generation retires with a record pile of wealth. Many will face cognitive decline in the coming decades, and the financial system doesn’t have a clear model for when that happens. This case could set a precedent.
  

• “This case screams out for more attention to how waning cognitive abilities affect older people’s capacity for financial decision-making and independent financial management,” said a financial analyst and consultant.
  

• “We need to put more responsibility on financial firms since they are well-positioned to detect warning signs.”

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MORE HEADLINES

🛢️ Why oil prices keep falling 

📱U.S. teens ‘almost constantly’ use YouTube and TikTok, per report

🧸 Hasbro to layoff 1,100 workers on weaker holiday toy sales

👩🏻‍⚖️ Jury rules against Google’s app store in antitrust hearing

🤝 Occidental Petroleum to buy Crownrock for $12 billion and raise dividend

☕️ + 🚗 Starbucks joins the EV business

⛴️ Oil Investors Watch Attacks on Shipping Vessels in Red Sea

Fallout from the ongoing conflict between Israel and Hamas initially stoked fears of a wider regional conflict that could, among other disruptions, throw the global oil market into turmoil.

While the conflict has mostly been contained, attacks on commercial ships transiting the Bab al-Mandab strait by Yemen’s Houthis, an Iran-aligned group, have raised tensions further. The Houthis have proclaimed their support for Palestinians, pledging to continue attacking ships destined for Israeli ports regardless of nationality.

Recent developments: On Tuesday, the group attacked a Norwegian commercial tanker, just over a week after the U.S. military reported that three other commercial vessels had been attacked in the southern Red Sea.

• In November, the Houthis also allegedly seized a British-owned cargo ship.

Why it matters:

Reuters reports that the Bab al-Mandab strait “is one of the world’s most important routes for global seaborne commodity shipments, particularly crude oil and fuel from the Gulf bound for the Mediterranean via the Suez Canal…as well as commodities bound for Asia.”

• About 7.8 million barrels of crude oil are shipped through the strait daily, representing 12% of all seaborne-traded oil in the first of 2023.

• The FT added that, “The incident is the latest example of shipowners from around the world being dragged into an intensifying conflict in the Middle East.”

Shipping disruption: Shipowners are increasingly hesitant about having their ships transit the area, with one saying, “You can’t defend yourselves against missiles.”

In response, the U.S. has moved two carrier strike groups to the region since October, as Washington works with allies to formulate a maritime task force to ensure “safe passage of ships in the Red Sea,” according to national security adviser Jake Sullivan.

• The world’s second-largest container ship company, AP Møller-Maersk, announced surcharges of up to $100 on all containers headed to Israel due to rising insurance costs after the recent attacks.

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QUICK POLL

Yesterday, we asked: Do you think the Dodgers overpaid for Shohei Ohtani?

— One “Yes” responder commented, “I love Baseball, and I like the Dodgers; St. Louis Cardinals, however, are my team. I’m not being ‘bearish’ on the deal, I just hope Ohtani keeps up his production and stays healthy. ”

— Another added, “Seems like a lot of money, so much more than anyone before.”

See you next time!

That's it for today on We Study Markets!

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