31 July 2020

1) The American economy last quarter is the worst on record, with a 32.9% annual rate contraction (April – June). American business ground to a halt from the pandemic lockdown this spring, leaving the country in its first recession in eleven years. This wipes out five years of economic gains in just months. From January to March, the GDP (Gross Domestic Product) declined by an annualized rate of 5%. While the unemployment is declining as states open up from the shutdown, there are still about 15 million unemployed workers. Americans are spending less money during th lockdown, partly because of lost of jobs. Consumer spending is the biggest driver of the economy, and it declined at an annual rate of 34.6% for the second quarter.

2) While Walmart has posted surging sales for each month, it is still taking cost savings measures. The retailer has laid off hundreds of workers including store planning, logistics, merchandising and real estate. Also, Walmart is reorganizing its 4,750 stores by consolidation of divisions and eliminating some regional manager roles. Walmart is performing well because of high demand and low prices during the pandemic. The company isn’t opening as many new stores in the U.S. anymore, so Walmart doesn’t need as many people to find new locations and so design them.

3) Job postings in technology are 36% down from 2019 levels. This is attributed to increased competition, low priority in hiring and uncertainty over the pandemic. Therefore, the tech industry is also feeling the economic effects of the coronavirus pandemic. Sending a very significant portion of its workers remote to work at home, there were predictions tech jobs would lead the recovery with increase job numbers. The ‘work at home’ was thought to show tech jobs might be available outside the traditional hubs. Neither has proved to be true. In short, the tech jobs are faring worst than the overall economy.

4) Stock market closings for – 30 JUL 20:

Dow 26,313.65 down 225.92
Nasdaq 10,587.81 up 44.87
S&P 500 3,246.22 down 12.22

10 Year Yield: down at 0.54%

Oil: down at $40.45

BUSINESSMAN & FMR PRES. CANDIDATE HERMAN CAIN HAS DIED….

By: Economic & Finance Report

Businessman and former Republican presidential candidate Herman Cain has died from corona virus (Covid-19) at age 74 years old. Mr. Cain was a Republican presidential candidate in the 2012 elections. He came up with the 9-9-9 Plan which was tax proposal for fixing the USA tax code. It was a paramount plan for his campaign. He was a former chairman of the Federal Reserve Bank of Kansas City.

Before his journey into politics and monetary policy, Herman can was CEO and President of Godfather Pizza (subsidiary of Burger King). After his stint at Godfather Pizza he became the CEO of the National Restaurant Association. He was also on various company board of directors as well. -SB

Image Credit: CBSNews.com

30 July 2020

1) First Walmart then Target and Dick’s Sporting Goods and now Best Buy have announced they will be closed on Thanksgiving, with more retailers expected to follow suit. The decision is in response to the coronavirus pandemic. Traditionally, Thanksgiving Day is the kick off of Black Friday sales, where retailers offer their lowest sales prices as the kickoff of the Christmas shopping season. But this also draws large crowds, something that goes against public health guidelines for social distancing. Instead, retailers will be offering their big sales online.

2) The spending habits of millennials had been credited with the decline of traditional consumer products, but now seem to be reversing for comebacks. Things like golf, starter homes and canned tuna are now on the rise, in part because of the covid-19 crisis. Some other products now on the rise is beer, mayo and cereal to name a few. More indications of how economic times in America are ever changing and becoming more unpredictable.

3) The pandemic crisis has sent the U.S. Postal Service into a fiscal tailspin, with President Trump saying he would not support a financial bailout until the Postoffice reformed its pricing of package deliveries for large on-line retailers like Amazon. But the federal government is preparing a $10 billion dollar loan to the Postoffice to continue services. This loan is part of the proposed $2 trillion dollar pandemic relief package passed in March, but the President said he wont spend the money until the USPS agrees to raise its prices. Much of the online retail business is dependent on the USPS to deliver their goods via mail delivery.

4) Stock market closings for – 29 JUL20:

Dow 26,539.57 up 160.29
Nasdaq 10,542.94 up 140.85
S&P 500 3,258.44 up 40.00

10 Year Yield: down at 0.58%

Oil: up at $41.32

29 July 2020

1) The fast food mega-giant McDonald’s is reporting a bigger than expected drop in global restaurant sales across the world. This is a result of the pandemic restricting sales of their drive thru and delivery operations, and in some cases shutting restaurants down completely. With second quarter sales down by 30%, McDonald’s is facing a bumpy and expensive recovery. The franchise chain has 39,000 restaurants worldwide, of which 96% are now open, verses 75% at the start of the second quarter. Store sales were down 39% in April but by June was down only 12%. Net income is down by 68% for $483.8 million dollars. McDonald’s is permanently closing 200 locations in the U.S. amid those losses, more than half located in Walmart stores.

2) The Federal Reserve has announced that its lending programs will be extended until the end of the year. This indicates the feds don’t think the U.S. economy is weathering the pandemic storm very well and needs continued help. The program lends to small and medium sized businesses and was due to expire at the end of September. Continuing the program will provide a critical backstop to help the economy recover. This Thursday will bring the first look at the second quarter gross domestic product, which is the broadest measure of the economy, but it’s expected to show an ailing economy.

3) For the second time, the renowned gun maker Remington Arms is filing for bankruptcy. This is the second time in two years that Remington has filed for Chapter 11 bankruptcy protection. Chronic low sales is blamed for Remington’s decline, despite the overall increase in sales of guns in America because of the pandemic. One by one, American gun manufactures have succumb to imports. Remington reports assets of $100 million dollars compared to $500 million dollars in liabilities.

4) Stock market closings for – 28 JUL 20:

Dow 26,379.28 down 205.49
Nasdaq 10,402.09 down 134.17
S&P 500 3,218.44 down 20.97

10 Year Yield: down at 0.58%

Oil: down at $41.07

28 July 2020

1) Economist are warning that the economy needs help now to avoid faltering. As the President and Congress struggle to create another economic aid package, evidence is growing that the U.S. economy is headed for trouble, especially if the government doesn’t take steps to support hiring and economic growth. Experts say the economy is in a pretty fragile state again and needs another shot in the arm. Unemployment is still at a high 11.1% and hiring seems to be slowing in July, so the economy is likely to weaken further. Few economist consider that the recovery will be a V-shaped path, that is, the sharp recession will be followed by a quick rebound. In addition to helping the millions of unemployed Americans, the governments needs to help businesses from going bust.

2) There are five trends which indicate the U.S. economy is not rebounding as hope. The first is ‘Direction Requests’ on smart phones for walking and driving directions, have gone flat over the last few weeks indicating people are staying at home. The second is ‘Restaurant Bookings’ which show a 60% drop from last year. Third trend is ‘Hotel Occupancy’ which has stagnated with occupancy at 47%. ‘Air Travel’ was slowly increasing, but has also stagnated this last month with air travel down 70% from last year. Finally, ‘Home Purchases’ is increasing at a slow rate, a reflection of peoples uncertainty and changing employment status of potential buyers.

3) Price of gold continues to climb, as investors seek the safety of the yellow metal amidst economic fears of the future. Gold has historically been a refuge for money in times of economic uncertainty, a panic investment. Bullion has climbed to a record high of $1,946 per ounce. The real interest rates (less inflation) is driving investors to gold, as well as the tumbling dollar. Silver bullion is also increasing in price as another safe heaven for investing.

4) Stock market closings for – 27 JUL 20:

Dow 26,584.77 up 114.88
Nasdaq 10,536.27 up 173.09
S&P 500 3,239.41 up 23.78

10 Year Yield: up at 0.61%

Oil: up at $41.66

27 July 2020

1) Another indication of the contraction of the oil business is the oil services company Schlumberger who cut 21,000 jobs or about one fifth of its 105,000 global employees. This is a direct result of an expected 25% drop in the number of oil wells drilled worldwide. Revenues fell 58% from last year for north American operations. The world wide cornavirus crisis caused a massive drop in oil demand, which collapsed the price of oil.

2) Boeing aircraft is facing another trouble, this time with their older Boeing 737 jets. The FAA was warned of corrosion which could cause dual-engine failure, and has ordered inspections. The corrosion problem is a result of hundreds of aircraft now in storage that have been idled because of the drop in air travel from the virus. The order requires aircraft that have not been operated for a week or more must be inspected which will impact about 2,000 aircraft. The corrosion is in engine valves, which has caused single-engine shutdowns which resulted from engine bleed air valves being stuck open.

3) Junk bonds are back again, but are packaged in a format met to appeal to investors, avoiding their seamy 1980s era reputation. Low interest rates driven by the Federal reserve is encouraging companies to borrow, which has lead to a record $51.5 billion dollars worth of junk bonds issued in June. Junk bonds are bonds with high yields (interest rates) but having a lot higher risk. The high risk comes from companies fiscal ability to pay out the bond on maturity or dividends. In a recessionary environment awash in cheap money, a troubled company can collapse under the weight of their debt. But extensive use of junk bonds pose the same dangers of the mortgage backed securities in 2008 with massive failing of businesses pulling the already fragile economy down.

4) Stock market closings for – 24 JUL 20:

Dow 26,469.89 down 182.44
Nasdaq 10,363.18 down 98.24
S&P 500 3,215.63 down 20.03

10 Year Yield: up at 0.59%

Oil: up at $41.34

24 July 2020

1) The parent company of Ann Taylor and Lane Bryant clothing chains, the Ascena Retail Group Inc., will close more than half its stores, a total of more than 1,000 stores. The troubled retailer was struggling like many other retailers to remain afloat, but the Covid-19 crisis tipped the scales into bankruptcy. Ascena has about 40,000 employees and there’s the expectation of cutting its 2,800 stores down to just 1,200 with significant losses of jobs. The chapter 11 will erase about $1 billion dollars in debt from its $12.5 billion dollars of liabilities, which includes $1.6 billion dollars of funded debt. Retailers have been among the hardest hit by Covid-19 lockdowns coupled with online shopping, which drained revenues and pushed so many retailers into bankruptcy.

2) Almost 16,000 restaurants have closed permanently from the Covid-19 pandemic, an indication of just how deeply the virus has affected the food industry, especially the restaurants. So far, about 60% of the restaurant closures have been permanent, with the number increasing with time. Restaurants now surpass the retail industry in the highest total business closures since the start of the pandemic. Bars and the night life industry has met the same fate, with 5,454 total business closures of which 2,429 are considered permanent closures, or 44% lost.

3) There is mounting evidence that America’s fragile economic recovery is faltering even as the pandemic seems to be leveling out. Reservations for restaurants are waning, air traffic is leveling off and foot traffic at stores is dwindling again. With rising infections in California, Texas and Florida, there is a growing sense that the recovery is fading. Small businesses have suffered the worst, having limited cash reserves and ability to obtain loans, and therefore are failing at record numbers. To compound the problem, there is weaker spending by consumers. Hopes for a real recovery depend more and more on an effective vaccine being created and available. Until there is one, there appears little hope that the economic will make any real lasting progress towards recovery.

4) Stock market closings for – 23 JUL 20:

Dow 26,652.33 down 353.51
Nasdaq 10,461.42 down 244.71
S&P 500 3,235.66 down 40.36

10 Year Yield: down at 0.58%

Oil: down at $41.21

23 July 20

1) The business community of America is facing a national coin shortage, making it even more difficult for the retail sector to function. Across the country, restaurants, grocery stores, and retail outlets are posting signs near their cash registers and drive thru windows asking people to pay with credit cards or exact change. This shortage is a result of the spreading coronavirus closing businesses that crippled economic activity in the U.S., so the circulation of coins dropped off significantly. Furthermore, the U.S. Mint who manufactures the nation’s coinage supply, has decreased staffing because of the pandemic, thus reducing the availability of coins.

2) New research has directly connected the explosive growth of passive investing to deteriorating corporate performance over the long haul. Companies with higher passive ownership spent more on stock repurchases, but saw worse financial outcomes. Passive investment can allow opportunistic management behavior with negative effects of future company performance. Companies with high passive ownership are less monitored, therefore allowing management to act unhindered in their own best interest. Passive ownership is a result of investing by mutual and ETF funds who track indexes instead of actively manage counterparts.

3) The government has placed orders for up to 600 million doses of Covid vaccine to Pfizer and BioNTech. The U.S. health officials have agreed to pay $1.95 billion dollars for 100 million doses of a vaccine. Nations around the world have begun ordering vaccines that are still being tested in an effort to halt the spread of the virus. To date, the coronavirus has killed 600,000 people around the world. It is planned the vaccine will be free to U.S. citizens.

4) Stock market closings for – 22 JUL 20:

Dow 27,005.84 up 165.44
Nasdaq 10,706.13 up 25.76
S&P 500 3,276.02 up 18.72

10 Year Yield: down at 0.60%

Oil: up at $41.90

22 July 2020

1) China, with the second largest economy in the world, is steadily developing into a technological powerhouse that could upend the status quo. China’s ten year plan called “Made in China 2025”, has a principle goal for China to catchup, then surpass the West in various technological fields. Some consider this not only threatens the U.S. economy, but the world economy too. China has already declared they intend to be the dominate power in the world by 2050, and having the high ground in technology development is a key milestone in that quest.

2) Some consider that the stock market will likely head upwards to a new high, fueled by borrowing and money printing. With another stimulus package in the near future, it is ‘out of fashion’ to consider how the borrowed money will be paid back. The central banks, who are not elected, stand ready to print as much money as is wanted, no matter that historically this is how inflation is created and fuel. Example is the Weimar Republic (Germany) who induced their great wave of hyper inflation by printing massive amounts of money in the 1920’s, that lead the way for the Nazi’s to ascend to power. Other problems stemming from printing too much money is currency depreciation, difficulties borrowing, higher interest rates and social unrest. With other investments limited, the excess of money goes to the stock market, thus pushing the market up, and possibly into a bubble just waiting to pop!

3) The Congress remains busy crafting a second stimulus package with lots of debates what should and shouldn’t go in it, intending on having a deal worked out by the end of next week. However, this could go into August before a bill is ready to sign. A major point of contention is checks vs taxes. Should stimulus be checks like the $1,200 checks given out a few months?. If checks, then who gets them this time and how much? The other strategy is reducing payroll taxes, but this only helps those who are working. The Republicans are proposing a $1 trillion dollar relief strategy, while the Democrats propose a sweeping $3.5 trillion dollar plan. This would add to the $2.9 trillion dollar package already implemented early this year. As usual, everything is being done will little to no real analysis, instead relying on gut feelings of lawmakers in making the future of America.

4) Stock market closings for – 21 JUL 20:

Dow 26,840.40 up 159.53
Nasdaq 10,680.36 down 86.73
S&P 500 3,257.30 up 5.46

10 Year Yield: down at 0.61%

Oil: up at $41.58