5 June 2020

1) The bankers are suggesting to America’s debt laden companies- raise money now, because things could get a lot worse! Although there is plentiful optimism across the county for a quick economic recovery, there are some real concerns for the near and far future, such as a new wave of coronavirus in the fall, an extended period of double-digit unemployment, spike in defaults and a slower than expected economic recovery as business adapt to prolonged social distancing. These all translate into reduced revenues for many months or even years. This is particularly hard on companies carrying a heavy debt load. Hard times means companies need to have as much cash reserve as possible to weather any fiscal storm over the horizon. Even companies like Uber Technologies, Inc are selling bonds, in this case $1 billion dollars of bonds last month even with a first quarter giving $8 billion dollars of cash. The mantra for businesses this day and age is ‘Cash is survival’.

2) Airlines in America are adding summer flights as passengers slowly return to traveling. The air carrier American Airlines plans to fly 55% of its domestic schedule in July, up dramatically from just 20% in May. Slowly, the airline business is coming back to life as more flights are being added to schedules in anticipation of a recovery across the country. While increased passengers is encouraging, passenger levels in the U.S. remain extremely depressed from the pandemic. The question is, are air carriers getting ahead of themselves in bring back service too fast, because if service grows faster than the number of passengers, airline companies could lose money by flying airplanes with too few paying people.

3) The job loss from the coronavirus may not be over with yet. About 6 million white collar workers, higher paid workers, could lose their jobs as the pandemic’s fallout slams other sectors of the economy. These are people who are supervisors at restaurants and hotels, real-estate and finance services. A second wave of layoffs is coming despite states starting to reopen their economies, but this time it’s the well paid workers and not the low wage workers as before who are losing their jobs.

4) Stock market closings for – 4 JUN 20:

Dow 26,281.82 up 11.93
Nasdaq 9,615.81 down 67.10
S&P 500 3,112.35 down 10.52

10 Year Yield:up at 0.82%

Oil: up at $37.35

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