16 October 2019

1) The IMF (International Monetary Fund) has made another cut to its 2019 global growth forecast, the fifth in a row. The reason given is a broad deceleration of the world’s largest economies with trade tensions undermining the expansion. Their projections of world economic growth has gone from a high of 3.9%, down to 3.5%, then to 3.4%, to 3.2% and finally to 3%.

2) The low mortgage rates has caused an epic housing shortage. The average mortgage rate for 30 year fixed was over 5% last November and stayed above 4.5%, but now is around 3.5%. Inventory trends in the mid-market indicate lower levels of inventory in early 2020. Housing starts have been moving up slowly, but mostly in the higher end homes, leaving the ‘starter home’ market depleted.

3) The production and delivery of Harley-Davidson’s new LiveWire electric motorcycle has been halted with the discovery of a problem with its charging mechanism. There was a non-standard condition in the final quality check, which halted deliveries of LiveWire bikes, however customers can continue riding their LiveWare motor cycles. Additional testing and analysis is progressing well.

4) Stock market closings for – 15 OCT 19:

Dow         27,024.80    up    237.44
Nasdaq      8,148.71    up    100.06
S&P 500     2,995.68    up       29.53

10 Year Yield:     up   at    1.77%

Oil:    down   at    $52.93

15 October 2019

1) There are fears that the manufacturing segment is in trouble and may contract for the third straight month. This in turn could drag down the U.S. GDP (Gross Domestic Product) in the third and fourth quarters. Three factors are causing this down turn- the trade war with China, the GM (General Motors) strike and Boeing’s 737 MAX problems stopping deliveries and slowing production.

2) In the recent past, the online retailer giant Amazon has been unable to compete with traditional retailers when selling single items costing less than a few dollars, because the shipping cost is more than the single item cost such as toothpaste, deodorant or a simple brush. Customers had to buy these items as add-ons to make the $25 minimum for free shipping. But these items are now available for free shipping with Amazon’s Prime shipping. This could make for a significant challenge to other retailers such as Walmart, Target and CVS.

3) GM is attempting to end the month long strike of the UAW (United Auto Workers) by making direct appeal to the workers. The company has lost more than a $1 billion dollars so far, and is making several promises to the workers trying to circumvent the union’s leadership. The UAW has increased strike pay from $250 to $275 per week with union members allowed to hold other jobs as long as it doesn’t interfere with their picket duty.

4) Stock market closings for – 14 OCT 19:

Dow            26,787.36    down    29.23
Nasdaq         8,048.65    down      8.39
S&P 500        2,966.15    down       4.12

10 Year Yield:    down   at    1.73%

Oil:    down   at    $53.50

14 October 2019

1) China has announced they are ending caps to foreign financial ownership, allowing foreign firms to have full ownership of financial services companies. Starting in 2020, overseas institutions can apply for total control of onshore ventures. China has been opening its financial sector at an unprecedented pace to lure financial giants such as Goldman Sachs, JP Morgan Chase and Morgan Stanley into greater participation in China’s economy.

2) Investors are retracting the fastest since the collapse of Lehman Brothers. In the past six months, money market funds have attracted billions of dollars of inflows, the largest flight to safe assets since the second half of 2008, with investors raising their cash holdings despite falling interest rates. This is being driven by unresolved issues of the trade war, Brexit and the domestic political turmoil mixed with fears of a recession.

3) The U.S. and China have reached a partial agreement Friday which would broker a truce in the trade war. This will lay the groundwork for a broader deal later with Presidents Trump and Xi Jinping. News to the agreement cause the markets to shoot up over 300 points. Part of the agreement is for China to make agricultural concessions and the U.S. provide some tariff relief.

4) Stock market closings for – 11 OCT 19:

Dow 26,816.59 up 319.92
Nasdaq 8,057.04 up 106.26
S&P 500 2,970.27 up 32.14

10 Year Yield: up at 1.75%

Oil: up at $54.91

The Linear – Singularity Paradox Explained

To understand the ‘thinking’ we witnessed in our political process on the news, the concept of Linear-Singularity must be understood.

James Lyman BSAE, BSEE, MSSM

Everyday, we see examples of the Linear-Singularity paradox in our political discourse. In watching the national news any day, any time, we can easily find examples, often of a glaring nature. The Linear-Singularity in problem solving is considering there’s one and only one thing causing or driving a problem, and that every aspect within the problem is linear. In reality, the real world is very seldom this simple. In actuality, there are almost always several things or forces which are at work, and often as not, the system of that problem isn’t simply proportional . . . it’s a nonlinear or probabilistic system. And human intuition doesn’t fair well with non-linear and probabilistic systems, because our minds are linear. We perceive our world in linear terms, that is, perceive everything as proportional.

Probably the best way to understand the Linear-Singularity paradox is by giving examples and showing why it is flawed. One big example we’re seeing daily in the news is climate change, which is riddled with examples of the Linear-Singularity paradox. You listen to the news, one group says it’s burning coal that’s causing global warming, so let’s ban all the coal and that will halt global warming. Another blames oil as the culprit for warming, others claim forest fires and burning the rain forest, or eating all that beef, urban development and the loss of green space, or the thawing of frozen methane deep down in the ocean to bubble up into the air. One political activist after another sounding the alarm that his particular Linear-Singularity is the key to controlling the warming of the Earth’s atmosphere, that if all the world would stop using this one particular thing then warming would stop here and now.

That’s the linear aspect of the Linear-Singularity, that the reducing of a warming source, such as coal or beef, will proportionally reduce the growing climate warming. Never mind other forces at work or how they may be interacting. That’s the linear in Linear-Singularity, the assumption that if you reduce the CO2 from one particular source, then the global warming will be reduced an equal amount. Nothing could be further from the truth! Because the CO2 is just one ingredient or component in the green house effect, and it’s not really known or understood how this mix actually works, and therefore the real effects of increasing or reducing a specific ingredient.

One thing you never hear in the global warming debate, is that all these different factors have the commonality of humans. Every source is the result of human activity that comes from being part of a high technology society. So the real driving force for global warming is the massive over population of a species- us! Like any other species, we produce waste, and with a world population of 7.53 billion, we’ve long ago surpassed the ability of the Earth’s environment to absorb, process and tolerate that waste. To really stop or even reverse the global warming you must drastically reduce that population. But you can’t just go and reduce the world’s human population . . . that’s called genocide! No, this is a very difficult and complex problem made worst by so many political activist employing Linear-Singularities thereby making any progress impossible to achieve.

Another source for numerous examples of Linear-Singularity is the problem of racism. You often see it in news reporting where the human race is divided conveniently into brown, white, black, red and yellow, with their conclusions based on nothing more than these divisions of color. But even the most cursory look at any of those color divisions quickly reveals a ‘crazy quilt’ of different subgroups, some small, some large of all sorts of different people, but all of the same color. These subgroups have their own wants, likes, dislikes, goals in life and standards, and these are often different between subgroups. More importantly, some of these subgroups don’t even like each other. There are tensions and conflicts between them as their wants, standards and values come into conflict. The only difference . . . the boundaries are not readily apparent to outsiders, hence they look and seem to be the same people.

That’s an example of singularity, in ignoring all those various subgroups and assuming that a racial group is one and the same, uniform in all aspects and therefore conflicts between racial groups is based just on the color of skin. A singularity! Pure and simple! And in using that singularity, you no longer have any real understanding of the system, and therefore your efforts to resolve problems is naught . . . nota . . . zilch . . . zero . . . nothing! Which is why problems with race continues. Using singularities leads to oversimplification, which in turn means no real understanding of a problem . . . a ‘must have’ essential to really solve problems.

The widespread use of Linear-Singularity points to how very little people really understand the world they live in and how it works.

This over simplification has spawn the ‘political activism’ that is so prevalent in today’s political discourse, the growing attitude that all the problems in the world are political that can be solved using political activism. That all the world is just one big debate. But all these people really do is create images and illusions, the smoke and mirrors so often spoken of, but nothing of real substance. All they can do is pretend they are solving problems and create a fantasy world where the problems are being solved. The result is nothing ever gets done, the problems . . . at best just continue ‘as is’, or at worst, grow and becomes even worst.

Needless to say, one should always avoid Linear-Singularities, and just as important, people should constantly be on guard for Linear-Singularities and know when one is being used, so they should be skeptical about what they are hearing.

Know that the presences of Linear-Singularities indicates what you are hearing is most likely invalid.

11 October 2019

1) Social Security recipients will receive a 1.6% cost of living increase in 2020, up from the average of 1.4%. This is less than the pervious two years, 2.8% for 2019 and 2.0% for 2018, but still it’s better than the zero increases of 2010, 2011 and 2016.

2) Because of a pig killing disease in China, the U.S. could see tightening supplies of pork products this next year. With China’s supply of pork decreasing, the Chinese may be forced to import significant pork supplies from the U.S. because pork is a major source of protein in the Chinese diet. This is despite the high tariffs China has imposed on U.S. pork imports. American pork exports to China will see about a 12% increase for 2019 and 13% for 2020.

3) Democratic presidential candidate Elizabeth Warren is causing concerns among businessmen with her promises to remake capitalism from the ground up. Now in the front ranks of Democratic contenders, her plans are now viewed with more concern. Warren would drastically cut back on the amount and influence of big business, push private companies from parts of the economy altogether and shift power to government and labor. The presidential contender has blamed big business for a wide range of social problems.

4) Stock market closings for – 10 OCT 19:

Dow             26,496.67    up    150.66
Nasdaq         7,950.78     up      47.04
S&P 500        2,938.13    up       18.73

10 Year Yield:    up   at    1.66%

Oil:    up   at    $53.94

10 October 2019

1) PG&E (Pacific Gas & Electric), the massive power supplier of California, has announced they are planning power outages for Northen and Central California which will effect an expected 800,000 customers in 31 counties to reduce the risk of wildfires in windy conditions. The Paradise fire and the 2017 Wind Country fires were ignited when wind blown power lines sparked. It is unknown what the economic impact will be from such a massive loss of electrical power that may last for days on end.

2) The prices for many popular drugs is rising far faster than inflation, more than twice the medical consumer price index since 2017. Prices may not be justified by clinical improvements to the drugs themselves. This is especially important for people with limited income, in particularly the elderly on fixed incomes who are the major consumer of drugs in America. This is at a time when President Trump is vowing to attack high drug prices in America.

3) American Airlines announced extensions of 737 MAX cancellations of flights through January 15, despite Boeing’s promises that the grounded jets would be flying again before year’s end. American said full year profit would be reduced by about $400 million dollars if the jet remained grounded through the second of November, and is likely to spill over into 2020.

4) Stock market closings for – 9 OCT 19:

Dow               26,346.01    up    181.97
Nasdaq            7,903.74    up      79.96
S&P 500           2,919.40    up      26.34

10 Year Yield:    up    1.59%

Oil:    down    $52.65

9 October 2019

1) The pizza giant Domino’s had been the darling of Wall Street, with its soaring sales, but its growth has gone stale. The company’s reported revenue and profit missed Wall Street’s forecast with its stock sagging. The same-store sales grew just 2.4% compared with last years 6.3%. Domino’s operates in 85 countries with 10,000 stores outside of the U.S., which generate half of its revenues.

2) Boeing aircraft has got its first 737 MAX order since the crashes forced grounding of all 737 MAX aircraft. Boeing’s net order tally, including cancellations, was a negative 84 for the first nine months of 2019. In addition, Southwest Airlines’ pilots union has filed a law suit against Boeing for damages caused by the prolonged grounding of its 737 MAX, claiming loss of pay to its pilot from canceled flights and seeing $115 million dollars in compensation.

3) Duke University professor Campbell Harvey, the father of the yield curve and pioneer of the economic forecasting model, says to prepare for a recession. He based his prediction on inverted curves, which happen when short term Treasury yields are higher than those with longer duration, which his research indicates the coming of a recession.

4) Stock market closings for – 8 OCT 19:

Dow                     26,164.04    down    313.98
Nasdaq                  7,823.78    down    132.52
S&P 500                 2,893.06    down      45.73

10 Year Yield:    down   at    1.54%

Oil:    down   at    $52.57

8 October 2019

1) GE (General Electric) announced they will freeze pensions for about 20,000 salaried U.S. employees in order to help the ailing conglomerate cut debt and reduce its retirement fund by $8 billion dollars. Presently, the company has $105.8 billion dollar debt. Their pension plans are among it biggest liabilities and is underfunded by about $27 billion dollars. This move will not effect present retirees who are collecting their pensions.

2) Twenty-one days into the strike, the UAW (United Auto Workers) and GM (General Motors) contract talks have taken a turn for the worse. The snag is product commitments for U.S. factories for new vehicles, engines, transmissions and other items represented by the union. GM is losing $80 million dollars a day, while striking workers are earning about one fifth their regular pay as $260 a month strike benefits.

3) The U.S. railroads slump is getting worse from the slowdown as manufacturing threatens U.S. economy. Trucking is also feeling a slowdown with less than truckload cargos decreasing, although long haul trucking seems to be holding up. Truck rates have dropped, which is pulling some freight business away from trains.

4) Stock market closings for – 7 OCT 19:

Dow                26,478.02    down    95.70
Nasdaq             7,956.29    down    26.18
S&P 500            2,938.79    down     13.22

10 Year Yield:    up   at    1.55%

Oil:    down   at    $52.80

7 October 2019

1) As part of its restructuring plan, HP announced they will cut about 7,000 to 9,000 jobs, resulting in an estimated savings of about $1 billion dollars. While HP expects to incur labor and non-labor cost of about $1 billion dollars, they expect to generate at lease $3 billion dollars of free cash flow. As of 31 October 2018, HP had world wide employment of about 55,000 workers.

2) Consumer spending has been the bright spot in an economy showing signs of weakening on multiple fronts, in particular manufacturing. Economists worry if consumer spending will continue to prop up the economy, saying that the up coming Christmas season will be a test. Issues such as trade, interest rates, global risk factors and political rhetoric are where confidence can be eroded by deterioration of these items.

3) The new Costco in Shanghai China reports membership of more than 200,000 as compared to an American average of 68,000 per store. Costco will open a second Shanghai location in early 2021. The first day opening, the store was so swamped with customers, that the doors had to be closed for four hours to limit the number of people inside to safe limits.

4) Stock market closings for – 4 OCT 19:

Dow                  26,573.72    up    372.68
Nasdaq               7,982.47    up    110.21
S&P 500              2,952.01    up      41.38

10 Year Yield:    down   at    1.52%

Oil:    up   at    $53.01

4 October 2019

1) MGM Resorts has reached agreement with families of victims who were killed in the October 2017 mass shooting in Las Vegas. The settlement for the 2,500 family victims will be almost $800 million dollars with the agreement that all pending litigation against MGM will be dismissed. The shooting left 58 dead while wounding hundreds of others.

2) Soon to be implemented, tariffs will make imports more expensive for Americans, such as Scotch and Irish whiskies, Parmesan cheese and French wine. The tariffs will be on $7.5 billion dollars of European imports. Further tariffs are threaten over aircraft subsidies by the European Union, coming at a time when economies have been hurt by the US-China trade war. The World Trade Organization has ruled America can impose tariffs because the European Union has failed to abide by earlier ruling of Airbus subsidies.

3) The service-sector activity in the U.S. slowed to its weakest pace in three years this September. This is another sign that the U.S. economy may be weakening where the services sector accounts for more than two thirds of economic activity. The non-manufacturing index fell to 52.6 last month, which was the lowest reading since August 2016 and far below the 55.3 expectations.

4) Stock market closings for – 3 OCT 19:

Dow                 26,201.04    up    122.42
Nasdaq              7,872.26    up      87.02
S&P 500             2,910.63    up      23.02

10 Year Yield:    down   at    1.54%

Oil:    down   at    $52.34