15 October 2020

1) The much feared Diablo winds, along with its low humidity, will bring critical fire weather to Northern California through Friday, increasing the risks of wild fires. There are widespread red flag fire warnings for Northen California above San Francisco because of extremely dry, gusty, north to northeast winds which will bring critical fire conditions. With the relative humidity down into the single digits and teens, winds could reach about 45 mph, with gust up to 55 mph, both conditions very conducive to rapidly spread wild fires. The Diablo winds are much like the Santa Ana winds so familiar to Southern Californians.
2) Boeing’s troubles continue with no new orders for jets and more 737 MAX cancellations as the companies crisis continues. There were more orders for the 373 MAX canceled in September with delivery of only 11 total aircraft to customers, which is less than half the number from the same month a year ago. Furthermore, the quality flaws on the 787 Dreamliner continue to hamper efforts to develop an alternative cash cow to the 737 MAX. The major source of Boeing’s problems is the coronavirus pandemic, which continues to hurt the demand for jets, for Boeing as well as its rival Airbus, and this is a factor that neither aircraft manufacture has any control over.
3) The prices for crude oil are rising with the dollar’s decline, which in turn is boosting appeal of commodities priced in dollars. There are signs of oil demand increasing in Asia, which is helping lift the overall outlook for oil consumption. The company Rogsheng Petrochemical of Singapore is buying up oil futures to run its expanded refinery operation in Zhejiang this quarter. The outlook for refineries output remain precarious, with refining margins severely depressed for this time of the year. Refineries typically need a spread of more than $10 a barrel to make it profitable to process crude oil.
4) Stock market closings for – 14 OCT 20:
Dow 28,514.00 down 165.81
Nasdaq 11,768.73 down 95.17
S&P 500 3,488.67 down 23.26
10 Year Yield: unchanged at 0.72%
Oil: up at $41.22

9 October 2020

1) The airlines around the world are expected to lose $77 billion dollars in the second half of 2020 as Covid-19 continues to crush air travel demand. There are desperate efforts to cut cost by cutting jobs, grounding aircraft and consolidating work, but all their efforts are not enough. The first half of 2020 has been brutal for airline business and the rest of the year isn’t looking much better despite modest increase in air travel. This translates into losing $13 billion dollars a month or $300,000 a minute. At the start, U.S. airlines were burning about $100 million per day, which they reduced to about $30 to $40 million at the end of the third quarter. The airlines hope to reach zero ‘cash burn’ by year’s end using workforce reductions and operational consolidation. Air travel in America is down roughly 70% from 2019.

2) As another hurricane is approaching through the Gulf of Mexico, oil workers are evacuating oil rigs in the gulf ahead of Hurricane Delta, in turn causing oil prices to rise in anticipation of lower available oil. Oil prices had been falling Wednesday, but started rising as the storm came into the Gulf and the off shore evacuations began. So far, 183 offshore oil facilities have been evacuated which has halted nearly 1.5 million barrels per day of oil output. In July, the Gulf of Mexico produced oil at 1.65 million barrels per day, which is 17% of U.S. crude oil output. The demand for oil at refineries is 13.2% lower than a year earlier, a result of the virus crisis.

3) Electric car maker Elon Musk is pushing his company to boost production to build half a million cars in one year. That means producing 170,000 cars in the fourth quarter, a 17% increase from the third quarter. A half a million cars would be a milestone for Musk’s company, a first in the history of Tesla. So far, Tesla has produced 330,000 cars while also posting profits for its fourth consecutive quarter. Additionally, Tesla is pushing production numbers up by adding more production capacity.

4) Stock market closings for – 8 OCT 20:

Dow 28,425.51 up 122.05
Nasdaq 11,420.98 up 56.38
S&P 500 3,446.83 up 27.38

10 Year Yield: down at 0.76%

Oil: up at $41.27

8 October 2020

1) Despite the economic failure of the first supersonic airliner, the French-British Concorde, there are now attempts to revitalize the supersonic airline service. Boom Supersonic has unveiled its first demonstrator aircraft called the X-B1, which is scheduled to start flight testing next year. The demonstrator is planned as a commercial stepping stone to an actual commercial supersonic airliner to transverse the Atlantic ocean in about three and a half hours- about half the present flight time. Plans called for supersonic jets that are quieter and more fuel efficient than the Concorde. Some might consider a supersonic airliner to be an optimistic endeavor considering the concerns over the airline’s industry future over the next several years.

2) Like other restaurant chains in decline, Ruby Tuesday’s decline was several years in the making, accelerated by the pandemic. Amidst speculation by industry insiders, the renowned Ruby Tuesday has filed for bankruptcy. By April, Ruby Tuesday had closed about 30% of its 470 restaurants, and with the virus crisis, restaurants continued closing. It has closed 300 restaurants in the last three years, 186 this year alone, while amassing a $43 million dollar debt plus $19 million dollars owed to landlords and vendors. The company is filing for chapter 11 bankruptcy and will continue operating about 230 restaurants in its bid to survive. Ruby Tuesday’s decline in sales was due to a major shift in consumer attention from casual dine-in to fast food and fast casual options.

3) The troubled aircraft manufacture Boeing Aircraft cuts their forecast for airplane demand due to the pandemic. Over the next decade, Boeing now expects deliveries of 18,350 commercial aircraft, which is down from its previous forecast by 10.7%. The coronavirus crisis is expected to create minimal demand for new jets during the next few years. Boeing still expects to deliver 43,110 commercial aircraft over the next 20 years, a forecast down only slightly from its previous forecast of 44,040 and so will be able to make up for lost sales in the years after the next decade.

4) Stock market closings for – 7 OCT 20:

Dow 28,303.46 up 530.70
Nasdaq 11,364.60 up +210.00
S&P 500 3,419.45 up 58.50

10 Year Yield: up at 0.78%

Oil: up at $40.06

24 August 2020

1) Despite being in a major recession with unemployment hovering around 22 million, the home sales market is on fire, last month setting a record 24.7% increase compared with June. While the housing market was all but frozen this spring, surprisingly it has rebound from the effects of the pandemic crisis. The previous record for sales was set in 1968 with a 20.7% rise. Furthermore, all regions of the country reported strong sales of homes. One factor is considered that all the work at home has homeowners looking for larger houses. The strong sales is driving prices upward, with the median price of homes up 8.5% from July, now at $304,100. This is the 101st straight month of increasing prices.

2) AI (Artificial Intelligence) has made significant inroads in competing with humans to do tasks better and faster. In a field most people would consider as strictly a human endeavor- Dog fighting, or aerial combat where fighter aircraft chase each other through the sky trying to shoot each other down, now has AI systems to replace people. An AI system developed by Heron Systems went against a human F-16 fighter pilot in simulated air combat and defeated him 5-0. The simulation was limited to the nose cannon only, no missiles allowed. A couple of years ago, Boeing Aircraft said they were developing robot airliners which flew by themselves- no pilots!

3) Researchers have created a minuscule robot beetle, weighing only 88 milligrams, that can operated for two hours without a battery. The machine runs on liquid methanol that powers its artificial muscles allowing it to carry 2.6 times its body weight. The artificial muscles are called ‘catalytic artificial micro-muscle’, that uses special metals that allows the use of methanol to generate power to a micro-machine. While the RoBeetle is just a demonstration of a technology, it shows that power can be derived without the use of conventional batteries, which limit the size and weight of micro-robots.

4) Stock market closings for – 21 AUG 20:

Dow 27,930.33 up 190.60
Nasdaq 11,311.80 up 46.85
S&P 500 3,397.16 up 11.65

10 Year Yield: down at 0.64%

Oil: down at $42.25

20 August 2020

1) Boeing Aircraft has received its first 737 MAX orders since 2019, from Enter Air, a Polish charter airline that exclusively uses only Boeing airplanes. They have ordered two 737 MAX with an option to order two more. With the option, this would bring its MAX fleet to ten aircraft. Frzegorz Polaniecki, the general director and board member of Enter Air, said he’s convinced the 737 MAX will be the best aircraft in the world for many years to come. This order for two aircraft pales in comparison to Boeing’s July net negative order of 836 aircraft, but it’s a start in the right direction. Cancellation of Boeing aircraft sales have far outpaced new orders this year because of the pandemic. The last six months, Boeing has faced a combination of problems specific to Boeing and the pandemic.

2) The Federal Reserve is lowering their estimate for economic growth over the second half of the year. The Reserve presents its forecast at the central bank’s eight interest rate committee meetings in a year. The reduced forecast is because they expect the rate of recovery in the Gross Domestic Product and the rate for reducing unemployment to be slower than previously expected. Reduction of the unemployment depends on the reopening of businesses, which in turn is depended on the pandemic.

3) According to Bank of America, moving manufacturing out of China could cost U.S. and European companies $1 trillion dollars over five years. Companies in over 80% of global sectors have experienced supply chain disruptions during the pandemic, so many are widening the scope of their reshoring plans. The shift to return manufacturing back to home countries has been spurred on by the Convid-19 crisis. Supporting companies will also benefit with the increase of economic activity by having manufacturing return.

4) Stock market closings for – 19 AUG 20:

Dow 27,692.88 down 85.19
Nasdaq 11,146.46 down 64.38
S&P 500 3,374.85 down 14.93

10 Year Yield: up at 0.68%

Oil: up at $42.79

3 July 2020

1) The aircraft manufacturer Boeing Aircraft is discontinuing production of it’s iconic 747 jumbo jet after a fifty year run. The last 747-8 will be completed in two years. This marks the end of an era of giant airliners with Airbus also discontinuing its A380 production. The number of routes in the world which requires a jumbo jet are few, with airline companies preferring the twin engine aircraft for long range flights. The 747 made its debut in 1970, and went on to rack up 1,571 orders over its production life, a record seconded only by the wide body 777. Boeing has lost 40$ million dollars for each 747 since 2016, with production down to just 6 units a year. The last 747 for passenger service was Air Force One. With air travel curtailed by the Covid-19 crisis, air carriers don’t expect air travel to recover fully until the mid decade, so airlines are culling out aging jetliners and four engine jumbos from their fleets to limit spending.

2) With interest rates near zero, the most used tool for the Feds to stimulate a sagging economy is becoming ineffective in reversing the pandemic induced recession. Therefore, the Feds are considering using quantitative easing or large scale assets purchases. This is where the U.S. central bank buys hundreds of billions of dollars in assets, most of which are U.S. Treasury and mortgage backed securities. By taking bonds (mostly 2 and 10 year Treasuries) off the market it replaces them with cash in the system, meaning there is now more cash available for lending to consumers, businesses and municipalities.

3) The Senate is considering a bill which would punish retailers for refusing cash payments. Retailers have been pushing for electronic payments to reduce the risk of virus contamination from contact of paying cash. The objective of the bill is to prevent disenfranchise of minorities who have limited to no banking access.

4) Stock market closings for – 2 JUL 20:

Dow 25,827.36 up 92.39
Nasdaq 10,207.63 up 53.00
S&P 500 3,130.01 up 14.15

10 Year Yield: down at 0.67%

Oil: up at $40.32

28 May 2020

1) The aircraft manufacture Boeing is laying off almost 12,000 workers this week, a result of the coronavirus crisis impact on the aircraft company. Boeing, which is the largest exporter in the U.S., is trimming its workforce by about 10% which include international locations. It is anticipated the airline industry will take some years to recover with air travel dropping a whopping 95% because of the virus, and major airlines canceling the majority of their domestic flights while suspending nearly all international flights. The company suffered a major set back with its 737 MAX grounding that resulted in near record number of order cancellations for passenger jets with zero new orders in April. This has been Boeing’s worst year in decades.

2) The discount home goods retailer Tuesday Morning has filed for bankruptcy, a result of the prolong store closings from Covid-19. The lost revenues created an insurmountable financial hurdle in a company that was thriving before the pandemic. The chain is closing 230 of its nearly 700 US stores across America. The first phase of closures of 130 stores will begin this summer. This is in line with another home goods retailer, Pier 1, which filed for bankruptcy in February, another casualty of the virus.

3) More than one in every six young workers have stopped working because of the coronavirus pandemic world wide. There are fears that young workers (15 to 28 years old) could face the inability to get proper training or gain access to jobs long after the pandemic ends, maybe even deep into their careers. Of those still working, about 23% report reduction in the number of hours they work. For 178 million young workers around the world, more than 40% are in the food services and hospitality industries, which is the hardest hit sector from the virus. Three fourths of the young workers are in informal jobs or casual labor. In addition, many companies in the U.S. are cutting salaries of those who still have a job, trying to remain in business, which will reduce discretionary income that will further slow economic recovery.

4) Stock market closings for – 27 MAY 20:

Dow 25,548.27 up 553.16
Nasdaq 9,412.36 up 72.14
S&P 500 3,036.13 up 44.367

10 Year Yield: down at 0.68%

Oil: down at $32.22

15 May 2020

1) There are growing fears of another economic bomb about to go off. A popping of the housing bubble, much like the 2008 bubble collapse of the housing market, may happen as early as July. Last time, the collapse of the housing market played out over four years, but for the pandemic, the rate could be much faster, as is being seen with the stock market. Home sales have been languishing, especially with the treat of the virus and people reluctant to let strangers tour their homes with possible infections. It is estimated that 15% of homeowners will fall behind on their mortgages and this would mean more delinquencies than during the Great Depression. This in turn is causing a tightening of lending standards which could continue even after the crisis subsides. All this makes for a bubble waiting to burst.

2) Delta Air Lines Inc. has announced they plan to retire their fleet of eighteen Boeing 777 jumbo jets, and will replace them with Airbus SE aircraft. This constitutes another major financial blow to the beleaguered aircraft manufacture struggling with their 737 MAX troubles from over a year ago. Delta attributes the early retirement of their 777 fleet to the pandemic impact and the need to economize with newer fuel efficient aircraft.

3) Growing fears of a slow recovery is beginning to show cracks in the markets as investor’s anticipation of a quick recovery of the economy fades. For weeks, the hopes that the massive stimulus of $3 trillion dollars would spur a relatively quick recovery later in the year, coupled with a hot rebound of the stock market despite the massive numbers of layoffs, but now hope is fading. The growing economic uncertainty of just how many people can restart their lives amid the uncertainty of controlling the virus, plus the dangers of opening up too early, is causing investors to rethink their view of how the economy will fair in the next few months, even the next few years.

4) Stock market closings for – 14 MAY 20:

Dow 23,625.34 up 377.37
Nasdaq 8,943.72 up 80.55
S&P 500 2,852.50 up 32.50

10 Year Yield: down at 0.62%

Oil: up at $27.98