13 October 2020

1) More bad news for the airline business with another expected huge round of losses coming. The second quarter was the worst financial hit in the history of the airline business, and the third quarter won’t be much better. The airlines reported a second quarter combined losses of $12 billion dollars with revenues down 86% for the previous year. Analysts are forecasting a $10 billion dollar lost for the third quarter. The airlines did reduce cost by trimming expenditures, reducing labor as employees took buyouts and early retirement packages. Also, a modest pickup in travel during the summer has help with increased revenues, but forecast are for sales to be down 75% in the third quarter.

2) Oil prices fell the most in a week because the Gulf of Mexico production is set to resume and Libya is reopening its largest oil field. The hurricane had shut down about 92% of oil production in the Gulf, while at the same time Libya’s largest field will reach its daily capacity of almost 300,000 barrels in ten days. World demand for oil crude has dropped with refineries operating near minimum capacity.

3) The third major opioid makers Mallinckrodt Pic has become the third major manufacture of opioid to go bankrupt after being swamped by claims with respect to profiting from the U.S. opioid epidemic. The drug company filed for Chapter 11 after getting creditors and claimants to agree on a restructuring plan. This plan hands over ownership to bondholders, wipes out shareholders and sets aside $1.6 billion dollars to resolve all its opioid litigation. Current shareholders will most likely get nothing, with stock prices in the penny range for most of the year. The Chapter 11 filing estimates liabilities of $1 billion to $10 billion dollars and assets in the same range.

4) Stock market closings for – 12 OCT 20:

Dow 28,837.52 up 250.62
Nasdaq 11,876.26 up 296.32
S&P 500 3,534.22 up 57.09

10 Year Yield: unchanged at 0.78%

Oil: down at $39.44

21 August 2020

1) A controversy has arisen on the national political scene about removal of mail sorting machines in the USPS (United States Postal Service), some charging this is an attempt to interfere in the up coming national elections. Having already removed hundreds of machines, the USPS is poised to decommission 671 of the massive sorting machines, which is roughly 10% of its inventory. This represents the sorting ability of 21.4 million pieces of paper mail per hour. Presently, the USPS processes up to 500 million items each day. The removal is part of a long range plan, in response to American’s diminishing use of traditional letters.

2) The ride sharing services Uber and Lyft are preparing to shut down in California because of a new law that reclassifies their drivers from contract workers to employees. Under an order issued ten days ago for their drivers to be employees with state mandated pay, benefits and taxes, the two service providers have threaten to suspend services if the order is not resended until an up coming referendum in November to exempt them is held. This is a major case for the growing on-demand economy and what its future in America’s economy will be. Being forced to use employee drives would fundamentally change their business, making them far less competitive with traditional taxi services.

3) The woes of America’s airline industry continues with the announcement that American Airlines is suspending service to 15 U.S. cities this fall. The move comes in response to declining demand and as a federal requirement to service those locations comes to an end. This is the latest step taken by American Airlines to cut costs amid airlines racking up billions in losses during the pandemic. The company will slash 30% of its management and administrative jobs with about 25,000 of their workers furloughed by October. They have reached a deal with their pilots union to offer more leaves and early-retirement packages. Estimates are that domestic airlines will lose more than $20 billion dollars in revenue this year, while globally the industry could lose up to $84 billion dollars this year.

4) Stock market closings for – 20 AUG 20:

Dow 27,739.73 up 46.85
Nasdaq 11,264.95 up +118.49
S&P 500 3,385.51 up +10.66

10 Year Yield: down at 0.64%

Oil: down at $42.78

2 July 2020

1) The airline industry is one of the hardest hit segments of the economy from the pandemic, with an estimated 36% drop in traffic this year. But the International Air Transport Association is warning that it could worsen with a 53% drop if boarder curbs on emerging market countries and the U.S. remain in place. The U.S. – EU (European Union) air travel market generates $29 billion dollars a year is threaten by the ban on non essential flights from the U.S. as the EU attempts to avoid an resurgence of the virus. Air travel was down over 90% for April and May, with little prospects for improvement in the near future, leaving the future of air carriers in doubt too.

2) The maker of electric automobiles Tesla has become the world’s most valuable automaker, surpassing Toyota’s for the first time on record. Tesla’s valuation is roughly $206.5 billion dollars compared with Toyota’s valuation of about $202 billion dollars. This underscores the vast investor enthusiasm for the automaker, which has yet to turn a profit on an annual basis. While it’s valuation exceeds Toyota, its car production of 103,000 cars lags far behind Toyota’s production of 2.4 million vehicles. The valuation comes from the stock in the company, with investors piling money in since there aren’t any other electric vehicles investments available, with Tesla stock soaring to $1,135 per share.

3) Electricity bills are set to surge this summer because of millions of Americans sheltering in place. This added demand will mean higher electricity costs for months to come. This will mean an additional $30 to $40 per month on electric bills in cities like New York and Philadelphia. Increases are anticipated to be highest for the northeast area of the country, decreasing when going westward. This comes when people’s finances are already stretched tight because of the coronavirus crisis.

4) Stock market closings for – 1 JUL 20:

Dow 25,734.97 down 77.91
Nasdaq 10,154.63 up 95.86
S&P 500 3,115.86 up 15.57

10 Year Yield: up at 0.68%

Oil: down at $39.71

22 June 2020

1) Oil has passed$40 a barrel, continuing a slow but steady recovery. This could be signaling a reawakening of the U.S. shale oil production. This rally allows the oil industry some breathing room with its high debt burden as the shale oil industry seeks to rebuild after the worst price collapse in a generation. This is far different than earlier this year when oil producers were paying to have their oil taken away. OPEC+ continues efforts to re-balance the global oil market, now abundantly clear that everyone loses in a price war.

2) More encouraging economic news with Ford Motor and Fiat Chrysler returning to pre-coronavirus pandemic production schedules in their American plants. Ford plans to fully return to production levels by July 6 while also ramping up their production facilities in Mexico. Although not given any firm dates, Fiat Chrysler is also returning to former production levels as rapidly as possible.

3) Experts are predicting the restaurant business, as we know it, is coming to an end because of the Convid-19 crisis. The industry generates $900 billion dollars a year, employs 15 million people, which is 15 times more than the airline business, which many are so concerned about now. Estimates vary widely of 20 to 80% of the privately own restaurants succumbing to the pandemic. The big franchise restaurant chains are expected to mostly survive and continue, but the independents are expected to fade out. One factor is change, which is coming too fast for small operations to adapt and keep pace with. The general consensus is that the business was in trouble long before the pandemic, struggling with poor working conditions, very thin profit margins, low wages and increasing competition. But it’s not just the restaurants themselves, for behind them is farming, distribution, suppliers and commercial real estate. It’s apparent that the demise of a significant number of independent restaurants will spell a significant change to the American business environment.

4) Stock market closings for – 19 JUN 20:

Dow 25,871.46 down 208.64
Nasdaq 9,946.12 up 3.07
S&P 500 3,097.74 down 17.60

10 Year Yield: unchanged 0.70%

Oil: up at $39.43

6 May 2020

1) The U.S. Bureau of Labor’s CPI (Consumer Price Index) statistic declined by 0.42% in March, the largest decline since January 2015. The CPI is used to measure the change in the cost of a typical basket of goods, which an American would buy in a month. This downward trend of the index indicates the value of the dollar is going up, which is deflation. Normally, the dollar is the subject of inflation, with prices rising between 0.1% and 0.3% per month, which makes a 0.4% drop somewhat strange. The largest factor driving this drop is energy cost, which experts attribute about three-quarters of the decline to, but other goods such as automobiles, airline tickets, household furnishing and apparel have also dropped in cost. However, there is debates among economists that the CPI is flawed, because it is based on items selected two years ago, which people may not actually be buying much of now. It doesn’t account for quick changes in people’s buying habits.

2) Oil prices continue to climb for the fifth straight day, the longest run of daily gains in nine months. Production cuts are starting to whittle down the surplus, coupled with the coronavirus lockdowns subsiding. Morgan Stanley predicts the supply glut most likely has hit its peak, but still the glut in oil will remain for quite a while.

3) Consumer debt has reached a record high to start 2020, even as credit card balances decline. Household debt balances total $14.3 trillion dollars through March, which is a 1.1% increase from the previous quarter. A $34 billion dollar drop in credit card balances was offset by an increase of $27 billion dollars in student loans and $15 billion dollars in auto debt. Mortgage balances rose by $156 billion dollars. The decline of credit card debt is an indicator that people are spending less on consumer goods as a result of the coronavirus.

4) Stock market closings for – 5 May 20:

Dow 23,883.09 up 133.33
Nasdaq 8,809.12 up 98.41
S&P 500 2,868.44 up 25.70

10 Year Yield: up at 0.66%

Oil: up at $25.68

15 April 2020

1) A second round of layoffs is starting, the first being workers at restaurants, malls and hotels, most of them lower skill levels, but now it’s higher skilled jobs threatened. Those higher skilled jobs had seemed secure, however the ‘work at home’ people are seeing layoffs and furloughs to add to the unemployed numbers. Jobs such as corporate lawyers, government workers and managers are seeing the pink slip with a threat of a prolonged labor downturn in 2007-09 recession. Economist anticipated that 14.4 million jobs will be lost in coming months, raising the unemployment rate to 13% for June. Already, 17 million Americans have been laid off, with estimates of 27.9 million jobs to be lost. The information businesses are being hit, with revenues not sufficient to pay electric bills for servers and computers to host web sites. Even large law firms catering to the corporate world are having significant layoffs. State and local governments employ 20 million people, but as tax revenues drop, they too are faced with reducing employees. Analysts consider it will take 5 1/2 years for the labor market to recover.

2) Boeing, the airline manufacture, is further suffering business setbacks with the cancellation of orders for 150 jets in March. This is a result of a near total halt in demand for air travel because of the coronavirus pandemic. There are now nearly 14,000 jets parked by airlines around the world. Boeing did report new orders for 31 aircraft in March. While Boeing still has a backlog of orders for about 5,000 jets, there are fears that delivery will be deferred which will further add to Boeing’s financial woes.

3) The IMF (International Monetary Fund) is predicting that the Great Lockdown recession will be the worst in almost a century, warning the world economy’s contraction and recovery will be worst than anticipated. The IMF estimates the global gross domestic product will shrink 3% this year, compared to a 3.3% growth in January. This will dwarf the 0.1% contraction in the 2009 financial crisis. These forecast dashing any hopes for a V-shaped economic rebound after the virus subsides, with a commutative loss of global GDP of this and next year, of about $9 trillion dollars. Economic damage is driven by how long the virus remains a major threat.

4) Stock market closings for – 14 APR 20:

Dow 23,949.76 up 558.99
Nasdaq 8,515.74 up 323.32
S&P 500 2,846.06 up 84.43

10 Year Yield: unchanged at 0.75%

Oil: down at $20.82

22 January 2020

1) The massive internet retailer Amazon has just been granted a patent for robots that drop off bunches of items on delivery routes. The robot has storage compartments where the customer comes out to the sidewalk, taps in the required security code on their smartphones that opens the door to a compartment so the person can get his package. The robot addresses the last mile or final fifty feet of package deliver. Such a robot also address the problem of porch pirates.

2) The mortgage companies seem to be reverting back to their old ways that triggered the financial crisis in 2008. This is the practice of giving large loans with small down payments to those with low FICO scores. FICO scores as low as 640 are getting mortgages of up to $2 million dollars, scores which were considered sub-prime prior to the 2008 economic near collapse.

3) The stock markets have pulled back from record high levels after the Center for Disease Control announced the first case of conronavirus in America. The highly contagious disease was discovered in a traveler coming from China. Particularly hit were stocks in casino and hotel companies, as well as airline companies and other companies involved with international travel. The Asian markets have also suffered a sudden drop which is blamed on the spreading virus.

4) Stock market closings for – 21 JAN 20:

Dow              29,196.04    down    152.06
Nasdaq          9,370.81    down      18.14
S&P 500         3,320.79    down        8.83

10 Year Yield:    down   at    1.77%

Oil:    down   at    $58.37

22 July 2019

1) The woes of traditional American big box retailers continues with J.C. Penney seeking strategies to keep their money losing company afloat. The company is in talks with specialist on reorganizing their trouble companies debt. Dressbarn, another retailer has announced the closing of all its retail stores starting this August with the closing of 53 stores.

2) The American retiree population is running out of money too soon. Three fifths of retirees do not have any traditional pension plan. The much vaunted 401K plan for replacing retirement plans, which became popular in the last quarter of the twentieth century, is failing to provide the needed retirement income despite the soaring stock market of the last ten years. This will leave America’s young people with a massive burden who themselves are facing financial challenges with shrinking job markets and displacement by technology.

3) The renowned airline manufacture Boeing announced they are taking a $4.9 billion dollar charge in the second quarter which will wipe out all of it’s profits for that quarter. This charge is compensation to airline companies for having their aircraft grounded, resulting in loss of business and revenues. Furthermore, Boeing has cut production of their best selling product as deliveries are backed up pending acceptance of their software fix by the government.

4) Stock market closings for – 19 JUL 19:

Dow                 27,154.20    down    68.77
Nasdaq             8,146.49    down    60.75
S&P 500            2,976.61    down    18.50

10 Year Yield:    up   at    2.05%

Oil:    up   at    $55.74

20 May 2019

1 ) Hewlett Packard is buying the supercomputer maker Cray for $1.4 billion dollars. HP is intent on strengthening it position against IBM by expanding its high end computer line, expanding into AI (Artificial Intelligence), Internet of things and distributed computing offerings, and is expecting to see a return on investment in the next two years.

2) There are reports that the U.S. China trade talks have been put on hold, causing a reversal of the markets. The holdup is the increased scrutiny of Chinese telecom companies. This scrutiny is making it harder for Chinese companies such as Huawei to do business with U.S. companies.

3) Airline baggage fees is becoming an increasingly lucrative source of income. The U.S. airlines brought in $4.9 billion dollars from luggage fees, an 80% increase from 2009. Typical fees is $30 for the first bag, $40 for the second and $150 for the third. There are also expensive payments for heavy or oversize bags.

4) 17 MAY 19 Stock markets closing:

Dow                  25,764.00     down    98.68
Nasdaq              7,816.28      down    81.76
S&P 500             2,859.53 down 16.79

10 Year Yield:    down   at    2.39%

Oil:    down   at    $62.71