22 March 2021

1) The U.S. Department of Justice has launched an antitrust investigation into the practices of renowned credit card company Visa regarding debit-card transactions. The DOJ is looking into the rules for routing transactions, both in stores and online. In its suit against Visa last year, the Justice Department claimed Visa already possesses monopoly power in the market for online debit-card transactions, arguing that roughly 70% of such transactions in the U.S. are routed over the firm’s network. At the heart of the Justice Department’s issues with Visa is the 2010 law known as the Durbin Amendment, which requires banks to include two networks on their debit cards. Merchants are then supposed to be given the choice of routing over a major network versus a smaller alternative such as Pulse, Star or NYCE. Those alternative networks can be cheaper for merchants.

2) The Federal Reserve stated that while the U.S. economy has been steadily rebounding from the pandemic recession, the recovery is far from complete and needs continued support from the Fed. About half the 20 million jobs that were lost to the pandemic have been recovered, and the outlook is brightening as vaccinations are more widely administered. The central bank’s policymakers forecasts are sharply upgraded, with the economy expected to accelerate quickly this year. At the same time, their forecast showed that the benchmark rate remains near zero through 2023, despite concerns in financial markets about potentially higher inflation.

3) Flipping houses in America is an easy way to make a quick buck. With the real-estate market red hot, profits on flips are at a record high, averaging some $66,000 per home. There are more than 60 banks and other financing companies catering to flippers. Memories of the 2007 real-estate bust are fading, and with interest rates on most fixed income investments still so paltry, lenders are desperate for anything that provides higher returns. The 7.9% average annual rate on a fix-and-flip loan is more than twice the 3.09% rate that a bank can earn on a 30-year mortgage. But there aren’t that many houses to purchase, the inventory of existing homes for sale is at its lowest since 1999, so now more flippers are chasing fewer transactions. Almost 68% of all home flippings last year sold for $300,000 or less.

4) Stock market closings for – 19 MAR 21:

Dow 32,627.97 down by 234.33
Nasdaq 13,215.24 up by 99.07
S&P 500 3913.10 down by 2.36

10 Year Yield: unchanged at 1.75%

18 June 2020

1) Retail giant Target has announced it is raising the minimum wage they pay to store and warehouse workers to $15 an hour, a $2 increase. Target had 350,000 workers employed in 1,900 stores across America. The company is also extending the benefits it started offering during the pandemic, including a new one of free visits to a virtual doctor. All this increases Target’s operating cost by more than $1 billion dollars a year. The company’s margins have been under pressure from pandemic related expenses, in addition to selling fewer high margin items such as apparel and accessories, as well as customers shifting to online shopping. Rival Walmart has announced they are testing a totally cashierless store as a way of limiting human contact because of the Convid-19 threat, but a cashierless store also means reduce labor cost, a goal long sought after by retailers.

2) There is a spike in mortgage demand driven by the record low interest rates. There is a 21% increase in mortgage applications from this time last year. The easing of the pandemic is releasing the pent up demand caused by the shutdown. A 30 year mortgage with 20% down fixed rate has an interest rate now of 3.3%. Refinancing continues to play a significant part in the home mortgage market.

3) Hilton Hotels is laying off 22% of its corporate workforce of 2,100 employees as a result of the coronavirus, while also extending furloughs for many of its corporate staff for an additional 90 days. The virus crisis has brought the hotel business to a near complete halt. The industry has lost about 7.7 million jobs, although occupancy has started to increase, signaling the worst may be coming to an end.

4) Stock market closings for – 17 JUN 20:

Dow 26,119.61 down 170.37
Nasdaq 9,910.53 up 14.66
S&P 500 3,113.49 down 11.25

10 Year Yield: down at 0.73%

Oil: down at $37.65

6 April 2020

1) Across the world, truckers are having a difficult time in their role of delivering food stocks to the people. In America, truck drivers are finding it more difficult to operate, unable to find places to eat, with restaurants shut down and their rigs too big to go to the drive-thru lanes. They are unable to find places to sleep, shower or even clean toilet facilities. Nevertheless, the food supply chain continues to struggle to get the necessary food to the people.

2) With the government announcement that we are now in a recession, questions abound how long will it last? For the ‘08 recession, it took more than a decade to recover. One major obstacle facing a recovery, from a near total shutdown of the economy, is the small businesses. Half the businesses in the American economy are classed as small businesses, and half of those have less than fifteen days cash reserves, which means a significant number of American businesses will not survive the virus shutdown. This will leave millions of workers scrambling to find work and therefore will greatly hinder a recovery.

3) Oil prices have rallied from news that the Saudi Arabia – Russia price war may be coming to an end with agreements to cut back oil production by ten million barrels a day. Oil is the keystone to economic vitality with oil prices needing to be above about $40 a barrel for shale oil to be profitable so America can remain oil independent.

4) Stock market closings for – 3 APR 20:

Dow 21,052.53 down 360.91
Nasdaq 7,373.08 down 114.23
S&P 500 2,488.65 down 38.25

10 Year Yield: down at 0.59%

Oil: up at $29.00

5 September 2019

1) A federal judge has ruled that investors may sue five big banks for conspiring to rig prices on bonds worth hundreds of billions of dollars issued by Fannie Mae and Freddie Mac for a seven year period. This clears the way for investors to pursue antitrust claims against Bank of America, BNP Paribas SA, Deutsche Bank AG, Goldman Sachs Group and Morgan Stanley. The banks are accused of fixing prices at a specific level before bringing the bonds to the secondary market.

2) The U.S. trade deficit narrowed overall slightly in July, however the gap with China surged to a six-month high. The trade tensions have caused wild swings in the trade deficit as exporters and importers try to stay ahead of the tariff fight between America and China. The Atlanta Federal Reserve is forecasting the economy growing at a 1.7% pace in the third quarter.

3) Oil dependent nations are facing economic troubles because gas and oil production are unsustainable. As oil and gas supplies dwindle and demand decreases, their once lucrative revenues may be decreasing. Nations whose economies are principally oil production face a trouble future as their oils supplies decline in the next few decades, with nothing to replace those revenues. Those nations facing economic troubles are the UAE, Nigeria, Qatar, Libya, Angola, Kuwait, Venezuela, Iraq and Saudi Arabia.

4) Stock market closings for – 4 SEP 19:

Dow            26,355.47    up    237.45
Nasdaq        7,976.88    up    102.72
S&P 500       2,937.78    up    31.51

10 Year Yield:    down   at    1.46%

Oil:    down   at    $55.98