6 July 2020

1) Newest job report is out with America gaining 4.8 million jobs as people return from the shutdown to work again. This gives an unemployment rate of 11.1%, which is still in the recession category, but is coming down over time. These returning jobs were mostly in the restaurant, hotel and retail sectors. There remains the question of how many restaurant jobs will finally return, with significant numbers of privately own businesses failing financially because of the shutdown.

2) The cornerstone of Ford’s reorganization, its F series Ford pickups, has dropped 22% in sales. Most of these are the F-150 full size pickups, with a new version just recently released. Total Ford sales are down 33.3%, with Ford executives making it clear just how critical the F-150 is to the future of Ford. Before the pandemic crisis set in, Ford had implemented a major restructuring of its operations intent on remaining a strong profitable company, and had expected to pay for this plan in part with the strong sales of the F-150. The F series models have been a part of Ford’s product line since 1948.

3) It’s reported that the developing world loses billions of dollars in money from migrant workers. These migrant workers range from Polish farmhands in the fields of southern France, to Filipino workers on cruise ships in the Caribbean, almost all of them losing their jobs because of the pandemic shutdown. These workers routinely sent cash home, so the third world economy is suffering too. Migrant workers comprise tens of millions of Indians, Filipinos, Mexicans and others from the developing countries, who sent a record $554 billion dollars back home last year. This is more than three times the development aid from foreign governments. Family members depend on this cash to pay for food, fuel and medical care. This drop in money sent home is four times the fall in the 2008 Great Recession.

4) Stock market closings for – 3 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: unchanged $40.32 back home

23 June 2020

1) Speculation abounds over what the next stimulus package will have, such as extended income support for the unemployed and underemployed. New temporary subsidies for low wage workers. Cheap loans for small and medium size businesses with additional support for state and local governments. Cost estimates for a second stimulus program range from one to two trillion dollars. But like the first stimulus package, no one is offering ideas how this money will be paid off, especially if economic expansion doesn’t materialize.

2) The worlds fastest super computer is now Japan’s Fugaku supercomputer developed by Riken and Fujitsu with backing from the Japanese government. It has a speed of roughly 415.53 petaflops, which is 2.8 times faster than the US Summit supercomputers at 148.6 petaflops. The Fugaku was under development for six years and will start full time operation by April 2021, although it has been pressed into service in the coronavirus crisis, running simulations on how droplets would spread in office spaces with partitions. Previously, the fastest supercomputers have belong to America and China.

3) The sales of existing homes has dropped in May, a result of the coronavirus impact on the economy. The sales of existing homes in May fell 9.7% compared with April, which makes for an annual decline of 26.6%. This is the largest decline since 1982 when interest rates were 18%. There remains a shortage of housing which is helping to uplift the market, and therefore the economy as soon as the crisis has subsided.

4) Stock market closings for – 22 JUN 20:

Dow 26,024.96 up 153.50
Nasdaq 10,056.48 up 110.35
S&P 500 3,117.86 up 20.12

10 Year Yield: up at 0.70%

Oil: up at $41.13

15 June 2020

1) The Independent Restaurant Coalition estimates that 85% of the independent restaurants may go bust by the end of 2020. The independent restaurants comprise 70% of all the restaurants in America. These restaurants rely more heavily on dine-in revenue, which the franchise chains don’t because of their drive up and take out business is well established, while also having a corporate safety net or support system to fall back on. It will be a long time before dine-in revenue returns to pre-pandemic levels because independents depend on densely packed dinning rooms to generate sufficient revenue to meet expenses, something that social distancing prevents. Most owners just don’t have the cash reserves to survive.

2) J.C. Penny stores will begin their ‘going out of business’ sales having just received bankruptcy court approval to begin liquidation sales at those stores closing permanently. There are 242 stores closing leaving about 600 stores to continue. Sales could start as early as this weekend. J.C. Penny is the largest company to file for Chapter 11 bankruptcy since the pandemic started. Penny faces a crucial deadline of 15 July for a business plan, which without one, the company is expected to pursue a sale instead, which could mean total liquidation.

3) Some are proposing negative interest rates for U.S. bonds as some European countries are doing. The rational for negative interest rates is they spur economic growth, which is controversial among economist with evidence that it really works being mixed. Lowering interest rates encourages businesses and individuals to invest and spend more, which helps the economy grow. The doubts about negative interest rates is companies and individuals would rather hold cash which cost nothing rather than pay to park their money in the bank. This encourages the money to be loan out rather than be parked, which often means riskier loans. While there are studies made of how effective negative interest rates are, so far the results are mixed.

4) Stock market closings for – 12 JUN 20:

Dow 25,605.54 up 477.37
Nasdaq 9,588.81 up 96.08
S&P 500 3,041.31 up 39.21

10 Year Yield: up at 0.70%

Oil: up at $36.56

11 June 2020

1) This last April, the government offered $349 billion dollars to small businesses, in their stimulates package called the Paycheck Protection Program or PPP, as a way of limiting the economic damaged from the shutdown orders and pandemic. This money was gone in just 13 days, so Congress approved a second round of $310 billion dollars, but so far there is $130 billion dollars left with more monies being returned than borrowed. Thousands of companies sent loan money back because loan terms were too restrictive, or the criteria for loan forgiveness was too murky. There has been about $3 billion dollars in loans that have been canceled or returned. Congress has moved to loosen the program’s rules giving businesses more flexibility in spending their aid. Nevertheless, many small businesses are facing closure amid the uncertainty of the economy and what the future holds.

2) America is on track for another 2008 class financial crisis with threats of financial collapse. The 2008 crisis forced banks to rethink their risk taking, and new regulations were put through designed to limit the risk that banks take in making loans. Already facing a prolong recession, the balance sheets of big banks could precipitate a collapsed of the financial sector, as almost happened in 2008. The last crisis was caused by CDO (Collateralized Debt Obligations) where sub-prime home mortgages were packaged and given ratings of high quality mortgages. When these over-rated CDOs began to default, the banks were on the verge of collapse, but the feds stepped in and saved the day . . . just barely. The banks have fallen back into their old habits now by using CLO (Collateralized Loan Obligations) which are like CDOs, however they are for businesses instead of home mortgages, but still having the high risk. With the threat of many small businesses failing from the coronavirus crisis, these CLOs could default causing the big banks to collapse, bringing the American economy down.

3) A record number of retail stores are expected to permanently close this year as consumer demand for discretionary items stalls and people shift to online shopping. As many as 25,000 retail stores could fold up, with more than 4,000 having all ready given up the ghost. It is anticipated the closures will snowball from the recession, adding to the effects of unsustainable debt levels. The retailers were struggling to stay afloat before the pandemic struck.

4) Stock market closings for – 10 JUN 10:

Dow 26,989.99 down 282.31
Nasdaq 10,020.35 up 66.59
S&P 500 3,190.14 down 17.04

10 Year Yield: down at 0.75%

Oil: up at $38.78

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

4 June 2020

1) The stock market continues to climb, with some saying this signals the end of the recession. The S&P 500 has a return of 37.7% over the past 50 trading days, which is the largest 50 day rally in history. This rally is attributed to the quick response of the Federal Reserve, with a record $2 trillion dollar federal stimulus package. Another factor is the unlimited asset purchases by the Federal Reserve. While the shutdown depressed retail and airlines businesses, other parts of the economy saw a boost, such as Netflix, Amazon and Facebook. But there is still the record high of over 40 million workers idled by the pandemic, while the weakening in the Chinese’s economy coupled with the tensions between China and America could have a telling effect to the economic recovery.

2) There are fears of another round of layoffs in the later part of 2020, amid questions of where the economy will go in the next six to twelve months. Businesses are now reluctant to expand and hire new people, and may decide to contract thus being better able to weather economic hard times. There is also the unspoken problem of continued automation taking jobs as AI (Artificial Intelligence) and automation that experts predict will continual to sap jobs for the next decade. Automation gives companies an added advantage in surviving when the economy slows down, but a second wave of layoffs may trigger that slowdown.

3) The giant movie theater chain AMC has announced they doubt they can remain in business after the effects of the coronavirus shutdown. The company has problems with their liquidity, their ability to generate revenue and the timeline for reopening its theaters. The chain expects to lose $2.1 to $2.4 billion dollars for the first quarter, with the second quarter to be even worst. With all its theaters closed down, AMC is generating zero revenues. The major problem in reopening is having enough cash for operations until cash starts coming in again, and there is still questions of when theaters will be able to open again, especially if there are flare-ups of the virus.

4) Stock market closings for – 3 JUN 20:

Dow 26,269.89 up 527.24
Nasdaq 9,682.91 up 74.54
S&P 500 3,122.87 up 42.05

10 Year Yield: up at 0.76%

Oil: down at $36.75

2 June 2020

1) Experts say it could take as much as a decade for America’s economy to fully recover from the coronavirus and the subsequent massive shutdown of businesses. Presently, it’s expected that the GDP (Gross Domestic Product) will decrease about 3% from 2020 to 2030 or about $7.9 trillion dollars. It’s expected that the measures to counter the virus, the business closures and social distancing measures, will reduce consumer spending, which in turn will cool the economy. With 41 million people now unemployed, more layoffs are expected for the next week with an unemployment rate of 19.6%. Furthermore, it’s expected that the coronavirus will cost the economic about $7.9 trillion dollars.

2) The reopening of America from the lockdown was going to be difficult enough, but now the growing violence of protest is threatening to hamper that recovery. Stores in the protest areas are closing for the protection of its employees such as CVS and Target, with doubts mounting if some of the stores will ever reopen. Mayor Lightfood of Chicago said the continuing violence is making the city reconsider the opening of Chicago’s businesses. Also, the wireless carriers T-Mobile has closed Metro and Sprint stores over the same consideration of possible violence.

3) China has stopped some imports of U.S. farm products such as soybeans and pork meat. This is the latest sign that the January phase one trade deal between the world’s two largest economies is unraveling. The halts come after President Trump’s criticism of China’s efforts to bring Hong Kong under the firm control of the communist. The president is threatening to strip Hong Kong of some of it’s special privileges, which in turn would make Hong Kong less valuable economically to China. Further aggravating U.S. and Chinese relations is the charges that China shares some responsibility for the Convid-19 pandemic.

4) Stock market closings for – 1 JUN 20:

Dow 25,475.02 up 91.91
Nasdaq 9,552.05 up 62.18
S&P 500 3,055.73 up 11.42

10 Year Yield: up at 0.66%

Oil: up at $35.56

1 June 2020

1) For the last few years, a number of retailers have been downsizing by closing a number of their stores across the country, something that the coronavirus pandemic has greatly accelerated. But the restaurant chains have also been downsizing as well, closing branches all across the county. Such popular names as Jack in the Box, Luby’s, Pizza Hut, Ruby Tuesday, Steak’nShake , Subway, Burger King, TGI Fridays and Applebee’s just to name a few, who are closing restaurants across the country. Each have been struggling for the last several years. This is another sign that the American consumer market is in the process of fundamentally changing.

2) The U.S. consumer spending plunged in April by the most on record because of the nation wide lock down. Spending fell 13.6% from the prior month, making for the sharpest drop in six decades. A rise in income temporarily masks the fact that people are in a fragile economic position, because the rise was a result of the one time stimulus checks. The virus crisis halted all but the most essential purchases, with economists expecting it will take a year or more before spending recovers.

3) It’s anticipated that the national debt will increase to more than 100% of the national GDP (Gross Domestic Product) by the end of the year. This will exceed the record set after World War II. The $25 trillion dollar national debt equates to $76,665 dollars per citizen or $203,712 dollars per taxpayer. The federal deficit is over $1.9 trillion dollars through April, and is expected to rise to $3.7 trillion dollars by the end of September, which is the end of the fiscal year. Such debt could draw investors to demand higher interest rates, as the federal government’s position becomes increasingly precarious. This is like an individual piling on credit card debt without consideration for the short or long term consequences to their financial position. For America, those consequences could be deep depression coupled with inflation of the dollar leaving money far less valuable than today.

4) Stock market closings for – 29 MAY 20:

Dow 25,383.11 down 17.53
Nasdaq 9,489.87 up 120.88
S&P 500 3,044.31 up 14.58

10 Year Yield: down at 0.65%

Oil: up at $35.32

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

26 May 2020

1) Sales of homes in the U.S. have dropped their biggest drop in nearly 10 years, because of the coronavirus crisis in April. The upending of the labor market and the broader economy has undercut demand for housing. Sales of existing homes have plunged 17.8% with existing home sales making up about 90% of U.S. home sales. In addition, April showed a record collapse in homebuilding and permits. With unemployment up past 38 million people and still climbing, it’s expected the home sale market will remain depressed for long after the pandemic crisis is over. The problem is further exasperated by a four month inventory of homes where a six to seven month supply is considered a healthy balance between supply and demand.

2) More contraction of consumerism with more retailers announcing closing of stores. The retailers Victoria’s Secret and Bath & Body Works will be permanently closing about 300 stores in America and Canada. With the young people of America having fewer good job opportunities and less disposable income, the hyper-consumerism economy born in the seventies is finding it harder to sustain itself, raising questions of what economic model might replace the present one . . . and what the job future would be for the young.

3) Companies have been borrowing at a rampant pace to shore up their liquidity during the pandemic. The wireless carrier AT&T is joining in with a new bond sale of $12.5 billion dollars of unsecured bonds in five parts. The intent is to take advantage of a global rally in credit to refinance their outstanding debt. Their 40 year security has a yield 250 basic points over the Treasuries. In the last few years, AT&T has been reducing its debt of nearly $200 billion dollars now down to $164 billion dollars, most of the debt coming from its acquisitions of Time Warner Inc and DirectTV.

4) Stock market closings for – 22 MAY 20:

Dow 24,465.16 down 8.96
Nasdaq 9,324.59 up 39.71
S&P 500 2,955.45 up 6.94

10 Year Yield: down at 0.66%

Oil: down at $33.56