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

25 September 2019

1) There are fears that the repo (repurchase agreements) market or short term funding, where banks lend to each other, is looking like it did on the 2007 market crash. The Federal Reserve Bank injected hundreds of billions of dollars into the repo system after it seized up last week when the interest rates quadruple. This has been coming about for the last several years after the Fed ended the policy of quantitative easing (QE) in order to increase liquidity to encourage banks to lend more. The squeeze like last week’s indicates there isn’t enough reserves in the financial system for the repo markets to operate. This means the government is having to buy back treasury securities.

2) Presidential candidate Bernie Sanders has propose a tax that would cut billionaires’s net worth in half. This wealth tax takes Elizabeth Warren’s idea and pushes it even further, with Sanders goal to cut American billionaires’ fortunes in half over 15 years. This wealth tax would raise an estimated $4.35 trillion dollars over the next decade by targeting 0.1% of U.S. households.

3) The consumer confidence index has declined by the most in nine months. Americans’ expectations for the economy and the job market deteriorated posing a risk to the household spending that is key to growth. The index dropped from 134.2 to 125.1, the lowest level since January. The overall measure remains elevated suggesting consumers will continue to support the record long U.S. expansion via spending.

4) Stock market closings for – 24 SEP 19:

Dow               26,807.77    down    142.22
Nasdaq            7,993.63    down    118.84
S&P 500         2,966.60    down       25.18

10 Year Yield:    down   at    1.64%

Oil:    $56.80

9 September 2019

1) Several state attorney generals will investigate Facebook for possible stifling competition and putting users at risk. This comes after reports that Google will face antitrust investigations from state attorney generals. The investigations will center on actions that endangered consumer data, reduced the quality of consumers’ choices or increased the price of advertising. States investigating include New York, Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee and the District of Columbia.

2) President Trump unhappy at GM for decision to close four of its domestic auto plants. General Motors, which was once the giant automaker in Detroit, is now one of the smallest. GM has gone from 33 plants in the US to 29, but has an additional 27 manufacturing plants in China. Presently, GM sells more cars in China than it does in America. This accounts for $16 billion dollars in profit for GM.

3) The American consumer is carrying the U.S. economy in last quarter. The personal expenditures rose last quarter while business and residential investment, net exports and inventories have declined. There are concerns that consumers may rein in spending from fears of economic future. Global commerce is slowing, partly in response to the trade war, and without strong consumer spending it’s hard to see alternate sources of economic growth.

4) Stock market closings for – 6 SEP 19:

Dow               26,797.46         up     69.31
Nasdaq            8,103.07    down    13.75
S&P 500           2,978.71          up      2.71

10 Year Yield:    down   at    1.55%

Oil:     up   at    $56.73

29 August 2019

1) Threat of a ‘no deal’ Brexit has the British pound falling relative to the US dollar and euro. The new British prime minister Boris Johnson announced the annual suspension of Parliament would be extended until 14 October, just two weeks before the UK is set to leave the European Union. This suspension is considered a move to block a no-deal Brexit within the UK parliament.

2) If General Motor exits from China, it will mean billions of dollars of profit lost. President Trump’s threatening order for American business to leave China would leave GM the hardest hit of the big three American automakers. While most of GM’s profits comes from North America, it makes about 43% of it annual auto sales in China. This would also mean the loss of all future growth potential, leaving it almost a North American only company, since GM has sold off its European operations.

3) The international gold market is falling prey to a forgery crisis. Gold bars are being stamped with logos of major refineries which makes them of questionable purity. These fake bars are being used as a means to launder cash money or trafficking illegally mined gold. The fakes became apparent when gold bars were found with identical serial numbers. In 2017 and 2018 there were 655 forged bars reported. Gold Kilobars are the most common form of gold in circulation and are worth about $50,000 each

4) Stock market closings for – 28 AUG 19:

Dow                26,036.10    up    258.20
Nasdaq             7,856.88    up      29.94
S&P 500            2,887.94    up      18.78

10 Year Yield:    down   at    1.47%

Oil:    up   at    $55.90

12 August 2019

1) The electric car company Tesla Inc is being sued claiming the company limited battery range of its older vehicles using software updates. The alleged intent was for Tesla to avoid costly fixes to defective batteries. The lawsuit is seeking class action status for thousands of Model S and X owners. The suit claims that older generation batteries had their range curtailed by an automatic software update. As a result of a battery fire, Tesla claims they are revising charge and thermal management settings via the software to further protect the battery and improve battery longevity.

2) The Chinese-American trade war hasn’t been bad for all nations, other nations are experiencing increase trade as a result of the war. Australia is the biggest beneficiary with exports to China of natural resources. Second is Switzerland, the third is Mexico which has replaced China as U.S. largest exporter. Fourth is Brazil who is benefitting from agricultural export to China and the fifth is Canada.

3) Malaysia is expanding its efforts to prosecute seventeen Goldman Sachs executives, who were allegedly involved in misleading investors in a $6.5 billion dollar bond sale. The bonds were for the state investment fund, 1 Malaysia Development Bhd or 1MDB. Charges include executives knowing that funds would be siphon off so Malaysia is also seeking to recoup funds and fees.

4) Stock market closings for – 9 AUG 19:

Dow             26,287.44    down    90.75
Nasdaq          7,959.14    down    80.02
S&P 500         2,918.65    down    19.44

10 Year Yield:    up   at    1.73%

Oil:    down   at    $54.27

31 July 2019

1) One of the nations largest credit card companies Capital One announced a massive data breach which affects tens of millions of customers. This news has sent its stock down 7%. Most of the data lost to hackers was personal information such as names, addresses, phone numbers and income of consumers and small businesses from 2005 to 2019. About 140,000 Social Security numbers of customers was comprised with 80,000 bank links. This breach is one of the largest yet.

2) China and America have resumed trade talks in Shanghai after a three month suspension. President Trump has criticized China for it’s reluctance to buy U.S. agricultural products, the Chinese using this as a pressure point on Trump with many farmers having previously supported Trump. There are low expectations for a breakthrough in trade talks because the two sides are further apart now than three months ago.

3) American consumer confidence is at the highest level since November negating its June drop. The index rose from June’s 124.3 to 135.7. The index measures consumers’ assessment of the current economic conditions and their expectations for the next six months. Consumers have little concern for trade tensions with China or a slowing economy. This should translate into robust spending in the near future.

4) Stock market closings for – 30 JUL 19:

Dow               ,198.02    down    23.33
Nasdaq       8,273.61    down    19.72
S&P 500      3,013.18    down      7.79

10 Year Yield:    up   at    2.06%

Oil:    up   at    $58.34

29 July 2019

1) Newly released reports says that raising the minimum wage to $15 per hour by 2025 will raise the wages for 22.2% of American workers. They claim that 33.5 million workers would experience a $92.5 billion dollar increase in pay or $2,800 per worker. Currently, the minimum wage is $7.25 per hour, but it’s not expected such legislation to increase the federal minimum wage can pass through congress and not be vetoed.

2) China is looking for new markets to sell to. Presently, it has too many factories making too many goods because the trade war has diminished sales to its biggest customer America. China is seeking to create free-trade zones across the Asia-Pacific region in the hopes of opening new markets. Additionally, China is talking with Japan and South Korea to lower trade barriers. The problem is no country can absorb the volume of goods that China sells to America.

3) High tech companies are taking business to Canada and her supple of technology skilled immigrants. Canada has more relaxed controls over entry for workers having the education and skills sought by high tech companies, and therefore provides a base for such companies to expand into. Canada processes work visas for such workers in weeks, while the U.S. is noted for its long delays to grant the needed visas.

4) Stock market closings for – 26 JUL 19:

Dow             27,192.45    up    51.47
Nasdaq          8,330.21    up    91.67
S&P 500         3,025.86    up    22.19

10 Year Yield:    up   at    2.08%

Oil:    down   at    $56.16

23 July 2019

1) Despite the world wide forces that normally pushes oil prices higher, the oil markets remain surprisingly flat. Available oil has dropped with the embargos on Venezuela and Iran, plus tensions over the Strait of Hormuz which would have normally pushed oil prices up. But at the same time, consumption has dropped with China leading the way, plus U.S. oil production continues to creep up. The International Energy Agency recently cut its expectations for global demand for 2019 and 2020.

2) Ford Motor Company stumbles in its attempt for global growth, in particular in trying to expand its market in China. Ford’s auto sales in China are down 27% for the first six months. Ford is being threatened by much improved Chinese’s domestic brands, resulting in a speedy and deep decline in Ford’s sales in China. So Ford is now counting on introducing new-models to revive its sales. Auto sales in China are softening as the Chinese economy slows and with the uncertainty over trade relations with America.

3) American farmers now facing a third obstacle to profits with a stifling heat wave spreading across the continent this summer. First, farmers faced the trade war with China imposing counter tariffs which dropped the demand for food products from one of their biggest customers. Then torrential rains flooded farmland delaying planting of crops and harvesting. Now droughts threaten to severely limit production and harvests. Many farmers may be facing financial disaster by the end of this year, not having the monetary resources to hold out for a better next year.

4) Stock market closings for – 22 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

27 June 2019

1) Ikea, the pioneer of inexpensive self-assembled home furniture is adapting its manufacturing and marketing methods to inexpensive housing. Sections for homes will be built in factories, then quickly assemble into ready to move-in houses. Bringing the factory manufacturing techniques to homes would significantly reduce the cost as compared to the hand built housing techniques now used. This could open the way to home ownership by the younger generations.

2) Despite the continual upsurge of the markets, Americans aren’t convinced the economy is doing well. A survey shows 39% of U.S. consumers believe the economy is ‘not so good’ or even poor. Lower income Americans are not doing as well as macro indicators would suggest, despite getting more raises recently. These gains don’t offset years of high unemployment and stagnant wages.

3) A huge drop in U.S. crude oil inventories and the outlook for demand has pushed oil futures prices up to near $60 dollars a barrel. Domestic stockpiles fell by 12.8 million barrels last week, the biggest drop in supplies since September 2016. In the past week, oil futures have jumped 10%, with the traditional expected increase in oil demand with summer driving. Gasoline reserves are further aggravated by the fire at Philadelphia Energy Solutions, the East Coast’s largest refinery.

4) Stock market closings for- 26 JUN 19:

Dow                    26,536.82    down    11.40
Nasdaq                  7,909.97          up    25.25
S&P 500                 2,913.78     down      3.60

10 Year Yield:    up   at    2.05%

Oil:    down   at    $59.21

21 June 2019

1) Boeing has landed a$24 billion dollar contract from IAG SA, the owner of British Airways, to purchase 737 MAX airliners. Rival builder Airbus has vowed to fight the agreement since they never received an RFP (Request For Proposal) for making a bid on the contract. The secret negotiations between Boeing and IAG was the bomb shell surprise coming out of the Paris air show this week. This sale comes as a major endorsement to Boeing’s 737 MAX to reestablish Boeing as a major supplier of airliners.

2) The price of crude oil shot up 5% over news that Iran has shot down a American drone aircraft, fueling additional fears of a US-Iran military confrontation. The drone was shot down by a surface to air missile while flying over international airspace of the Strait of Hormuz. This is another move by Iran to control the seaway and thus control the flow of oil in an effort to force the U.S. to abandon its crippling economic sanctions.

3) The cost of opening a major fast food franchise in terms of liquid assets can be as much as a million dollars or more. You must have $500,000 cash to open a McDonald’s, $750,000 to open a Taco Bell and $2 million dollars to open a Wendy’s. Startup costs exceed a million dollars for most major fast food chains in America, with additional monthly fees for royalties, advertising and services, which can add up to 10% of gross sales.

4) Stock market closings for- 20 JUN 19:

Dow            26,753.17    up    249.17
Nasdaq         8,051.34    up      64.02
S&P 500        2,954.18    up      27.72

10 Year Yield:     down   at    2.00%

Oil:    up   at    $57.16