12 October 2020

1) With the recession from the Covid-19 came predictions of waves of bankruptcy filings as businesses, large and small, failed. But that wave of bankruptcy has not materialized, and so far, there’s no sign that it will, indeed bankruptcies are down a little from last year. This is a good sign that companies and households are not as stressed as many economist feared. However, bankruptcy filings aren’t a perfect measure of hardship, with many companies barely hanging on, so bankruptcies may still be coming. Many small businesses and households go bust without ever formally filing for bankruptcy.

2) The four massive high tech companies, Google, Amazon, Apple and Facebook are under investigation at Federal and State levels for antitrust. These investigations are spurred by concerns that competition is being stifled by the domination of these companies, but there are concerns that the big tech is trying to also stifle conservative voices. Google is facing a relatively narrow complaint from the Justice Department that it seeks to disadvantage rivals in search and advertising. The focus on Apple is their apps store with accusations that Apple introduces new products and then put out apps that compete with them. Facebook has raised concerns over how they treat some of their app developers on its platform and therefore engaged in unlawful monopolistic practices. Amazon is suspected of conflict of interest in competition with small sellers on its marketplace platform.

3) Silicon Valley companies are thinking about the future of work taking actions from pay cuts to permanent work-from-home as they strive to cope with the coronavirus crisis. The big tech companies have formed various plans for the future of work. Some companies, (Twitter and Slack), said their employees never need to return to the office, while others, such as Microsoft, are adopting a hybrid model where employees report to the office only a few days a week. Amazon and Salesforce are adopting new benefits to help out working parents, such as subsidized back-up childcare and extended paid leave, while Facebook, employees may work from home permanently. However, if they leave the Bay Area for a less expensive city, they’ll may face a pay cut. Silicon Valley may bear little resemblance to the thriving hub before the pandemic. Tech companies have largely shut down their sprawling campuses and asked employees to work from home — in some cases, forever. When those offices reopen office life is unlikely to resemble the past. Companies may change their real estate plans, opting instead for a new type of office, or none at all.

4) Stock market closings for – 9 OCT 20:

Dow 28,586.90 up 61.39
Nasdaq 11,579.94 up 158.96
S&P 500 3,477.13 up 30.30

10 Year Yield: up at 0.78%

Oil: down at $40.52

2 September 2020

1) Five American companies make up 24% of the S&P 500 Index, the big high tech companies Apple, Amazon, Microsoft, Facebook and Alphabet. These five companies made up 17% of the index at the start of the year. This makes a significant part of American net worth and security for retirement dependent on just a handful of stocks, which makes some financial advisers nervous having their eggs in too few baskets. One hiccup in the technology sector could mean major losses across the board.

2) Another shooting of a young black man Monday in South Los Angeles has sparked more protest that could lead to more city rioting. The man was stopped for violating vehicle codes, but then ran, with the police in hot pursuit. When police caught up with him, he punched one policeman in the face at which time a semiautomatic pistol dropped out causing both policemen to open fired. Since the victim didn’t have the weapon in hand, nor was it ever pointed at either police officers, so there are questions about the shooting. So far, protests have been peaceful.

3) The U.S. Justice Department is investigating the protest leaders and their funding in Portland and other cities for possible criminal activity. With riots and civil unrest now at a hundred days, and significant monetary loses have been occurred, questions are being raised about who is behind the well organized protesters seemingly intent on violent confrontation. Of especial interest is the loosely organized far left Antifa and the Black Lives Matter, and who is ultimately controlling their operations through funding and why.

4) Stock market closings for – 1 SEP 20:

Dow 28,645.66 up 215.61
Nasdaq 11,939.67 up 164.21
S&P 500 3,526.65 up 26.34

10 Year Yield: down at 0.67%

Oil: up at $43.01

16 March 2020

1) Bill Gates, the co-founder of Microsoft is stepping down from the company’s board of directors, which makes it the biggest boardroom departure in the tech industry, since the death of Apple’s Steve Jobs. Additionally, Mr. Gates is vacating his board seat at Berkshire Hathaway Inc., intending to devote his time to his philanthropic efforts. He will continue serving as a technical advisor to Microsoft.

2) Oil prices climbed up 5% on the announcement by President Trump that the Department of Energy would purchase crude for the nations’ strategic petroleum reserve. The objective is to boost oil prices to keep shale producers in business, because oil needs to be $40 or more a barrel to break even, depending on the particulars of an oil field. The shale oil companies are further in trouble because they are carrying a high debt level. Shale oil production is very capital intensive and therefore very sensitive to oil prices if companies aren’t to go bankrupt. Some suggest that the Russians engineered the rupture of the Saudi Arabia – Russian agreement to limit production levels as a means to cripple the U.S. shale oil production and thereby make America dependent on foreign oil again.

3) President Trump and the Congress have agreed on several provisions of a package, but have been far apart on others. Their discussions center on ways to minimize the economic impact of the coronavirus fears. One point is to ensure that every American can receive a virus test without consideration of money.

4) Stock market closings for – 13 MAR 20:

Dow 23,185.62 up 1985.00
Nasdaq 7,874.88 up 673.07
S&P 500 2,711.02 up 230.38
10 Year Yield: up at 0.95%
Oil: up at $32.93

12 March 2020

1) The WHO (World Heath Organization) has declared the coronavirus to be a pandemic, which in turn has cause the markets to make another plunge after its apparent recovery on Tuesday. The number of coronavirus cases world wide is now in excess of 100,000 with more than 1,000 in the U.S. The central banks in other western nations are cutting their interest rates in an attempt to minimize the effects of the virus and avoid a world wide economic slowdown. At present, there doesn’t seem to be an end to the markets volatility.

2) The United Kingdom is levying an additional 2% tax on big high tech companies starting the first of April. Call the ‘digital services tax’, it will levy a tax on the revenues from search engines, social media services and online marketplaces used by British citizens, but it only applies to companies making more than $650 million dollars and derive more than $35 million dollars revenue from UK users. This will encompass companies like Amazon, Apple, facebook and Google. The EU (European Union) is considering a similar tax, but with a 3% rate.

3) Oil production in the U.S. is expected to drop as a result of the dramatic collapse in oil prices. This would be the first decline in output since 2016 as drillers are cutting back on capital spending. Oil prices are below $35 a barrel, well below the breakeven price for most American shale fields. Oil prices have been pushed down by the economic impact of the coronavirus plus Saudi Arabia and Russian failing to agree on limited oil production.

4) Stock market closings for – 11 MAR 20 Stocks down 20% from their high.

Dow 23,553.22 down 1464.94
Nasdaq 7,952.05 down 392.20
S&P 500 2,741.38 down 140.85

10 Year Yield: up at 0.82%

Oil: down at $33.12

2 March 2020

1) The stock markets continue their downward crash over worries of the conronavirus impact on economies making the week the worst week since the financial crisis. Caterpillar, a bellwether stock for global growth, slide down 3%, the worst performer among Dow stocks. Apple dropped 2.9% while Chevron and Cisco Systems are down more than 2%. Investors are worried the downward slide may continue after the conronavirus subsides, especially if China doesn’t return to its previous position, so recovery could be a long haul.

2) The sale of smartphones is collapsing in China, which is the largest market in the world. The plunged in sales is directly due to the coronavirus outbreak. Chinese companies had skidded to a halt, with the accelerated outbreak last month a result of quarantine mandates, travel restrictions and factory shutdowns. Huawei, the Chinese tech company, is being hit hard because it is the top selling smartphone in China.

3) Gold prices have been acting strangely with the reversals in the markets because of coronavirus fears. Traditionally, gold has been a ‘panic investment’ that investors flee to when there’s economic uncertainty, but this time investors are selling gold to generate cash. They are fleeing anything priced via bidding, for safer assets such as treasury bonds, which in turn is driving down bond interest rates. This indicates how worried the professional investors are about the world economic system.

4) Stock market closings for – 28 FEB 20:

Dow 25,409.36 down 357.28
Nasdaq 8,567.37 up 0.89
S&P 500 2,954.22 down 24.54

10 Year Yield: down at 1.13%

Oil: down at $45.26

21 November 2019

1) For 80 years Boeing Aircraft has operated as an ‘association of engineers’, but this changed in 2001 when the upper management who came from MacDonnel Douglas (a failed company), elected to move Boeing’s corporate headquarters to Chicago. The rational was upper management shouldn’t be close to a principal business, because the corporate center is inevitably drawn into day to day business operations. With this, Boeing became a financially driven business instead of engineering driven, with decision based on cost cutting instead of safety. This has resulted in the 737 MAX fiasco now being played out.

2) Apple has started construction of its $1 billion dollar campus in Austin Texas, which is beside its new MacBook Pro laptop manufacturing facility. The 3 million square foot campus will have 5,000 employees with capacity to grow to 15,000. Currently, Apply employs 7,000 people in Austin. This is seen as another move by Apple to limit its manufacturing in China.

3) Walmart is redesigning its grocery department in order to counter impending competition to traditional brick-and-mortar from online giant Amazon. Already the country’s largest grocer, Walmart will widen aisles, add low profile displays in the produce departments, an organic shop and update signage throughout its stores. These changes are expected to be improvements for the customers and workers.

4) Stock market closings for – 20 NOV 19:

Dow               27,821.09    down    112.93
Nasdaq           8,526.73    down      43.93
S&P 500          3,108.46    down       11.72

10 Year Yield:    down   at    1.74%

Oil:    up   at    $57.09

14 November 2019

1) The new streaming service Disney+ has surpassed ten million sign-ups since its launch Tuesday. In response Disney’s stock is up slightly while Netflix shares are down 1%. While there were technical problems connecting at first, that didn’t prevent customers from flooding the sign up page. The initial signup is for a free seven day trial, so it’s unknown how many will continue with the pay service.

2) In October, consumer prices rose the most in seven months as the price for gasoline was higher, along with medical treatment and recreation. But in general, inflation remained low and fairly stable, with consumer price index jumping 0.4%, primary from rising cost of energy. While gas prices surged upwards 3.7% in October, it’s still less than what Americans were paying a year ago.

3) The ever expanding corporate giant Google will offer personal checking accounts next year in partnership with Citigroup Inc and a small credit union at Stanford University. To be called Cache, it is intended to follow Apple Inc. and Facebook Inc into the financial industry. Google’s strategy is to deeply partner with banks and the financial system.

4) Stock market closings for – 13 NOV 19:

Dow                   27,783.59         up    92.10
Nasdaq               8,482.10    down      3.99
S&P 500              3,094.04         up      2.20

10 Year Yield:    down   at    1.87%

Oil:    up   at    $57.38

4 November 2019

1) In their Friday report the U.S. economy added 128,000 jobs in October, a report considered to be very strong when many economist expected a gain of 75,000 jobs. Furthermore, job growth for September was revised upwards to 180,000 from 136,000 and August jobs up from 168,000 to 219,000 new jobs. The good news has spurred the stock markets up.

2) Alphabet, the parent company for Google, is acquiring Fitbit in an attempt to strengthen the search giant’s lineup of hardware and move further into the health market. The $2.1 billion dollar sale will strengthen Fitbit to complete against Apple. Fitbit has slowed since Apple introduced its smartwatch.

3) The U.S. dollar may be weakening with Citi latest projections that the dollar index could fall to as low as 85 as the Federal Reserve increases its balance sheet by purchasing more bond assets. The dollar usually weakens when bond yields fall. If the dollar index were to weaken to 85, the euro could strengthen to 1.21 which helps emerging market equities. Additionally, capital could flow to the Hong Kong market if the dollar weakens, making a lot of stocks very attractive.

4) Stock market closings for – 1 NOV 19:

Dow             27,347.36    up    301.13
Nasdaq          8,386.40    up      94.04
S&P 500         3,066.91    up      29.35

10 Year Yield:    up   at    1.73%

Oil:    up   at    $56.23

28 October 2019

1) The telecommunications giant AT&T is making its belated entry into the streaming video business to compete with Netflix, Apple and Disney. AT&T plans to reach about 80 million subscribers globally, 50 million in the United States by 2025. HBO Max is expanding its customer base into the streaming market through AT&T wireless. AT&T also owns the satellite service DirecTV.

2) The UAW (United Auto Workers) has approved a new contract with GM (General Motors) which ends the six week strike. GM is calling back technicians to prepare the plants to resume production, with production resuming as early as Monday at some plants. The new contract gives workers a series of wage increases and a path for temporary workers to become permanent employees. Permanent workers can earn as much as $32 an hour.

3) The U.S. government has ended its 2019 fiscal year with the largest deficit since 2012. Gains in tax receipts were offset by higher spending and growing debt service payments. The budget deficit has widened to $984 billion dollars, which was 4.6% of the nation’s gross domestic product. Last years deficit was $779 billion dollars and 3.8% of the GDP. Defense, healthcare and social security programs are a major source for driving the deficit, with worries that these expenditures will not be sustainable.

4) Stock market closings for – 25 OCT 19:

Dow             26,958.06    up    152.53
Nasdaq          8,243.12    up      57.32
S&P 500         3,022.55    up      12.26

10 Year Yield:    up   at    1.80%

Oil:    up   at   $56.63

5 June 2019

1) The tech giants Apple, Google, Facebook and Amazon are facing antitrust troubles. The government is stepping up scrutiny of these big four with possible new rules, regulations and law suits. The investigative efforts will be split between the Justice Department and Federal Trade Commission driven by mounting criticism over political bias, disinformation and privacy breaches. This could spell years of troubles and law suits and possible breakup of the companies.

2) The threat of tariffs on Mexican imports has American oil refiners worried, since Mexico is the number two source of foreign oil to the United States. American produced oil is a light oil which is a poor match for Gulf Coast refining facilities, while the Mexican oil is a heavy oil that when blended with the America optimizes the refinery’s output.

3) The Medicaid system is still suffering from the Great recession, so there are fears than another recession could be devastating for the system. This is at a time when state spending on Medicaid is still high with no signs of subsiding. In a recession, payrolls decrease from people unemployed or underemployed, so contributions are down. This means less buildup of reserve funds needed for the future, and a second recession so soon, could seriously deplete those reserves quicker, leaving the future of the system in doubt.

4) Stock market closings for 4 June 2019: Jump in Dow comes from Fed signals flexibility on rates.

Dow               25,332.18    up    512.40
Nasdaq             7,527.12    up    194.10
S&P 500            2,803.27    up      58.82

10 Year Yield:    up   at    2.12%

Oil:    down   at    $52.95