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
1) The decay of the worlds airline industry is reaching out past the airline companies themselves, with jet engine maker Rolls-Royce announcing a $7 billion dollar lost for the first half of 2020. Rolls-Royce gets paid by the hours their engines are flown on airliners, and with the massive drop in air travel from the pandemic, the company’s revenues have drastically dropped leaving its survival in doubt. The company is being forced to sell assets to meet its cash needs, so they are reducing eleven of their locations to just 6, with the loss of 9,000 jobs. Stock dropped 9% on the news of reorganization which was already down 66% since the start of the virus crisis.
2) Not all of the retail industry is bleak news, with Abercombie & Fitch outperforming expectations in the second quarter. While the apparel company did lose ground in the last quarter, it performed better than analyst expected, with sales down by 17%, nevertheless their earnings per share made remarkable gains over last year. This is a result of aggressive costs reductions earlier in the quarter when the company slashed expenses by $200 million dollars by reducing salary expenditures and skipping dividends. Success in their e-commerce operations has also pushed up the revenues and promises to add more as people go to online for more of their shopping.
3) Another small indication that manufacturing is returning to America is Roche Holding AG plans to move its glucose testing strips manufacturing plant from Pueto Rico, where it has operated for about 40 years. The company is streamlining its operations by combining the plant with its other existing facilities. The move will cost 200 jobs in Peuto Rico, which has a number of other drug and medical device manufacturing plants.
4) Stock market closings for – 27 AUG 20:
Dow 8,492.27 up 160.35
Nasdaq 11,625.34 down 39.72
S&P 500 3,484.55 up 5.82
10 Year Yield: up at 0.75%
Oil: down at $42.96
1) The fast food mega-giant McDonald’s is reporting a bigger than expected drop in global restaurant sales across the world. This is a result of the pandemic restricting sales of their drive thru and delivery operations, and in some cases shutting restaurants down completely. With second quarter sales down by 30%, McDonald’s is facing a bumpy and expensive recovery. The franchise chain has 39,000 restaurants worldwide, of which 96% are now open, verses 75% at the start of the second quarter. Store sales were down 39% in April but by June was down only 12%. Net income is down by 68% for $483.8 million dollars. McDonald’s is permanently closing 200 locations in the U.S. amid those losses, more than half located in Walmart stores.
2) The Federal Reserve has announced that its lending programs will be extended until the end of the year. This indicates the feds don’t think the U.S. economy is weathering the pandemic storm very well and needs continued help. The program lends to small and medium sized businesses and was due to expire at the end of September. Continuing the program will provide a critical backstop to help the economy recover. This Thursday will bring the first look at the second quarter gross domestic product, which is the broadest measure of the economy, but it’s expected to show an ailing economy.
3) For the second time, the renowned gun maker Remington Arms is filing for bankruptcy. This is the second time in two years that Remington has filed for Chapter 11 bankruptcy protection. Chronic low sales is blamed for Remington’s decline, despite the overall increase in sales of guns in America because of the pandemic. One by one, American gun manufactures have succumb to imports. Remington reports assets of $100 million dollars compared to $500 million dollars in liabilities.
4) Stock market closings for – 28 JUL 20:
Dow 26,379.28 down 205.49
Nasdaq 10,402.09 down 134.17
S&P 500 3,218.44 down 20.97
10 Year Yield: down at 0.58%
Oil: down at $41.07
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
1) The investment bank Morgan Stanley is buying ETrade Financial Corp. for $13 billion dollars, planning to now manage money for regular people. ETrade will bring five million retail customers worth $360 billion dollars in assets, and an online bank with cheap deposits which Morgan Stanley can funnel into loans. Morgan Stanley had provided financial management to the upper end clients, the million and billionaires.
2) General Electric has avoided a business setback with exports of its jet engines to China. Fears that the Chinese could reverse engineer the new design and bolster its own aircraft manufacturing industry, has drawn threats of barring the LEAP 1C engine export to China. This would have been a major blow to GE’s efforts to recover from its slump, the engine sales being central to recovery efforts. The GE engine is slated for use in China’s C919 narrow body airliner now in development.
3) Clients of Fidelity Investments experienced shock and duress on finding their account balances at $0.00 or worst yet, even unable to find their accounts on the internet. This is a result of Fidelity’s website going down, which the company is working to resolve amongst a blizzard of Tweets from worried clients. Fidelity has 30 million individual investors, some 29.6 million brokerage accounts with a total of $7.8 trillion dollars in total customer assets.
4) Stock market closings for – 20 FEB 20:
Dow 29,219.98 down 128.05
Nasdaq 9,750.96 down 66.22
S&P 500 3,373.23 down 12.92
10 Year Yield: down at 1.52%
Oil: up at $53.73
1) America’s largest manufacturer of truck engines plans to lay off 2,000 workers. Orders for heavy duty trucks is down last year by 51%. This market dip is forcing Cummins Diesel to cut back on its production, reducing its 62,610 workforce by the 2,000. The company is forced to do a more aggressively cost cutting program because the down turn is happening faster than anticipated. Other manufactures of parts and assemblies, such as drivetrains, braking and axles used in large trucks are also forced into layoffs and bankruptcies.
2) The national debt has just passed $23 trillion dollars the first of November. This is a record high for the amount of money owed by the Federal government brought on by the growing budget deficits and is roughly equal to the Chinese, Japanese and German economies combined. Both parties have abandoned fiscal conservative spending and are intent on spending more on the domestic and military fronts, a contest over promises of who will spend more while cutting taxes.
3) The Ford Motor Company has $37 billion dollars in cash and short term assets on its balance sheet , but is strapped for cash. This makes Ford one of the top ten U. S. companies flush with cash. But Ford faces so many future challenges, it must hold onto every penny it can. First is a major multi-year restructuring, principally in Europe and South America. Also, Ford is overdue to refresh its key vehicles, including the company’s best selling F series pickup trucks, which will cost several billion dollars. Finally, Ford’s efforts to join the rush into electric vehicles, with seven new electric models due by the end of 2020.
4) Stock market closings for – 25 NOV 19:
Dow 28,066.47 up 190.85
Nasdaq 8,632.49 up 112.60
S&P 500 3,133.64 up 23.35
10 Year Yield: down at 1.76%
Oil: down at $57.91
1) Experts question if proposals to tax the billionaires, the so call wealth taxes, really work in practice? Lawyers and advisers to the wealthy say the tax would never collect the amounts claimed by proponents, simply because a yearly determination of assets isn’t easy and straight forward. There are just too many strategies that can be used to shelter assets, including moving them off shore. Attempts to tax the wealthy in other nations have been far from successful, the Great Brain Drain of Britain is a prime example. The rich simply move somewhere else.
2) While U.S. retail sales rebounded in October, consumers cut back on purchases of big ticket household items and clothing. This could temper expectations for a strong holiday shopping season. Still, compared to October of last year, retail sales are up 3.1%. Consumer spending accounts for more than two-thirds of the economy.
3) NextEra Energy Inc., the world’s first utility with capitalization of $100 billion dollars plus, owes its success to clean power business. Two decades ago this Florida utility plowed some of its extra cash into a wind farm in Oregon. Then NextEra made loans to wind-farm developers, and when some ran into financial troubles, NextEra forgave debts in exchange for majority stakes in the farms. Without any master plan for renewables, NextEra grew in the industry to become the largest.
4) Stock market closings for – 15 NOV 19:
Dow 28,004.89 up 222.93
Nasdaq 8,540.83 up 61.81
S&P 500 3,120.46 up 23.83
10 Year Yield: up at 1.83%
Oil: up at $57.93
1) Two of the largest Wall Street banks are trying to create an index to track the market impact of President Trumps’s tweets. J.P. Morgan Chase and Company has created an index to quantify the effects on U.S. bond yields. Citigroup Inc.’s foreign exchange team consider Trump’s tweets increasingly relevant to foreign exchange moves. Approximately 10% of the president’s tweets since his election in 2016 pertain to subjects of importance to U.S. markets.
2) The Elliott Management Corp. offers a plan to boost the share price of AT&T by more than 50% through asset sales and cost cutting. The four part plan calls for the company to divest assets including satellite-TV provider DirecTV, Mexican wireless operations, parts of its land line business and other assets. The bases for the plan is for AT%T to exit businesses that don’t fit its strategy as well as running more efficient operations, plus stop making major acquisitions.
3) China has added almost 100 tons of gold to its reserves since resuming buying in December. Bullion is near a six year high as central banks including the Federal Reserve cut interest rates. Trade war restrictions as with China, or sanctions as with Russia, gives an incentive for central banks to diversify, with gold providing an ideal hedge with increasing political and economic uncertainty. Spot gold was $1,510.27 an ounce on Monday, and is expected to rise to $1,600 an ounce in the coming months.
4) Stock market closings for – 13 SEP 19:
Dow 27,219.52 up 37.07
Nasdaq 8,176.71 down 17.75
S&P 500 3,007.39 down 2.18
10 Year Yield: up at 1.90%
Oil: down at $54.82
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