23 March 2020

1) The shutting down of many of American service industries is having an effect on America’s hard pressed trucking industry. Suddenly, there are fewer hauling jobs, a result of the coronavirus control measures. There are 300,000 to 400,000 thousand truck drivers who own their trucks and don’t have much protection if rates or demand for their service falls. Trucking is often considered a leading economic indicator where the rest of the economy is heading, because 71% of the freight in America is moved by trucks. A downturn in freight being hauled indicates the economy is slumping.

2) President Trump says the U.S. may be headed for a recession for the first time in eleven years as the coronavirus cripples the world economies which in turn can pull the U.S. economy down despite it being strong. Experts anticipate America will enter a recession in the upcoming second quarter, from April through June, with a decline of 4% to 8% annual pace. The unemployment rate could zoom up to 6% from its current fifty year low of 3.5%, which would hinder a recovery. Typically, economic hard times opens the way for new technologies to displace workers as business strive for ways to reduce cost and remain profitable.

3) The Department of Labor reported a 30% increase in unemployment claims, which is one of the largest spikes in claims. This signals the start of feared layoffs in response to the coronavirus impact on the economy. As more businesses are vastly reducing or stopping operations, they have no real choice but to lay off workers in the hope of surviving the coming economic storm. America’s oil industry is facing massive layoffs with tens of thousands being laid off in the shale fields like the Permian Basin as oil prices drop to alarming lows. No longer profitable to pump out shale fields and strapped with high levels of debt, the oil companies are facing bankruptcy. Six years ago, a sharp price drop in oil cost 200,000 oil workers their jobs.

4) Stock market closings for – 20 MAR 20: The Dow had its worst month since 1931.

Dow 19,173.98 down 913.21
Nasdaq 6,879.52 down 271.06
S&P 500 2,304.92 down 104.47

10 Year Yield: down at 0.94%

Oil: down at $23.64

19 February 20

1) Negative yielding debt are bonds with an interest rate below 0%. Since the peaking of the U.S.- China trade dispute, a third of all investment grade bonds have rates below 0%, for a total of $17 trillion dollars. This forces portfolio managers into riskier assets to deliver returns. But because the global economy is not growing any more, the bonds may not be saleable.

2) The Boy Scouts of America filed for bankruptcy protection under Chapter 11 in the face of 275 abuse lawsuits and another 1,400 potential cases to come. The organization has already paid out more than $150 million dollars in settlements and legal cost. Its strategy is to contain financial damage of abuse scandals and emerge as a more sustainable organization.

3) The luxury automaker JLR (Jaguar Land Rover) is facing halts in their UK production plants because of supply chain problems from the deadly coronavirus in China. The company is racing to prevent plant closures by the end of the month, going to such extreme measures as flying critical parts out of China in suitcases. Fiat Chrysler’s European plants are facing similar closures from parts shortages.

4) Stock market closings for – 18 FEB 20:

Dow 29,232.19 down 165.89
Nasdaq 9,732.74 up 1.57
S&P 500 3,370.29 down 9.87

10 Year Yield: down at 1.56%

Oil: up at $52.10

4 February 2020

1) All ready shaken by the trade war, China is now being racked by the coronavirus, with fears of the virus pushing the Chinese markets down by $393 billion dollars on the first day of trading since the Lunar New Year. This is an 8% drop on the Shanghai composite index, the biggest drop in more than four years. This is despite the biggest cash injection of China’s financial system since 2004. Additionally, commodities contracts have all posted sharp drops, a strong indication of an economic slowdown.

2) The shopping malls are dying as shopping habits of consumers change over to the internet. It’s estimated that 25% of American malls will shut their doors by 2022, and more of the 9,300 retail stores that closed in 2019 were in malls. Mall owners are searching for ways to halt the trend of shrinking retailing in malls, including buying major retail companies such as Forever 21 and Aeropostale.

3) As traditional brick-and-mortar stores continue its slide downwards, a number of companies are considered at risk of bankruptcy this next year. Stores like Neiman Marcus ply their way in red ink, including J. Crew, Francesca’s, Rite Aid, JCPenny, Pier 1, Dressbarn, Destination Maternity, Men’s Wearhouse and Stein Mart. Companies heavy into cloths and fashion ware are the ones struggling the most to avoid the bankruptcy courts.

4) Stock market closings for – 3 FEB 20:

Dow              28,399.81    up    143.78
Nasdaq          9,273.40    up     122.47
S&P 500         3,248.92    up       23.40

10 Year Yield:    unchanged   at    1.52%

Oil:    down   at    $49.91

23 January 2020

1) Present Trump has renewed his threats to impose tariffs on imported cars from Europe, citing that the European Union is even more difficult to do business with than China. His comments signals he is turning his attention to renegotiating trade deals with the bloc. Automobiles have been at the center of trade tensions for the past couple of years.

2) The millennials own just 4% of American real estate by value, much less than the 32% which baby boomers owned. This comparison is with approximately the same media age of the two groups, meaning the millennials are far behind the baby boomers economically. While millennials may close that gap in the next four years, it’s unlikely they will reach 20% ownership, still far behind the baby boomers.

3) There is a rash of retail store closings after the holiday season, due to sales slump. Fashion retailer Express is closing 91 stores, Bed Bath & Beyond is closing 60 , Schurman Retail Group is closing its Papyrus and American Greeting stores for a total of 254 locations in the next four to six weeks. Express is the latest in a serious of fashion retailers to close, part of the struggle of malls to compete in the new retail arena. Last year, retailers Forever 21 filed for bankruptcy, with Charlotte Russe and Payless ShoeSource going out of business.

4) Stock market closings for – 22 JAN 20:

Dow            29,186.27    down       9.77
Nasdaq         9,383.77          up     12.96
S&P 500        3,321.75          up       0.96

10 Year Yield:       unchanged   at    1.77%

Oil:         down   at    $56.17

27 December 2019

1) The Permian Basin continues to experience difficulties producing oil, becoming increasingly gassy as drilling slows down. This undercuts profits for producers at a time when investors are demanding better returns. The region has long been plagued with a massive glut of gas which crude producers must sometimes pay to have hauled away or burn in the open air. This problem is intensifying as wells age and fewer new wells are drilled.

2) Oil prices rise to a three month high because of optimism on supply. The stage is set for the biggest monthly gain in almost a year on speculation that supplies are shrinking. Prices are up almost 12% for this month and are now higher since the mid-September high. The U.S. stockpiles have dropped 7.9 million barrels this last week, while Russia cut their crude output with a reduction of 240,000 barrels a day for December. Oil has surged about 36% for this year.

3) American retailers continue to struggle while some are actually thriving. The once giant Sears has fallen into bankruptcy having closed over 3,000 stores. Other major retailers in decline are Blockbuster Video, Radioshack, Victoria’s Secret, the Gap, JCPenny, Toys R Us and Borders Books. Retailers such as TJ Maxx, Amazon, Walmart, Target, Dollar General, Costco and Ross have flourished in the peril waters of American consumerism.

4) Stock market closings for – 26 DEC 19:

Dow                28,621.39    up    105.94
Nasdaq             9,022.39    up      69.51
S&P 500            3,239.91    up      16.53

10 Year Yield:    down   at    1.90%

Oil:    up   at     $61.68

16 December 2019

1) The Trump administration has reached a trade deal in principle with China. Reportedly, the United States has offered to cut existing tariffs on Chinese goods by as much as 50%, while also suspending new tariffs that are scheduled to become effective on Sunday. This is a bid to secure a “Phase One” trade deal. The 50% tariff reduction would be on $375 billion dollars of Chinese goods, and $160 billion dollars in goods scheduled to become effective on the fifteenth of December.

2) The natural gas boom has fizzled because of a glut in U.S. gas with sinking profits. Hydraulic fracturing has uncorked a lucrative new source of natural gas supply, with billions of dollars poured into export terminals to ship gas to China and Europe. But the drop in gas prices has caused a bust with energy companies shutting down drilling rigs, filing for bankruptcy protection and slashing the value of shale fields. The supply of gas has far outstripped demand and the over-supply likely to remain for several more years.

3) The number of applications for unemployment jumped to more than a two year high last week, but experts don’t think this signals a coming round of layoffs. Claims are up by 49,000 for a seasonally adjusted 252,000 for the week ending the seventh of December. The previous week, claims had dropped to 203,000, which was a seven month low. In the same period, the government reported adding 266,000 new jobs to the economy.

4) Stock market closings for – 12 DEC 19:

Dow                   28,132.05    up    220.75
Nasdaq               8,717.32    up      63.27
S&P 500              3,168.57    up       26.94

10 Year Yield:    down   at    1.90%

Oil:    up   at    $59.48 +0.30

10 December 2019

1) Celadon, a truckload carrier and American trucking giant, is slated to declare bankruptcy as early as December the 11 th. This may possibly be the largest truckload bankruptcy in history. Already, fuel cards for truck drivers are getting turned off, leaving truckers stranded in the field unable to get home without using their own money. As many as 3,200 truck drivers may find themselves stranded in addition to being without jobs. In the first half of 2019, about 640 trucking companies went bankrupt, triple the number from last year as freight volumes decline for 11 straight months. Celadon’s stock has gone from $20 a share down to 41 cents.

2) The Federal Government’s liquidity problem hasn’t gone away yet, even with hundreds of billions of dollars in new liquidity created out of thin air. The Feds will not know if there is enough money to cover repos, the short term loaning of money from bank to bank to cover short term cash shortages. If there is insufficient liquidity, then there’s the danger of a ‘lock up’ of American’s financial system.

3) Yes Bank Ltd. is expected to reject an offer of $1.2 billion dollars, more than half its planned $2 billion dollar capital raising. Instead, the company is turning to institutional investors to make up the shortfall. The bank would prefer to have institutions rather than individual investors in their fund raising. Yes Bank needs new investors in order to replenish its capital, which is now down to regulatory minimum as a result of bad loans.

4) Stock market closings for – 9 DEC 19:

Dow           27,909.60    down     105.46
Nasdaq        8,621.83    down       34.70
S&P 500       3,135.96    down         9.95

10 Year Yield:    down   at    1.83%

Oil:    down   at    $58.87

25 November 2019

1) American retailers, such as Home Depot are facing a new crime wave driven by drugs and fueled by the opioid crisis. Known as organized retail crime, people steal for crime rings in exchange for cash they can buy drugs with. The stolen merchandise is then resold at pawnshops, online or directly to a buyer. Worst yet, the thieves are using violence against store employees who try to stop the open theft, even using guns and knifes. The store is left to just stand and watch as thieves roll shopping carts of merchandise out the door to sell for drugs.

2) The tuna supplier Bumble Bee Foods announced they are filing for Chapter 11 bankruptcy protection to be purchased by its largest creditor FCF Fishery, for $925 million dollars. Bumble Bee’s debt burden has forced the bankruptcy, which in turn was caused by a $25 million dollar fine for forming a cartel with Chicken of the Sea and Starkist to fix prices. The fine was levied by the Department of Justice. Additionally, the popularity of packaged tuna has been declining with a 42% per capita drop over the last 30 years.

3) There are growing fears that phase one of the China-American trade deal may not get signed before the additional tariffs take effect in mid-December. Phase one would not eliminate tariffs on either side, instead would address issues of intellectual property and financial services access including sizeable purchases by China of American agricultural products. Phase one is considered a starting point for resolving trade differences.

4) Stock market closings for – 22 NOV 19:

Dow          27,875.62    up    109.33
Nasdaq       8,519.88    up      13.67
S&P 500      3,110.29    up         6.75

10 Year Yield:    unchanged   at    1.77%

Oil:    up   at    $57.93

13 November 2019

1) An FAA (Federal Aviation Administration) official states that Southwest Airlines should ground 49 of its airliners that had repairs failing to meet legal standards. The official claims there is a high likelihood of a violation of a regulation, order or standard, so the FAA must take immediate action to revoke the certification of the planes. Aircraft in questions is the Boeing 737 NG which were previously owned by foreign carriers, saying inspections should be speeded up, but fall short of grounding the aircraft.

2) Dean Foods, America’s largest milk producer, is filing for bankruptcy. The 94 year old company has struggled in recent years because Americans are drinking less cows milk. In 2019, sales are down 7%, while for the first half of the year, profits are down 14%, with Dean’s stock dropping 80% in a year. The company is straddled with debt and is unable to fully fund its pensions.

3) The retail giant Walmart is experiencing internal strife over its e-commerce operation with the corporate culture of traditional marketing. Apparently, Walmart’s management doesn’t have a real understanding of the complex technology of e-commerce. The impact of Walmart’s plunge into online retailing has reduced Walmart’s already thin profit margins, which are at historic lows. Some high profile acquisitions and other strategic moves have cratered and talented executives on both sides have departed.

4) Stock market closings for – 12 NOV 19:

Dow               27,691.49    unchanged    
Nasdaq            8,486.09      up    21.81
S&P 500           3,091.84      up      4.83

10 Year Yield:    down   at    1.91%

Oil:    up   at    $56.78

5 November 2019

1) Saudi Arabia has started its long anticipated IPO (Initial Public Offering) of Aramco, the Saudi state run oil giant. A sliver of the firm will be offered on a local stock exchange with the intent of raising billions of dollars for the kingdom. Initially, the firm’s shares will be traded on Riyadh’s Tadawul stock exchange, but later shares will be offered on foreign exchanges. Aramco is valued at $2 trillion dollars, with first and second quarter income of $46.8 billion dollars.

2) The high end luxury retailer Barneys of New York fell into bankruptcy, parts sold off as scrape to end an era. The retailer introduced such names as Armani, Alaia, Comme des Garcons, Louboutin and Zegna. The name Barneys was taken control of by Authentic Brands Group, a name which is part of the New York culture since 1923, and will license it to other companies like Saks Fifth Avenue. Next week, the company’s inventory at its five stores and two warehouse locations will be sold.

3) Predictions for 2020 investors include a recession, questions of interest rate cuts, market volatility, impact of the up coming election cycle, Brexit, earnings growth, low unemployment, mild inflation and wage growth. Each of these uncertainties can play a part on the ultimate outcome for the 2020 economy with interactions of them making the future economy uncertain for investors.

4) Stock market closings for – 4 NOV 19:

Dow           27,462.11    up    114.75
Nasdaq        8,433.20    up      46.80
S&P 500       3,078.27    up      11.36

10 Year Yield:    up   at    1.79%

Oil:    up   at    $56.45