7 August 2020

1) Another drop in applications for unemployment benefits is giving hope for the economy. For the week ending 1 August, there were 1.19 million jobless claims, down by 249,000 claims. Total unemployment is now at 16.1 million, the lowest since April. But even with continual drops, the claims are still five times the pre-crisis levels. More than decreasing claims is needed for the economy to improve, for much more hiring is required. There are fears of conditions improving so sluggishly, that the effects of the crisis become increasingly permanent. With the resurgence of the pandemic, there are signs of the economy stalling in what is already a fragile economy.

2) The Covid-19 crisis is fueling the need for high speed internet access, and rural America is responding with their electric and telephone co-ops using loans from the federal government. Subscribers are getting speeds up to 1 gigabit per second, with some planning for speeds up to 10 gigabits per second. Rural areas have the duel problem of low population densities and long distances, so its not economically feasible for private companies to install systems. The only alternative is satellite internet systems.

3) The Bank of England is warning of the potential risk of what’s called the ‘shadow banks’ in amplifying the volatility of unstable economies. Funds in investments like pension funds, investment funds like real estate investment trusts and money market funds are increasingly absorbing the cash once kept in banks, but are not as secure in times of crisis as traditional banks. This makes it harder for businesses to access their money when needed most. The non-banks impact in a financial turmoil is being assessed, lead by the Bank of England.

4) Stock market closings for – 6 AUG 20:

Dow 27,386.98 up 185.46
Nasdaq 11,108.07 up 109.67
S&P 500 3,349.16 up 21.39

10 Year Yield: down at 0.54%

Oil: down at $41.97

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

7 May 2020

1) The bust in the Texas oil fields is the worst in memory, says the billionaire Russell Gordy. The coronavirus pandemic has triggered an unbelievable collapse in crude oil prices that is sinking fortunes across Texas, with no clear way out visible in the near future. Texas accounts for 9% of the nations GDP (Gross Domestic Product), so as oil pulls Texas’ economy down, it will undoubtably pull the nations down too. In the past, declining energy prices have helped the U.S. economy, but this time its likely to cut into investment and employment. Texas may lose 1.3 million jobs by June, as the virus puts an end to the U.S. shale oil revolution, which may spill into a broader downturn for Texas, that will also drag the rest of the country down too. Furthermore, Americans are driving and flying much less, which has reduced the demand for oil, bringing on a crisis in storage for the oil surplus. There are expectations that home prices will decline during the remainder of this year and into the next. This in turn will impact the construction industry.

2) As a result of the pandemic, the mortgage industry is implementing reforms that will be long lasting in terms of how lenders operate and how consumers obtain financing. It’s anticipated that digital mortgage processing will become more prevalent as people seek to minimize contact with others. Relators are seeing as much as a 500% increase in home video tours. Reports are that many people are seeing involuntary credit reductions and even terminations of their credit cards as banks seek to reduce their exposure to risk in a troubled economy where jobs are at risk of elimination. This means a further reduction on consumer spending.

3) Disney has seen a 91% plunged of it profits last quarter, a direct result of the coronavirus crisis. The operating profits in Disney’s parks lost about $1 billion dollars to add to a total loss of $1.4 billion dollars in total operating income. Disney has had to close its Walt Disney World and Disneyland theme parks, plus its Disney Stores and the suspension of its cruises and disruptions of its supply chain . However, its new video streaming service Disney Plus grew 26% to 33.5 million subscribers last quarter with revenues up 260%

4) Stock market closings for – 6 MAY 20:

Dow 23,664.64 down 218.45
Nasdaq 8,854.39 up 45.27
S&P 500 2,848.42 down 20.02

10 Year Yield: up at 0.71%

Oil: down at $24.35

10 March 2020

1) Monday markets opened in a steep downward spiral from sell offs, driven by the coronavirus fears, followed by the sharp drop in oil prices. The Dow dropped 2,000 points, with a massive sell off of both the S&P 500 and Nasdaq, which triggered a key market circuit breaker that halted trading for fifteen minutes. There are widespread fears over the economic impact of low oil prices, with some experts fearing oil prices down to $20 a barrel. Gold prices crossed the $1,700 dollar an ounce, hitting the highest since December 2012. The banks are hard pressed as the interest continues to sink, cutting into their margins.

2) Experts speculate that the Feds will cut the interest rate to zero in the next few months in an effort to forestall a downturn of the economy. The entire U.S. yield curve fell below 1% for the first time in history on expectations that the Federal Reserve will cut rates to zero in the next few months. Some speculate the Feds may adopt a negative rate just as some European countries have, such as Germany’s -1%.

3) While checkout-free with cashless supermarkets is now a novelty, Amazon expects this technology to spread to other retailers. Amazon has announced it plans to license its automated checkout technology to other retailers, telling of several other companies that have already signed up for the technology. The technology has been proven with cashless convenience stores across America and with Amazon’s new Go-supermarkets. The technology represents another significant step in retail automation.

4) Stock market closings for – 9 MAR 20: The stock market is like a rectal thermometer- it’s rude and crude, but surprisingly effective in showing a sick economy.

Dow 23,851.02 down 2013.76
Nasdaq 7,950.68 down 624.94
S&P 500 2,746.56 down 225.81

10 Year Yield: down at 0.50%

Oil: down at $30.24

27 January 2020

1) Bayer AG is facing a fourth jury trial over its Roundup weed killer causing cancer. Plaintiff’s claim glyphosate, the active ingredient in Roundup, is a carcinogen. In the three previous trials, Bayer was found liable for causing cancer resulting in damages of tens of millions of dollars, which are being appealed. The number of claimants are more than 75,000 although so far less than 50,000 claims have been formally filed.

2) Banks are raising the limit on people’s credit cards, even when they don’t ask for the raise. This is at a time when Americans are drowning in debt, in a effort to further boost their profits. For years Capital One financial Corp. resisted increasing limits of customers who looked vulnerable to getting over their heads in debt, but now have reversed their policy actively seeking more debt from customers.

3) A second coronavirus case has been confirmed in the U.S., a Chicago resident who had traveled to Wuhan in December. Wuhan is the center of virus outbreak in China, having already killed a couple of dozen or more people. China is now shutting down several very large cities in an attempt to stop the spread of the disease. Fears over the economic damage to the American economy has cause a sharp drop in the U.S. markets from news of a second coronavirus case. Presently, the U.S. government is monitoring passengers flying in from China for early signs of the illness hoping to quarantine the sick and prevent spreading of the virus.

4) Stock market closings for – 24 JAN 20:

Dow               28,989.73    down    170.36
Nasdaq            9,314.91    down      87.57
S&P 500           3,295.47    down       30.07

10 Year Yield:    down   at    1.68%

Oil:    down   at    $54.20

21 January 2020

1) As Boeing’s 737 MAX crisis continues, Boeing is talking with banks to borrow $10 billion dollars or more to finance the rising cost from its 737 MAX woes. So far, the company has borrowed $6 billion dollars to cover its cash-sapped operations after having suspended production of the planes this month. The crisis which grounded the 737 MAX is now entering its eleventh month.

2) The global auto industry continues its downward slide into deeper recession with sales down 4%. Automakers are struggling to find buyers in China and India, with the downward trend expected to continue this year. The number of vehicles sold dropped from 94.4 million down to 90.3 million last year, with the record high in 2017 of 95.2 million. The IMF says new autos account for 5.7% of economic output and 8% of the goods exported. Autos are the second largest consumer of steel and aluminum.

3) Because of unrest in Iraq and Libya, oil rose to its highest in more than a week. Oil prices have always been heavily influenced by geopolitical instability, especially those countries heavily involved with oil exports. Lybia has Africa’s largest oil reserves, with their Sharara oil field being Lybia’s largest by pumping 300,000 barrels a day.

4) Stock market closings for – 20 JAN 20:

Dow              29,348.10    up    50.46
Nasdaq          9,388.94    up     31.81
S&P 500         3,329.62    up    12.81

10 Year Yield:    up   at    1.84%

Oil:    down   at    $58.70

US-CHINA PHASE 1 TRADE AGREEMENT : SIGNED……

By: Economic & Finance Report

On January 15, 2020 (Wednesday), the USA and China signed the first phase of the US-China Trade Agreement. The first phase of the agreement, has China purchasing 200 billion dollars worth of goods and services, within the next 2 years from the United States .

The United States will then reduce the tariffs of $120 billion dollars worth of Chinese products, which is currently at 15% to be reduced to 7.5%. Chinese exports will then achieve over $260 billion dollars in the 2020 fiscal year.

The agreement provides more and better protection for American companies. American companies have discontent in China stealing intellectual property and trade stipulations. Phase 1, allows US banks to operate in China, while also enabling penalties for bad business and financial practices; instituted by US banks while operating in China.

So far the Phase 1 deal; seems to be a success as global markets have reacted positively to the signing of the USA-China Phase 1 Agreement. -SB

30 December 2019

1) China has had another year of record corporate bond defaults, which is by design. Ten years ago, bond defaults almost never happened, not because Chinese businesses were healthy, but rather the government stepped in to prevent default. Companies were often linked to the government and bonds which were largely bought by state owned lenders, making a financial system with little discipline. The government has become more comfortable with defaults and so is stepping out of economic control, to impost more incentive to make careful assessment of companies.

2) This year, more than fifty banks have announced plans to cut 77,780 jobs, the most lost since 91,448 jobs in 2015. The 2019 cuts will bring the total for the last six years to more than 425,000 lost jobs. The European banks are still weak from the ‘o-eight’ financial crisis, and are still struggling to regain their footing, forcing continual cost cutting measures. Job losses are anticipated to continue into 2022.

3) With germs growing more resistant to common antibiotics, many drug companies are hemorrhaging money and going out of business. The effect is reduced efforts to develop new antibiotics just when they are become most needed. Other well established drug companies are abandoning the antibiotic market segment refraining from doing any research on new antibiotic drugs. One marketing problem is antibiotics are prescribed for just days to weeks, so there isn’t the revenue stream as with drugs continually consumed year after year by a patient such as insulin. Presently, drug resistant infections kill 35,000 people each year.

4) Stock market closings for – 27 DEC 19:

Dow                28,645.26         up     23.87
Nasdaq            9,006.62    down    15.77
S&P 500           3,240.02          up         0.11

10 Year Yield:    down   at    1.87%

Oil:    up   at    $61.72

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

23 October 2019

1) China is growing at its slowest pace in nearly thirty years, with a 6% growth rate down graded to 5.8% growth which was predicted by the IMF (International Monetary Fund) for 2020. China’s economy isn’t looking very good, and what’s worst it’s getting worst. Economist are in disagreement over just what is causing the decline, considering there’s more than just the trade war responsible for China’s down slide. Slowing of global trade is another factor, but still with a 6% growth, China is above the world average of 3%.

2) The major credit card companies are launching a ‘one-click’ checkout button for fast secure online purchases similar to the PayPal. Now available with Cinemark, Movember and Rakuten websites, it will soon be available on BassPro, JoAnn Fabric, Papa John’s, Saks Fifth Avenue, SHOP.com and Tickets.com by the end of the year, with further companies to be added in 2020. Users won’t have to create or log into an account to make a purchase, nor will they need to enter their card info into every new site. The new service is being offered by Visa, Mastercard, Discover and American Express.

3) According to a survey from the consultant firm McKinsey & Co., more than half the world’s banks are too weak to survive a downturn of economies. These banks are not economically viable because of their returns on equity, which are not keeping pace with costs.

4) Stock market closings for – 22 OCT 19:

Dow                26,788.10    down    39.54
Nasdaq            8,104.30    down    58.69
S&P 500           2,995.99    down    10.73

10 Year Yield:    down   at    1.77%

Oil:    up   at    $54.32