25 June 2020

1) There are ten companies that may not make it through the summer. These are high brand names of Hertz, J.C. Penney, Pier 1 Imports, Tuesday Morning, J. Crew, Neiman Marcus, Gold’s Gym, Tailored Brands (Men’s Warehouse and Jos. A. Banks) and Diamond Offshore Drilling, which are all in bankruptcy now. The high number of retailers shows the ongoing retail apocalypse with the retail sector, which had already hit before the pandemic by falling sales, lower costumer traffic and too many stores. Retail was near the edge of collapsed with last years Christmas holiday shopping doing little to boost business, especially those located in malls. Last year, 9,500 retail stores closed, with estimates of 15,000 stores closing for good in 2020. This may indicated a fundamental shift in America’s economy, a shift away from hyper-consumerism to something else besides a service based economy. Shopper visits to stores are about half of last year’s numbers, and that’s with businesses reopening after more than two months on lockdown.

2) Fears continue to grow that we are not finished with the Convid-19 crisis yet, as the number of new cases continues to increase. This is happening with states and cities easing their shutdown measures to reopen the economy to start a recovery. The seven day average of new virus cases has swung up 30% from a week ago. It was hoped the warm weather would suppress the virus spread as it does with the flu, but if the virus is resurrecting, then the shutdown may need to returned with the resulting economic impact.

3) The Ford Motor Co., who is in the process of its global restructuring plan and paying off debt related to the coronavirus pandemic, is betting its future on its new line of pickups. Ford is offering its popular F-150 model in traditional internal combustion engines, new hybrids and all electric versions. The Ford F-150 has been the country’s top selling truck for more than 40 years, the best selling for the last consecutive 38 years. Their F-150 is a key part in Ford’s plans to profitably grow their business, to help in the $11 billion restructuring cost and pay off the $20 billion dollars in new debt.

4) Stock market closings for – 24 JUN 20:

Dow 25,445.94 down 710.16
Nasdaq 9,909.17 down 222.20
S&P 500 3,050.33 down 0.96

10 Year Yield: down at 0.68%

Oil: down at $38.07

15 May 2020

1) There are growing fears of another economic bomb about to go off. A popping of the housing bubble, much like the 2008 bubble collapse of the housing market, may happen as early as July. Last time, the collapse of the housing market played out over four years, but for the pandemic, the rate could be much faster, as is being seen with the stock market. Home sales have been languishing, especially with the treat of the virus and people reluctant to let strangers tour their homes with possible infections. It is estimated that 15% of homeowners will fall behind on their mortgages and this would mean more delinquencies than during the Great Depression. This in turn is causing a tightening of lending standards which could continue even after the crisis subsides. All this makes for a bubble waiting to burst.

2) Delta Air Lines Inc. has announced they plan to retire their fleet of eighteen Boeing 777 jumbo jets, and will replace them with Airbus SE aircraft. This constitutes another major financial blow to the beleaguered aircraft manufacture struggling with their 737 MAX troubles from over a year ago. Delta attributes the early retirement of their 777 fleet to the pandemic impact and the need to economize with newer fuel efficient aircraft.

3) Growing fears of a slow recovery is beginning to show cracks in the markets as investor’s anticipation of a quick recovery of the economy fades. For weeks, the hopes that the massive stimulus of $3 trillion dollars would spur a relatively quick recovery later in the year, coupled with a hot rebound of the stock market despite the massive numbers of layoffs, but now hope is fading. The growing economic uncertainty of just how many people can restart their lives amid the uncertainty of controlling the virus, plus the dangers of opening up too early, is causing investors to rethink their view of how the economy will fair in the next few months, even the next few years.

4) Stock market closings for – 14 MAY 20:

Dow 23,625.34 up 377.37
Nasdaq 8,943.72 up 80.55
S&P 500 2,852.50 up 32.50

10 Year Yield: down at 0.62%

Oil: up at $27.98

20 April 2020

1) The coronavirus pandemic and subsequent ‘sheltering in place’ is changing the American supermarkets. Online shopping of groceries had been somewhat of an awkward luxury service, that was growing ever so slowly, despite efforts of retailers to promote the new service. But the lockdown, stay at home orders have catapulted the service forward by up to a fifty times (not percent) increase in usage. Stores have been left struggling to meet the demand with many unable to keep up with that demand. When the pandemic ends, it will have forever changed the supermarket for many Americans, for once customers have used and got use to the service, then they will most likely continue using online grocery shopping, at least in part. But online shopping eliminates one of the big mainstays of modern supermarkets, the psychology of shopping with the browsing and impulse buying. The counter to this is automation which reduces the staff and labor cost of traditional retail stores, just as Amazon has done with dry goods.

2) The Chinese maker of driverless cars, Pony.ai, has launched a delivery service in Irvine California using its robot cars to deliver to people stuck at home from the virus. Teaming up with the e-commerce site Yamibuy, orders from Yamibuy get delivered to the customers homes. Each car can deliver between 500 to 700 packages a day. A year ago the company launched a robo-taxi service in Irvine, but with the ‘shelter in place’ order, their taxis were repurposed for deliveries.

3) Everyone is baffled over how the stock market continues to hold, even climbing, with what is happening today. For example-
a) Unemployment is now at 22 million and still climbing
b) Threat of large numbers of businesses going bankrupt
c) Recession starting, which most expect will last at least 12 months
d) Automation expected to eliminate up to 50% of jobs in 15 to 25 years
e) Global coronavirus cases surpass 1.5 million and continue growing
At a time when the markets would normally be crashing down from all the uncertainty, what is holding them up? Experts think because of the quick reaction of the government in passing the $2.2 trillion dollar economic stimulus waylaid market fears by showing something is being done. Also, Warren Buffett’s axiom, “Be fearful when others are greedy, and be greedy only when others are fearful.” Finally, the ‘social distancing’ measures seems to be controlling the virus, thereby lessening its economic effects in the long run.

4) Stock market closings for – 17 APR 20:

Dow 24,242.49 up 704.81
Nasdaq 8,650.14 up 117.78
S&P 500 2,874.56 up 75.01

10 Year Yield: up at 0.65%

Oil: down at $18.12