30 June 2020

1) The Boeing Aircraft Co. has started it re-certification process for the 737 MAX with the take off of a test aircraft for the first flight. An FAA (Federal Aviation Administration) pilot was on board as test flights begin, to determine if the aircraft is safe for flying with passengers. The first flight test is to fly maneuvers for about three hours, the test craft being fitted with a number of instruments and monitoring equipment to test and record how the aircraft performs. Test include the ‘wind-up turn’ which is a steep turn that essentially approaches a stall, with wings almost at 90 degrees of bank. This maneuver should trigger the Boeing software system that played a role in both crashes, which caused the aircraft design to be grounded. The software caused the aircraft’s nose to be repeatedly pointed downward at the ground until pilots lost control. These certification flights are expected to take approximately three days, and while they are an important milestone, there remains a number of key tasks to be completed.

2) According to the Bureau of Labor Statistics, 47.2% of American adults are now jobless, almost half the adult population. This is a direct result of losing 30 million jobs because of the coronavirus crisis. While there was an unexpected snap back in May, there are now signs of a slowdown in the labor market improvement because of fears of a Convid-19 resurgence increased these last few weeks. The massive loss of jobs is what is now dragging the economy down. Both Texas and Florida have paused plans for further reopening because of a record spike in coronavirus cases.

3) Lending institutions are pulling back sharply on their lending to U.S. consumers during the pandemic, because they can’t tell who is creditworthy anymore. There are millions of Americans out of work and behind on their debts, but many of these missed payments aren’t reflected in credit scores. This is a result of the government’s stimulus package which allows borrowers to defer their debt payments, but credit companies can’t report these late payments to credit reporting companies. For May, there were more than 100 million accounts with deferred debt payments. This is a sign of widespread financial distress.

4) Stock market closings for – 29 JUN 20:

Dow 25,595.80 up 580.25
Nasdaq 9,874.15 up 116.93
S&P 500 3,053.24 up 44.19

10 Year Yield: unchanged at 0.64%

Oil: up at $39.55

29 May 2020

1) Another 2.1 million Americans are unemployed as the economy begins its reopening with restriction on economic activity easing in some parts of the country. One bright spot is the number of continued claims (people remaining on unemployment) dropped slightly from people returning to work. While the number of new claims continues to drop each week, it still remains at a record high, with the drop in new claims remaining higher than anticipated. The continued elevated number of claims isn’t a good sign, showing that we are not through the business shutdowns and possible closures yet, with some furloughs shifting over to permanent layoffs. The unemployment in America is now at 40.7 million workers.

2) Boeing aircraft manufacturer may be starting its recovery announcing the resumption of limited production of its 737 MAX after a five month halt. The 737 MAX has been grounded since March of 2018 because of software problems resulting in two airliners crashing. While the FAA has not cleared the airplane for return to passenger service, Boeing expects the 737 MAX to fly again in mid 2020.

3) The millennials and generation-Z are worst off economically than any previous generation, they are experiencing slower economic growth since entering the workforce than any other generation in U.S. history. It’s not just that it’s a bad recession, or that it’s hitting young people more, but rather that it’s hitting people who have already been hit by the Great Recession. Millennials have experienced slower economic growth since entering the workforce than any other generation in U.S. history, and they will bear these economic scars throughout their lives, with lower earnings, lower wealth and delayed milestones, such as home ownership. The old adage of ‘just work harder, sink or swim by your own effort’ no longer applies, because many millennials are now having to swim upstream against a much stronger current . . . from the forces of automation and technology displacement.

4) Stock market closings for – 28 MAY 20:

Dow 25,400.64 down 147.63
Nasdaq 9,368.99 down 43.37
S&P 500 3,029.73 down 6.40

10 Year Yield: up at 0.70%

Oil: down at $33.68

28 May 2020

1) The aircraft manufacture Boeing is laying off almost 12,000 workers this week, a result of the coronavirus crisis impact on the aircraft company. Boeing, which is the largest exporter in the U.S., is trimming its workforce by about 10% which include international locations. It is anticipated the airline industry will take some years to recover with air travel dropping a whopping 95% because of the virus, and major airlines canceling the majority of their domestic flights while suspending nearly all international flights. The company suffered a major set back with its 737 MAX grounding that resulted in near record number of order cancellations for passenger jets with zero new orders in April. This has been Boeing’s worst year in decades.

2) The discount home goods retailer Tuesday Morning has filed for bankruptcy, a result of the prolong store closings from Covid-19. The lost revenues created an insurmountable financial hurdle in a company that was thriving before the pandemic. The chain is closing 230 of its nearly 700 US stores across America. The first phase of closures of 130 stores will begin this summer. This is in line with another home goods retailer, Pier 1, which filed for bankruptcy in February, another casualty of the virus.

3) More than one in every six young workers have stopped working because of the coronavirus pandemic world wide. There are fears that young workers (15 to 28 years old) could face the inability to get proper training or gain access to jobs long after the pandemic ends, maybe even deep into their careers. Of those still working, about 23% report reduction in the number of hours they work. For 178 million young workers around the world, more than 40% are in the food services and hospitality industries, which is the hardest hit sector from the virus. Three fourths of the young workers are in informal jobs or casual labor. In addition, many companies in the U.S. are cutting salaries of those who still have a job, trying to remain in business, which will reduce discretionary income that will further slow economic recovery.

4) Stock market closings for – 27 MAY 20:

Dow 25,548.27 up 553.16
Nasdaq 9,412.36 up 72.14
S&P 500 3,036.13 up 44.367

10 Year Yield: down at 0.68%

Oil: down at $32.22

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

5 May 2020

1) Apparel retailer J. Crew is filing for bankruptcy, with other struggling retailers expected to succumb this year too, big retailer names like Sears and J.C. Penny. J Crew is considered to be the first retail casualty of the pandemic with others expected to quickly follow. The pandemic has caused numerous stores to be closed, laying off hundreds of thousands of employees and losing most of their sales. The big retail stores were struggling before the virus hit, with people backing away from consumerism and now after the coronavirus shutdown, people are spending little other than for groceries and daily essentials. With further declining retail revenues, more stores will close with more layoffs. Furthermore, Americans’ appetite and ability to shop continues to decline, so it looks very dismal for a major segment of the American economy, which in turn will be a burden on other segments of the economy continually pulling the rest down.

2) The service sector of the economy is also experiencing troubles in what appears to be an emerging new economy for America. Gold’s Gym International is seeking bankruptcy protection as it struggles with debt after the prolong shutdown from the virus. With the shrinking of people’s disposable income, that is the money they have left after essential spending like food, housing and transportation, the non essential businesses of the service economy are finding it harder to survive.

3) General Electric is eliminating as many as 13,000 jobs in its jet engine business, another casualty of the coronavirus devastation to the aviation segment of the economy. With airline manufactures, such as Boeing building fewer airliners, there is less demand for new jet engines. This means a 25% reduction on GE’s aviation work force with little near future likelihood of those jobs returning, indeed if the recession deepens, more jobs may be lost. Like Boeing, GE aviation was having troubles before the virus hit.

4) Stock market closings for – 4 MAY 20:

Dow 23,749.76 up 26.07
Nasdaq 8,710.72 up 105.77
S&P 500 2,842.74 up 12.03

10 Year Yield: down at 0.64%

Oil: up at $21.33

30 April 2020

1) Experts are speculating on the interest rates going negative in the near future, something that President Trump wants. Negative interest rates have been a reality in the EU (European Union), with studies showing that investors do not significantly increase their equity holdings as interest rates decline. But when the rates go negative, they start increasing their equity holdings significantly. This in turn is a big boost to the stock market. Interest rates are an excellent predictor of long range growth potential, today’s level reflecting the markets expectation of sustained low future growth.

2) Larry Kudlow, the top White House economist, is calling for stimulate measures before a slowdown of the economy. Measures include tax breaks such as payroll tax holiday and deregulation of small businesses. This is in anticipation of growth in the second quarter worse than in the first, which shrank 4.8%. Additionally, he supports a second stimulus package to create incentives to grow in the medium and long term. Also more investment in infrastructure should be included.

3) After posting a massive first quarter loss, Boeing has announced they will slash staff and production of about 16,000 people or about 10% of its personnel. Demand for air travel evaporated because of the coronavirus, so Boeing is drastically scaling back production of the two widebody passenger jets, its 787 Dreamliner and the 777. Boeing lost $1.7 billion dollars, while shutting down its factories, because of the pandemic, added another $137 million dollar lost.

4) Stock market closings for – 29 APR 20:

Dow 24,633.86 up 532.31
Nasdaq 8,914.71 up 306.98
S&P 500 2,939.51 up 76.12

10 Year Yield: up at 0.63%

Oil: up at $15.35

15 April 2020

1) A second round of layoffs is starting, the first being workers at restaurants, malls and hotels, most of them lower skill levels, but now it’s higher skilled jobs threatened. Those higher skilled jobs had seemed secure, however the ‘work at home’ people are seeing layoffs and furloughs to add to the unemployed numbers. Jobs such as corporate lawyers, government workers and managers are seeing the pink slip with a threat of a prolonged labor downturn in 2007-09 recession. Economist anticipated that 14.4 million jobs will be lost in coming months, raising the unemployment rate to 13% for June. Already, 17 million Americans have been laid off, with estimates of 27.9 million jobs to be lost. The information businesses are being hit, with revenues not sufficient to pay electric bills for servers and computers to host web sites. Even large law firms catering to the corporate world are having significant layoffs. State and local governments employ 20 million people, but as tax revenues drop, they too are faced with reducing employees. Analysts consider it will take 5 1/2 years for the labor market to recover.

2) Boeing, the airline manufacture, is further suffering business setbacks with the cancellation of orders for 150 jets in March. This is a result of a near total halt in demand for air travel because of the coronavirus pandemic. There are now nearly 14,000 jets parked by airlines around the world. Boeing did report new orders for 31 aircraft in March. While Boeing still has a backlog of orders for about 5,000 jets, there are fears that delivery will be deferred which will further add to Boeing’s financial woes.

3) The IMF (International Monetary Fund) is predicting that the Great Lockdown recession will be the worst in almost a century, warning the world economy’s contraction and recovery will be worst than anticipated. The IMF estimates the global gross domestic product will shrink 3% this year, compared to a 3.3% growth in January. This will dwarf the 0.1% contraction in the 2009 financial crisis. These forecast dashing any hopes for a V-shaped economic rebound after the virus subsides, with a commutative loss of global GDP of this and next year, of about $9 trillion dollars. Economic damage is driven by how long the virus remains a major threat.

4) Stock market closings for – 14 APR 20:

Dow 23,949.76 up 558.99
Nasdaq 8,515.74 up 323.32
S&P 500 2,846.06 up 84.43

10 Year Yield: unchanged at 0.75%

Oil: down at $20.82

13 February 2020

1) NASA (National Air and Space Administration) has asked for a 12% increase to give a $25.2 billion dollar budget for next year. Nearly half of this years proposed budget is for NASA’s lunar project with much of the money going to the biggest American space companies. Lockheed Martin, Boeing and Aerojet Rocketdyne will be the primary beneficiaries with $1.4 billion dollars going to the Orion spacecraft and $2.26 billion dollars for the Space Launch System. There is $3.37 billion dollars proposed to fund a crewed lunar lander system.

2) Federal Reserve Chairman Jerome Powell suggest that the central bank may not have the ability to fight the next recession and therefore Congress may need to get ready to help. This is a result of the already low interest rate, one of the prime tools used by the central bank to counter recession trends. Tax cuts and government spending increases may be necessary to fight a downturn, for there is little else the central bank has to counter a recession.

3) The giant aircraft maker Boeing Aircraft is facing bigger problems than just fixing its 737MAX and getting it certified to fly. The company needs to be focused on its next generation of passenger aircraft. Boeing didn’t get any new orders for aircraft in January compared with 45 orders last year, while delivering 13 airliners compared with 46 last January. Boeing is falling behind its rival Airbus and must build its next generation of planes to remain competitive. This means getting its 777X finished and ready for delivery with its other wide body plane, the 787 Dreamliner. In the background is a possible new design concept the 797.

4) Stock market closings for – 12 FEB 20:

Dow 29,551.42 up 275.08
Nasdaq 9,725.96 up 87.02
S&P 500 3,379.45 up 21.70

10 Year Yield: up at 1.63%

Oil: up at $51.69

12 February 2020

1) The demise of the big box and department stores in malls, has spawned a move to trendy local shops. These are standalone small format stores designed to experiment with new retail strategies and increased foot traffic. These stores tend to be positioned closer to neighborhoods away from the malls. The department stores and big box retailers grew rapidly and over saturated the market, while the small format stores have less investments and lower lease costs.

2) Boeing Aircraft company reported zero new orders for this January, while Airbus tallied 274 orders for commercial airplanes in the same month. The company did deliver 13 new airplanes in January, six were 787 Dreamliners, two 777s, two 767 and three 737NG. Boeing is anticipating re-certification of its 737MAX by the middle of 2020.

3) California is now estimated to have 150,000 homeless people, reaching record numbers, of which two-thirds are living on the streets. There are more than 100 homeless camps across Oakland, in which authorities are in the process of dismantling. The homeless scratch out a living doing odd jobs, focus groups or medial trials. The rising cost of housing is the prime force driving people to homelessness, the number increasing each day despite the soaring stock market and record low unemployment rate.

4) Stock market closings for – 11 FEB 20:

Dow 29,276.34 down 0.48
Nasdaq 9,638.94 up 10.55
S&P 500 3,357.75 up 5.66

10 Year Yield: up at 1.59%

Oil: up at $50.07

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