21 May 2020

1) The Federal government is moving to address the record deficits that America has amassed. One method is to stretch out the time over which the deficit is paid off. Part of that plan is the reinstating of the 20 year bond, which was last issued in 1986. The Feds will auction off $20 billion dollars worth of bonds Wednesday, with an expected return of 1.21% verses 0.70% for the 10 year bonds and 1.42% for the 30 year bonds. The government is also considering 50 and 100 year bonds, but there doesn’t seem to be any demand for such financial instruments. It’s expected that the deficit will be $3.4 trillion dollars for fiscal 2020 and $2 trillion dollars for 2021.

2) The CBO (Congressional Budget Office) estimates the nation’s unemployment rate will exceed 15% through September then remain above 11% for the rest of the year. For 2021, they estimate an average of 9.3%. For the second quarter of 2020, the labor market is projected to see the steepest declines since the 1930’s. These high unemployment rates are expected to persist despite lawmakers’ efforts to counter with injections of cash into the economy. Further layoffs are expected despite the $660 billion dollar Paycheck Protection Program, but a partial rebound is possible in the last three months of the year, with as much as 30% of laid off workers being rehired.

3) Housing sales are way down, the lack of inventory has propped up prices with bidding wars from the limited availability of properties. The health guidelines have made it more difficult to market homes, another fallout of the pandemic. Since the pandemic began, the demand has fallen off, with the number of sellers also contracting, therefore the limited availability of properties. Despite the economic uncertainty, the supply shortage prior to the Covid-19 crisis still remains. Nevertheless, the housing market has cooled, with sales of existing homes projected to fall 20% in April compared to March, which had a 8.5% drop. Construction of new houses is down as contractors wait out the virus. While loan interest rates are low, lending institutions have tightened up their loan standards.

4) Stock market closings for – 20 MAY 20:

Dow 24,575.90 up 369.04
Nasdaq 9,375.78 up 190.67
S&P 500 2,971.61 up 48.67

10 Year Yield: down at 0.68%

Oil: up at $33.52

29 April 2020

1) The ‘consumer confidence index’ dropped in April by the largest amount on record. The index dropped from 118.8 in March to 86.9, while the ‘present conditions index’ plunged from 166.7 to 76.4, its 90 point drop the largest on record. The ‘expectations index’, which is based on the future outlook, improved slightly from 86.8 to 93.8. The sharp drops are a result of the sudden massive unemployment from the shelter in place orders met to contain the coronavirus. But business is stirring with retailers starting to open up again. Simon Property Group, which is the largest mall owner in the U.S., is opening 49 of its malls and outlet centers in May across the country.

2) Another housing economic crisis could be building for the near future. The mortgage market has been disrupted with millions of borrowers having to postpone payments because of the pandemic and shelter in place, a result of massive layoffs. While some mortgage companies are allowing deferment of payments during the business shutdown, there’s the rising question of how to make up those payments after returning to work. Experts expect a repeat of the 2008 fiscal crisis with mortgages, because borrowers are already stretched thin financially, now having extra debt, but not the resources to service it. There could be another wave of foreclosures coming.

3) As nations scramble to get cash for economic stimulus efforts, they are selling off bonds at a frantic rate, much of it being bought by central banks. This is particularly true for the Asian bond market, with many experts saying this hasn’t come too soon, despite the long term risks. This frenzy in government selling bonds has cause a ‘whip-saw’ reaction in yield rates. Many central banks could be in big trouble if stimulus spending fails to avoid economic recovery, or worst yet an economic collapse.

4) Stock market closings for – 28 APR 20:

Dow 24,101.55 down 32.23
Nasdaq 8,607.73 down 122.43
S&P 500 2,863.39 down 15.09

10 Year Yield: down at 0.61%

Oil: up at $13.27

9 March 2020

1) The FCC (Federal Communications Commission) will vote later this month on rules requiring all providers of phone service to implement automatic call blocking. This automatic technology will block illegal robocalls, that is, the automatic calling of people with a prerecorded message or to connect the person to a salesman. This will give phone and cable companies until June 20, 2021 to implement. This blocking technology is called STIR/SHAKEN protocol that authenticates the origin of a call and can automatically block it if it’s from an illegal robocaller.

2) The U.S. credit markets of bonds are suffering their worst day in a decade as fears increase over the spreading coronavirus and it’s possible effects on corporate income as well as their ability to repay debt. Bonds of American Airlines Group Inc. dropped to near distressed levels as companies worldwide canceled business travel. Other travel related bonds, such as rental car and cruise line companies, as well as energy companies, their bonds and loans fell further towards distressed levels. The selling off of bonds triggered a surge in derivative indexes that investors use to hedge against losses. The week has seen the most cash in at least ten years being withdrawn from funds buying corporate bonds and loans.

3) There are fears that the unraveling of the Saudi-Russia alliance will cause the biggest plunge of oil prices since 2015. Talks between members of the OPEC+ collapsed in Vienna, with members free to pump oil without any restrictions starting next month. The collapses is a result of Russia’s refusal to accept Saudi Arabia’s proposal for output cuts aimed at offsetting the coronavirus crisis’s impact on demand. Oil futures have plunged about 9% in New York and London.

4) Stock market closings for – 6 MAR 20:

Dow 25,864.78 down 256.50
Nasdaq 8,575.62 down 162.98
S&P 500 2,972.37 down 51.57

10 Year Yield: down at 0.71%

Oil: down at $41.57

5 March 2020

1) The newest supercomputer called El Capitan, which will become operational in 2023, is being built in Lawrence Livermore National Laboratory at a cost of $600 million dollars. The new computer will perform 2 exaflops or 2,000,000,000,000,000,000 floating point calculations per second. If the world population was to perform one such calculation per second it would take everybody eight years to do what El Capitan does in one second. The computer will be used to do simulations of nuclear explosions, genetics research, astrophysical modeling, aircraft/automotive design and climate change. It’s the size of two tennis courts, and will use 30 megawatts of power, enough for 12,000 homes.

2) The long time publishing giant Simon & Schuster, founded in1924, is up for sale by its present owner ViacomCBS. In the last few decades, the traditional publishers have been devastated by technologies and the internet, in particular publishing on demand services. Although Simon & Schuster is not losing money, the publishing industry is no longer a growth industry. The company will most likely be sold to another publisher seeking to reduce cost by merging assets.

3) Oil prices have plunged in response to demand caused by flight cancellations, factory shutdowns and slowdowns in passenger traffic, all caused by fears of the coronavirus crisis. Natural gas prices are also down at a near four year low. The oil and gas companies, who have piled on debt to capitalize on the shale boom, are facing serious fiscal problems and may not survive. The markets for energy have dropped seriously, both stocks and bonds, which in the past, have had a detrimental ripple effect on the rest of the economy.

4) Stock market closings for – 4 MAR 20: The Dow jumped more than 1,000 points after Biden Victories.

Dow 27,090.86 up 1173.45
Nasdaq 9,018.09 up 334.00
S&P 500 3,130.12 up 126.75

10 Year Yield: down at 0.99%

Oil: up at $47.20

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

29 October 2019

1) Despite more than two centuries in New York, JP Morgan is quietly shrinking its workforce there. The bank has been relocating several thousand New York based employees out of the area to reduce operating cost incase of an economic downturn. JP Morgan is considering moving the hub from New York to other lower cost hubs such as Plano, Texas or Columbus, Ohio or Wilmington, Delaware.

2) The world famous jeweler Tiffany has been offered $14.5 billion dollars from LVMH, which would be the largest take over by LVMH. The goal of the acquisition is to extend the reach of Louis Vuitton into the U.S. markets. Jewelry is one of the few segments of the luxury market where LVMH is not the leader, but having Tiffany would make it a stronger competitor under the ownership of LVMH.

3) The subprime auto giant Santander Consumer USA Holdings has defaulting loans at a faster rate since 2008. Many of these loans are packaged into bonds. The growing number of borrowers defaulting indicates that many of the borrowers may be getting loans based on fraudulent application information. Delinquent auto loans have reached their highest levels this year since 2011. The weakening performance in managed portfolio signals elevated risks and is an overall negative development.

4) Stock market closings for – 28 OCT 19:

Dow              27,090.72    up    132.66
Nasdaq           8,325.99    up      82.87
S&P 500          3,039.42    up      16.87

10 Year Yield:    up   at    1.85%

Oil:    down   at    $55.74

ZERO COMMISSION ONLINE EQUITY TRADES HAVE ARRIVED!!!!!!!!!!!!!!!!!

Image Credit: Imagebros.com

By: Economic & Finance Report

Online stock brokers TD Ameritrade, E*Trade & Charles Schwab have officially cut their online broker commissions to zero. Charles Schwab was the first brokerage, Interactive Brokers followed suit in cutting their commission rates, then came along TD Ameritrade and E*Trade.

Many online brokers are cutting their commissions to nil (0 zero), because of the climate that brokerages such as Robin Hood has had on the industry, allowing free trades of equities to their clients.

Since then other brokers have also cut their commissions to incur more of fairer playing field for their investors, traders and account holders. Many have speculated this was bound to happen at some point. Well, it looks like it has finally arrived. -SB

5 September 2019

1) A federal judge has ruled that investors may sue five big banks for conspiring to rig prices on bonds worth hundreds of billions of dollars issued by Fannie Mae and Freddie Mac for a seven year period. This clears the way for investors to pursue antitrust claims against Bank of America, BNP Paribas SA, Deutsche Bank AG, Goldman Sachs Group and Morgan Stanley. The banks are accused of fixing prices at a specific level before bringing the bonds to the secondary market.

2) The U.S. trade deficit narrowed overall slightly in July, however the gap with China surged to a six-month high. The trade tensions have caused wild swings in the trade deficit as exporters and importers try to stay ahead of the tariff fight between America and China. The Atlanta Federal Reserve is forecasting the economy growing at a 1.7% pace in the third quarter.

3) Oil dependent nations are facing economic troubles because gas and oil production are unsustainable. As oil and gas supplies dwindle and demand decreases, their once lucrative revenues may be decreasing. Nations whose economies are principally oil production face a trouble future as their oils supplies decline in the next few decades, with nothing to replace those revenues. Those nations facing economic troubles are the UAE, Nigeria, Qatar, Libya, Angola, Kuwait, Venezuela, Iraq and Saudi Arabia.

4) Stock market closings for – 4 SEP 19:

Dow            26,355.47    up    237.45
Nasdaq        7,976.88    up    102.72
S&P 500       2,937.78    up    31.51

10 Year Yield:    down   at    1.46%

Oil:    down   at    $55.98

14 May 2019

1) China has countered U.S. tariffs imposed last Friday with tariffs on $60 billion dollars of U.S. imports to China. About 10 to 15% of America’s import revenues come from China, and while the trade war is high stakes and risky, it’s the only real tool America has to deal with China, because China ignores the world trade organization rulings.

2) Fears are increasing that China may not buy as many U.S. treasury notes as she has in the past, which would force America to increase the prime interest rate. There are even fears that China might not buy any bonds at all, or even start selling off bonds she now holds in retaliation for the tariffs. It’s reported that China is also buying up gold.

3) Boeing aircraft is fearful of being a target for tariff reprisals, who holds substantial orders from China. Apple, who gets 20% of its revenues from China, and Caterpillar are also facing business downturns if China places tariffs on imports of their products.

4) 13 MAY 19 Stock market closings: China’s tariffs announcement turns markets downward.

Dow               25,324.99    down    617.38
Nasdaq            7,647.02    down    269.92
S&P 500           2,811.87    down      69.53

10 Year Yield:     down   at    2.41%

Oil:     down   at    $60.97

NAIRA BONDS UP THIS YEAR IN 2015…. BEATING ESTIMATES….

Naira bonds

By: Economic & Finance Report

Nigerian bonds are up over 7% this year  alone.  In October Naira bonds beat the US stock market over 24% according to data provided by Standard & Poors report, first reported by Channels Tv online.

Nigerian bonds have beaten other African bonds in yield, surpassing South Africa and Kenyan bonds collectively. Kenyan and South African bonds have returned negatively in the red by 13%, while Naira bonds have gained a respective positive 7%.-SB 

*( reporting & data provided by Channels Tv & S&P index)*