28 Auguest 2020

1) The decay of the worlds airline industry is reaching out past the airline companies themselves, with jet engine maker Rolls-Royce announcing a $7 billion dollar lost for the first half of 2020. Rolls-Royce gets paid by the hours their engines are flown on airliners, and with the massive drop in air travel from the pandemic, the company’s revenues have drastically dropped leaving its survival in doubt. The company is being forced to sell assets to meet its cash needs, so they are reducing eleven of their locations to just 6, with the loss of 9,000 jobs. Stock dropped 9% on the news of reorganization which was already down 66% since the start of the virus crisis.

2) Not all of the retail industry is bleak news, with Abercombie & Fitch outperforming expectations in the second quarter. While the apparel company did lose ground in the last quarter, it performed better than analyst expected, with sales down by 17%, nevertheless their earnings per share made remarkable gains over last year. This is a result of aggressive costs reductions earlier in the quarter when the company slashed expenses by $200 million dollars by reducing salary expenditures and skipping dividends. Success in their e-commerce operations has also pushed up the revenues and promises to add more as people go to online for more of their shopping.

3) Another small indication that manufacturing is returning to America is Roche Holding AG plans to move its glucose testing strips manufacturing plant from Pueto Rico, where it has operated for about 40 years. The company is streamlining its operations by combining the plant with its other existing facilities. The move will cost 200 jobs in Peuto Rico, which has a number of other drug and medical device manufacturing plants.

4) Stock market closings for – 27 AUG 20:

Dow 8,492.27 up 160.35
Nasdaq 11,625.34 down 39.72
S&P 500 3,484.55 up 5.82

10 Year Yield: up at 0.75%

Oil: down at $42.96

11 August 2020

1) Online retailer giant Amazon is considering taking over closed department stores in some malls to use as warehouses in their distribution system. Amazon is in talks with Simon Property Group, America’s largest mall owner, to convert J.C. Penny and Sears stores into distribution hubs for package delivery. Simon malls have 63 J.C. Penny and 11 Sears stores available. With many traditional brick-and-mortar stores in collapse, such a deal would make sense for both Amazon and Simon. Amazon is looking for more space closer to where customers live to help with its one day delivery strategy, while Simon needs cash rich tenants to bolster their business.

2) A report that outlines the three potential future movies in the Star Trek franchise has been released. The movies for Star Trek follow-on’s have been in limbo since the 2016’s Star Trek Beyond. There are three potential projects being considered for possible production, including a Tarantino’s Star Trek movie. The first movie by Noah Hawley (Fargo and Legion creator) is centered on a pandemic story line using a brand new cast, but is now on pause. The second is a movie by Tarantino, of Pulp Fiction fame, as writer, but not necessary directing it. Something of a take on of a prior Star Trek episode, it would be largely an earthbound 1930’s gangster setting. The third is a far more traditional Star Trek with the recent stars Chris Pine and Zachary Quinto. The next few weeks is expected to yield the fate of the Star Trek franchise.

3) Latest job numbers show 1.8 million new jobs created last month to give a 10.2% unemployment rate. This is another coming down of the rate, a good sign for the economy. This leaves 43% unemployed of the 22 million people who lost their jobs from the pandemic, so the economy is still a long way from a full recovery. Fears are that it will be a long time before full recovery, what with the large number of small businesses that have succumb to the Covid-19 crisis with subsequent loss of jobs. The continual struggling price of oil indicates a still weak international economy.

4) Stock market closings for – 10 AUG 20:

Dow 27,791.44 up 357.96
Nasdaq 10,968.36 down 42.63
S&P 500 3,360.47 up 9.19

10 Year Yield: up at 0.57%

Oil: up at $41.99

24 July 2020

1) The parent company of Ann Taylor and Lane Bryant clothing chains, the Ascena Retail Group Inc., will close more than half its stores, a total of more than 1,000 stores. The troubled retailer was struggling like many other retailers to remain afloat, but the Covid-19 crisis tipped the scales into bankruptcy. Ascena has about 40,000 employees and there’s the expectation of cutting its 2,800 stores down to just 1,200 with significant losses of jobs. The chapter 11 will erase about $1 billion dollars in debt from its $12.5 billion dollars of liabilities, which includes $1.6 billion dollars of funded debt. Retailers have been among the hardest hit by Covid-19 lockdowns coupled with online shopping, which drained revenues and pushed so many retailers into bankruptcy.

2) Almost 16,000 restaurants have closed permanently from the Covid-19 pandemic, an indication of just how deeply the virus has affected the food industry, especially the restaurants. So far, about 60% of the restaurant closures have been permanent, with the number increasing with time. Restaurants now surpass the retail industry in the highest total business closures since the start of the pandemic. Bars and the night life industry has met the same fate, with 5,454 total business closures of which 2,429 are considered permanent closures, or 44% lost.

3) There is mounting evidence that America’s fragile economic recovery is faltering even as the pandemic seems to be leveling out. Reservations for restaurants are waning, air traffic is leveling off and foot traffic at stores is dwindling again. With rising infections in California, Texas and Florida, there is a growing sense that the recovery is fading. Small businesses have suffered the worst, having limited cash reserves and ability to obtain loans, and therefore are failing at record numbers. To compound the problem, there is weaker spending by consumers. Hopes for a real recovery depend more and more on an effective vaccine being created and available. Until there is one, there appears little hope that the economic will make any real lasting progress towards recovery.

4) Stock market closings for – 23 JUL 20:

Dow 26,652.33 down 353.51
Nasdaq 10,461.42 down 244.71
S&P 500 3,235.66 down 40.36

10 Year Yield: down at 0.58%

Oil: down at $41.21

17 June 2020

1) As restaurants start to reopen, they are finding a serious problem- it takes cash to reopen again, cash that many don’t have in the bank. The cost of food, staff, cleaning and training for new sanitary protocols is proving daunting, with one independent owner calculating he needs $80,000 cash to reopen. The suppliers are facing a similar problem since many of their restaurant customers still own them money, but need supplies on credit to reopen, so many suppliers are threatened with bankruptcy too. And if that’s not enough, restaurants that had opened in some major cities are threatened with another shutdown as the virus pandemic re-emerges again, and so not only face another loss of sales revenue, just when they need the money the most, but also have additional cash outlays for reopening. The closing of restaurants has shed more than 8 million jobs.

2) In a month filled with economic bad news, retail sales have posted their largest monthly jump upwards ever. With the cornonavirus lockdown coming to an end, consumers are out shopping again making a 17.7% headline gain including food sales, which beat the previous record of October 2001. Clothing and accessories were the biggest gains of 188%. This gain reverses the 16.4% plunged from a month ago. While very encouraging, the economy still has a lot to regain.

3) There is a faster than expected turnaround in home buyer demand, after a sharp drop-off at the start of the coronavirus pandemic. The National Association of Home Builders/Wells Fargo Housing Market Index jumped 21 points in June to 58, where above 50 indicates a positive market. In April, the index dropped a record 42 points to 30. Builders report increase demand for families seeking single family homes in inner and outer suburbs featuring lower density neighborhoods.

4) Stock market closings for – 16 JUN 20:

Dow 26,289.98 up 526.82
Nasdaq 9,895.87 up 169.84
S&P 500 3,124.74 up 58.15

10 Year Yield: up at 0.76%

Oil: up at $37.76

4 June 2020

1) The stock market continues to climb, with some saying this signals the end of the recession. The S&P 500 has a return of 37.7% over the past 50 trading days, which is the largest 50 day rally in history. This rally is attributed to the quick response of the Federal Reserve, with a record $2 trillion dollar federal stimulus package. Another factor is the unlimited asset purchases by the Federal Reserve. While the shutdown depressed retail and airlines businesses, other parts of the economy saw a boost, such as Netflix, Amazon and Facebook. But there is still the record high of over 40 million workers idled by the pandemic, while the weakening in the Chinese’s economy coupled with the tensions between China and America could have a telling effect to the economic recovery.

2) There are fears of another round of layoffs in the later part of 2020, amid questions of where the economy will go in the next six to twelve months. Businesses are now reluctant to expand and hire new people, and may decide to contract thus being better able to weather economic hard times. There is also the unspoken problem of continued automation taking jobs as AI (Artificial Intelligence) and automation that experts predict will continual to sap jobs for the next decade. Automation gives companies an added advantage in surviving when the economy slows down, but a second wave of layoffs may trigger that slowdown.

3) The giant movie theater chain AMC has announced they doubt they can remain in business after the effects of the coronavirus shutdown. The company has problems with their liquidity, their ability to generate revenue and the timeline for reopening its theaters. The chain expects to lose $2.1 to $2.4 billion dollars for the first quarter, with the second quarter to be even worst. With all its theaters closed down, AMC is generating zero revenues. The major problem in reopening is having enough cash for operations until cash starts coming in again, and there is still questions of when theaters will be able to open again, especially if there are flare-ups of the virus.

4) Stock market closings for – 3 JUN 20:

Dow 26,269.89 up 527.24
Nasdaq 9,682.91 up 74.54
S&P 500 3,122.87 up 42.05

10 Year Yield: up at 0.76%

Oil: down at $36.75

18 May 2020

1) The federal government has warned that the financial sector faces significant vulnerabilities because of the coronavirus pandemic. Both businesses and households are struggling with fragile finances and will be for the foreseeable future. So far, the banking system has withstood the initial downturn, but there are significant risk if the virus crisis proves to be lengthy and/or more sever than hoped for. The financial stress will continue to build if the crisis persists from households and businesses being deprived of wages and revenues. No sectors would be immune from the risk they face from default on debt, being forced to sell off assets, bankruptcy or having value of assets dwindled. Forceful early interventions have been effective in resolving liquidity stresses. There are fears that what might start out as a cash crunch could spiral into something worse, that few if any parts of the economy are safe.

2) The retail industry has been devastated by the coronavirus crisis with April sales diving down 16.4% (Manufacturing is also down by 13.7%) with major retailers such as J.C. Penny, J Crew and Neiman Marcus filing for bankruptcy recently. However, discount retail chains such as Dollar General and Aldi seem to be thriving as consumers cut back on discretionary spending while continuing to spend on food and household essentials. The Dollar style stores are gaining because of their low prices and close proximity to customers, with people buying things they have run out of between their larger routine shopping trips. In recent years, the Dollar style stores have significantly increased their number of stores thereby enabling them to capture more retail sales from the traditional retailers.

3) Some are predicting that the pandemic has permanently changed the auto industry, with some automakers made stronger while others are left too weak to survive. The pressure from the electric automobiles will become stronger with fewer conventional automakers able to make the transition. There are fears that people have discovered they need to travel much less, that they can get a surprisingly amount done from home. This translates into lower demand for automobiles. Demand for new cars was expected to be low before the pandemic, now things are expected to get very brutal for survival of some automakers.

4) Stock market closings for – 15 MAY 20:

Dow 23,685.42 up 60.08
Nasdaq 9,014.56 up 70.84
S&P 500 2,863.70 up 11.20

10 Year Yield: up at 0.64%

Oil: up at $29.78

12 May 20:

1) Economic advisers are urging the reopening of the economy as quickly as possible to reduce unemployment rates, which they fear are already above 20%. But despite the risk of permanent economic damage, public health experts warn that reopening nonessential businesses could lead to a flare up of the pandemic. This could mean unemployment worst than the 1930’s great depression with a true unemployment rate reaching 25%. However, there are early reports that China is experiencing a recurrence of the coronavirus after they’ve started their reopening process, so the warnings of health experts isn’t to be taken lightly. While some officials state that 80% of the unemployment is from furloughs and expect very rapid re-employment with the ending of the shutdown, there remains the very real problem of how fast they can be rehired. With a large portion of businesses now strapped for cash, they will have to restart slowly as money permits. No doubt, many will have gone bust during the shutdown, having already run out of money, while many more will be cash starved for weeks, months or even years, teetering on the brink of bankruptcy.

2) Toyota Motor company plans to cut North American production by about a third before October, with expectations that it will be some time before production is restored to present levels. The company will build about 800,000 vehicles in the United States, Canada and Mexico, a number which is down 29% from the same time last year.

3) The electric automaker Tesla, controlled by Elon Musk, has filed a federal lawsuit Saturday against Alameda County in California to reverse the closing of the auto plant. The Tesla’s plant in Fremont, California was closed by health orders from the county and remain closed for social distancing reasons. Additionally, Musk is threatening to move the manufacturing plant to a more business friendly state such as Texas or Nevada, considering the regulation to be the last straw. In the last few years, California has faced a ‘business drain’ as significant number of businesses and skilled/educated workers move out of California for states offering more opportunity.

4) Stock market closings for – 11 MAY 20:

Dow 24,221.99 down 109.33
Nasdaq 9,192.34 up 71.02
S&P 500 2,930.32 up 0.52

10 Year Yield: up at 0.73%

Oil: at up at $25.38

11 May 2020

1) The Money market mutual funds have traditionally been the ultimate haven for investors wanting to preserve capital, but this is increasingly difficult in a zero interest rate environment. The problem centers on having twice as much cash as typical. The money market funds have soared with assets at a record high of $4.77 trillion dollars because of the flight to safety this year by investors. Of that, about 75% of those assets are in Treasury and other government funds perceived as the lest risky and therefor least likely to actually lose value. The U.S. Treasury has issued in excess of $1.5 trillion dollars to fund the stimulus program and the loss of tax revenues. With interest rates near zero, some fund companies are waving management fees in order to preserve returns for clients, otherwise their clients would actually be losing money.

2) The rural department chain store Stage Stores, who predominantly caters to the rural areas and small to mid-size markets, is also experiencing the crunch on retailing. The company’s owners are preparing for bankruptcy , another casualty of the coronavirus pandemic. The chain has about 700 department stores in small towns and rural communities with about 13,600 full and part time employees. The classic retailer JC Penny is reportedly preparing to also file for bankruptcy including plans to permanently close a quarter of its 850 stores. The company missed a $17 million dollar debt payment and is going into default. The cruise ship line Norwegian Cruise Line in Miami has warned the company could go out of business because of the pandemic. The company has $6 billion dollars in long term debt, plus it’s faced with a huge number of clients demanding their money back for cruises already booked.

3) The U.S. Postal Service is reporting a huge loss, a direct result of the coronavirus crisis. The government owned corporation reported a $4.5 billion dollar loss for the first quarter. The USPS anticipates losses for the next 18 months amid steep declines in revenues. They have warned congress that government assistance is required if they are to continue delivering the mail. The congress has authorized the Treasury Department to lend the USPS up to $10 billion dollars as part of the $2.3 trillion dollar stimulus package, but President Trump has threaten to block that aid.

4) Stock market closings for – 8 MAY 20:

Dow 24,331.32 up 455.43
Nasdaq 9,121.32 up 141.66
S&P 500 2,929.80 up 48.61

10 Year Yield: up 0.68%

Oil: up at $26.04

23 April 2020

1) The present unemployment rate is thought to be higher than anytime during the Great Depression, raising the question if the present day recession will last as long as the Depression, which was almost ten years. While some sever recessions have been short lived, usually they are long affairs. Lowering the interest rates is a traditional tool used by the government to counter a recession and stimulate the economy, but interest rates are already near zero when the coronavirus hit, so the government didn’t have its primary tool. Many economist are considering the strategy ‘America is back open for business’ as unlikely to create a huge surge in growth. There are three other major factors to consider- 1) the other world economies are continually pulling America’s down 2) the big mess that oil is in and 3) predictions from several different experts that in the next 15 to 25 years as much as 50% of the jobs will disappear to technology. It will be difficult for employment to return to pre-coronavirus levels if jobs are continually disappearing faster than people are being rehired. One interesting point, a financial analyst is predicting that Disney World, Disneyland and their overseas parks will not be able to reopen until January 2021, and if such a cash rich company is having so much difficulty reopening, how about the multitude of smaller companies with much more limited resources?

2) U.S. automakers are taking the first steps to bring workers back and start manufacturing operations again, but are finding it easier said than done. There are negotiations with the United Auto Workers union, for the manufactures to provide protective gear, frequently sanitize equipment and take worker temperatures to prevent infection of the virus to the union members. As much as workers want to return to a paycheck, there are real fears of catching the virus. Fiat Chrysler has announced May 4 as the gradual restart date, with General Motors and Ford expected to quickly follow.

3) Reports are building that the coronavirus may cause lasting damage to some organs such as the kidneys. There are fears from reports that the virus may cause damage to the heart, lungs and possibly the liver. Furthermore, the blood from Covid-19 patients is having unprecedented blood clotting, evident by blood clots forming while trying to insert IVs or taking blood samples. Internal blood clots can be life threatening, and autopsies are finding such internal blood clots.

4) Stock market closings for – 22 APR 20:

Dow 23,475.82 up 456.94
Nasdaq 8,495.38 up 232.15
S&P 500 2,799.31 up 62.75

10 Year Yield: up at 0.62%

Oil: up at $14.23

13 March 2020

1) The popular theme parks Disneyland and Disney World have been closed until April because of the threat of coronavirus. The closure commences on 14 March, but the hotel resort will remaining open until 16 March to allow guess to make travel arrangements for returning home. Walt Disney Co. will continue to pay cast members during the closure. Disney Cruise Line will suspend all new departures beginning Saturday until the end of the month. At this time, it is uncertain how adversely this will financially effect Walt Disney Co.

2) A global recession, driven by the coronavirus pandemic, may result because of the flow of goods, services and people becoming more restricted. In the past day, President Trump has restricted travel from Europe, Italy has closed almost every shop, India suspended most visas and Ireland partially shut down. Many sporting events have been closed to public spectators with major lost of revenues. Many nations fear a contraction, with China the first in decades, thus ending the 11 year expansion. The Federal Reserve’s emergency interest rate cut of March 3 failed to boost investor’s confidence.

3) The Federal Reserve has announced its plan to ease market strain and halt its downward spiral. The Feds will offer a huge injection of liquidity to the Treasury market to counter market dysfunction. Government bonds are liquid assets making them the easiest thing to sell in turbulent times when investors need to raise cash. The New York Feds have been buying Treasury bills in what is called repurchase agreements or repos. This added liquidity is intended to bring stability to the markets and arrest the downward movements.

4) Stock market closings for – 12 MAR 20: The markets continue their drastic downward spiral.

Dow 21,200.62 down 2,352.60
Nasdaq 7,201.80 down 750.25
S&P 500 2,480.64 down 260.74

10 Year Yield: up at 0.85%

Oil: down at $30.88