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

27 March 2020

1) The $2 trillion dollar coronavirus relief bill has been passed and Treasury Secretary Steven Mnuchin said the people should receive cash payments within three weeks. The IRS has been tasked with distributing the monies, but the agency is hobbled by obsolete technologies such as 1960’s era computers, limited staff and a small budget. So there are questions if the agency can get the job done in a timely manner, let alone in three weeks. Experts say its more like a matter of months rather than weeks for Americans to receive their check.

2) Almost 3.3 million Americans have applied for unemployment benefits this last week, more than quadruple the previous record set in 1982. This is a result of the wide spread economic shutdown from the coronavirus pandemic. This rate of layoffs is expected to accelerate as the U.S. economy sinks into a recession with the collapse of revenues for a wide range of businesses. Economist predict the nation’s unemployment rate could approach 13% by May.

3) Gold has traditionally been a panic investment which people and nations buy to protect the value of their money. The worldwide panic over the coronavirus coupled with a flood of stimulus by central banks has ignited demand for gold to store wealth. But the gold market is running into difficulties in buying. Stored in high security vaults, government mandated shut downs have left access iffy. Also, refiners of gold have been forced to close because of the virus. Transporting gold is done via airlines, but the sharp drop in air service has also made transport of the metal difficult. All these factors have put a squeeze on gold futures.

4) Stock market closings for – 26 MAR 20:

Dow 22,552.17 up 1351.62
Nasdaq 7,797.54 up 413.24
S&P 500 2,630.07 up 154.51

10 Year Yield: down at 0.81%

Oil: down at $23.18

24 March 2020

1) The International Monetary Fund stated the global recession caused by the coronavirus pandemic could be worse than the global financial crisis of 2008-9. However, the world economic output should recover in 2021 because of the extraordinary fiscal actions already being taken by many countries and their central banks. But for a 2021 recovery, countries need to prioritize containment and strengthen health systems.

2) The U.S. is entering a recession, but the ultimate fear is a protracted malaise akin to a depression. Some prominent economy watchers are drawing comparisons to the Great Depression, although falling short of forecasting another one, based on the fact that the world has not seen a synchronized interruption in economic output in decades as was seen with the Great Depression. The U.S. will suffer a huge economic contraction as businesses close and Americans stay home, with some estimates that the economy will have the worst quarter since 1947.

3) Most U.S. small businesses have only days to stay afloat amid the coronavirus crisis. Only about half of the 30 million small businesses in America have a 15 day cash reserve needed to survive. The shelter in place orders have cut business revenues to near zero almost over night. Particularly hard hit is the service industries such as restaurants, landscaping, personal services and salons. These small businesses employ about 60 million people, or half of American’s work force. Many of the businesses were already operating on razor thin margins before the virus crisis. With so little cash reserves, they are forced to immediately reduce hours or layoff employees to survive.

4) Stock market closings for – 23 MAR 20:

Dow 18,591.93 down 582.05
Nasdaq 6,860.67 down 18.84
S&P 500 2,237.40 down 67.52

10 Year Yield: down at 0.76%

Oil: up at $24.24

12 March 2020

1) The WHO (World Heath Organization) has declared the coronavirus to be a pandemic, which in turn has cause the markets to make another plunge after its apparent recovery on Tuesday. The number of coronavirus cases world wide is now in excess of 100,000 with more than 1,000 in the U.S. The central banks in other western nations are cutting their interest rates in an attempt to minimize the effects of the virus and avoid a world wide economic slowdown. At present, there doesn’t seem to be an end to the markets volatility.

2) The United Kingdom is levying an additional 2% tax on big high tech companies starting the first of April. Call the ‘digital services tax’, it will levy a tax on the revenues from search engines, social media services and online marketplaces used by British citizens, but it only applies to companies making more than $650 million dollars and derive more than $35 million dollars revenue from UK users. This will encompass companies like Amazon, Apple, facebook and Google. The EU (European Union) is considering a similar tax, but with a 3% rate.

3) Oil production in the U.S. is expected to drop as a result of the dramatic collapse in oil prices. This would be the first decline in output since 2016 as drillers are cutting back on capital spending. Oil prices are below $35 a barrel, well below the breakeven price for most American shale fields. Oil prices have been pushed down by the economic impact of the coronavirus plus Saudi Arabia and Russian failing to agree on limited oil production.

4) Stock market closings for – 11 MAR 20 Stocks down 20% from their high.

Dow 23,553.22 down 1464.94
Nasdaq 7,952.05 down 392.20
S&P 500 2,741.38 down 140.85

10 Year Yield: up at 0.82%

Oil: down at $33.12