7 October 2020

1) Ikea, the big Swedish world wide modular furniture manufacture, has experienced a surge in sales from the pandemic as people turned homes into offices and schools. Their online sales are up 45% over the last 12 months to August, with 4 billion visits to their website. Outdoor furniture is the fastest growing category, followed by office furniture. While many of their stores were forced to close from the virus, their online sales remain high even as stores reopen. The furniture retailer has added 6,000 new employees world wide to make a total work force of 217,000. Online sales account for about one fifth of total sales.

2) Job openings in America fell in August for the first time in four months, indicating a moderation in hiring as the crisis continues. Available positions slipped down to 6.49 million from July’s 6.7 million. These numbers do not include recalls from layoffs or positions that are offered only internally. However, layoffs and discharges are at a low for August, although there are still 13.6 million Americans unemployed, which means there are about 2 unemployed competing for each job opening. There are fewer vacancies in construction, retail and health care industries, while vacancies increased for manufacturing, food service and government.

3) Federal reserve Chairman Jerome Powell says America is on the long road to economic recovery from the pandemic induced recession, but still there are other problems on the horizon. There are fears of the economy shifting into reverse once again, especially if a resurgence of the virus comes with cold weather . . . the flue season. Such a resurgence could significantly limit economic activity leaving many unemployed stranded with no jobs for many more months. Powell is calling for the passing of the second stimulus bill presently being debated in the Congress. He considers the risk of pouring too much money into the economy far lower than the risk of not spending enough, despite the already sky high federal budget. While he considers the debt is on an unsustainable path, and has been for some time, but this is not the time to address it.

4) Stock market closings for – 6 OCT 20:

Dow 27,772.76 down 375.88
Nasdaq 11,154.60 down 177.88
S&P 500 3,360.95 down 47.68

10 Year Yield: down at 0.74%

Oil: up at $39.83

29 September 2020

1) A railroad link between Alaska and Canada has been a dream for generations, because such a rail link would reduce Alaska’s costs for goods and services. It would also give Canada’s land locked oil-sands access to ports in Alaska, therefore making for more domestic oil reserves, but such a railroad line faces numerous steep challenges. President Donald Trump has endorsed such a proposal, but several regulatory agencies in both America and Canada must first approve such an undertaking before the first shovel full of dirt can be moved, and this is expected to take years to get permits. The Alaska-Alberta railway Development Corporation (A2A Rail) project would be privately funded costing about $17 billion dollars and would run about 1,600 miles.

2) The plague of wild fires continues in California with several new fires in Northen California consuming thousands of acres a day. The fires are consuming vineyards and destroying the wine business, including grape vineyards that have produced for over a hundred years. The heat wave continues to bring dry air into the conflagration, thus drying out vegetation to make ideal fuel for fires, while strong winds are fanning and spreading the flames. Fires are around the San Francisco area, the Napa-Sonoma wine region and Shasta County which are consuming land at a prodigious rate. Two major fires are the Zogg Fire, which has burned through 15,000 acres and the Glass Fire burning through 11,000 acres. The damage is being created so fast that estimates of dollar losses can not be reliably made.

3) The Congress continues to struggle with a second stimulus bill, the Democrats looking to score at the polls if passed before the election. The big question and holdup is the personal stimulus check to individuals and how much it will be this time. It now appears that $1,200 will be the maximum for individuals, but this time there will be restrictions which will lower the amount for many people based on how much their income is. After nearly two months of relative inactivity, House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have agreed to resume negotiations.

4) Stock market closings for – 28 SEP 20:

Dow 27,584.06 up 410.10
Nasdaq 11,117.52 up 203.96
S&P 500 3,351.60 up 53.14 %

10 Year Yield: unchanged at 0.66%

Oil: up at $40.57

4 September 2020

1) For first time since World War II the U.S. government’s debt will nearly equal the size of the entire American economy. By the end of 2020, the amount of debt owed by the United States will be about 98% of the nation’s gross domestic product with a debt that is about three times the 2019 level. The huge surge in debt is a result of the Congress spending an additional $3 trillion dollars in emergency funding since March, a result of the economic downturn from the coronavirus crisis. This is why some members of Congress and the White House have balked at approving an additional $2 trillion dollars in spending in view of the weak economy coupled with having little promise of improving soon. Few experts believe the Congress is likely to do something to reduce the deficit in the short term, all the while unemployment remains near 10 percent. Interest rates are low, which makes it less costly for the federal government to borrow. In addition to increase emergency spending, tax revenues fell as business slowed and many people lost their jobs.

2) After a steady increase in the markets, setting new records for highs, the stock markets took a sudden nose dive. This was caused by a massive and sudden sell off of the technology sector. The tech stocks had been on a ten day winning streak then a sudden overnight change which caught everyone by surprise. The Nasdaq dropped almost 600 points while the Dow was down 800 points. Market experts are left wondering what will come next, especially with the next jobs report for August coming out.

3) The pace of rehiring is expected to slow in August, so the economy will likely add fewer jobs than in July, while workers continue to be laid off. Because of the pandemic, America lost about 22 million jobs in March and April. In May through July, about 9.3 million jobs came back, so we are still short about 12 to 13 million jobs. Part of this is a result of so many small businesses having gone bust, so it will take a long time to replace those businesses and therefore replace the jobs they had. Economic turmoil is when technology displacement is prevalent as business seek the means to survive by reducing labor cost (eliminating jobs).

4) Stock market closings for – 3 SEP 20:

Dow 28,292.73 down 807.77
Nasdaq 11,458.10 down 598.34
S&P 500 3,455.06 down 125.78

10 Year Yield: down at 0.62%

Oil: down at $41.03

28 July 2020

1) Economist are warning that the economy needs help now to avoid faltering. As the President and Congress struggle to create another economic aid package, evidence is growing that the U.S. economy is headed for trouble, especially if the government doesn’t take steps to support hiring and economic growth. Experts say the economy is in a pretty fragile state again and needs another shot in the arm. Unemployment is still at a high 11.1% and hiring seems to be slowing in July, so the economy is likely to weaken further. Few economist consider that the recovery will be a V-shaped path, that is, the sharp recession will be followed by a quick rebound. In addition to helping the millions of unemployed Americans, the governments needs to help businesses from going bust.

2) There are five trends which indicate the U.S. economy is not rebounding as hope. The first is ‘Direction Requests’ on smart phones for walking and driving directions, have gone flat over the last few weeks indicating people are staying at home. The second is ‘Restaurant Bookings’ which show a 60% drop from last year. Third trend is ‘Hotel Occupancy’ which has stagnated with occupancy at 47%. ‘Air Travel’ was slowly increasing, but has also stagnated this last month with air travel down 70% from last year. Finally, ‘Home Purchases’ is increasing at a slow rate, a reflection of peoples uncertainty and changing employment status of potential buyers.

3) Price of gold continues to climb, as investors seek the safety of the yellow metal amidst economic fears of the future. Gold has historically been a refuge for money in times of economic uncertainty, a panic investment. Bullion has climbed to a record high of $1,946 per ounce. The real interest rates (less inflation) is driving investors to gold, as well as the tumbling dollar. Silver bullion is also increasing in price as another safe heaven for investing.

4) Stock market closings for – 27 JUL 20:

Dow 26,584.77 up 114.88
Nasdaq 10,536.27 up 173.09
S&P 500 3,239.41 up 23.78

10 Year Yield: up at 0.61%

Oil: up at $41.66

22 July 2020

1) China, with the second largest economy in the world, is steadily developing into a technological powerhouse that could upend the status quo. China’s ten year plan called “Made in China 2025”, has a principle goal for China to catchup, then surpass the West in various technological fields. Some consider this not only threatens the U.S. economy, but the world economy too. China has already declared they intend to be the dominate power in the world by 2050, and having the high ground in technology development is a key milestone in that quest.

2) Some consider that the stock market will likely head upwards to a new high, fueled by borrowing and money printing. With another stimulus package in the near future, it is ‘out of fashion’ to consider how the borrowed money will be paid back. The central banks, who are not elected, stand ready to print as much money as is wanted, no matter that historically this is how inflation is created and fuel. Example is the Weimar Republic (Germany) who induced their great wave of hyper inflation by printing massive amounts of money in the 1920’s, that lead the way for the Nazi’s to ascend to power. Other problems stemming from printing too much money is currency depreciation, difficulties borrowing, higher interest rates and social unrest. With other investments limited, the excess of money goes to the stock market, thus pushing the market up, and possibly into a bubble just waiting to pop!

3) The Congress remains busy crafting a second stimulus package with lots of debates what should and shouldn’t go in it, intending on having a deal worked out by the end of next week. However, this could go into August before a bill is ready to sign. A major point of contention is checks vs taxes. Should stimulus be checks like the $1,200 checks given out a few months?. If checks, then who gets them this time and how much? The other strategy is reducing payroll taxes, but this only helps those who are working. The Republicans are proposing a $1 trillion dollar relief strategy, while the Democrats propose a sweeping $3.5 trillion dollar plan. This would add to the $2.9 trillion dollar package already implemented early this year. As usual, everything is being done will little to no real analysis, instead relying on gut feelings of lawmakers in making the future of America.

4) Stock market closings for – 21 JUL 20:

Dow 26,840.40 up 159.53
Nasdaq 10,680.36 down 86.73
S&P 500 3,257.30 up 5.46

10 Year Yield: down at 0.61%

Oil: up at $41.58

11 June 2020

1) This last April, the government offered $349 billion dollars to small businesses, in their stimulates package called the Paycheck Protection Program or PPP, as a way of limiting the economic damaged from the shutdown orders and pandemic. This money was gone in just 13 days, so Congress approved a second round of $310 billion dollars, but so far there is $130 billion dollars left with more monies being returned than borrowed. Thousands of companies sent loan money back because loan terms were too restrictive, or the criteria for loan forgiveness was too murky. There has been about $3 billion dollars in loans that have been canceled or returned. Congress has moved to loosen the program’s rules giving businesses more flexibility in spending their aid. Nevertheless, many small businesses are facing closure amid the uncertainty of the economy and what the future holds.

2) America is on track for another 2008 class financial crisis with threats of financial collapse. The 2008 crisis forced banks to rethink their risk taking, and new regulations were put through designed to limit the risk that banks take in making loans. Already facing a prolong recession, the balance sheets of big banks could precipitate a collapsed of the financial sector, as almost happened in 2008. The last crisis was caused by CDO (Collateralized Debt Obligations) where sub-prime home mortgages were packaged and given ratings of high quality mortgages. When these over-rated CDOs began to default, the banks were on the verge of collapse, but the feds stepped in and saved the day . . . just barely. The banks have fallen back into their old habits now by using CLO (Collateralized Loan Obligations) which are like CDOs, however they are for businesses instead of home mortgages, but still having the high risk. With the threat of many small businesses failing from the coronavirus crisis, these CLOs could default causing the big banks to collapse, bringing the American economy down.

3) A record number of retail stores are expected to permanently close this year as consumer demand for discretionary items stalls and people shift to online shopping. As many as 25,000 retail stores could fold up, with more than 4,000 having all ready given up the ghost. It is anticipated the closures will snowball from the recession, adding to the effects of unsustainable debt levels. The retailers were struggling to stay afloat before the pandemic struck.

4) Stock market closings for – 10 JUN 10:

Dow 26,989.99 down 282.31
Nasdaq 10,020.35 up 66.59
S&P 500 3,190.14 down 17.04

10 Year Yield: down at 0.75%

Oil: up at $38.78

9 June 2020

1) The worst U.S. economic downturn since the Great Depression has been officially declared a recession by the National Bureau of Economic Research. While the recession had been a foregone conclusion for most people since the coronavirus outbreak shut the economy down, the NBER declaration makes it a fact, adding that the different characteristics and dynamics makes this recession different from previous recessions. The recession is officially to have started in February.

2) The child care businesses are the hardest hit by the Covid-19 pandemic shutdown with a third of the child care workers laid off or furloughed nation wide. Only the hotel and restaurant industries were hit harder, but because child care providers operate on such thin margins, many are going out of business. With parents unable to find day care for their children, they are unable to return to work, as much as they would like to. So this in turn is another hindrance to economic recovery for America. Therefore, Congress is proposing as much as $100 billion dollars for the child care industry in the next stimulus package.

3) A ten year long treasure hunt has come to an end with the finding of a treasure chest filled with jewels and gold coins worth a reported million dollars. An estimated 350,000 treasure hunters have been searching in the Rocky Mountains since 2010, a ten year long treasure hunt. Hidden by Forrest Fenn, an 89 year old art dealer, who confirmed the treasure was found by an anonymous person from the east. Thousands have spent considerable time and resources searching for the treasure, some even giving up their jobs to search full time. Some have claimed the entire enterprise is an elaborate hoax and have filed lawsuits. Clues to the treasure’s location were in a cryptic 24 line poem that Fenn wrote and published in his book, “The thrill of the Chase”, published in 2010.

4) Stock market closings for – 8 JUN 20:

Dow 27,572.44 up 461.46
Nasdaq 9,924.74 up 110.66
S&P 500 3,232.39 up 38.46

10 Year Yield: down at 0.88%

Oil: down at $38.51

13 May 2020

1) The U.S. consumer prices has declined for the second straight month as the shutdown continues with people spending less. Prices have fallen 0.8% on a seasonally adjusted basis in April, which makes it the largest drop since December 2008. The prices are being forced down by the falling cost of gasoline and energy prices. While falling prices might at first seem like a good thing, economist say that deflation, the opposite of inflation, would be very bad news. This starts a chain reaction spurred by people not buying things, which means manufactures and producers often can’t charge enough to make the product they are trying to sell, so then they stop making products and layoff people. But food prices are climbing, with the biggest increase since February 1976 by 2.6%. The Federal Reserve tries to keep inflation at around 2%, which is considered ideal, but core inflation is likely to be below 1% for the coming year. Normally, it’s expected that a large release of money into the economy, such as the recent stimulus program, would cause inflation to increase.

2) Tim Hortons of Restaurant Brands International, says the food service industry needs to change for the near future, and possibly forever. The company is increasing its digital ordering capabilities by adding to restaurants smartphone apps with enhancements to its drive-thrus and curb service. Restaurant brands using delivery services such as pizza have seen an increase in revenues during the shutdown. The delivery service industries such as GrubHub were growing before the virus crisis, but have been given a real boost which will most likely be sustained when restrictions are lifted. Some restaurant chains are even experimenting with ‘kitchen only’ restaurants with multiple brands under the same roof providing delivery only. This could be an answer to the ‘living wage’ problem with restaurant systems using less labor thereby making a greater surplus of labor which keeps wages low.

3) The economic damage to the economy may not be over with yet, indeed there are fears that the economic crisis could still get worst. The provisions from Congress has done a fair job of sheltering the most vulnerable citizens, whose provisions will run out at the end of July. It’s unlikely that the labor market will be restored by July, so if the Congress doesn’t act, the economy could slide downward even more.

4) Stock market closings for – 12 MAY 20:

Dow 23,764.78 down 457.21
Nasdaq 9,002.55 down 189.79
S&P 500 2,870.12 down 60.20

10 Year Yield: down at 0.68%

Oil: up at $25.83

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

16 March 2020

1) Bill Gates, the co-founder of Microsoft is stepping down from the company’s board of directors, which makes it the biggest boardroom departure in the tech industry, since the death of Apple’s Steve Jobs. Additionally, Mr. Gates is vacating his board seat at Berkshire Hathaway Inc., intending to devote his time to his philanthropic efforts. He will continue serving as a technical advisor to Microsoft.

2) Oil prices climbed up 5% on the announcement by President Trump that the Department of Energy would purchase crude for the nations’ strategic petroleum reserve. The objective is to boost oil prices to keep shale producers in business, because oil needs to be $40 or more a barrel to break even, depending on the particulars of an oil field. The shale oil companies are further in trouble because they are carrying a high debt level. Shale oil production is very capital intensive and therefore very sensitive to oil prices if companies aren’t to go bankrupt. Some suggest that the Russians engineered the rupture of the Saudi Arabia – Russian agreement to limit production levels as a means to cripple the U.S. shale oil production and thereby make America dependent on foreign oil again.

3) President Trump and the Congress have agreed on several provisions of a package, but have been far apart on others. Their discussions center on ways to minimize the economic impact of the coronavirus fears. One point is to ensure that every American can receive a virus test without consideration of money.

4) Stock market closings for – 13 MAR 20:

Dow 23,185.62 up 1985.00
Nasdaq 7,874.88 up 673.07
S&P 500 2,711.02 up 230.38
10 Year Yield: up at 0.95%
Oil: up at $32.93