1) A second virus shock wave is already hitting China’s factories as European factories are delaying orders and asking for delays in payments as the coronavirus sweeps across Europe closing their factories. These are cutting off orders to Chinese factories just as they were beginning to come back to life, a double hammer blow to China’s economy. Estimated April to May sales are expected to be down as much as 40% from last year. This is raising grave doubts about the world’s second largest economy being able to repair damage and return to its pre-virus station.
2) The Index of Consumer Sentiment dropped to 89.1 in March, the lowest level since October 2016, a three year low. It is the fourth largest in nearly 50 years. Further declines is dependent on the success of curtailing the spread of the virus and how soon households receive funds from the government stimulus. To date, there are 540,000 cases of coronavirus with America overtaking China and Italy with the most cases having a total of 85,000.
3) The Department of Justice is investigating the credit scoring firm FICO for possible antitrust violations. There are three other major credit companies: Equifax, Experian and TransUnion. FICO is the only scoring model accredited by mortgage loan companies Fannie Mae and Freddie Mac. The DOJ investigation comes after TransUnion’s antitrust countercase against FICO. The lenders determine which credit scoring system is utilized on a loan application, not the consumer or loan applicant.
4) Stock market closings for – 27 MAR 20:
Dow 21,636.78 down 915.39 Nasdaq 7,502.38 down 295.16 S&P 500 2,541.47 down 88.60
1) Fully 70% of the American economy is consumer spending. Even through wages and incomes have been stagnant for many households, the consumer has continued to spend. It is not new investment by corporations, tax cuts or big new federal spending programs that stimulate the economy, but rather it’s consumer spending. However, fears of the coronavirus is dampening that spending by curtailing business trips, personal travel, sports and other outings. With the interest rate near zero, the major tool used to combat a recession is now impotent.
2) The collapse of the long standing deal between Saudi Arabia and Russia, to limit oil production, fell through this weekend sending oil prices crashing from oil supplies surplus. The coronavirus has caused China to limit economic activity and therefore reduced China’s oil consumption leading to further oil surpluses. China’s purchase of oil is down 20%. The low oil prices has made the world economy very unstable and therefore volatile. For America, independent oil companies have gone deeply into debt to pay for the shale oil extraction process, who are now threaten by low oil prices making it impossible to pay that debt. Failure of these oil companies could ripple through the American economy to pull other segments down.
3) Airlines across the world continue to sink deeper into crisis from the worsening coronavirus epidemic reducing the number of passengers, who are foregoing travel fearing the virus. The situation is made worst by not being able to predict how long the crisis will likely last and therefore unable to make accommodating plans. The lockdown of Italy has further aggravated world air travel, especially with the interruption of tourism just as the tourist season would be ramping up.
4) Stock market closings for – 10 MAR 20
Dow 25,018.16 up 1,167.14 Nasdaq 8,344.25 up 393.577
1) Consumer electronics giant Samsung has started building a $220 million dollar research and development center in Hanoi, Vietnam. The center is to be completed by the end of 2022 and will employ between 2,200 to 3,000 people, and will be the largest of its kind in Southeast Asia. It will do research on subjects like artificial intelligence, internet technology, big data and 5G. Samsung is the single largest foreign investor in Vietnam, with investments totaling $17 billion dollars.
2) Huawei technologies, the controversial 5G supplier, is circumventing the barring of doing business with U.S. suppliers of critically needed electronic chips, by turning to manufacturing their own versions. The strategy appears to be working with Huawie selling more than 50,000 next generation base stations free of U.S. technology in their last quarter. The company is quickly ramping up its HiSilicon division to make more America component free devices, amide accusations that Huawei is stealing the intellectual property in making their own chips.
3) History shows that stocks often rebound quickly from a disease outbreak. Within six months, stocks are usually on the mend from drops caused by disease outbreaks. After the disastrous drops of last week, the markets started surging upward again, giving validity to this hypophysis- ‘Invest with a plan, instead of trying to predict trends.’
4) Stock market closings for – 2 MAR 20: Single greatest-gain in one day ever.
Dow 26,703.32 up 1293.96 Nasdaq 8,952.16 up 384.80 S&P 500 3,090.23 up 136.01
1) J. P. Morgan Chase posted profit and revenue far in excess to analysts’ expectation at the end of 2019. Fourth quarter profit was up 21% to $2.57 a share compared with $2.35 estimates of analysts. The investment bank produced record revenue for the fourth quarter. Citigroup also beat estimates for profit and revenue, their fixed income trading revenue gaining 49%.
2) Consumer prices rose at the fastest pace in eight years, in 2019. The increase was driven by higher gasoline, health care and rent prices in addition to the biggest annual advance in inflation since 2011. The consumer price index rose 0.2% in December, while economist had forecast 0.3%. The cost of living in 2019 rose 2.3% from 2.1%. Price increase for food was mild, while prices fell for used vehicles and airline fares.
3) Three of China’s automakers are considering expanding into Mexico with factories. Car makers Changan, BYD (electric cars) and Anhui Jianghuai or JAC, who already has manufacturing facilities in Mexico, but is considering expanding. The companies are considering expansion sometime this next year. No comments on if and where cars will be exported to.
4) Stock market closings for – 14 JAN 20:
Dow 28,939.67 up 32.62 Nasdaq 9,251.33 down 22.60 S&P 500 3,283.15 down 4.98
1) There are fewer international students coming to America, which is hurting American universities and the economy. International student enrollment has been declining since the fall of 2016 which is estimated to cost the economy $11.8 billion dollars and more than 65,000 jobs. There is a perception among students that getting a visa for the United States is more difficult and it’s increasingly unsafe in the U.S.
2) National retailer Kohl’s posted quarterly sales that was lower than analysts’ projections, and has fallen the most in almost three years. This raises further concerns about the future of department stores, a market segment that has been struggling to adapt to broad changes in consumer habits. Kohl’s shares fell as much as 18%, the biggest one day tumble since January of 2017. Other department store chains such as Macy’s and Nordstrom have seen declines too.
3) Home Depot shares fell after reporting a third quarter earnings below Wall Street expectations, and the company cut its full year outlook for the rest of 2019. Like so many other traditional retailers, Home Depot is struggling to adapt to the online market place. While they are spending a lot of money to become a bigger online player, the company hasn’t seen the results they expected. The home improvement retail landscape is getting tougher.
4) Stock market closings for – 19 NOV 19:
Dow 27,934.02 down 102.20 Nasdaq 8,570.66 up 20.72 S&P 500 3,120.18 down 1.85
1) As part of its restructuring plan, HP announced they will cut about 7,000 to 9,000 jobs, resulting in an estimated savings of about $1 billion dollars. While HP expects to incur labor and non-labor cost of about $1 billion dollars, they expect to generate at lease $3 billion dollars of free cash flow. As of 31 October 2018, HP had world wide employment of about 55,000 workers.
2) Consumer spending has been the bright spot in an economy showing signs of weakening on multiple fronts, in particular manufacturing. Economists worry if consumer spending will continue to prop up the economy, saying that the up coming Christmas season will be a test. Issues such as trade, interest rates, global risk factors and political rhetoric are where confidence can be eroded by deterioration of these items.
3) The new Costco in Shanghai China reports membership of more than 200,000 as compared to an American average of 68,000 per store. Costco will open a second Shanghai location in early 2021. The first day opening, the store was so swamped with customers, that the doors had to be closed for four hours to limit the number of people inside to safe limits.
4) Stock market closings for – 4 OCT 19:
Dow 26,573.72 up 372.68 Nasdaq 7,982.47 up 110.21 S&P 500 2,952.01 up 41.38
1) The retailing mammoth Amazon has spawned a rival called ‘Free and Fair Markets Initiative’ (FFMI), who have launched a nation wide campaign to criticize Amazon’s business practices. They claim that Amazon stifles competition and innovations, inhibiting consumer choice, gorging on government subsidies, endangering its warehouse workers and exposing consumer data to privacy breaches. The group claims to have grass-roots support, but haven’t disclosed they are receiving backing from some of Amazon’s major corporate rivals such as Walmart.
2) An additional 4,500 Canadian auto workers have been furloughed as a result of UAW (United Auto Workers) strike on GM (General Motors), which is now in its fifth day. This is a result of the strike disrupting operations and supplies of auto parts and assemblies needed for Canada’s plant to manufacture automobiles.
3) The Ohio Public Employees Retirement System, the largest public pension system in Ohio, is moving to reduce cost of living benefits for current and future retirees. This requires legislative changes, which the board of directors have voted to ask lawmakers for. Like so many retirements, public and private, the public pension system is striving to straighten out its finances. The fund has $24 billion dollars in unfunded liabilities to contend with and this proposed action will wipe out $3.44 billion dollars of that liability. .
4) Stock market closings for – 20 SEP 19:
Dow 26,935.07 down 159.72 Nasdaq 8,117.67 down 65.20 S&P 500 2,992.07 down 14.72
1) Several state attorney generals will investigate Facebook for possible stifling competition and putting users at risk. This comes after reports that Google will face antitrust investigations from state attorney generals. The investigations will center on actions that endangered consumer data, reduced the quality of consumers’ choices or increased the price of advertising. States investigating include New York, Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee and the District of Columbia.
2) President Trump unhappy at GM for decision to close four of its domestic auto plants. General Motors, which was once the giant automaker in Detroit, is now one of the smallest. GM has gone from 33 plants in the US to 29, but has an additional 27 manufacturing plants in China. Presently, GM sells more cars in China than it does in America. This accounts for $16 billion dollars in profit for GM.
3) The American consumer is carrying the U.S. economy in last quarter. The personal expenditures rose last quarter while business and residential investment, net exports and inventories have declined. There are concerns that consumers may rein in spending from fears of economic future. Global commerce is slowing, partly in response to the trade war, and without strong consumer spending it’s hard to see alternate sources of economic growth.
4) Stock market closings for – 6 SEP 19:
Dow 26,797.46 up 69.31 Nasdaq 8,103.07 down 13.75 S&P 500 2,978.71 up 2.71
1) Disney announced it has sold its stake in the YES Network to investors including Amazon for 347 million dollars. The YES Network airs the Yankees games as well as other local sports and specialty content, and was one of the assets the Department of Justice required Disney to sell. It’s unknown what Amazon’s role in this acquisition will be.
2) The traditional shipping companies UPS and FedEx are now being challenged by Amazon’s emerging shipping empire as exemplified by its recent breakup with FedEx. As its consumer business has expanded, Amazon has built a network of suburban warehouses package and sorting centers feeding a fleet of delivery vehicles. This is turning it from a customer delivery service to a rival. In expanding with new service centers, Amazon is gobbling up failed malls. This expansion is driven in part by its rapidly expanding Prime membership, now with 100 million subscriptions in the US, with Amazon now delivering over half of its own orders.
3) Jack Ma, the billionaire founder of Chinese e-commerce giant Alibaba, the equivalent of Amazon.com, predicts that by 2030 computers and artificial intelligence will not only shrink the number of jobs by as much as 40%, but also reduce the number of work hours available to the remaining workers. This is just one more prediction of near term technology displacement coming in the next ten to twenty-five years that have recently been made public.
4) Stock market closings for – 30 AUG 19:
Dow 26,403.28 up 41.03 Nasdaq 7,962.88 down 10.51 S&P 500 2,926.46 up 1.88
1) Retail giant Walmart reported a strong second quarter and raised its earnings expectations for the year. This news eases concerns about consumer demand dropping because of the trade war with China. Shoppers spent more at stores and websites, indicating the consumer economy has not lost steam. Walmart posted a 20 quarter or five years of growth unmatched by any other retailer. The retailer gets 56% of its revenues from grocery sales, so it is less vulnerable to tariffs.
2) In July, American’s spent more at retail stores and restaurants, indicating the economic growth remains healthy, despite fears of a coming global economic slowdown and possible recession. Despite such fears, consumer confidence remains steady. Most economists are not forecasting a recession, because consumer spending and the job market remains strong.
3) Saudi Arabia is ramping up its oil exports to China, with crude shipments doubled over the last year, while its oil exports to America have dropped by nearly two thirds. This shift has occurred in part from oil embargo on Iran, which has caused Asian importers to shift away from Iran to other sources, aided by U.S. growing independence of any oil imports. The U.S. is becoming the worlds largest producer of oil.
4) Stock market closings for – 15 AUG 19:
Dow 25,579.39 up 99.97 Nasdaq 7,766.62 down 7.32 S&P 500 2,847.60 up 7.00