7 October 2019

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

10 Year Yield:    down   at    1.52%

Oil:    up   at    $53.01

23 September 2019

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

10 Year Yield:    down   at    1.76%

Oil:    $58.39

9 September 2019

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

10 Year Yield:    down   at    1.55%

Oil:     up   at    $56.73

31 August 2019

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

10 Year Yield:    down   at    1.51%

Oil:    up   at    $55.16

16 August 2019

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

10 Year Yield:     down   at    1.53%

Oil:     up   at    $54.70

14 August 2019

1) Boeing aircraft has not received any new orders for their 737 MAX in six months. This could give Boeing’s competitor Airbus a major market advantage having made 389 commercial plane deliveries in the same six months, making Airbus the largest supplier of this market segment with its A320 design. The grounding of the 737 MAX has forced Boeing to park completed aircraft to await its air worthiness to be restored.

2) Signs of inflation are increasing as U.S. consumer prices increased broadly in July. Expectations are for the Federal Reserve to again cut interest rates next month as much as half a percentage point in September. Continue trade tensions between China and America out weight fears of inflation so interest rates will continue to remain low, if not go lower.

3) Fears grow that protests in Hong Kong, which have persisted for the last two months, could have a lasting detrimental effect on U.S. and global markets. Hong Kong operates with a high degree of autonomy from China, having its own currency and judiciary system. This is fueling the rising concerns of investors of a major violent eruption of conflict between Hong Kong and main line China, coupled with concerns over U.S. – China trade war and the total impact on the world markets. With Hong Kong a financial hub, an invasion by Chinese troops with sever repressive measures on the people could disrupt other markets across the world. Furthermore, violence with loss of life could make it impossible for President Trump to resolve differences with China.

4) Stock market closings for – 13 AUG 19:

Dow              26,279.91    up    382.20
Nasdaq           8,016.36    up    152.95
S&P 500          2,926.32    up      43.23

10 Year Yield:    up   at    1.68%
Oil:    down   at    $56.73

1 July 2019

1) Consumer spending increased in May as well as prices creeping up too. Both point to a slowing economic growth and benign inflation pressures. These two facts gives the Federal Reserve more reason to cut interest rates next month. Inflation is under the 2% target for this year with a projected 1.5% verses 1.8% originally expected. Consumer spending is about two thirds the U.S. economy.

2) Consumerism is changing fast, with a push to ‘no cashier checkouts’. Amazon Go stores are pushing the technology where sales payment is made automatically just by picking out items and walking out the door. E-commerce and on-line shopping continue their assault on traditional brick and mortar stores. Another strategy is showrooms in place of stores that allow the customer to try out products prior to purchasing them. Finally, drone delivery allows getting your purchases at home in less time than it takes to drive to and from a store. All these new technologies are coming together with increased profits by reducing labor cost.

3) The weekly jobless claims has increased more than expected, although there is no sign of significant layoffs as the economy slows down. Unemployment claims were 227,000 up by 10,000. The economy is slowing with manufacturing sliding down and the trade deficient widening as consumer confidence ebbs.

4) Stock market closings for- 28 JUN 19: Results from bank stress test edged markets up. Best June performance since 1938.

Dow            26,599.96    up    73.38
Nasdaq         8,006.24    up    38.49
S&P 500        2,941.76    up    16.84

10 Year Yield:    down   at    2.00%

Oil:    down   at    $58.20

22 January 2019

1) The new Congress may have profound future economic impact for America. New members of the Financial Services Committee includes members of the radical left of the democratic party, with very little experience in fiscal matters, but having a strong socialist agenda for reforms to the banking system. Fears for the impact are growing as these members expound on their desire to eliminate big banks in America.

2) Brexit is having an effect on British consumer spending. Reduce retail spending with retail sales falling 0.9% over concerns for consequence of Brexit uncertainty. Consumer spending had been strong during the summer of 2018.

3) Netflix is burning through its cash at a staggering rate to pay for their blockbuster original hits, having spent $3 billion dollars for productions in 2018. Their negative cash flow is expected to accelerate in 2019, but they are still adding new subscribers. All this to remain competitive with the other subscribers of Amazon, Hulu and Google with Apple, Disney and Warner Media also entering the market.

4) 18 JAN 19 Stock market closings:    China announced spending spree of America products, bumping the markets upward.

Dow                    24,706.35      up    336.25
Nasdaq                 7,157.23      up      72.77
S&P 500                2,670.71      up      34.75

10 Year Yield:    up   at   2.78%

Oil:      down   at    $53.76

18 January 2019

1) The question of ‘monopoly’ for the large tech companies is starting to come to light as a results of congressional questions about the power and influence of such companies as Amazon, Facebook and Google.

2) There are four major retailers on ‘death watch’ for 2019, and they are Barns & Noble, Kmart, JC Penny and Sears. This is particularly important concerning the viability of a consumer based economy.

3) There are talks circulating around Washington of easing the tariffs on China. However, there has been little progress in negotiations, in particular issues of intellectual property.

4) 17 JAN 19    Stock market closings:

Dow               24,370.10    up    162.94
Nasdaq            7,084.46    up      49.77
S&P 500           2,635.96    up      19.86

10 Year Yield:    up   at    2.75%

Oil:    up   at    $52.15

FUTURE of HYPER CONSUMERISM!!!!!!!!!!!

The Real Value to Society for the Youth of America is as Consumers, But What Becomes of Them if Hyper-Consumerism Declines.

By: James Lyman BSAE, BSEE, MSSM

Economic & Finance Report

I’m old enough to remember the first oil crisis of 1973, when the Arab nations tried to punish America for her support of Israel in the Seventy-Two war by cutting off oil shipments. American manufacturing was already in decline when the economic shock of oil shortages ripped through society. Suddenly, American manufacturing started crumbling away as factory after factory closed with American business losing all interest in making their money by manufacturing. The Rust Belt was born. Confronted with a growing problem of spreading unemployment and diminishing opportunity for people, the government had to come up with a new way of doing things, a new kind of economy.

The solution was deemed to be the service economy, the hyper-consumerism where people’s value in the economy and to society was as consumers working to support other consumers, who in turn worked to support more consumers. Instead of producing real material wealth as was formally done with a manufacturing based economy, America would depend almost exclusively on the multiplying effect of money being exchanged from one person to another, a basic principle taught in any introduction course of economics.

Not long ago I wrote another article titled, “Tiny House – Tiny Future” about how the millenniums were turning away from the traditional living in large houses and instead going to homes that are one tenth the traditional size, and consequently foregoing the purchasing common to the hyper-consumerism society simply because they no longer have the room to keep stuff. This I proposed was maybe a sign that hyper-consumerism was coming to an end, that it was not sustainable. With diminishing opportunities for the young, they don’t have the monies to participate in hyper-consumerism the buying of things just to be buying and having things.

Then while checking my email, I glimpsed a banner for a news story about how some of the top ten retailers where closing stores, which instantly caught my attention. Could this be another sign that hyper-consumerism was on the decline, that the much vaunted service economy we depend on is now crumbing just as manufacturing with the rust belt did? Will the millenniums and Z Generation be less able to make substantive contributions to society? I decided to check into this and here’s a parcel list of those retailers who are contracting by closing stores:

Sears & Kmart: 43 additional stores

J.C. Penney: 138 stores

Macy’s: 68 stores

Payless ShoeSource:  512 stores and counting

Radio Shack:  1,000 stores with only 70 remaining

Staples:  70 stores

CVS: 70 stores

Neiman Marcus: number not stated

Furthermore, some of the top American retailers may be declaring bankruptcy this year. No doubt, you’ve heard the recent story of how Alfred Angelo Bridal, the national bridal gown retailer, suddenly closed their doors in bankruptcy leaving hundreds of soon to be brides with nothing to wear to their nuptials but what was already in their closets. Not only that, but they would get just a fraction of their money back  and then months or years from now at that!

So what if this is portents of things to come? So what if the youth of America doesn’t have the hyper-consumerism based economy of their parents and grandparents? Well the real question is, what do they have instead? What is in line to replace it? The answer is nothing! No one in the government is working on some alternative, just like 1973 when American manufacturing was fading. It wasn’t until the shock of the oil crisis that our government gave the situation any consideration, and then it was a quicky decision with little to no real consideration (in other words talking points), and certainly no modeling of the consequences from that decision. That time, they sort of lucked out and it’s worked for several decades, but can they luck out again?

And how do I know that no consideration is being given to a possible demise of hyper-consumerism? Because you hear virtually nothing about the obsolete people problem with the displacement of workers by technology. This is a very integral part of today’s economic problems for the millenniums, in that anytime you can reduce the intellectual-skill levels required for a job, you reduce your labor cost. Displacement by technology means that millenniums are less able to make money because machines are doing the better paying work. Without money, their value as consumers diminishes so they are less able to support a hyper-consumerism based economy. Like the washing away of sand under the foundation of a house, there just comes a time when the house can no longer stand.

Without hyper-consumerism  what will become of so many of America’s youth.