8 October 2020

1) Despite the economic failure of the first supersonic airliner, the French-British Concorde, there are now attempts to revitalize the supersonic airline service. Boom Supersonic has unveiled its first demonstrator aircraft called the X-B1, which is scheduled to start flight testing next year. The demonstrator is planned as a commercial stepping stone to an actual commercial supersonic airliner to transverse the Atlantic ocean in about three and a half hours- about half the present flight time. Plans called for supersonic jets that are quieter and more fuel efficient than the Concorde. Some might consider a supersonic airliner to be an optimistic endeavor considering the concerns over the airline’s industry future over the next several years.

2) Like other restaurant chains in decline, Ruby Tuesday’s decline was several years in the making, accelerated by the pandemic. Amidst speculation by industry insiders, the renowned Ruby Tuesday has filed for bankruptcy. By April, Ruby Tuesday had closed about 30% of its 470 restaurants, and with the virus crisis, restaurants continued closing. It has closed 300 restaurants in the last three years, 186 this year alone, while amassing a $43 million dollar debt plus $19 million dollars owed to landlords and vendors. The company is filing for chapter 11 bankruptcy and will continue operating about 230 restaurants in its bid to survive. Ruby Tuesday’s decline in sales was due to a major shift in consumer attention from casual dine-in to fast food and fast casual options.

3) The troubled aircraft manufacture Boeing Aircraft cuts their forecast for airplane demand due to the pandemic. Over the next decade, Boeing now expects deliveries of 18,350 commercial aircraft, which is down from its previous forecast by 10.7%. The coronavirus crisis is expected to create minimal demand for new jets during the next few years. Boeing still expects to deliver 43,110 commercial aircraft over the next 20 years, a forecast down only slightly from its previous forecast of 44,040 and so will be able to make up for lost sales in the years after the next decade.

4) Stock market closings for – 7 OCT 20:

Dow 28,303.46 up 530.70
Nasdaq 11,364.60 up +210.00
S&P 500 3,419.45 up 58.50

10 Year Yield: up at 0.78%

Oil: up at $40.06

14 September 2020

1) With 13 million Americans unemployed and their unemployment benefits running out, many will have only seasonal jobs to turn to. But with such wide spread unemployment, getting hired for seasonal work wont be easy. With the coming holidays, seasonal jobs traditionally mushroom with major companies already hosting hiring events to fulfill their temporary ranks. Companies like Michael’s will hire over 16,000 temporary people, with UPS expecting to hire over 100,000 for holiday package delivery. Retailers doing e-commerce, such as Amazon or Walmart are expected to need many seasonal workers and therefore are good places for job seekers to apply.

2) Fears are growing that the coronavirus crisis could cause a double dip recession, that the recession could end up looking like a roller coaster of ups and downs. The upsurge in virus cases is eroding consumer confidence and leading to renewed limits on certain businesses. Economic recovery can bloom then fade away only to repeat again. Some economic factors point to a recovery, yet others point downwards, with the picture further complicated by the ‘what ifs’ of the coronavirus and just how it will play out, where a second wave of the virus could be just as economically disruptive as the first one, maybe even more so. Additionally, a significant portion of the economy has been destroyed. Half the businesses in America are small businesses and at the start of the crisis, about half of those had cash reserves of just fifteen days or less . . . meaning by now they have gone bust! No one knows what the repercussion from such massive losses of business will ultimately have on the economy in general.

3) Mechanical breakdown insurance, which isn’t an extended warranty, but rather is insurance that pays for mechanical auto repairs of a car’s power train, much as accident insurance pays for the repair of body damage. It will have some amount for a deductible, then pays the remainder of a mechanic’s bill for repair, both labor and parts. Usually, any mechanic can be used. Most major insurance companies who offer auto insurance will also offer breakdown insurance too. Prices range from $20 to $100 a year.

4) Stock market closings for – 11 SEP 20:

Dow 27,665.64 up 131.06
Nasdaq 10,853.54 down 66.05
S&P 500 3,340.97 up 1.78

10 Year Yield: down at 0.67%

Oil: up at $37.39

31 July 2020

1) The American economy last quarter is the worst on record, with a 32.9% annual rate contraction (April – June). American business ground to a halt from the pandemic lockdown this spring, leaving the country in its first recession in eleven years. This wipes out five years of economic gains in just months. From January to March, the GDP (Gross Domestic Product) declined by an annualized rate of 5%. While the unemployment is declining as states open up from the shutdown, there are still about 15 million unemployed workers. Americans are spending less money during th lockdown, partly because of lost of jobs. Consumer spending is the biggest driver of the economy, and it declined at an annual rate of 34.6% for the second quarter.

2) While Walmart has posted surging sales for each month, it is still taking cost savings measures. The retailer has laid off hundreds of workers including store planning, logistics, merchandising and real estate. Also, Walmart is reorganizing its 4,750 stores by consolidation of divisions and eliminating some regional manager roles. Walmart is performing well because of high demand and low prices during the pandemic. The company isn’t opening as many new stores in the U.S. anymore, so Walmart doesn’t need as many people to find new locations and so design them.

3) Job postings in technology are 36% down from 2019 levels. This is attributed to increased competition, low priority in hiring and uncertainty over the pandemic. Therefore, the tech industry is also feeling the economic effects of the coronavirus pandemic. Sending a very significant portion of its workers remote to work at home, there were predictions tech jobs would lead the recovery with increase job numbers. The ‘work at home’ was thought to show tech jobs might be available outside the traditional hubs. Neither has proved to be true. In short, the tech jobs are faring worst than the overall economy.

4) Stock market closings for – 30 JUL 20:

Dow 26,313.65 down 225.92
Nasdaq 10,587.81 up 44.87
S&P 500 3,246.22 down 12.22

10 Year Yield: down at 0.54%

Oil: down at $40.45

30 July 2020

1) First Walmart then Target and Dick’s Sporting Goods and now Best Buy have announced they will be closed on Thanksgiving, with more retailers expected to follow suit. The decision is in response to the coronavirus pandemic. Traditionally, Thanksgiving Day is the kick off of Black Friday sales, where retailers offer their lowest sales prices as the kickoff of the Christmas shopping season. But this also draws large crowds, something that goes against public health guidelines for social distancing. Instead, retailers will be offering their big sales online.

2) The spending habits of millennials had been credited with the decline of traditional consumer products, but now seem to be reversing for comebacks. Things like golf, starter homes and canned tuna are now on the rise, in part because of the covid-19 crisis. Some other products now on the rise is beer, mayo and cereal to name a few. More indications of how economic times in America are ever changing and becoming more unpredictable.

3) The pandemic crisis has sent the U.S. Postal Service into a fiscal tailspin, with President Trump saying he would not support a financial bailout until the Postoffice reformed its pricing of package deliveries for large on-line retailers like Amazon. But the federal government is preparing a $10 billion dollar loan to the Postoffice to continue services. This loan is part of the proposed $2 trillion dollar pandemic relief package passed in March, but the President said he wont spend the money until the USPS agrees to raise its prices. Much of the online retail business is dependent on the USPS to deliver their goods via mail delivery.

4) Stock market closings for – 29 JUL20:

Dow 26,539.57 up 160.29
Nasdaq 10,542.94 up 140.85
S&P 500 3,258.44 up 40.00

10 Year Yield: down at 0.58%

Oil: up at $41.32

24 June 2020

1) Economists are concerned about four major factors bearing down on a recovery of the economy. These are 1) the household fiscal cliff, 2) a great business die-off, 3) state and local budget shortfalls, and 4) the lingering health crisis. The pandemic shutdown cost the jobs of 40 million Americans, 40% of them low wage workers. This has left many households short of money, having little to no savings to meet their fiscal obligations such as rent and utilities. Add to this, there has been a steep decline in consumer spending leaving large numbers of businesses to face bankruptcy, thereby making a contraction of the economy. But businesses are not the only one facing revenue shortfalls, for governments are also facing shortages of money needed for their operations and paying employees, as in more layoffs. Finally, the cost of controlling the Convid-19 virus, especially if a major second wave does emerge, for both preventive treatment and caring for the sick. All four of these factors may very well be pushing America’s economy towards another Great Recession, which could last for many years.

2) The New York eviction moratorium ended this weekend, raising fears that tens of thousands of residents will soon face evictions which will flood the courts. This problem is a reflection of a problem across all of America as those 40 million laid-off workers have been unable to pay rent or mortgage payments and now face losing their residence. But it isn’t one sided, for landlords and lenders are also facing money shortages to meet their obligations too, which can lead to their fiscal demise. Most of the tenants and home owners have limited monies beyond their income, so paying back rent and mortgage is going to be near impossible.

3) China is warning of the risk of a naval incident with the US. Claiming that the U.S. military is deploying in unprecedented numbers to the Asia-Pacific region, which makes for a rising risk of an incident with China’s navy. The United States freedom of navigation operations in the South China Sea has angered the Chinese, who is trying to establish dominance in the area and hence control of the territory. The Chinese claim that 60% of America’s warships and 375,000 soldiers are deployed in the Indo-Pacific region, including three aircraft carriers. So far, the U.S. Navy has conducted 28 freedom of navigation operations by sailing through the area where China has built islands, and therefore claiming the area as theirs.

4) Stock market closings for – 23 JUN 20:

Dow 26,156.10 up 131.14
Nasdaq 10,131.37 up 74.89
S&P 500 3,131.29 up 13.43

10 Year Yield: unchanged at 0.71%

Oil: up at $40.02

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

1 June 2020

1) For the last few years, a number of retailers have been downsizing by closing a number of their stores across the country, something that the coronavirus pandemic has greatly accelerated. But the restaurant chains have also been downsizing as well, closing branches all across the county. Such popular names as Jack in the Box, Luby’s, Pizza Hut, Ruby Tuesday, Steak’nShake , Subway, Burger King, TGI Fridays and Applebee’s just to name a few, who are closing restaurants across the country. Each have been struggling for the last several years. This is another sign that the American consumer market is in the process of fundamentally changing.

2) The U.S. consumer spending plunged in April by the most on record because of the nation wide lock down. Spending fell 13.6% from the prior month, making for the sharpest drop in six decades. A rise in income temporarily masks the fact that people are in a fragile economic position, because the rise was a result of the one time stimulus checks. The virus crisis halted all but the most essential purchases, with economists expecting it will take a year or more before spending recovers.

3) It’s anticipated that the national debt will increase to more than 100% of the national GDP (Gross Domestic Product) by the end of the year. This will exceed the record set after World War II. The $25 trillion dollar national debt equates to $76,665 dollars per citizen or $203,712 dollars per taxpayer. The federal deficit is over $1.9 trillion dollars through April, and is expected to rise to $3.7 trillion dollars by the end of September, which is the end of the fiscal year. Such debt could draw investors to demand higher interest rates, as the federal government’s position becomes increasingly precarious. This is like an individual piling on credit card debt without consideration for the short or long term consequences to their financial position. For America, those consequences could be deep depression coupled with inflation of the dollar leaving money far less valuable than today.

4) Stock market closings for – 29 MAY 20:

Dow 25,383.11 down 17.53
Nasdaq 9,489.87 up 120.88
S&P 500 3,044.31 up 14.58

10 Year Yield: down at 0.65%

Oil: up at $35.32

16 April 2020

1) With many of the big box stores under siege from store closings and bankruptcies, the U.S. retail sales has suffered a record drop in March. In turn, factory outputs have declined by the most since 1946, as part of the coronavirus economic contraction in the first quarter. The drop is the sharpest rate in decades despite the measures taken to prop up the economy. People are now making comparisons to the Great Depression of 1930’s, considering this recession will be as deep if not deeper than that depression. People are losing jobs by the millions, and one question is how many of those jobs will return and how many will be taken by technology displacement. Last month, retail sales plunged 8.7%, the biggest decline since 1992 when government began taking numbers. Restaurants and bars are included in the retail decline with a drop of 26.6% last month, although grocery and health care rose. Consumer spending has dropped sharply with forecast of a 41% decline for second quarter. Consumer spending accounts for more than two thirds of the U.S. economic activity.

2) The price of oil has fallen below $20 per barrel because of predictions of a record slump in world demand. In April, global oil demand is expected to fall by 29 million barrels a day from last year. This is oil demand levels that was last seen in 1995. The U.S. had been oil independent for several years now, because of its domestic shale oil production, but for this oil to be profitable to extract, oil prices must be above $40 a barrel. With oil prices forecast to be low for the foreseeable future, the shale oil industry is in dire straights.

3) Time when companies are under stress, such as during a recession, provides impudence for them to reorganize and streamline their operations. By adapting to a new environment through restructuring of a company, they are able to reduce operating cost, thereby being better able to survive. Recession brings layoffs and furloughs, so companies seek to get work done with fewer people, usually by using new technologies. Consequently, those jobs are gone, never to return, when the economy returns to health.

4) Stock market closings for – 15 APR 20:

Dow 23,504.35 down 445.41
Nasdaq 8,393.18 down 122.56
S&P 500 2,783.36 down 62.70

10 Year Yield: down at 0.64%

Oil: down at $20.15

30 March 2020

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

10 Year Yield: down at 0.75%

Oil: down at $21.84

11 March 2020

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

S&P 500 2,882.23 up 135.67

10 Year Yield: up at 0.748%

Oil: up at $34.62