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

22 May 2020

1) Again, there is additional unemployment this week with 2.4 million people filing for unemployment benefits this last week. This brings the total U.S. unemployment during the pandemic up to 38 million, with continuing claims at 25.07 million, the highest level on record. The good news is the filings continue to decline from previous weeks. So far, there’s no indications that the easing of the lockdowns is having any effect on the unemployment dilemma.

2) The apparel retailer chain ‘The Gap’ is accelerating its implementation of robots in warehouses to assemble online orders, thus avoiding the use of human contact during the pandemic. The Gap is tripling the number of item picking robots in use to 106 by the fall. With the pandemic forcing the closure of its stores nationwide, their online sales shot up just when social distancing rules reduced their staff. Each robot does the work of four humans in a warehoused that was already highly automated. This is an example of increased automation occurring during times of economic shock, leaving fewer jobs for when the economy improves. These are times when employers shed less skilled workers by replacing them with technology and higher skilled workers thereby reducing their labor cost.

3) The second crisis for the American economy is arriving. The pandemic is having sever consequence for state and local governments with lockdowns eviscerating their finances. Monies needed to pay for public services and infrastructure have withered leaving governments to do triage of the services they provide. Basic services such as police, fire fighting, health, trash and water/sewer services are threatened with curtailment for lack of monies to pay salaries and supplies such as gasoline. Such actions is politically dangerous which can fuel political extremism that threatens democracy. Losses of state and local revenues are estimated to be 15 to 45 percent, or an overall loss of $1.75 trillion dollars a year. With growing doubts of re-employment after the crisis passes, this economic crisis is long term.

4) Stock market closings for – 21 MAY 20:

Dow 24,474.12 down 101.78
Nasdaq 9,284.88 down 90.90
S&P 500 2,948.51 down 23.10

10 Year Yield: down at 0.68%

Oil: up at $33.82

13 April 2020

1) As the administration considers efforts to restart the economy, economist are considering what a recovery will look like. Although there are widely differing opinions, most consider it will be a long slow process. While it was a great shock with the sudden stopping of businesses followed by the sudden massive unemployment, few consider that there will be a quick ‘snap back’ like with a light switch being snapped back on. The shutdown is causing fundamental shifts in the social-economic system. People’s shopping and ‘going-out’ habits such as restaurants, movies and sporting events is changing, which is also a change in spending habits. People are more reluctant to travel in high density such as airliners or cruise ships. Many small businesses will not survive this recession, and with half the businesses in America classed as small, there will be a significant change in the business environment, plus it will be a long time to reabsorb the massive unemployed, since automation will move in to fill the void. Finally, America’s economy is subject to being pulled down by the world economies, which few are expecting a strong comeback from, since so many were already weak before the coronavirus.

2) Consumer prices fell 0.4% in March, the largest monthly decline in five years. This is from the cost of things like traveling, gasoline, airfares and hotel rooms plunging. Energy cost is down 5.8% with gasoline prices down 10.5%. Food prices did continue rising. There are fears that the GDP will drop 30% or more adding to the economic bad news.

3) The wild gyrations of the stock market is leaving investors confused over what is happening. Stocks are going up when the future is filled with doubts and uncertainty, not a time when investors buy equities. The unemployment is quickly approaching, and may surpass 15% amidst fears of a huge economic contraction with a long term recession- a time when normally only fools would buy into the markets.

4) Stock market closings for – 10 APR 20:

Markets closed for Good Friday

8 November 2019

1) Bill Gates, the Microsoft co-founder, says he’s happy to pay his share of taxes, but expressed consternation over Elizabeth Warren’s proposals to tax America’s wealthy. He considers the presidential hopeful is not very open minded to consider his concerns. Warren’s wealth tax proposal is 2% annual levy on household wealth above $50 million dollars with an additional 1% tax on wealth above $1 billion dollars. She estimates this would cover 75,000 tax payers raising $2.6 to $2.75 trillion dollars over a ten years.

2) Stores are starting their Black Friday sales earlier this year, in part because the holiday shopping season is six days shorter. Retailer Target will begin online Black Friday sale on Thanksgiving morning, with stores opening their doors at 5 p.m. and remaining open through 1 a.m. the next day. On Black Friday, their stores open at 7 a.m.. Other retailers such as Walmart started their holiday shopping season last October.

3) Xerox is offering HP a takeover bid of $22 per share. The bid consists of 77% cash and 23% stock which would be $17 in cash and 0.137 Xerox shares for each HP share. If accepted, the deal would generate about $2 billion dollars in cost synergies with HP stock holders owning 48% of the company. HP has announced job cuts between 7,000 and 9,000 by the end of fiscal 2022. HP is worth $29 billion dollars and is more than three times the size of Xerox in terms of market cap.

4) Stock market closings for – 7 NOV 19:

Dow                 27,674.80    up    182.24
Nasdaq              8,434.52    up      23.89
S&P 500             3,085.18    up        8.40

10 Year Yield:    up   at    1.93%

Oil:    up   at    $57.07