1) The federal government has warned that the financial sector faces significant vulnerabilities because of the coronavirus pandemic. Both businesses and households are struggling with fragile finances and will be for the foreseeable future. So far, the banking system has withstood the initial downturn, but there are significant risk if the virus crisis proves to be lengthy and/or more sever than hoped for. The financial stress will continue to build if the crisis persists from households and businesses being deprived of wages and revenues. No sectors would be immune from the risk they face from default on debt, being forced to sell off assets, bankruptcy or having value of assets dwindled. Forceful early interventions have been effective in resolving liquidity stresses. There are fears that what might start out as a cash crunch could spiral into something worse, that few if any parts of the economy are safe.
2) The retail industry has been devastated by the coronavirus crisis with April sales diving down 16.4% (Manufacturing is also down by 13.7%) with major retailers such as J.C. Penny, J Crew and Neiman Marcus filing for bankruptcy recently. However, discount retail chains such as Dollar General and Aldi seem to be thriving as consumers cut back on discretionary spending while continuing to spend on food and household essentials. The Dollar style stores are gaining because of their low prices and close proximity to customers, with people buying things they have run out of between their larger routine shopping trips. In recent years, the Dollar style stores have significantly increased their number of stores thereby enabling them to capture more retail sales from the traditional retailers.
3) Some are predicting that the pandemic has permanently changed the auto industry, with some automakers made stronger while others are left too weak to survive. The pressure from the electric automobiles will become stronger with fewer conventional automakers able to make the transition. There are fears that people have discovered they need to travel much less, that they can get a surprisingly amount done from home. This translates into lower demand for automobiles. Demand for new cars was expected to be low before the pandemic, now things are expected to get very brutal for survival of some automakers.
4) Stock market closings for – 15 MAY 20:
Dow 23,685.42 up 60.08 Nasdaq 9,014.56 up 70.84 S&P 500 2,863.70 up 11.20
1) The second wave of unemployment is coming after an unprecedented spike in layoffs from the cornonavirus ‘stay at home’ orders. But while businesses will soon start rehiring workers, many will take the opportunity to replace their workers with cheaper and more contingent labor. The crisis will accelerate trends towards industry consolidation that reduces potential employers, automation, which replaces human labor, and worker precarity when convenience of employers and customers entirely overrides the well being of workers. Further aggravating employment will be the large number of small businesses expected to succumb to the recession leaving fewer employment opportunities. Also, the force isolation is changing people’s buying habits with more online shopping, delivery services and self service kiosks. These methods of automation also represent cost cutting methods, which companies will cultivate to make more wide spread. All this promises to make the second round even harsher.
2) Oil prices continue their downward spiral, with futures at record lows as investors worry about lack of storage and the world economy. German and Japanese data indicates a bleak global economy, which will in turn pull America’s down. Despite measures being taken to reduce the supply, the glut will continue for the foreseeable future. Numerous statistics and prices point to a continual crisis for the world and American economies.
3) Restaurants are particularly hard hit by the coronavirus economy, with more than 8 million workers having lost their jobs, about two-thirds of the restaurant labor force. About four in ten restaurants have closed, while many others struggle to stay afloat by providing curbside service. The National Restaurant Association is asking for more monies to support survival of restaurants during this period of government enforced business closure. Like so many other small businesses, the future for many restaurants is looking very doubtful.
4) Stock market closings for – 20 APR 20: Oil drops from $18.12 for Friday to -$16.10, almost a complete inversion in price.
Dow 23,650.44 down 592.05 Nasdaq 8,560.73 down 89.41 S&P 500 2,823.16 down 51.40
1) The investment bank Morgan Stanley is buying ETrade Financial Corp. for $13 billion dollars, planning to now manage money for regular people. ETrade will bring five million retail customers worth $360 billion dollars in assets, and an online bank with cheap deposits which Morgan Stanley can funnel into loans. Morgan Stanley had provided financial management to the upper end clients, the million and billionaires.
2) General Electric has avoided a business setback with exports of its jet engines to China. Fears that the Chinese could reverse engineer the new design and bolster its own aircraft manufacturing industry, has drawn threats of barring the LEAP 1C engine export to China. This would have been a major blow to GE’s efforts to recover from its slump, the engine sales being central to recovery efforts. The GE engine is slated for use in China’s C919 narrow body airliner now in development.
3) Clients of Fidelity Investments experienced shock and duress on finding their account balances at $0.00 or worst yet, even unable to find their accounts on the internet. This is a result of Fidelity’s website going down, which the company is working to resolve amongst a blizzard of Tweets from worried clients. Fidelity has 30 million individual investors, some 29.6 million brokerage accounts with a total of $7.8 trillion dollars in total customer assets.
4) Stock market closings for – 20 FEB 20:
Dow 29,219.98 down 128.05 Nasdaq 9,750.96 down 66.22 S&P 500 3,373.23 down 12.92
1) The poor showings of two major movies this last weekend shows the risk Hollywood faces with new movie productions. The final installment of Star Wars, The Rise of Skywalker and Cats both have fallen short of predicted first week ticket sales, highlighting the risk associated with cinema productions. The theatrical market is dominated by a few blockbuster movies at the expense of almost everything else, leaving theater owners struggling for productions to draw needed customers.
2) Holiday shopping set records over the weekend with Super Saturday sales reaching $34.4 billion dollars making it the biggest single day in U.S. retail history. Super Saturday topped Black Friday’s $31.2 billion dollars by 10%. This is despite foot traffic in the malls being down, indicating people are spending more. Next question is – will this stellar momentum lead to sustained economic growth in 2020.
3) The internet music downloading site Spotify is expanding into the podcasts market. The company is spending big to lock down exclusive shows and introduce several new features for users. Already a success now making a profit with music, Spotify is determined to be a power player in the world of podcasts, considering podcast to be a great complementary product. Spotify has announced it has acquired Gimlet Media and Anchor production companies to strengthen its podcast abilities.
4) Stock market closings for – 23 DEC 19:
Dow 28,551.53 up 96.44 Nasdaq 8,945.65 up 20.69 S&P 500 3,224.01 up 2.79
1) Analyst say Netflix, the video streaming service, must lower its prices in 2020 to avoid lost of millions of its U.S. customers because of the rising competition. It is suggested that Netflix must add a second lower priced service to compete with Disney+, Apple+, Hulu, CBS All Access and Peacock, otherwise they risk losing four million U.S. subscribers. Since Netflix’s balance sheet cannot withstand lower revenues, the company must create a pricing tier that has lower monthly cost, but still support advertising revenue.
2) Mortgage lenders are warned to brace for a downturn, with Fannie Mae and Freddie Mac pulling back on some mortgages meant to make home ownership more affordable. They are reducing the proportion of loans they back to borrowers with small down payments. This tamping down on risk is to limit their defaults thereby producing greater profits.
3) Morgan Stanley, the investment bank giant, is cutting about 1,500 jobs globally in a year end push for efficiency. The cuts are more in the technology and operations divisions, but include executives in sales, trading and research operations including several managing directors. These reductions amount to about 2% of the firm’s workforce with a charge between $150 to $200 million dollars in its fourth quarter.
4) Stock market closings for – 10 DEC 19:
Dow 27,881.72 down 27.88 Nasdaq 8,616.18 down 5.64 S&P 500 3,132.52 down 3.44
1) The newly released November jobs report is the best in ten months and blows away expectations as striking GM workers returned to work. The good news confirms the economy remains on a moderate expansion path despite a prolonged manufacturing slump. Even better news is the unemployment rate has falling back to 3.5% damping fears of an up coming recession.
2) The oil cartel OPEC+ (plus) will adjust its output target and redistribute production cuts between its members. Saudi Arabia pressured the decision since they have long carried an outsized share of the burden. The cartel, which pumps more than half the world’s oil, agreed to reduce its output by 500,000 barrels a day. Saudi Arabia is the world’s largest oil exporter and the de facto leader of OPEC.
3) Amazon Business, one unit of the giant Amazon, operating in the business-to-business marketplace, serving a variety of customers from large companies to hospitals, to schools and colleges. Growing faster than their consumer retailing segment, analyst say Amazon Business could be a $31 billion dollar business in four years. Started in 2015, it had over a billion dollars of sales in its first year.
4) Stock market closings for – 6 DEC 19:
Dow 28,015.06 up 337.27 Nasdaq 8,656.53 up 85.83 S&P 500 3,145.91 up 28.48
1) For 80 years Boeing Aircraft has operated as an ‘association of engineers’, but this changed in 2001 when the upper management who came from MacDonnel Douglas (a failed company), elected to move Boeing’s corporate headquarters to Chicago. The rational was upper management shouldn’t be close to a principal business, because the corporate center is inevitably drawn into day to day business operations. With this, Boeing became a financially driven business instead of engineering driven, with decision based on cost cutting instead of safety. This has resulted in the 737 MAX fiasco now being played out.
2) Apple has started construction of its $1 billion dollar campus in Austin Texas, which is beside its new MacBook Pro laptop manufacturing facility. The 3 million square foot campus will have 5,000 employees with capacity to grow to 15,000. Currently, Apply employs 7,000 people in Austin. This is seen as another move by Apple to limit its manufacturing in China.
3) Walmart is redesigning its grocery department in order to counter impending competition to traditional brick-and-mortar from online giant Amazon. Already the country’s largest grocer, Walmart will widen aisles, add low profile displays in the produce departments, an organic shop and update signage throughout its stores. These changes are expected to be improvements for the customers and workers.
4) Stock market closings for – 20 NOV 19:
Dow 27,821.09 down 112.93 Nasdaq 8,526.73 down 43.93 S&P 500 3,108.46 down 11.72
1) The new streaming service Disney+ has surpassed ten million sign-ups since its launch Tuesday. In response Disney’s stock is up slightly while Netflix shares are down 1%. While there were technical problems connecting at first, that didn’t prevent customers from flooding the sign up page. The initial signup is for a free seven day trial, so it’s unknown how many will continue with the pay service.
2) In October, consumer prices rose the most in seven months as the price for gasoline was higher, along with medical treatment and recreation. But in general, inflation remained low and fairly stable, with consumer price index jumping 0.4%, primary from rising cost of energy. While gas prices surged upwards 3.7% in October, it’s still less than what Americans were paying a year ago.
3) The ever expanding corporate giant Google will offer personal checking accounts next year in partnership with Citigroup Inc and a small credit union at Stanford University. To be called Cache, it is intended to follow Apple Inc. and Facebook Inc into the financial industry. Google’s strategy is to deeply partner with banks and the financial system.
4) Stock market closings for – 13 NOV 19:
Dow 27,783.59 up 92.10 Nasdaq 8,482.10 down 3.99 S&P 500 3,094.04 up 2.20
1) There are fears that the manufacturing segment is in trouble and may contract for the third straight month. This in turn could drag down the U.S. GDP (Gross Domestic Product) in the third and fourth quarters. Three factors are causing this down turn- the trade war with China, the GM (General Motors) strike and Boeing’s 737 MAX problems stopping deliveries and slowing production.
2) In the recent past, the online retailer giant Amazon has been unable to compete with traditional retailers when selling single items costing less than a few dollars, because the shipping cost is more than the single item cost such as toothpaste, deodorant or a simple brush. Customers had to buy these items as add-ons to make the $25 minimum for free shipping. But these items are now available for free shipping with Amazon’s Prime shipping. This could make for a significant challenge to other retailers such as Walmart, Target and CVS.
3) GM is attempting to end the month long strike of the UAW (United Auto Workers) by making direct appeal to the workers. The company has lost more than a $1 billion dollars so far, and is making several promises to the workers trying to circumvent the union’s leadership. The UAW has increased strike pay from $250 to $275 per week with union members allowed to hold other jobs as long as it doesn’t interfere with their picket duty.
4) Stock market closings for – 14 OCT 19:
Dow 26,787.36 down 29.23 Nasdaq 8,048.65 down 8.39 S&P 500 2,966.15 down 4.12
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