22 March 2021

1) The U.S. Department of Justice has launched an antitrust investigation into the practices of renowned credit card company Visa regarding debit-card transactions. The DOJ is looking into the rules for routing transactions, both in stores and online. In its suit against Visa last year, the Justice Department claimed Visa already possesses monopoly power in the market for online debit-card transactions, arguing that roughly 70% of such transactions in the U.S. are routed over the firm’s network. At the heart of the Justice Department’s issues with Visa is the 2010 law known as the Durbin Amendment, which requires banks to include two networks on their debit cards. Merchants are then supposed to be given the choice of routing over a major network versus a smaller alternative such as Pulse, Star or NYCE. Those alternative networks can be cheaper for merchants.

2) The Federal Reserve stated that while the U.S. economy has been steadily rebounding from the pandemic recession, the recovery is far from complete and needs continued support from the Fed. About half the 20 million jobs that were lost to the pandemic have been recovered, and the outlook is brightening as vaccinations are more widely administered. The central bank’s policymakers forecasts are sharply upgraded, with the economy expected to accelerate quickly this year. At the same time, their forecast showed that the benchmark rate remains near zero through 2023, despite concerns in financial markets about potentially higher inflation.

3) Flipping houses in America is an easy way to make a quick buck. With the real-estate market red hot, profits on flips are at a record high, averaging some $66,000 per home. There are more than 60 banks and other financing companies catering to flippers. Memories of the 2007 real-estate bust are fading, and with interest rates on most fixed income investments still so paltry, lenders are desperate for anything that provides higher returns. The 7.9% average annual rate on a fix-and-flip loan is more than twice the 3.09% rate that a bank can earn on a 30-year mortgage. But there aren’t that many houses to purchase, the inventory of existing homes for sale is at its lowest since 1999, so now more flippers are chasing fewer transactions. Almost 68% of all home flippings last year sold for $300,000 or less.

4) Stock market closings for – 19 MAR 21:

Dow 32,627.97 down by 234.33
Nasdaq 13,215.24 up by 99.07
S&P 500 3913.10 down by 2.36

10 Year Yield: unchanged at 1.75%

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 February 2020

1) Senator Josh Hawley (R) aims to overhaul the Federal Trade Commission to counter the power wielded by big tech companies like Google and Facebook. He proposes dismantling the current agency tasked with protecting US consumers and place it under the Department of Justice. The Missouri senator says the current FTC lacks the teeth needed to hold high tech companies accountable for data breaches or lost of consumer information as well as privacy issues.

2) The genetic testing business for consumers, which has been growing over the past decade, now seems to be slowing because of concerns for privacy and market saturation. One major company announced a 6% layoff of employees with another laying off 14% as a result of slowdown of demand over the last eighteen months. Cost for testing is becoming another factor, especially for amateur genealogical researchers.

3) The U.S. is using technologies such as drones to scout for potential rare-earths reserves at home and aborad. Presently, America is almost 100% dependent on foreign supplies for the critically needed natural resource, most coming from China. Rare-earths are used in applications such as cellphones, wind turbines and missiles. While the U.S. does mine some rare-earths, it all must be shipped overseas, principally China, to be processed. America doesn’t have any processing plants of her own.

4) Stock market closings for – 10 FEB 20:

Dow 29,276.82 up 174.31
Nasdaq 9,628.39 up 107.88
S&P 500 3,352.09 up 24.38

10 Year Yield: down at 1.55%

Oil: down at $49.65

25 November 2019

1) American retailers, such as Home Depot are facing a new crime wave driven by drugs and fueled by the opioid crisis. Known as organized retail crime, people steal for crime rings in exchange for cash they can buy drugs with. The stolen merchandise is then resold at pawnshops, online or directly to a buyer. Worst yet, the thieves are using violence against store employees who try to stop the open theft, even using guns and knifes. The store is left to just stand and watch as thieves roll shopping carts of merchandise out the door to sell for drugs.

2) The tuna supplier Bumble Bee Foods announced they are filing for Chapter 11 bankruptcy protection to be purchased by its largest creditor FCF Fishery, for $925 million dollars. Bumble Bee’s debt burden has forced the bankruptcy, which in turn was caused by a $25 million dollar fine for forming a cartel with Chicken of the Sea and Starkist to fix prices. The fine was levied by the Department of Justice. Additionally, the popularity of packaged tuna has been declining with a 42% per capita drop over the last 30 years.

3) There are growing fears that phase one of the China-American trade deal may not get signed before the additional tariffs take effect in mid-December. Phase one would not eliminate tariffs on either side, instead would address issues of intellectual property and financial services access including sizeable purchases by China of American agricultural products. Phase one is considered a starting point for resolving trade differences.

4) Stock market closings for – 22 NOV 19:

Dow          27,875.62    up    109.33
Nasdaq       8,519.88    up      13.67
S&P 500      3,110.29    up         6.75

10 Year Yield:    unchanged   at    1.77%

Oil:    up   at    $57.93

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