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