17 January 2020

1) The trust funds for Social Security are in trouble and will run dry by 2035. But Social Security is not going bankrupt because the program’s primary source of revenue is payroll taxes, which at present is 12.4% of pay. So even if the trust fund should run out, Social Security still would have the money to largely keep up with benefits. A much greater danger for retirees is high inflation, for historically the first to suffer from a collapsing economy are those on fixed incomes.

2) The recently signed phase one agreement with China made for a cease-fire in the trade, but leaves the tariffs largely in place, with some considering the tariffs to be the new norm in international trade. China has committed to making $200 billion dollars in purchases from America. The agreement does not address the intellectual property issues, both the forced intellectual transfers and out right theft.

3) Claims for unemployment benefits fell more than expected last week, indicating a sustained strong labor market. Claims dropped 10,000 last week to 204,000 with the labor market remaining on a solid footing, the unemployment rate holding near a fifty year low of 3.5% for December. Layoffs were in manufacturing, transportation and warehousing.

4) Stock market closings for – 16 JAN 20:

Dow              29,297.64    up    267.42
Nasdaq          9,357.13    up      98.44
S&P 500         3,316.81    up      27.52

10 Year Yield:    up   at    1.81%

Oil:    up   at    $58.59

16 January 2020

1) Nigeria may become the superpower of Africa, repeating the economic miracle of China and India. While investors are not moving into Nigeria yet, they are watching. Like China and India, Nigeria was once a colony of the west, and like India, was a colony of the British, and just like India its language is English. Right now, Nigeria is economically where China was forty years ago, before Mao Zedong died and Deng Xiaoping deregulated the economy to unleash it. For many other reasons, Nigeria is set to repeat the economic miracle of China.

2) House mortgage applications has soared to its highest level in eleven years, for new homes and refinance. Applications are up 30.2% from last week, and are 109% higher than a year ago. The interest rates are under 4% , combining with a rosy economic outlook and high employment causing home buyers to rush into the market. This is causing a near record low supply of housing across America, pushing prices up.

3) Retailer giant Target didn’t have a strong holiday sales in their toy departments, less than what was expected. This is ringing alarm bells for the entire industry. While Target gained market share in toys, its toy sales were flat over the 2019 holidays compared to last year. Toy makers like Hasbro, Mattel and Spin Master are offering a smaller variety of toys and games, a result in part from the bankruptcy of Toys-R-Us. Increasingly, toy sales is going to online retailers such as Amazon.

4) Stock market closings for – 15 JAN 20:

Dow            29,030.22    up    90.55
Nasdaq         9,258.70    up      7.37
S&P 500        3,289.29    up      6.14

10 Year Yield:    down   at    1.79%

Oil:    down   at    $58.13

EFR PODCAST END OF THE YEAR WRAP UP REVIEW 2019:

EFR PODCAST EP. #35: END OF THE YEAR WRAP UP 2019

HEDGEFUNDS TO SEE MORE CLOSURES IN 2019 THAN LAUNCHES!!!!!!!!!!!!

By: Economic & Finance Report

2019 was not the year of the hedge fund. Many hedge funds in 2019 were strapped for cash and liquidity was not as readily available, as in previous years.

According to Bloomberg news wire, hedge funds will be reporting more losses and closures for the 5th year in a row. More then 4,000 hedgefunds have liquidated in the past five years (HedgeFund Research Inc).

The reasons have varied on why hedge funds have been closing in recent years, such as investors revolting, or wanting their money earlier from the funds, to simply hedgefund officers getting tired on running their funds and family owned offices.

The profits have not been there as well. There are various reasons of funds closing at rapid paces, but take note this is a trend that may continue until the profits are there.

Credit: Bloomberg.com, Hedgefund Research Inc

18 December 2019

1) Walt Disney’s Star War’s empire has been fading at the box office with many fans finding the new offerings less than anticipated. The last chapter of the Star Wars series, The Rise of Skywalker, is being heavily promoted to halt the financial slide. In playing up the nostalgia aspects and the fact that this will be the last Star Wars release for years, they are trying to reverse the downward slide of the franchise, which Walt Disney purchased from George Lucas for $4 billion dollars in 2012.

2) Ford Motor Company plans to invest more than $1.45 billion dollars in two of its manufacturing facilities in Detroit, to make electric, autonomous and sports-utility vehicles. The new manufacturing will add 3,000 jobs, with Ford saying it will invest $11 billion dollars to make forty new hybrid and fully electric vehicles by 2022.

3) Fears continue that Boeing’s halting of the 737 MAX production could have serious impact on the U.S. economy next year. This production halt is anticipated to go until March and April of next year. Presently, Boeing has 400 airplanes in storage awaiting delivery. The production halt will impact everything from airlines to parts manufacturers, with a supply chain consisting of hundreds of firms and tens of thousands of workers. This widely diversified economic network makes forecasting the total economic impact of Boeing very difficult.

4) Stock market closings for – 17 DEC 19:

Dow                  28,267.16    up    31.27
Nasdaq             8,823.36    up       9.13
S&P 500            3,192.52   up        1.07

10 Year Yield:    unchanged   at    1.89%

Oil:    up   at    $60.54

2 December 2019

1) Deere & Co., the famous manufacture of green and yellow tractors, reported lower earnings blaming trade tensions and poor weather in the U.S. farm belt. Last year’s difficult growing and harvesting conditions have made farmers cautious about investing in new farm equipment. Sales of the construction and forestry division are expected to be down by 10% to 15%, while agricultural is down 5% to 10% next year.

2) Texas oil explorers say predictions of shale production isn’t reflecting the industry’s slowdown. Producers are being starved of funding, stocks have plunged and little interest in public offerings, which may cause a downturn to be more enduring. Seeking to cut costs, drillers have laid off 1,000 workers. There are predictions that U.S. oil production growth will flatten as early as 2021. There is a rapid decline of shale well production, partly a result of placing wells too close together.

3) Global manufacturing has been dragging the world economy down this last year. Weak auto sales have added to the problem, with China’s auto market the worst with a 11% decline in sales. Slow auto sales have cut production at auto plants, with Audi cutting 7,500 jobs. U.S. dealerships are struggling to clear inventory for the new year, with a 12% rise in incentive spending in November, compared to a typical 4%.

4) Stock market closings for – 29 NOV 19:

Dow         28,051.41    down    112.59
Nasdaq      8,665.47    down      39.70
S&P 500     3,140.98    down      12.65

10 Year Yield:    up   at    1.78%

Oil:    down   at    $55.42

22 November 2019

1) After HP rejected Xerox’s offer of $22 per share, Xerox is now threatening to go hostile with its $33.5 billion dollar buyout if HP does not agree to a friendly discussion before November the 25 th. Goldman Sachs & Co. set a $14 target price , the median price target on HP stock by 15 analysts is $20. HP had rejected Xerox first offer considering the combined companies would be saddled with outsized debt, and therefore not in the best interest of the shareholders.

2) The world economy is predicted to expand just 2.9% next year. The global economy is stuck in a rut which it wont exit unless governments revolutionize policies and how they invest, rather than just hope for a cyclical upswing. The biggest concern is that the deterioration of the outlook continues unabated, reflecting unaddressed structural changes. The risk of further escalation of world tensions is a serious concern.

3) General Motors and Fiat Chrysler are embroiled in a law suit with GM alleging that fiat Chrysler got an unfair business advantage by bribing officials of the United Auto Workers union. The suit alleges racketeering by paying millions in bribes to get concessions and gain advantages in three labor agreements with the UAW union. Details of the racketeering have been exposed in a federal probe of corruption in the union which resulted in multiple arrests starting in 2017.

4) Stock market closings for – 21 NOV 19:

Dow             27,766.29    down    54.80
Nasdaq          8,506.21    down    20.52
S&P 500         3,103.54    down      4.92

10 Year Yield:    up   at    1.77%

Oil:    unchanged   at    $57.09

1 November 2019

1) The international auto makers Fiat-Chrysler and Peugeot, which is owned by PSA group of France, have agreed to merge. This deal will create one of the world’s largest auto makers by volume, having a market value of $48.4 billion dollars. The focus on the Jeep sport-utility vehicles and RAM trucks account for the majority of Fiat-Chrysler’s profit, helping to offset the Fiat brand.

2) New data shows that low income people are more likely to shop at Family Dollar and Dollar General than at Walmart, the traditional retailer for the poor. Low income is considered those with household incomes below $50 thousand dollars. The data was obtained by measuring location data from 50 million mobile devices. The Dollar General chain has 16,000 stores in 44 states and the Dollar Tree has 15,115 stores in the U.S. and Canada, while Walmart has 4,700 stores.

3) Five months of protests has brought Hong Kong’s economy into a recession with a sharp contraction in the third quarter. The economy is being driven completely by social events, so traditional economic measures to reverse a recession, such as cutting interest rates, should have little effect. So far, the city hasn’t seen significant capital outflow from the unrest, something many feared when protest demonstrations started. One major factor in determining if Hong Kong will recover is how soon mainland Chinese tourist will return. There is no signs of the protest coming to an end.

4) Stock market closings for – 31 OCT 19:

Dow            27,046.23    down    140.46 
Nasdaq         8,292.36    down      11.61
S&P 500        3,037.56    down        9.21

10 Year Yield:    down   at    1.69%

Oil:    down   at    $54.16

31 October 2019

1) The Federal Reserve has cut interest rates for the third time this year to ensure the U.S. economy weathers a global trade war without a recession. While the feds signaled the rate cut cycle might be at a pause, there is signs for a future rate cut if need be. The markets have shown little response to the cut because the action was widely expected. While unemployment is near a 50 year low, inflation is moderate while gross domestic product grew at 1.9% in the third quarter, parts of the economy like manufacturing having slowed as well as the global economy.

2) A new kind of consumer debt is gaining popularity, called the Online Installment Loan. It is a longer maturity loan unlike the payday loans, but also comes with the triple digit interest rates. Unlike the payday loans aimed at the nation’s poor, these loans are targeting the working class who have amassed debt over years. The installments generate much greater revenue for loan companies than the payday loans, with loan amounts much larger.

3) While the U.S. economy continues growing, with unemployment at a half century low, factory activity has contracted for two consecutive months. Manufactures of consumer goods are still stronger, while those manufactures engaged in global markets are feeling the effects of trade wars and profound uncertainly of the future. Thousands of factory workers have been laid off in the mid-west with factory wages being higher than average, as well as higher benefits than other jobs not requiring a college degree..

4) Stock market closings for – 30 OCT 19:

Dow                  27,186.69    up    115.27
Nasdaq               8,303.98    up      27.12
S&P 500              3,046.77    up         9.88

10 Year Yield:    down   at    1.80%

Oil:    down   at    $54.90