12 October 2020

1) With the recession from the Covid-19 came predictions of waves of bankruptcy filings as businesses, large and small, failed. But that wave of bankruptcy has not materialized, and so far, there’s no sign that it will, indeed bankruptcies are down a little from last year. This is a good sign that companies and households are not as stressed as many economist feared. However, bankruptcy filings aren’t a perfect measure of hardship, with many companies barely hanging on, so bankruptcies may still be coming. Many small businesses and households go bust without ever formally filing for bankruptcy.

2) The four massive high tech companies, Google, Amazon, Apple and Facebook are under investigation at Federal and State levels for antitrust. These investigations are spurred by concerns that competition is being stifled by the domination of these companies, but there are concerns that the big tech is trying to also stifle conservative voices. Google is facing a relatively narrow complaint from the Justice Department that it seeks to disadvantage rivals in search and advertising. The focus on Apple is their apps store with accusations that Apple introduces new products and then put out apps that compete with them. Facebook has raised concerns over how they treat some of their app developers on its platform and therefore engaged in unlawful monopolistic practices. Amazon is suspected of conflict of interest in competition with small sellers on its marketplace platform.

3) Silicon Valley companies are thinking about the future of work taking actions from pay cuts to permanent work-from-home as they strive to cope with the coronavirus crisis. The big tech companies have formed various plans for the future of work. Some companies, (Twitter and Slack), said their employees never need to return to the office, while others, such as Microsoft, are adopting a hybrid model where employees report to the office only a few days a week. Amazon and Salesforce are adopting new benefits to help out working parents, such as subsidized back-up childcare and extended paid leave, while Facebook, employees may work from home permanently. However, if they leave the Bay Area for a less expensive city, they’ll may face a pay cut. Silicon Valley may bear little resemblance to the thriving hub before the pandemic. Tech companies have largely shut down their sprawling campuses and asked employees to work from home — in some cases, forever. When those offices reopen office life is unlikely to resemble the past. Companies may change their real estate plans, opting instead for a new type of office, or none at all.

4) Stock market closings for – 9 OCT 20:

Dow 28,586.90 up 61.39
Nasdaq 11,579.94 up 158.96
S&P 500 3,477.13 up 30.30

10 Year Yield: up at 0.78%

Oil: down at $40.52

2 October 2020

1) With the government support ending the first of October, American and United airlines are cutting 32,000 jobs. The airlines received $50 billion dollars under the CARES Act to boost liquidity and support payroll in exchange for not laying off employees through the 30th of September. Their revenue down by more than 80% and a full recovery still years off, the industry needs to shrink, so American airlines furloughed 19,000 workers with United airlines to furlough 13,000 people. However, both airlines said they are ready to reverse their course if a new support bill is passed.

2) Red China has announce its program to go to the moon. Its new launch vehicle was unveiled on September 18th, which is designed to send a 27.6 ton spacecraft into trans-lunar injections. At liftoff, it will weight about 4.85 million pounds, which is about three times China’s present largest rocket, the ‘Long March 6′. Made up of three 16.4 foot diameter cores or stages, it is similar to America’s ‘Delta IV Heavy’ and ‘Falcon Heavy’. The new three stage rocket will be 285 feet long, but China has not announced a time frame to start testing.

3) Boeing Aircraft has built some 460 of their 737 MAX jets, whose delivery has been frozen since March of 2019. This is a $16 billion dollar inventory, that with the 737 MAX’s certification to fly approaching, needs to be sold for Boeing to stay viable. Many of these aircraft were built for clients that have since canceled their orders, or worst yet have gone out of business, and are now called ‘White Tails’ from a lack of an airline livery painting. Boeing is now looking for new customers to buy these aircraft, in particular Delta airline which is the only major U.S. carrier without any 737 MAX aircraft in their inventory. But Delta’s relations with Boeing has been poor in recent years, while they have also parked many of their jets because of the slowdown from the pandemic, so with Delta intent on not spending cash on aircraft, this makes for a hard sale.

4) Stock market closings for – 1 OCT 20:

Dow 27,816.90 up 35.20
Nasdaq 11,326.51 up 159.00
S&P 500 3,380.80 up 17.80

10 Year Yield: unchanged at 0.68%

Oil: down at $38.58

1 October 2020

1) After two previous recalls for Mustangs and Super Duty pickups, Ford has announced a third recall of nearly every new vehicle it sells today, a total of about 620,246 vehicles for dysfunctional (blank picture) backup cameras. All 2020 models are being recalled, the Ford Explorer, F-150 pickups, Mustang, Transit, Super Duty pickups, Expedition, Escape, Range and Edge. The only exception is the Ecosport. All have defective back up camera systems that can go dark or have a flickering image. Backup cameras are federally mandated, and therefore Ford vehicles don’t comply with Federal Motor Vehicle Safety Standards and therefore must be repaired.
2) Disney has announced it is laying off 28,000 employees in the U.S., a direct result of the pandemic’s effects on its theme parks. The laid-off employees comprise 67% of their part time workers and will affect Disney’s Parks, Experiences and Products unit. The parks and resorts division has more than 100,000 U.S. employees. On shutting down its theme parks globally this spring, Disney’s profits dropped a whopping 91% for the first three months of 2020. The theme parks have been impacted, a result of the limited capacity from physical distancing requirements and the continued uncertainty of the duration of the pandemic.
3) Nigeria is overhauling its State Oil Company and may sell a stake in the company. Nigeria is Africa’s biggest crude oil producer so the sale of shares is a big deal. The Nigerian government seeks to establish a commercially oriented and profit driven national petroleum company, which generates about half of the government’s revenue and more than 90% of its export earnings. The company has for years been a tool for political patronage to cronies, with its closed operations fueling corruption. Being a publicly traded company sheds the cloak of secrecy by opening the books for inspection thereby making corruption more difficult and likely to be detected.
4) Stock market closings for – 30 SEP 20:
Dow 27,781.70 up 329.04
Nasdaq 11,167.51 up 82.26
S&P 500 3,363.00 up 27.53
10 Year Yield: 0.68% up 0.03
Oil: up at $39.86

27 July 2020

1) Another indication of the contraction of the oil business is the oil services company Schlumberger who cut 21,000 jobs or about one fifth of its 105,000 global employees. This is a direct result of an expected 25% drop in the number of oil wells drilled worldwide. Revenues fell 58% from last year for north American operations. The world wide cornavirus crisis caused a massive drop in oil demand, which collapsed the price of oil.

2) Boeing aircraft is facing another trouble, this time with their older Boeing 737 jets. The FAA was warned of corrosion which could cause dual-engine failure, and has ordered inspections. The corrosion problem is a result of hundreds of aircraft now in storage that have been idled because of the drop in air travel from the virus. The order requires aircraft that have not been operated for a week or more must be inspected which will impact about 2,000 aircraft. The corrosion is in engine valves, which has caused single-engine shutdowns which resulted from engine bleed air valves being stuck open.

3) Junk bonds are back again, but are packaged in a format met to appeal to investors, avoiding their seamy 1980s era reputation. Low interest rates driven by the Federal reserve is encouraging companies to borrow, which has lead to a record $51.5 billion dollars worth of junk bonds issued in June. Junk bonds are bonds with high yields (interest rates) but having a lot higher risk. The high risk comes from companies fiscal ability to pay out the bond on maturity or dividends. In a recessionary environment awash in cheap money, a troubled company can collapse under the weight of their debt. But extensive use of junk bonds pose the same dangers of the mortgage backed securities in 2008 with massive failing of businesses pulling the already fragile economy down.

4) Stock market closings for – 24 JUL 20:

Dow 26,469.89 down 182.44
Nasdaq 10,363.18 down 98.24
S&P 500 3,215.63 down 20.03

10 Year Yield: up at 0.59%

Oil: up at $41.34

20 July 2020

1) The international British Airways has announced they are retiring their entire fleet of Boeing 747 jets, a direct result of the Convid-19 crisis. Once one of the biggest airlines using the iconic jumbo jet, the contraction of the airline industry and the likelihood that air travel will not return to its previous size is forcing all airlines to abandon their jumbo jets early. They are going to the more modern fuel efficient Airbus A350 and Boeing 787 in their place. British Airways now has 31 Boeing 747s, about 10% of its total fleet, with an average age of 23 years.

2) What appears to be a massive attempt to embezzle monies from the general public has come to light with the social media Twitter confirming that 130 accounts were targeted in a hack. The accounts of a handful of prominent users were compromised that allowed criminals to gain access to prominent users such as Joe Biden, Barack Obama, Elon Musk, Bill Gates and Kanye West to post solicitations for money. The attackers were able to gain control of accounts then send Tweets from those accounts asking to send money via Bitcoin to commit cryptocurrency fraud. Wire fraud is a federal felony crime, so the FBI immediately began an investigation of who and how the fraud was perpetrated.

3) Delta Airlines is proposing a 15% cut to minimum pay for pilots to avoid furloughs for a year. This would have to come after the first of October when federal aid terms expire. This is in view that a quick recovery in air travel is becoming increasingly remote because of the rise in new coronavirus cases. More than 60,000 airline employees across several carriers have been warned that their jobs are at risk, including more than 2,500 of Delta’s 14,000 pilots. As financial losses pile up, employees are urge to take early retirements, buyouts and other forms of leave in a attempt to slash cost as financial losses pile up. So far, more than 1,700 pilots have signed up for early retirements. This is just another indicator how the air travel business is probably fundamentally changing.

4) Stock market closings for – 17 JUL 20:

Dow 26,671.95 down 62.76
Nasdaq 10,503.19 up 29.36
S&P 500 3,224.73 up 9.16

Year Yield: up at 0.63%

Oil: down at $40.57

16 July 2020

1) Delta Airlines is expecting to spend up to $3.3 billion dollars on buyouts and early retirements in an effort to slash their labor cost. So far, 17,000 employees have signed up to leave the company because there is little in sight for the pandemic’s impact to end soon. The company is prohibited from laying off workers through 30 September under the terms of the $25 billion federal aid package met to support employee payroll. Delta has roughly 91,000 employees so this is a 19% reduction in their work force. The separation packages include cash severance, extended health care benefits and free flights. Other airlines are offering similar packages in an effort to reduce their work force.

2) Heritage Brands, an anchor of outlet malls across American, is closing all of its 162 stores starting next year. PVH Corp, which owns such brand names as Calvin Klein and Tommy Hilfiger, blames the closure on a combination of changing shopping habits of people and the Covid-19 pandemic. This will result in a 12% reduction in jobs or about 450 employees, saving the company $80 million dollars annually. The company had a 43% drop in revenue because of the impact of the coronavirus.

3) There are growing fears of an environmental disaster erupting in the Red Sea on the coast of Yeman. An abandoned oil tanker with 1.1 million barrels of crude oil, is beached on the coast of Yeman, with the potential to explode or rupture causing major environmental and humanitarian damage in the area. UN officials are trying to gain access to the ship to assess the tanker’s condition, conduct any possible urgent repairs and make recommendations for extraction of the oil, but the area is controlled by Houthi rebels. The danger is from sea water entering the ship’s interior causing rust and loss of structural integrity plus the inert gas that prevents the tanks from gathering inflammable gases has leaked out, so there is the threat of an explosion. To start with, an oil spill could result in 126,000 Yemeni fishermen losing their source of income.

4) Stock market closings for – 15 JUL 20:

Dow 26,870.10 up 227.51
Nasdaq 10,550.49 up 61.92
S&P 500 3,226.56 up 29.04

10 Year Yield: up at 0.63%

Oil: up at $41.04

13 July 2020

1) Robert De Niro, the world famous actor, has had his personal finance’s badly hit by the coronavirus pandemic. He’s been forced to cut the credit limit of his ex-wife from $100,000 to $50,000 a month because of his cash flow problems. His restaurant and hotel chain, the Nobu and The Greenwich Hotel, have had huge losses over the past few months. Additionally, his earnings from the movie “The Irishman” have almost dried up. It’s reported that the actor will be lucky to make $7.5 million this year. Both the restaurant chain and hotel have been closed or partially closed for months with next to no income. The Nobu lost $3 million in April and $1.87 million in May, with De Niro forced to borrow money to pay investors $500,000 on a capital call.

2) The online retailer giant Amazon is requiring employees to remove the Tik Tok application from their phones if their device accesses Amazon email because of security concerns. Tik Tok is a video sharing app which has become the most popular social media apps in the world. But government officials and business leaders are becoming wary of the Chinese owned company. The U.S. military has already banned using Tik Tok because of threat of spying by the Chinese. A new privacy feature in iOS 14 revealed Tik Tok was accessing users’ clipboard content despite promises by the Chinese to discontinue the practice last year.

3) An underwater or upside-down mortgage occurs when the home value is lower than the mortgage. While not common, this occurs when home values decline leading to owing more than the current house value and therefore having negative equity. Factors which cause home values to rise and fall are interest rates, high rates of foreclosures and short sales in your area, and natural disasters. Underwater mortgages usually occur during an economic downturn where home values fall off. One way to become up-side down is when secondary financing (home equality loan) equals more than 100% of the home value.

4) Stock market closings for – 10 JUL 20:

Dow 26,075.30 up 369.21
Nasdaq 10,617.44 up 69.69
S&P 500 3,185.04 up 32.99

10 Year Yield: up at 0.63%

Oil: up at $40.62

29 June 2020

1) Microsoft is permanently closing almost all of its stores across the nation and world. Just like other retail outlets, Microsoft had to shutter all its stores due to the coronavirus pandemic. There are 83 stores worldwide of which 72 are in the U.S., however only four will remain open in the world. The stores allowed people to try out software and hardware offered by Microsoft including laptop computers. No news if there will be any layoffs or how many, the stores are moving to the digital realm, which will absorb many of the store employees. The physical stores generated negligible retail revenue for Microsoft.

2) As oil prices reach the magic $40 a barrel, shale fracking is starting to reawaken to pump oil. The number of fracking crews had bottomed out at 45 last month, but is now back up to 78 this last week. There had been roughly 400 fracking crews before the decline in oil prices started. The drilling of new oil wells remains on hold with a 70% slump, making for the lowest number of active drilling rigs since 2011.

3) Nike is warning its employees of coming layoffs, but these layoffs will not effect store employees. The layoffs are expected to come in two waves, the first this July followed in the fall with a the second wave. These layoffs come amid reports of poor earnings, with sales down 38% giving a net loss of $790 million dollars when the Convid-19 virus forced closing of most of its stores. This compares with nearly a billion dollars in earnings for the same time last year. Nike has 76,700 employees, but it’s not know yet how many will lose their jobs. All wasn’t bad for Nike, with their online sales skyrocketing 75%, with e-sales accounting for 30% of Nike’s total business.

4) Stock market closings for – 26 JUN 20:

Dow 25,015.55 down 730.05
Nasdaq 9,757.22 down 259.78
S&P 500 3,009.05 down 74.71

10 Year Yield: down at 0.64%

Oil: down at $38.16

3 June 2020

1) The economic activity for the second quarter is down, while more than half the GDP (Gross Domestic Product) is now showing a 52.8% drop. Consequently, the personal consumption expenditures is expected to fall 58.1%, which makes up 68% of the nation’s GDP. The current recession is unique in that it was lead by the services sector instead of the traditional manufacturing or construction sectors.

2) Because of the Convid-19 shutdown, the retail industry has a mountain of apparel stock piling up in stores, distribution centers, warehouses and shipping containers. Those retailers now face the difficult decisions of what is best to do with this overstock and choked supple chain. Their options are to keep it in storage, hold sales, offload to ‘off price’ retailers who then sell at deep discounts or move it to online resale sites. None of these options are ideal, but they do limit the damage to company’s bottom line. For apparel that isn’t so fashion sensitive, such as underwear, t-shirts and chinos, warehousing for a short time to wait for demand to return is a viable option. But storing inventory cost money. The opposite strategy is to hold sales and sell stock to the off-price retailers. The ‘in store’ sales is usually better because dumping in bulk to the discounters usually brings only pennies on the dollar for retailers. This amounts to huge losses for the retailer. The most lucrative option is moving merchandise to online re-sellers who take a commission on sales, however this is largely only open for high end brands. No matter what options a retailer takes, it all spells out large losses for them because of the pandemic.

3) Southwest Airlines is offering buyout packages and temporary paid leaves to employees in an attempt to ensure survival, in anticipation of a slow recovery. The airline company has not imposed any layoffs or furloughs in its 49 year history, and while overstaffing isn’t tied to 100% capacity levels, it has never faced the drastic drop in passenger service as now seen with the pandemic. Therefore, Southwest if seeking to voluntarily reduce workforce as softly as possible.

4) Stock market closings for – 2 JUN 20:

Dow 25,742.65 up 267.63
Nasdaq 9,608.38 up 56.33
S&P 500 3,080.82 up 25.09

10 Year Yield: up at 0.68%

Oil: up at $36.90

5 May 2020

1) Apparel retailer J. Crew is filing for bankruptcy, with other struggling retailers expected to succumb this year too, big retailer names like Sears and J.C. Penny. J Crew is considered to be the first retail casualty of the pandemic with others expected to quickly follow. The pandemic has caused numerous stores to be closed, laying off hundreds of thousands of employees and losing most of their sales. The big retail stores were struggling before the virus hit, with people backing away from consumerism and now after the coronavirus shutdown, people are spending little other than for groceries and daily essentials. With further declining retail revenues, more stores will close with more layoffs. Furthermore, Americans’ appetite and ability to shop continues to decline, so it looks very dismal for a major segment of the American economy, which in turn will be a burden on other segments of the economy continually pulling the rest down.

2) The service sector of the economy is also experiencing troubles in what appears to be an emerging new economy for America. Gold’s Gym International is seeking bankruptcy protection as it struggles with debt after the prolong shutdown from the virus. With the shrinking of people’s disposable income, that is the money they have left after essential spending like food, housing and transportation, the non essential businesses of the service economy are finding it harder to survive.

3) General Electric is eliminating as many as 13,000 jobs in its jet engine business, another casualty of the coronavirus devastation to the aviation segment of the economy. With airline manufactures, such as Boeing building fewer airliners, there is less demand for new jet engines. This means a 25% reduction on GE’s aviation work force with little near future likelihood of those jobs returning, indeed if the recession deepens, more jobs may be lost. Like Boeing, GE aviation was having troubles before the virus hit.

4) Stock market closings for – 4 MAY 20:

Dow 23,749.76 up 26.07
Nasdaq 8,710.72 up 105.77
S&P 500 2,842.74 up 12.03

10 Year Yield: down at 0.64%

Oil: up at $21.33