11 March 2020

1) Fully 70% of the American economy is consumer spending. Even through wages and incomes have been stagnant for many households, the consumer has continued to spend. It is not new investment by corporations, tax cuts or big new federal spending programs that stimulate the economy, but rather it’s consumer spending. However, fears of the coronavirus is dampening that spending by curtailing business trips, personal travel, sports and other outings. With the interest rate near zero, the major tool used to combat a recession is now impotent.

2) The collapse of the long standing deal between Saudi Arabia and Russia, to limit oil production, fell through this weekend sending oil prices crashing from oil supplies surplus. The coronavirus has caused China to limit economic activity and therefore reduced China’s oil consumption leading to further oil surpluses. China’s purchase of oil is down 20%. The low oil prices has made the world economy very unstable and therefore volatile. For America, independent oil companies have gone deeply into debt to pay for the shale oil extraction process, who are now threaten by low oil prices making it impossible to pay that debt. Failure of these oil companies could ripple through the American economy to pull other segments down.

3) Airlines across the world continue to sink deeper into crisis from the worsening coronavirus epidemic reducing the number of passengers, who are foregoing travel fearing the virus. The situation is made worst by not being able to predict how long the crisis will likely last and therefore unable to make accommodating plans. The lockdown of Italy has further aggravated world air travel, especially with the interruption of tourism just as the tourist season would be ramping up.

4) Stock market closings for – 10 MAR 20

Dow 25,018.16 up 1,167.14
Nasdaq 8,344.25 up 393.577

S&P 500 2,882.23 up 135.67

10 Year Yield: up at 0.748%

Oil: up at $34.62

25 February 2020

1) The drug maker Moderna Inc. has shipped its first batch of coronavirus vaccine to U.S. government researchers for human testing. The government will test if the experimental shot can help suppress the epidemic that originated in China. Test are expected to start by the end of April on 20 to 25 healthy volunteers to see if two doses are safe and can induce an immune response that protects against infection. Using the virus’ genetic sequence, Moderna was able to make a fast response in developing a vaccine.

2) The United States Supreme Court has ruled on a decade long legal battle against Apple. The decision against Apple leaves the company open to paying $440 million dollars to the technology licensing company VirnetX for violations of its patents. The legal battle has been on going since 2010 for violations of VirnetX four patents. With the ruling against Apple, the case will be sent back to the district court in Texas to enforce the $440 million damages.

3) Canada’s oil sands industry may have built its last big mine. The cancellation of Teck Resources Ltd.’s Frontier project in northen Alberta, which was expected to produce more crude than OPEC member Gabon, has seen most of it’s foreign investors fall out. Other proposed mines may not be able to clear the hurdles that foil the Frontier project, thus ending an era of mega-projects that had made Canada the largest importer of crude to the United States. The dropping of crude oil prices has had a detrimental effect on the industry.

4) Stock market closings for – 24 FEB 20: The Dow closes down 1,000 points wiping out a year’s gains.

Dow 27,960.80 down 1031.61
Nasdaq 9,221.28 down 355.31
S&P 500 3,225.89 down 111.86

10 Year Yield: down at 1.38%

Oil: down at $51.34