7 October 2020

1) Ikea, the big Swedish world wide modular furniture manufacture, has experienced a surge in sales from the pandemic as people turned homes into offices and schools. Their online sales are up 45% over the last 12 months to August, with 4 billion visits to their website. Outdoor furniture is the fastest growing category, followed by office furniture. While many of their stores were forced to close from the virus, their online sales remain high even as stores reopen. The furniture retailer has added 6,000 new employees world wide to make a total work force of 217,000. Online sales account for about one fifth of total sales.

2) Job openings in America fell in August for the first time in four months, indicating a moderation in hiring as the crisis continues. Available positions slipped down to 6.49 million from July’s 6.7 million. These numbers do not include recalls from layoffs or positions that are offered only internally. However, layoffs and discharges are at a low for August, although there are still 13.6 million Americans unemployed, which means there are about 2 unemployed competing for each job opening. There are fewer vacancies in construction, retail and health care industries, while vacancies increased for manufacturing, food service and government.

3) Federal reserve Chairman Jerome Powell says America is on the long road to economic recovery from the pandemic induced recession, but still there are other problems on the horizon. There are fears of the economy shifting into reverse once again, especially if a resurgence of the virus comes with cold weather . . . the flue season. Such a resurgence could significantly limit economic activity leaving many unemployed stranded with no jobs for many more months. Powell is calling for the passing of the second stimulus bill presently being debated in the Congress. He considers the risk of pouring too much money into the economy far lower than the risk of not spending enough, despite the already sky high federal budget. While he considers the debt is on an unsustainable path, and has been for some time, but this is not the time to address it.

4) Stock market closings for – 6 OCT 20:

Dow 27,772.76 down 375.88
Nasdaq 11,154.60 down 177.88
S&P 500 3,360.95 down 47.68

10 Year Yield: down at 0.74%

Oil: up at $39.83

17 September 2020

1) The Federal Reserve announced it is keeping its key policy rate unchanged and it intended to keep interest rates near zero for a least the next three years. This is a time period that is much longer than analysts had expected and reflects the concern for near future economic growth. The Feds will continue to purchase additional assets, principally government and corporate bonds, to support its monetary stance. Their goal is to achieve a maximum employment while keeping inflation at 2% over the long term. The prime interest rate will remain between 0% and 0.25% until at least the end of 2023. Their actions essentially acknowledge they were a bit behind the curve with their forecast on the economy.

2) Fox News is beginning a round of layoffs, the hair and makeup department being particularly hard hit. None of the network’s on-air talent is being let go, but now only the news anchors will receive hair and makeup services, while their guess will not. This is, in part, because since the pandemic more and more of interviews are being done remotely. The job cuts are expected to affect less than 3% of the overall staff, with the intent to streamline operations. TV news services are shifting from traditional TV broadcast to on-demand outlets streaming video services. Fox News is the most watched cable news network with 3.28 million viewers, that’s more than CNN and MSNBC combined. A time of economic stress causes changes to the economic environment, which opens the way for new technologies to emerge that reduce labor cost.

3) As hurricane Sally continues its journey into the interior of America, the next question on people’s minds is the ‘dollar amount for damages?’, a question that follows every hurricane which makes landfall on the continental United States. Sally dumped heavy rains and has brought historic flooding to the Gulf Coast, leaving much of Alabama and Florida coast lands under water. There were forecast of some areas receiving over three feet of rain, but as the storm system travels north and east, inundating land with water that runs off into rivers, more flooding is feared down river from the runoff. The flooding is a result of Sally moving so slow, slower than the average person walks, turning heavy rains into heavy flooding.

4) Stock market closings for – 16 SEP 20:

Dow 28,032.38 up 36.78
Nasdaq 11,050.47 down 139.86
S&P 500 3,385.49 up 15.71

10 Year Yield: up at 0.69%

Oil: up at $40.18

20 August 2020

1) Boeing Aircraft has received its first 737 MAX orders since 2019, from Enter Air, a Polish charter airline that exclusively uses only Boeing airplanes. They have ordered two 737 MAX with an option to order two more. With the option, this would bring its MAX fleet to ten aircraft. Frzegorz Polaniecki, the general director and board member of Enter Air, said he’s convinced the 737 MAX will be the best aircraft in the world for many years to come. This order for two aircraft pales in comparison to Boeing’s July net negative order of 836 aircraft, but it’s a start in the right direction. Cancellation of Boeing aircraft sales have far outpaced new orders this year because of the pandemic. The last six months, Boeing has faced a combination of problems specific to Boeing and the pandemic.

2) The Federal Reserve is lowering their estimate for economic growth over the second half of the year. The Reserve presents its forecast at the central bank’s eight interest rate committee meetings in a year. The reduced forecast is because they expect the rate of recovery in the Gross Domestic Product and the rate for reducing unemployment to be slower than previously expected. Reduction of the unemployment depends on the reopening of businesses, which in turn is depended on the pandemic.

3) According to Bank of America, moving manufacturing out of China could cost U.S. and European companies $1 trillion dollars over five years. Companies in over 80% of global sectors have experienced supply chain disruptions during the pandemic, so many are widening the scope of their reshoring plans. The shift to return manufacturing back to home countries has been spurred on by the Convid-19 crisis. Supporting companies will also benefit with the increase of economic activity by having manufacturing return.

4) Stock market closings for – 19 AUG 20:

Dow 27,692.88 down 85.19
Nasdaq 11,146.46 down 64.38
S&P 500 3,374.85 down 14.93

10 Year Yield: up at 0.68%

Oil: up at $42.79

BUSINESSMAN & FMR PRES. CANDIDATE HERMAN CAIN HAS DIED….

By: Economic & Finance Report

Businessman and former Republican presidential candidate Herman Cain has died from corona virus (Covid-19) at age 74 years old. Mr. Cain was a Republican presidential candidate in the 2012 elections. He came up with the 9-9-9 Plan which was tax proposal for fixing the USA tax code. It was a paramount plan for his campaign. He was a former chairman of the Federal Reserve Bank of Kansas City.

Before his journey into politics and monetary policy, Herman can was CEO and President of Godfather Pizza (subsidiary of Burger King). After his stint at Godfather Pizza he became the CEO of the National Restaurant Association. He was also on various company board of directors as well. -SB

Image Credit: CBSNews.com

29 July 2020

1) The fast food mega-giant McDonald’s is reporting a bigger than expected drop in global restaurant sales across the world. This is a result of the pandemic restricting sales of their drive thru and delivery operations, and in some cases shutting restaurants down completely. With second quarter sales down by 30%, McDonald’s is facing a bumpy and expensive recovery. The franchise chain has 39,000 restaurants worldwide, of which 96% are now open, verses 75% at the start of the second quarter. Store sales were down 39% in April but by June was down only 12%. Net income is down by 68% for $483.8 million dollars. McDonald’s is permanently closing 200 locations in the U.S. amid those losses, more than half located in Walmart stores.

2) The Federal Reserve has announced that its lending programs will be extended until the end of the year. This indicates the feds don’t think the U.S. economy is weathering the pandemic storm very well and needs continued help. The program lends to small and medium sized businesses and was due to expire at the end of September. Continuing the program will provide a critical backstop to help the economy recover. This Thursday will bring the first look at the second quarter gross domestic product, which is the broadest measure of the economy, but it’s expected to show an ailing economy.

3) For the second time, the renowned gun maker Remington Arms is filing for bankruptcy. This is the second time in two years that Remington has filed for Chapter 11 bankruptcy protection. Chronic low sales is blamed for Remington’s decline, despite the overall increase in sales of guns in America because of the pandemic. One by one, American gun manufactures have succumb to imports. Remington reports assets of $100 million dollars compared to $500 million dollars in liabilities.

4) Stock market closings for – 28 JUL 20:

Dow 26,379.28 down 205.49
Nasdaq 10,402.09 down 134.17
S&P 500 3,218.44 down 20.97

10 Year Yield: down at 0.58%

Oil: down at $41.07

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

16 June 2020

1) The markets sank Monday, down by 762 points, when the news of the Feds bond-buying plan became known, reversing the selling to buying which raised the Dow up 150 points. The downward slide was from fears of a second round of the Convid-19 virus with the possibility of more economic damage. The plan is for the Federal Reserve to buy individual corporate bonds, on top of the exchange traded funds it is already buying. This is a move to ease credit conditions to further stimulate the economy. The program can buy up to $750 billion dollars worth of corporate credit, which the Feds can buy on the secondary market, individual bonds that have maturities of five or less years. Bonds is how corporations typically fund their operations and expansion using debt, and this program will ease debt for corporations allowing them to grow more and provide jobs.

2) The oil giant BP (British Petroleum) has signaled to investors that the economic shock of the pandemic will reverberate for years. This in turn means less gas and oil needed by the world in the future. The company is expected to write down $17.5 Billion dollars of its oil and gas holdings this next quarter, meaning they are worth less in the future than what they are worth today. The coronavirus pandemic has caused steep declines in demand for gas and oil worldwide, and this is expected to last for a number of years. This write down is in the approximate class of the Deepwater horizon disaster in the Gulf of Mexico, which was $32 billion dollars.

3) Britain’s Brexit, the planned exit of Britain from the European Union, has been overshadowed by the world wide pandemic, but nevertheless Brexit trade talks have continued. But the talks have reached an impasse. Britain left the union at the end of January, but had not reached agreements on traded with the other European countries. Although Britain left the union, the two economies have continued operating as before Brexit, so there has been little changed in trading. But this is only to the end of the year, and with Britain a major trader of goods with Europe, it’s important to reach agreements before that time comes. One major point of contention is how future disagreements will be adjudicated or arbitrated.

4) Stock market closings for – 15 JUN 20:

Dow 25,763.16 up 157.62
Nasdaq 9,726.02 up 137.21
S&P 500 3,066.59 up 25.28

10 Year Yield: unchanged at 0.70%

Oil: up at $37.07

4 June 2020

1) The stock market continues to climb, with some saying this signals the end of the recession. The S&P 500 has a return of 37.7% over the past 50 trading days, which is the largest 50 day rally in history. This rally is attributed to the quick response of the Federal Reserve, with a record $2 trillion dollar federal stimulus package. Another factor is the unlimited asset purchases by the Federal Reserve. While the shutdown depressed retail and airlines businesses, other parts of the economy saw a boost, such as Netflix, Amazon and Facebook. But there is still the record high of over 40 million workers idled by the pandemic, while the weakening in the Chinese’s economy coupled with the tensions between China and America could have a telling effect to the economic recovery.

2) There are fears of another round of layoffs in the later part of 2020, amid questions of where the economy will go in the next six to twelve months. Businesses are now reluctant to expand and hire new people, and may decide to contract thus being better able to weather economic hard times. There is also the unspoken problem of continued automation taking jobs as AI (Artificial Intelligence) and automation that experts predict will continual to sap jobs for the next decade. Automation gives companies an added advantage in surviving when the economy slows down, but a second wave of layoffs may trigger that slowdown.

3) The giant movie theater chain AMC has announced they doubt they can remain in business after the effects of the coronavirus shutdown. The company has problems with their liquidity, their ability to generate revenue and the timeline for reopening its theaters. The chain expects to lose $2.1 to $2.4 billion dollars for the first quarter, with the second quarter to be even worst. With all its theaters closed down, AMC is generating zero revenues. The major problem in reopening is having enough cash for operations until cash starts coming in again, and there is still questions of when theaters will be able to open again, especially if there are flare-ups of the virus.

4) Stock market closings for – 3 JUN 20:

Dow 26,269.89 up 527.24
Nasdaq 9,682.91 up 74.54
S&P 500 3,122.87 up 42.05

10 Year Yield: up at 0.76%

Oil: down at $36.75

19 May 2020

1) The managing director Kristalina Georgieva of the IMF (International Monetary Fund) says the Fund is likely to revise downward its forecast of a 3% contraction of the GDP (Gross Domestic Product) for 2020. In turn, this will most likely cause a revision of the IMF’s forecast for a partial recovery of 5.8% in 2021. This means a longer time for a full economic recovery from the virus crisis. The IMF had forecasted that the business closures to slow the virus would throw the world into the deepest recession since the 1930’s Great Depression.

2) Gold markets have risen to their highest in more than seven years, a result of the Federal Reserve saying stocks and asset prices could suffer a significant decline as a result of the coronavirus crisis. The economic recovery could go to the end of 2021, depending on the arrival of an effective vaccine. Owning gold is considered to be a safe haven in times of economic turmoil, able to retain its value when other assets are sinking in value. Other precious metals such as silver, platinum and palladium are also experiencing a swing upward in price, but since these are commodities, their value may drop in a slower economy and reduced industrial demand.

3) The price of oil is above $30 a barrel for the first time in two months as U.S. and other country producers continue to cut production in order to restore the balance of the oil market. The world wide shut downs from the virus has drastically reduced the demand for oil world wide, with the world’s storage capacity quickly filling to maximum capacity, and for a time, producers having to pay to have their oil production removed. While the price of oil is still too low to salvage the shale oil (fracking) business in America, it still bodes well for the U.S. and world economies. Nevertheless, expectations are it will be well into the next year for the oil markets to be fully restored. Oil futures contracts that are due in June, show few signs of a resulting plunge in oil prices as when the May contracts came due and investors had to pay others to take their oil away.

4) Stock market closings for – 18 MAY 20:

Dow 24,597.37 up 911.95
Nasdaq 9,234.83 up 220.27
S&P 500 2,953.91 up 90.21

10 Year Yield: up at 0.74%

Oil: up at $32.21

14 May 2020

1) Jerome Powell, the Federal reserve Chairman, has warned of a possible prolonged recession caused by the economic damaged from the coronavirus crisis. Widespread bankruptcies among small businesses and extended unemployment for many people remain a serious problem for the economy. Furthermore, he considers the proposed $3 trillion dollar aid package to be worthwhile if it averts long term economic damage thereby giving a strong recovery. Almost $3 trillion dollars has already been spent on economic assistance, with the interest rate cut down to near zero. Cutting the interest rate has been the traditional tool used to counter recessions and economic slow downs, but with interest rates almost zero, the feds no longer have this tool. Nothing is being said about the massive increase to the already very large federal debt, nor the impact on the long term economy if it fails to return to healthy growth to pay off that debt. Otherwise, it could become a boat anchor around America’s neck making swimming in the ‘economic lake’ very difficult, or maybe impossible later on. The markets responded to Powell’s remarks with a down turn.

2) Unemployment continues to subside with initial reports of another 2.5 million lost jobs compared to 3.2 million for the previous week. This brings the total unemployed for the past eight weeks to a staggering 36 million people without work. Percent wise, the unemployed numbers are worst than the Great Depression of the 1930’s. Economist anticipate a further, although smaller increase in unemployed people for the next few weeks before the curve bottoms out and employment starts increasing as businesses opens up to resume operations.

3) Automakers are preparing to restart manufacturing with plants in Mexico, which are due to open as soon as Monday. U.S. assembly plants rely heavily on Mexican auto plants for parts and subassemblies used in building cars, and there were fears of U.S. manufacturing being hindered by part shortages. Approximately 39% of auto parts for car manufacturing comes from Mexico.

4) Stock market closings for – 13 MAY 20:

Dow 23,247.97 down 516.81
Nasdaq 8,863.17 down 139.38
S&P 500 2,820.00 down 50.12

10 Year Yield: down at 0.65%

Oil: up at $26.23