28 July 2020

1) Economist are warning that the economy needs help now to avoid faltering. As the President and Congress struggle to create another economic aid package, evidence is growing that the U.S. economy is headed for trouble, especially if the government doesn’t take steps to support hiring and economic growth. Experts say the economy is in a pretty fragile state again and needs another shot in the arm. Unemployment is still at a high 11.1% and hiring seems to be slowing in July, so the economy is likely to weaken further. Few economist consider that the recovery will be a V-shaped path, that is, the sharp recession will be followed by a quick rebound. In addition to helping the millions of unemployed Americans, the governments needs to help businesses from going bust.

2) There are five trends which indicate the U.S. economy is not rebounding as hope. The first is ‘Direction Requests’ on smart phones for walking and driving directions, have gone flat over the last few weeks indicating people are staying at home. The second is ‘Restaurant Bookings’ which show a 60% drop from last year. Third trend is ‘Hotel Occupancy’ which has stagnated with occupancy at 47%. ‘Air Travel’ was slowly increasing, but has also stagnated this last month with air travel down 70% from last year. Finally, ‘Home Purchases’ is increasing at a slow rate, a reflection of peoples uncertainty and changing employment status of potential buyers.

3) Price of gold continues to climb, as investors seek the safety of the yellow metal amidst economic fears of the future. Gold has historically been a refuge for money in times of economic uncertainty, a panic investment. Bullion has climbed to a record high of $1,946 per ounce. The real interest rates (less inflation) is driving investors to gold, as well as the tumbling dollar. Silver bullion is also increasing in price as another safe heaven for investing.

4) Stock market closings for – 27 JUL 20:

Dow 26,584.77 up 114.88
Nasdaq 10,536.27 up 173.09
S&P 500 3,239.41 up 23.78

10 Year Yield: up at 0.61%

Oil: up at $41.66

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

27 March 2020

1) The $2 trillion dollar coronavirus relief bill has been passed and Treasury Secretary Steven Mnuchin said the people should receive cash payments within three weeks. The IRS has been tasked with distributing the monies, but the agency is hobbled by obsolete technologies such as 1960’s era computers, limited staff and a small budget. So there are questions if the agency can get the job done in a timely manner, let alone in three weeks. Experts say its more like a matter of months rather than weeks for Americans to receive their check.

2) Almost 3.3 million Americans have applied for unemployment benefits this last week, more than quadruple the previous record set in 1982. This is a result of the wide spread economic shutdown from the coronavirus pandemic. This rate of layoffs is expected to accelerate as the U.S. economy sinks into a recession with the collapse of revenues for a wide range of businesses. Economist predict the nation’s unemployment rate could approach 13% by May.

3) Gold has traditionally been a panic investment which people and nations buy to protect the value of their money. The worldwide panic over the coronavirus coupled with a flood of stimulus by central banks has ignited demand for gold to store wealth. But the gold market is running into difficulties in buying. Stored in high security vaults, government mandated shut downs have left access iffy. Also, refiners of gold have been forced to close because of the virus. Transporting gold is done via airlines, but the sharp drop in air service has also made transport of the metal difficult. All these factors have put a squeeze on gold futures.

4) Stock market closings for – 26 MAR 20:

Dow 22,552.17 up 1351.62
Nasdaq 7,797.54 up 413.24
S&P 500 2,630.07 up 154.51

10 Year Yield: down at 0.81%

Oil: down at $23.18

10 March 2020

1) Monday markets opened in a steep downward spiral from sell offs, driven by the coronavirus fears, followed by the sharp drop in oil prices. The Dow dropped 2,000 points, with a massive sell off of both the S&P 500 and Nasdaq, which triggered a key market circuit breaker that halted trading for fifteen minutes. There are widespread fears over the economic impact of low oil prices, with some experts fearing oil prices down to $20 a barrel. Gold prices crossed the $1,700 dollar an ounce, hitting the highest since December 2012. The banks are hard pressed as the interest continues to sink, cutting into their margins.

2) Experts speculate that the Feds will cut the interest rate to zero in the next few months in an effort to forestall a downturn of the economy. The entire U.S. yield curve fell below 1% for the first time in history on expectations that the Federal Reserve will cut rates to zero in the next few months. Some speculate the Feds may adopt a negative rate just as some European countries have, such as Germany’s -1%.

3) While checkout-free with cashless supermarkets is now a novelty, Amazon expects this technology to spread to other retailers. Amazon has announced it plans to license its automated checkout technology to other retailers, telling of several other companies that have already signed up for the technology. The technology has been proven with cashless convenience stores across America and with Amazon’s new Go-supermarkets. The technology represents another significant step in retail automation.

4) Stock market closings for – 9 MAR 20: The stock market is like a rectal thermometer- it’s rude and crude, but surprisingly effective in showing a sick economy.

Dow 23,851.02 down 2013.76
Nasdaq 7,950.68 down 624.94
S&P 500 2,746.56 down 225.81

10 Year Yield: down at 0.50%

Oil: down at $30.24

2 March 2020

1) The stock markets continue their downward crash over worries of the conronavirus impact on economies making the week the worst week since the financial crisis. Caterpillar, a bellwether stock for global growth, slide down 3%, the worst performer among Dow stocks. Apple dropped 2.9% while Chevron and Cisco Systems are down more than 2%. Investors are worried the downward slide may continue after the conronavirus subsides, especially if China doesn’t return to its previous position, so recovery could be a long haul.

2) The sale of smartphones is collapsing in China, which is the largest market in the world. The plunged in sales is directly due to the coronavirus outbreak. Chinese companies had skidded to a halt, with the accelerated outbreak last month a result of quarantine mandates, travel restrictions and factory shutdowns. Huawei, the Chinese tech company, is being hit hard because it is the top selling smartphone in China.

3) Gold prices have been acting strangely with the reversals in the markets because of coronavirus fears. Traditionally, gold has been a ‘panic investment’ that investors flee to when there’s economic uncertainty, but this time investors are selling gold to generate cash. They are fleeing anything priced via bidding, for safer assets such as treasury bonds, which in turn is driving down bond interest rates. This indicates how worried the professional investors are about the world economic system.

4) Stock market closings for – 28 FEB 20:

Dow 25,409.36 down 357.28
Nasdaq 8,567.37 up 0.89
S&P 500 2,954.22 down 24.54

10 Year Yield: down at 1.13%

Oil: down at $45.26

17 September 2019

1) The drone attacks on two Saudi oil refineries has caused a jump in world oil prices. The strikes wiped out half of Saudi Arabia’s output capacity leading to fears of de-stabilization of the world’s crude producing region and therefore to the world’s economy. Prices for oil leaped with the opening of markets on Monday, the biggest jump in prices ever. President Trump claims that Iran was behind the attacks and that a coalition should be formed to counter the threat of Iran. The strike was made using 10 drones with the disruption surpassing the Kuwaiti invasion by Saddam Hussein in 1990.

2) UAW (United Auto Workers) workers at GM (General Motors) have gone on strike which has shut down the automakers highly profitable U.S. operations. Lost production is expected to cost GM $40 to $50 million dollars a day. There are a number of issues which GM and union officials said must be resolved before a new contract can be signed. The UAW wants to block the closing of plants engaged in manufacturing of sedans, which the company and other manufactures are discontinuing as the market goes to SUVs and crossover automobiles.

3) Gold and silver prices have surged from the global turmoil of Saudi oil attacks. Gold and silver are the traditional safe haven for investors in times of uncertainty. This gives further impetus to lower the interest rates by a quarter point to counter a slide into a recession.

4) Stock market closings for – 16 SEP 19:

Dow            27,076.82    down    142.70
Nasdaq        8,153.54    down      23.17
S&P 500       2,997.96    down        9.43

10 Year Yield:    down   at    1.84%

Oil:    down   at    $61.90

16 September 1019

1) Two of the largest Wall Street banks are trying to create an index to track the market impact of President Trumps’s tweets. J.P. Morgan Chase and Company has created an index to quantify the effects on U.S. bond yields. Citigroup Inc.’s foreign exchange team consider Trump’s tweets increasingly relevant to foreign exchange moves. Approximately 10% of the president’s tweets since his election in 2016 pertain to subjects of importance to U.S. markets.

2) The Elliott Management Corp. offers a plan to boost the share price of AT&T by more than 50% through asset sales and cost cutting. The four part plan calls for the company to divest assets including satellite-TV provider DirecTV, Mexican wireless operations, parts of its land line business and other assets. The bases for the plan is for AT%T to exit businesses that don’t fit its strategy as well as running more efficient operations, plus stop making major acquisitions.

3) China has added almost 100 tons of gold to its reserves since resuming buying in December. Bullion is near a six year high as central banks including the Federal Reserve cut interest rates. Trade war restrictions as with China, or sanctions as with Russia, gives an incentive for central banks to diversify, with gold providing an ideal hedge with increasing political and economic uncertainty. Spot gold was $1,510.27 an ounce on Monday, and is expected to rise to $1,600 an ounce in the coming months.

4) Stock market closings for – 13 SEP 19:

Dow                  27,219.52         up    37.07
Nasdaq               8,176.71    down   17.75
S&P 500              3,007.39    down     2.18

10 Year Yield:    up   at    1.90%

Oil:    down   at    $54.82

3 September 2019

1) Gold is renowned for being a panic investment, something that investors move their money into when fearing that sever financial troubles are coming. Investors are worried about political uncertainty that plagues world markets, and are pushing gold prices up to record highs. Real yields in the US have fallen to about zero which makes gold especially appealing as a safe haven.

2) The Price of oil falls as the trade war deepens stoking concerns over growth. Principal cause for concern is the trade war and the deterioration of manufacturing in China. Oil prices is considered a gage of economic health because slower growth means there will be less demand for oil, so prices drop. Furthermore, since oil is bought and sold as futures commodities, the price reflects anticipation of near future economic state of the world.

3) Owners of 98,000 Volkswagen AG U.S. vehicles which had fuel economy labels overstating efficiency will ask a U.S. judge for $26 million dollars. The EPA said the German automaker must forfeit greenhouse gas emissions credits and lower the fuel economy ratings on these vehicles after using software to falsify fuel efficiency ratings.

4) Stock market closings for – 2 SEP 19:

Markets closed for holiday.

29 August 2019

1) Threat of a ‘no deal’ Brexit has the British pound falling relative to the US dollar and euro. The new British prime minister Boris Johnson announced the annual suspension of Parliament would be extended until 14 October, just two weeks before the UK is set to leave the European Union. This suspension is considered a move to block a no-deal Brexit within the UK parliament.

2) If General Motor exits from China, it will mean billions of dollars of profit lost. President Trump’s threatening order for American business to leave China would leave GM the hardest hit of the big three American automakers. While most of GM’s profits comes from North America, it makes about 43% of it annual auto sales in China. This would also mean the loss of all future growth potential, leaving it almost a North American only company, since GM has sold off its European operations.

3) The international gold market is falling prey to a forgery crisis. Gold bars are being stamped with logos of major refineries which makes them of questionable purity. These fake bars are being used as a means to launder cash money or trafficking illegally mined gold. The fakes became apparent when gold bars were found with identical serial numbers. In 2017 and 2018 there were 655 forged bars reported. Gold Kilobars are the most common form of gold in circulation and are worth about $50,000 each

4) Stock market closings for – 28 AUG 19:

Dow                26,036.10    up    258.20
Nasdaq             7,856.88    up      29.94
S&P 500            2,887.94    up      18.78

10 Year Yield:    down   at    1.47%

Oil:    up   at    $55.90

8 August 2019

1) Disney, the owner of the Star Wars franchise rights, is finding that today’s kids are not as interested in Star Wars as previous generations have been. While the last of the trilogies have turned a profit, they have not met the success of previous movies. Purchased from Lucasfilm Ltd in 2012 for $4.05 billion dollars, Disney is worried about the long term profitability of the franchise. It’s newly opened attraction Star Wars theme-park hasn’t meet expectations, indicated the young are not entranced by the intergalactic saga.

2) Gold continues to increase in value as more jittery investors flee traditional havens for money, to the supposed safety of gold ownership. With gold now at $1,500 per ounce, it is outperforming stocks this year. Concerns over the world economy from uncertainty of the U.S. and China trade war, China’s currency, oil and repercussions from political hot spots across the world have all combined to form a economic climate of fear and uncertainty. All foretell of a global slow down in growth, and as always the case, gold provides safety better than money in economic hard times.

3) A federal judge has ordered litigation over defective General Motors ignition switches to be narrowed in claims by owners. Owners claimed they lost value in their vehicles because of the defect, but the judge ruled the owners have failed to show the value of their vehicles has declined as a result of the defect. Instead, damages could only be measured by costs to repair defective vehicles, which is zero if GM paid for repairs. This defect is linked to 124 deaths.

4) Stock market closings for – 7 AUG 19:

Dow             26,007.07    down    22.45
Nasdaq           7,862.83          up    29.56
S&P 500          2,883.98          up       2.21

10 Year Yield:    down   at    1.68%

Oil:    up   at    $52.29