22 September 2020

1) Bad news from the conronavirus continuing to pile in with a just-released report that 60% of the small businesses that have closed because of the virus, and will never open again. Of nearly 163,700 businesses that have closed since March 1, about 98,000 say they’ve shut their doors for good. This is a 23% increase from July. About 32,100 of these businesses are restaurants, with close to 19,600, or about 61%, closing permanently. The National Restaurant Association says 100,000 restaurants have closed, either permanently or long-term, with a lose of $240 billion in sales this year. Restaurants operate on razor-thin margins even in the best of times, and so are less likely to make it through the disruption. Consumers are spending less on dining-out, while the disposable income for Americans is shrinking. Retail stores are also struggling with about 30,400 shopping and retail establishments closing since March 1, and of these 17,500, or 58% of them are permanent.

2) Many of the workers now working at home, are engaged in day trading to counter boredom for both entertainment and profits, but with growing fears that this trend could end badly. Most of these individual investors do not have the wealth, time or temperament to make money and sustain losses for any period of time. Major companies can have big rallies on the market, only to suddenly turn around with big losses. These casual investors are competing with large investors who have technology that allows them to trade on information before most people have time to read about it. In the long run, small investors, with about 30 stocks, have only a 40% chance of doing as well as the overall market.

3) The incredibly low interest rates have caused a rush of home sales in 2020 as people take advantage of the low interest rate, and in turn all these new mortgages have flooded the bond market as investors scoop them up. But it’s not just home sales, because 69% of the new mortgages are refinances of old mortgages. Many of these mortgages are then sold to government sponsored agencies such as Fannie Mae, Freddie Mac and Ginnie Mae, who then repackage the loans into mortgage backed bonds or securities. These bonds often have higher returns than traditional Treasurys. Additionally, the bonds are often backed by government guarantees meaning there is little risk to the investors.

4) Stock market closings for – 21 SEP 20:
Dow 27,147.70 down 509.72
Nasdaq 10,778.80 down 14.48
S&P 500 3,281.06 down 38.41
10 Year Yield: down at 0.67%
Oil: down at $39.72

AMERICANS THAT ARE WEALTHY; ARE CLOSELY MONITORING THEIR FINANCES UNDER TRUMP PRESIDENCY OR BIDEN PRESIDENCY

By: Economic & Finance Report

Wealthy Americans are monitoring their finances and tax proposals from both candidates as the 2020 presidential election gets closer.

Money managers, financial advisors and accountants across the United States spectrum, have been advising their wealthy clients about what they may expect from either a Trump reelection presidency or a Biden presidency.

Some experts have advised their clients on what they will be paying in taxes under a Biden Democratic Presidency and Congress; what to expect with the current Trump Presidency and a full Republican Congress.

Things may be mightly different in comparison, opposed to exemptions and what the rich/wealthy will have to shell out and what they will save in either presidency. -SB

15 September 2020

1) The old, almost extinct vinyl record album technology for music has surpassed the newer high technology CD music media this year, by selling $129.9 million compared to $232.1 million dollars for vinyl records. This is the first time vinyl has outsold CDs since the 1980’s. About 8.8 million records were sold with 10.2 million CDs, so number wise CD’s are still ahead. Overall, the music industry now is center on digital downloads, digital subscription and streaming services such as Spotify, Apple Music and YouTube with revenues up 12% overall. The recorded music for the first six months of 2020 was $5.6 billion dollars so combined vinyl and CD’s are just a small fraction of the total business.

2) Amazon is hiring again expecting to fill 100,000 part time and full time openings across the U.S. and Canada. This is in addition to 33,000 technology and corporate jobs announced just a week ago, many paying six figure salaries. The 100,000 labor jobs pay at least $15 an hour with a $1,000 sign up bonuses in some cities. Amazon is opening 100 new buildings this month because of the pandemic fueled sales surge with increase home delivery, as shopping habits shift to e-commerce. Market value for Amazon is now at $1.6 trillion dollars and continues climbing.

3) Oil giant BP (British Petroleum) says the demand for oil may have peaked last year, that global market for crude oil might never recover from the coronavirus pandemic. The company considers there are three scenarios for energy demand, all of which forecast a decline in demand for oil over the next thirty years. 1) ‘Business as usual’ oil demand increases slightly after the pandemic crisis passes, then plateaus around 2025 finally it declines after 2030. 2) Governments take more aggressive steps to curb carbon emissions, 3) there are significant shifts in societal behavior, both leading to a decline in oil demand. All point to a shift in the world economic system with a significant decline in growth for many countries.

4) Stock market closings for – 14 SEP 20:

Dow 27,993.33 up 327.69
Nasdaq 11,056.65 up 203.11
S&P 500 3,383.54 up 42.57

10 Year Yield: unchanged at 0.67%

Oil: down at $37.38

8 September 2020

1) About two-thirds of the restaurants in New York are expected to permanently close by the end of this year. Restaurants in New York State are not allowed to do indoor dining, only takeout and outdoor dining is permitted. Therefore, a major portion of New York restaurants are unable to meet their revenue requirements without the indoor dinning. Surveys indicated that 64% of restaurant owners are likely to close by the end of this year, and about 55% to shut down before November, which amounts to a collapse of the restaurant industry in New York State. A group of 100 restaurant owners are banning together to launch a class action lawsuit to open up indoor dining.

2) In August, the American economy added 1.37 million jobs, which was above the 1.32 million forecasted by economist. The big winners were the Government and Retail trade, with the 2020 censes accounting for much of the government’s increase in jobs, but like the censes itself, those jobs will be temporary. The job increase in retail is a result of retail stores opening back up, and so those jobs should remain, baring losses from stores closing from failure. With the growing signs that the U.S. economy is improving and jobs are coming back, there is less pressure on Congress to pass a new fiscal stimulus package. The unemployment rate has fallen below 10% to 8.4%, but is still a long way from the 3.5% before the pandemic.

3) The hopes of a comfortable retirement are continually dimming for the youth of America because of a number of reasons. The increase life span after retirement means more money is needed to cover retirement. Retired people are still subject to economic downfalls such as the Great Recession of 08 that robbed workers of earning power. The age of private pensions is gone, with workers now expected to provide all their own retirement out of their own pockets. This goes hand and hand with Social Security’s money reserves dropping as more retirees take their pension. Interest rates are low, making saving for retirement unproductive while the stock market is risky, plus people are reaching retirement with more debt and therefore requiring more money to sustain themselves. The average American needs to have three quarters of a million dollars to retire and be able to maintain their standard of living.

4) Stock market closings for – 4 SEP 20:

Dow 28,133.31 down 159.42
Nasdaq 11,313.13 down 144.97
S&P 500 3,426.96 down 28.10

10 Year Yield: up at 0.72%

Oil: down at $39.51

For- 7 SEP 20:

Dow 28,133.31 down 159.42
Nasdaq 11,313.13 down 144.97
S&P 500 3,426.96 down 28.10

10 Year Yield: up at 0.72%

Oil: down at $39.15

4 September 2020

1) For first time since World War II the U.S. government’s debt will nearly equal the size of the entire American economy. By the end of 2020, the amount of debt owed by the United States will be about 98% of the nation’s gross domestic product with a debt that is about three times the 2019 level. The huge surge in debt is a result of the Congress spending an additional $3 trillion dollars in emergency funding since March, a result of the economic downturn from the coronavirus crisis. This is why some members of Congress and the White House have balked at approving an additional $2 trillion dollars in spending in view of the weak economy coupled with having little promise of improving soon. Few experts believe the Congress is likely to do something to reduce the deficit in the short term, all the while unemployment remains near 10 percent. Interest rates are low, which makes it less costly for the federal government to borrow. In addition to increase emergency spending, tax revenues fell as business slowed and many people lost their jobs.

2) After a steady increase in the markets, setting new records for highs, the stock markets took a sudden nose dive. This was caused by a massive and sudden sell off of the technology sector. The tech stocks had been on a ten day winning streak then a sudden overnight change which caught everyone by surprise. The Nasdaq dropped almost 600 points while the Dow was down 800 points. Market experts are left wondering what will come next, especially with the next jobs report for August coming out.

3) The pace of rehiring is expected to slow in August, so the economy will likely add fewer jobs than in July, while workers continue to be laid off. Because of the pandemic, America lost about 22 million jobs in March and April. In May through July, about 9.3 million jobs came back, so we are still short about 12 to 13 million jobs. Part of this is a result of so many small businesses having gone bust, so it will take a long time to replace those businesses and therefore replace the jobs they had. Economic turmoil is when technology displacement is prevalent as business seek the means to survive by reducing labor cost (eliminating jobs).

4) Stock market closings for – 3 SEP 20:

Dow 28,292.73 down 807.77
Nasdaq 11,458.10 down 598.34
S&P 500 3,455.06 down 125.78

10 Year Yield: down at 0.62%

Oil: down at $41.03

13 August 2020

1) Another national retail outlet, Stein Mart, is going the way of the brick and mortar retail system announcing they are closing all their stores in bankruptcy amid Covid-19 pandemic. Based in Jacksonville, Florida the company operates 281 stores in 30 states with 9,000 employees. Stein Mart ‘going out of business’ sale is expected to begin in August 14 or 15 with complete liquidation of inventory, with the anticipation of all stores closed by the fourth quarter of 2020. The retailer joins a long list of businesses to file for bankruptcy protection amid the coronavirus crisis.

2) With all the money being pumped into the economy by the government, there were fears of fueling inflation. Those fears were increased with the July consumer price data showing that prices are indeed on the rise. But some are saying these price increases are a result of supply and demand dynamics from the pandemic, and will fall once the supply system becomes stable with production reaching equilibrium again. It’s just a matter of time.

3) Amid suspicion of a rigged election by authoritarian leader Alexander Lukashenko, Germany and Lithuania is calling for renewed sanctions on Belarus. Claiming a landslide victory in his presidential election, Lukashenko has cracked down on protesters and demonstrators. The EU (European Union) has call an extraordinary meeting of foreign ministers to discuss the situation, considering the election was neither free nor fair, and efforts to suppress demonstrations as unacceptable. The EU is considering reinstating sanctions. The protest have been violent with about 1,000 people arrested to add to the 5,000 already being held, and injuries to both protesters and police.

4) Stock market closings for – 12 AUG 20:

Dow 27,976.84 up 289.93
Nasdaq 11,012.24 up 229.42
S&P 500 3,380.35 up 46.66

10 Year Yield: up at 0.67%

Oil: up at $42.56 +0.01

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

23 July 20

1) The business community of America is facing a national coin shortage, making it even more difficult for the retail sector to function. Across the country, restaurants, grocery stores, and retail outlets are posting signs near their cash registers and drive thru windows asking people to pay with credit cards or exact change. This shortage is a result of the spreading coronavirus closing businesses that crippled economic activity in the U.S., so the circulation of coins dropped off significantly. Furthermore, the U.S. Mint who manufactures the nation’s coinage supply, has decreased staffing because of the pandemic, thus reducing the availability of coins.

2) New research has directly connected the explosive growth of passive investing to deteriorating corporate performance over the long haul. Companies with higher passive ownership spent more on stock repurchases, but saw worse financial outcomes. Passive investment can allow opportunistic management behavior with negative effects of future company performance. Companies with high passive ownership are less monitored, therefore allowing management to act unhindered in their own best interest. Passive ownership is a result of investing by mutual and ETF funds who track indexes instead of actively manage counterparts.

3) The government has placed orders for up to 600 million doses of Covid vaccine to Pfizer and BioNTech. The U.S. health officials have agreed to pay $1.95 billion dollars for 100 million doses of a vaccine. Nations around the world have begun ordering vaccines that are still being tested in an effort to halt the spread of the virus. To date, the coronavirus has killed 600,000 people around the world. It is planned the vaccine will be free to U.S. citizens.

4) Stock market closings for – 22 JUL 20:

Dow 27,005.84 up 165.44
Nasdaq 10,706.13 up 25.76
S&P 500 3,276.02 up 18.72

10 Year Yield: down at 0.60%

Oil: up at $41.90

11 June 2020

1) This last April, the government offered $349 billion dollars to small businesses, in their stimulates package called the Paycheck Protection Program or PPP, as a way of limiting the economic damaged from the shutdown orders and pandemic. This money was gone in just 13 days, so Congress approved a second round of $310 billion dollars, but so far there is $130 billion dollars left with more monies being returned than borrowed. Thousands of companies sent loan money back because loan terms were too restrictive, or the criteria for loan forgiveness was too murky. There has been about $3 billion dollars in loans that have been canceled or returned. Congress has moved to loosen the program’s rules giving businesses more flexibility in spending their aid. Nevertheless, many small businesses are facing closure amid the uncertainty of the economy and what the future holds.

2) America is on track for another 2008 class financial crisis with threats of financial collapse. The 2008 crisis forced banks to rethink their risk taking, and new regulations were put through designed to limit the risk that banks take in making loans. Already facing a prolong recession, the balance sheets of big banks could precipitate a collapsed of the financial sector, as almost happened in 2008. The last crisis was caused by CDO (Collateralized Debt Obligations) where sub-prime home mortgages were packaged and given ratings of high quality mortgages. When these over-rated CDOs began to default, the banks were on the verge of collapse, but the feds stepped in and saved the day . . . just barely. The banks have fallen back into their old habits now by using CLO (Collateralized Loan Obligations) which are like CDOs, however they are for businesses instead of home mortgages, but still having the high risk. With the threat of many small businesses failing from the coronavirus crisis, these CLOs could default causing the big banks to collapse, bringing the American economy down.

3) A record number of retail stores are expected to permanently close this year as consumer demand for discretionary items stalls and people shift to online shopping. As many as 25,000 retail stores could fold up, with more than 4,000 having all ready given up the ghost. It is anticipated the closures will snowball from the recession, adding to the effects of unsustainable debt levels. The retailers were struggling to stay afloat before the pandemic struck.

4) Stock market closings for – 10 JUN 10:

Dow 26,989.99 down 282.31
Nasdaq 10,020.35 up 66.59
S&P 500 3,190.14 down 17.04

10 Year Yield: down at 0.75%

Oil: up at $38.78

10 June 2020

1) President Trump is slipping in the polls, and this may pose a risk to the markets. Even though the wild swings of the markets have subsided and then surged upwards, with the Democrat Joe Biden gaining in the polls, there is concerns that the markets will take a down turn as Biden becomes stronger. The President is facing criticism over his handling of the coronavirus pandemic and the protest from the killing of George Floyd by the police. A victory by Joe Biden and a Democratic sweep are considered more ‘market unfriendly’ outcomes. Taxes are one major area of contrast between the candidates, with taxes a major concern for American businesses. These fears are fueled by the Dow sliding downwards for the first time this month as the rally pauses.

2) Borrowing by the British government to pay for the coronavirus shutdown is soaring to levels not seen since World War II. This is on top of the financial problems from Brexit with Britain’s debt jumping five-fold to a 300 billion pound deficit ($380 billion dollars) . This could leave Britain with a 2.2 trillion pound debt and the need to raise taxes with an impact on economic growth. Britain is funding this expenditure with sales of bonds, but have fears of a Greece style loss of confidence among investors. The government is hoping for a fast recovery after restrictions are lifted, allowing the debt to quickly be paid down.

3) There are fears that the U.S. dollar is entering a bear market so may no longer be the safe haven for investors. This bear market could go for five to ten years. This would occur if the global economy really is bottoming out and thereby rebound again, while U.S. interest rates are at zero, with potential growth lower than the merging markets. The U.S. dollar is depreciating against many international peer currencies these last few days.

4) Stock market closings for – 9 JUN 20:

Dow 27,272.30 down 300.14
Nasdaq 9,953.75 up 29.01
S&P 500 3,207.18 down 25.21

10 Year Yield: down at 0.83%

Oil: down at $38.39