7 April 2020

1) Ten million people have rushed to file unemployment claims only to find a system swamped to the point of being nonfunctional. State websites are buckling, their phone lines jammed with backlogs mounting from jobless people seeking benefits, needing help. To make matters worst, the federal government has not dispersed all the necessary monies to states so there isn’t enough money for benefits. While the coronavirus is concentrated in a few areas of the country, the economic havoc has been nation wide.

2) Wells Fargo bank is bowing out of the new federal program aimed at helping small businesses retain workers and pay bills. The bank is no longer accepting new loan applications under the Paycheck Protection Program, which is part of the $2.2 trillion dollar economic relief package. The bank had committed $10 billion dollars to the loan program, but has already reached more than that amount in applications. Last year, Wells Fargo arranged more small business loans than any other lender. The Paycheck Protection Program offers 1% interest loans to business with fewer than 500 workers, and if borrowers don’t lay off workers in the next eight weeks, they will have their loans and interest forgiven. The program allots $350 billion dollars, but as of Friday only 17,000 loans have been approved for a total of $5.4 billion dollars.

3) Jamie Dimon, CEO for JP Morgan Chase, predicts a ‘bad recession’ as a result of the coronavirus, where the GDP (Gross Domestic Product) could plunge as much as 35% annual rate in the second quarter with a down turn lasting the rest of the year. Furthermore, the unemployment rate could spike as high as 14% during this recession. Because of the extension of new credit, a major recession means we are exposing the bank to billions of dollars of additional credit losses in helping businesses through this setback.

4) Stock market closings for – 6 APR 20:

Dow 22,679.99 up 1627.46
Nasdaq 7,913.24 up 540.16
S&P 500 2,663.68 up 175.03

10 Year Yield: up at 0.68%

Oil: down at $26.73

6 April 2020

1) Across the world, truckers are having a difficult time in their role of delivering food stocks to the people. In America, truck drivers are finding it more difficult to operate, unable to find places to eat, with restaurants shut down and their rigs too big to go to the drive-thru lanes. They are unable to find places to sleep, shower or even clean toilet facilities. Nevertheless, the food supply chain continues to struggle to get the necessary food to the people.

2) With the government announcement that we are now in a recession, questions abound how long will it last? For the ‘08 recession, it took more than a decade to recover. One major obstacle facing a recovery, from a near total shutdown of the economy, is the small businesses. Half the businesses in the American economy are classed as small businesses, and half of those have less than fifteen days cash reserves, which means a significant number of American businesses will not survive the virus shutdown. This will leave millions of workers scrambling to find work and therefore will greatly hinder a recovery.

3) Oil prices have rallied from news that the Saudi Arabia – Russia price war may be coming to an end with agreements to cut back oil production by ten million barrels a day. Oil is the keystone to economic vitality with oil prices needing to be above about $40 a barrel for shale oil to be profitable so America can remain oil independent.

4) Stock market closings for – 3 APR 20:

Dow 21,052.53 down 360.91
Nasdaq 7,373.08 down 114.23
S&P 500 2,488.65 down 38.25

10 Year Yield: down at 0.59%

Oil: up at $29.00

3 April 2020

1) Unemployment claims have jumped twice the previous week’s numbers, with 6.6 million Americans filing for benefits. This brings the last two weeks total of new unemployed to 10 million. The speed and scale of job losses are unprecedented. The record for loses in a month had been 695,000 in 1982. The coronavirus has wiped out more jobs in two weeks than were lost in the worst months of the last recession. Companies based on white-collar workers, have been able to keep their people working with work at home, but as revenues dry up, it’s questionable how long before they too will be forced to start layoffs. The growing number of laid off workers unable to pay their bills could well lead to a cascade of further layoffs and business failures.

2) While the price of oil has always had an effect on the equities, the recent plunged has had a more profound effect and therefore causing the roller-coaster volatility of the markets. This dramatized how very central oil is to the entire modern world. Stabilizing the oil prices would greatly help stabilizing the markets, and therefore the whole world economic system. Central to this is for Russia and Saudi Arabia to end their price war and resume limiting production. But central to this is Russia’s desire to damage American domestic oil production by destroying the shale oil companies, which would reduced American’s influence in the world especially in the middle east where Russia is very active.

3) Already wracked by fiscal problems from decline of the milk product markets, dairymen now suffer a further decrease in their market as a result of the coronavirus crisis. This is a result of restaurants, schools and other food service outlets reduced to stopping operations and therefore not needing milk products. The dairy industry is still producing, but doesn’t have anyplace to sell their milk, so the industry is asking the government to increase its purchases of dry milk, butter and cheese.

4) Stock market closings for – 2 APR 20:

Dow 21,413.44 up 469.93
Nasdaq 7,487.31 up 126.73
S&P 500 2,526.90 up 56.40

10 Year Yield: down at 0.63%

Oil: up at $24.90

30 March 2020

1) A second virus shock wave is already hitting China’s factories as European factories are delaying orders and asking for delays in payments as the coronavirus sweeps across Europe closing their factories. These are cutting off orders to Chinese factories just as they were beginning to come back to life, a double hammer blow to China’s economy. Estimated April to May sales are expected to be down as much as 40% from last year. This is raising grave doubts about the world’s second largest economy being able to repair damage and return to its pre-virus station.

2) The Index of Consumer Sentiment dropped to 89.1 in March, the lowest level since October 2016, a three year low. It is the fourth largest in nearly 50 years. Further declines is dependent on the success of curtailing the spread of the virus and how soon households receive funds from the government stimulus. To date, there are 540,000 cases of coronavirus with America overtaking China and Italy with the most cases having a total of 85,000.

3) The Department of Justice is investigating the credit scoring firm FICO for possible antitrust violations. There are three other major credit companies: Equifax, Experian and TransUnion. FICO is the only scoring model accredited by mortgage loan companies Fannie Mae and Freddie Mac. The DOJ investigation comes after TransUnion’s antitrust countercase against FICO. The lenders determine which credit scoring system is utilized on a loan application, not the consumer or loan applicant.

4) Stock market closings for – 27 MAR 20:

Dow 21,636.78 down 915.39
Nasdaq 7,502.38 down 295.16
S&P 500 2,541.47 down 88.60

10 Year Yield: down at 0.75%

Oil: down at $21.84

20 March 2020

1) Today, more coronavirus concerns have surfaced that most airlines will go bankrupt soon without government bailouts. The virus has shut global aviation down because of virus outbreaks as well as travel restrictions that are intended to contain the virus. Within weeks, many airlines will need government help to avoid bankruptcy. Major U.S. airlines are seeking $50 billion dollars in financial assistance because of the steep falloff in U.S. travel demand. Estimates are for $25 billion dollars in grants, $25 billion dollars in loans and significant tax relief to survive.

2) Monday markets opened with another sharp downfall of all three major markets despite the Federal Reserve embarking on a massive monetary stimulus campaign to curb the slowing economic growth from the coronavirus. Shortly after opening, trading was halted for fifteen minutes from a ‘circuit breaker’ triggered by the S & P 500. The U.S. central bank has launched a massive $700 billion dollar quantitative easing program designed to help cushion the economic downside from the virus. The Dow was down 11% while both the Nasdaq and S & P fell more than 10%.

3) As fears grow of a world economic downturn, which will put economic stress on the U.S. economy, people are becoming concerned about their jobs. American workers may lose their jobs by the millions as the effects of the virus ripple through the financial system, the impact being devastating. The disease has spread rapidly around the world with whole nations shutting down as well as major cities. It’s unknown just what the impact will be for the world economy, when major economic areas isolate themselves from the system, even for a few weeks. Many segments of the economy are reporting significant problems which can lead to further problems across the U.S. and world economy. All this translates into layoffs, at a time when the young people of America have limited opportunities.

4) Stock market closings for – 19 MAR 20:

Dow 20,087.19 up 88.27
Nasdaq 7,150.58 up 160.73
S&P 500 2,409.39 up 11.29

10 Year Yield: down at 1.12%

Oil: up at $25.08

27 February 2020

1) South Carolina has the lowest unemployment rate with 2.3% which ties with Utah and Vermont. But while there’s lots of jobs, they mostly pay low wages making it hard for people to make a living. The state is typical of states across the U.S., with job growth looking strong on the surface, but much of the work is meager wages and few benefits. As automation pushes more people down to the lower paying ranks, they find themselves struggling to acquire the basics of living, even with wages that are above the minimum wage.

2) With the government’s announcement that Americans should prepare for a Covid-19 (coronavirus) crisis, and the continual spread of the virus, prices of hygienic masks have surged upwards. Tracking the product on Amazon shows an immediate rise just twenty-four hours after the announcement. A pack of disposable masks which were $125 surged to $220 in just three days, showing the deep concerns people have to the coronavirus threat.

3) Micro units are small dwellings of about 350 square feet or less, which may be the answer to affordable housing. The micro unit comes complete with a kitchen, bathroom and living or sleeping space comparable to studio apartments in Paris, Tokyo or Rome. This gives everything needed for basic living, but little else. Micro units are approximately 20% to 30% cheaper than conventional sized units, and are most popular with young single working adults, age under 30, who are willing to compromise space for location, amenities and cost savings.

4) Stock market closings for – 26 FEB 20:

Dow 26,957.59 down 123.77
Nasdaq 8,980.78 up 15.16
S&P 500 3,116.39 down 11.82

10 Year Yield: down at 1.31%

Oil: down at $48.65

13 February 2020

1) NASA (National Air and Space Administration) has asked for a 12% increase to give a $25.2 billion dollar budget for next year. Nearly half of this years proposed budget is for NASA’s lunar project with much of the money going to the biggest American space companies. Lockheed Martin, Boeing and Aerojet Rocketdyne will be the primary beneficiaries with $1.4 billion dollars going to the Orion spacecraft and $2.26 billion dollars for the Space Launch System. There is $3.37 billion dollars proposed to fund a crewed lunar lander system.

2) Federal Reserve Chairman Jerome Powell suggest that the central bank may not have the ability to fight the next recession and therefore Congress may need to get ready to help. This is a result of the already low interest rate, one of the prime tools used by the central bank to counter recession trends. Tax cuts and government spending increases may be necessary to fight a downturn, for there is little else the central bank has to counter a recession.

3) The giant aircraft maker Boeing Aircraft is facing bigger problems than just fixing its 737MAX and getting it certified to fly. The company needs to be focused on its next generation of passenger aircraft. Boeing didn’t get any new orders for aircraft in January compared with 45 orders last year, while delivering 13 airliners compared with 46 last January. Boeing is falling behind its rival Airbus and must build its next generation of planes to remain competitive. This means getting its 777X finished and ready for delivery with its other wide body plane, the 787 Dreamliner. In the background is a possible new design concept the 797.

4) Stock market closings for – 12 FEB 20:

Dow 29,551.42 up 275.08
Nasdaq 9,725.96 up 87.02
S&P 500 3,379.45 up 21.70

10 Year Yield: up at 1.63%

Oil: up at $51.69

30 January 2020

1) The Federal Reserve has left the interest rates unchanged, which was widely expected as the U.S. economy continues to grow at a slow and steady pace. So the interest rate will remain in the range of 1.5% to 1.75% , thereby encouraging more lending and home buying. Presently, those in the government don’t anticipate any changes, up or down, to the interest rate this year.

2) Founded in 1893, Sears was once the world’s largest retailer with billions of dollars in profits. Ten years ago, the giant retailer had 3,500 stores, but now Sears’ and Kmart combined have just 182 locations. Sears became the first major retailer to have an IPO (Initial Public Offering) in 1906 at $97.50 a share. Originally a mail order retailer, Sears opened its first department store in Chicago in 1928.

3) The budget deficient for the Federal government is forecast to past $1 trillion dollars in 2020 from contentious spending exceeding government income. Federal borrowing is likely to continue climbing dramatically over the next decade, reaching an un-precedent $31 trillion dollars by 2030. Some say this is a poor refection on the fiscal health of the nation.

4) Stock market closings for – 29 JAN 20:

Dow           28,734.45         up    11.60
Nasdaq        9,275.16         up      5.48
S&P 500       3,273.40    down      2.84

10 Year Yield:    down   at    1.59%

Oil:    down   at    $53.15

30 December 2019

1) China has had another year of record corporate bond defaults, which is by design. Ten years ago, bond defaults almost never happened, not because Chinese businesses were healthy, but rather the government stepped in to prevent default. Companies were often linked to the government and bonds which were largely bought by state owned lenders, making a financial system with little discipline. The government has become more comfortable with defaults and so is stepping out of economic control, to impost more incentive to make careful assessment of companies.

2) This year, more than fifty banks have announced plans to cut 77,780 jobs, the most lost since 91,448 jobs in 2015. The 2019 cuts will bring the total for the last six years to more than 425,000 lost jobs. The European banks are still weak from the ‘o-eight’ financial crisis, and are still struggling to regain their footing, forcing continual cost cutting measures. Job losses are anticipated to continue into 2022.

3) With germs growing more resistant to common antibiotics, many drug companies are hemorrhaging money and going out of business. The effect is reduced efforts to develop new antibiotics just when they are become most needed. Other well established drug companies are abandoning the antibiotic market segment refraining from doing any research on new antibiotic drugs. One marketing problem is antibiotics are prescribed for just days to weeks, so there isn’t the revenue stream as with drugs continually consumed year after year by a patient such as insulin. Presently, drug resistant infections kill 35,000 people each year.

4) Stock market closings for – 27 DEC 19:

Dow                28,645.26         up     23.87
Nasdaq            9,006.62    down    15.77
S&P 500           3,240.02          up         0.11

10 Year Yield:    down   at    1.87%

Oil:    up   at    $61.72

22 November 2019

1) After HP rejected Xerox’s offer of $22 per share, Xerox is now threatening to go hostile with its $33.5 billion dollar buyout if HP does not agree to a friendly discussion before November the 25 th. Goldman Sachs & Co. set a $14 target price , the median price target on HP stock by 15 analysts is $20. HP had rejected Xerox first offer considering the combined companies would be saddled with outsized debt, and therefore not in the best interest of the shareholders.

2) The world economy is predicted to expand just 2.9% next year. The global economy is stuck in a rut which it wont exit unless governments revolutionize policies and how they invest, rather than just hope for a cyclical upswing. The biggest concern is that the deterioration of the outlook continues unabated, reflecting unaddressed structural changes. The risk of further escalation of world tensions is a serious concern.

3) General Motors and Fiat Chrysler are embroiled in a law suit with GM alleging that fiat Chrysler got an unfair business advantage by bribing officials of the United Auto Workers union. The suit alleges racketeering by paying millions in bribes to get concessions and gain advantages in three labor agreements with the UAW union. Details of the racketeering have been exposed in a federal probe of corruption in the union which resulted in multiple arrests starting in 2017.

4) Stock market closings for – 21 NOV 19:

Dow             27,766.29    down    54.80
Nasdaq          8,506.21    down    20.52
S&P 500         3,103.54    down      4.92

10 Year Yield:    up   at    1.77%

Oil:    unchanged   at    $57.09