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

15 April 2020

1) A second round of layoffs is starting, the first being workers at restaurants, malls and hotels, most of them lower skill levels, but now it’s higher skilled jobs threatened. Those higher skilled jobs had seemed secure, however the ‘work at home’ people are seeing layoffs and furloughs to add to the unemployed numbers. Jobs such as corporate lawyers, government workers and managers are seeing the pink slip with a threat of a prolonged labor downturn in 2007-09 recession. Economist anticipated that 14.4 million jobs will be lost in coming months, raising the unemployment rate to 13% for June. Already, 17 million Americans have been laid off, with estimates of 27.9 million jobs to be lost. The information businesses are being hit, with revenues not sufficient to pay electric bills for servers and computers to host web sites. Even large law firms catering to the corporate world are having significant layoffs. State and local governments employ 20 million people, but as tax revenues drop, they too are faced with reducing employees. Analysts consider it will take 5 1/2 years for the labor market to recover.

2) Boeing, the airline manufacture, is further suffering business setbacks with the cancellation of orders for 150 jets in March. This is a result of a near total halt in demand for air travel because of the coronavirus pandemic. There are now nearly 14,000 jets parked by airlines around the world. Boeing did report new orders for 31 aircraft in March. While Boeing still has a backlog of orders for about 5,000 jets, there are fears that delivery will be deferred which will further add to Boeing’s financial woes.

3) The IMF (International Monetary Fund) is predicting that the Great Lockdown recession will be the worst in almost a century, warning the world economy’s contraction and recovery will be worst than anticipated. The IMF estimates the global gross domestic product will shrink 3% this year, compared to a 3.3% growth in January. This will dwarf the 0.1% contraction in the 2009 financial crisis. These forecast dashing any hopes for a V-shaped economic rebound after the virus subsides, with a commutative loss of global GDP of this and next year, of about $9 trillion dollars. Economic damage is driven by how long the virus remains a major threat.

4) Stock market closings for – 14 APR 20:

Dow 23,949.76 up 558.99
Nasdaq 8,515.74 up 323.32
S&P 500 2,846.06 up 84.43

10 Year Yield: unchanged at 0.75%

Oil: down at $20.82

21 January 2020

1) As Boeing’s 737 MAX crisis continues, Boeing is talking with banks to borrow $10 billion dollars or more to finance the rising cost from its 737 MAX woes. So far, the company has borrowed $6 billion dollars to cover its cash-sapped operations after having suspended production of the planes this month. The crisis which grounded the 737 MAX is now entering its eleventh month.

2) The global auto industry continues its downward slide into deeper recession with sales down 4%. Automakers are struggling to find buyers in China and India, with the downward trend expected to continue this year. The number of vehicles sold dropped from 94.4 million down to 90.3 million last year, with the record high in 2017 of 95.2 million. The IMF says new autos account for 5.7% of economic output and 8% of the goods exported. Autos are the second largest consumer of steel and aluminum.

3) Because of unrest in Iraq and Libya, oil rose to its highest in more than a week. Oil prices have always been heavily influenced by geopolitical instability, especially those countries heavily involved with oil exports. Lybia has Africa’s largest oil reserves, with their Sharara oil field being Lybia’s largest by pumping 300,000 barrels a day.

4) Stock market closings for – 20 JAN 20:

Dow              29,348.10    up    50.46
Nasdaq          9,388.94    up     31.81
S&P 500         3,329.62    up    12.81

10 Year Yield:    up   at    1.84%

Oil:    down   at    $58.70

16 October 2019

1) The IMF (International Monetary Fund) has made another cut to its 2019 global growth forecast, the fifth in a row. The reason given is a broad deceleration of the world’s largest economies with trade tensions undermining the expansion. Their projections of world economic growth has gone from a high of 3.9%, down to 3.5%, then to 3.4%, to 3.2% and finally to 3%.

2) The low mortgage rates has caused an epic housing shortage. The average mortgage rate for 30 year fixed was over 5% last November and stayed above 4.5%, but now is around 3.5%. Inventory trends in the mid-market indicate lower levels of inventory in early 2020. Housing starts have been moving up slowly, but mostly in the higher end homes, leaving the ‘starter home’ market depleted.

3) The production and delivery of Harley-Davidson’s new LiveWire electric motorcycle has been halted with the discovery of a problem with its charging mechanism. There was a non-standard condition in the final quality check, which halted deliveries of LiveWire bikes, however customers can continue riding their LiveWare motor cycles. Additional testing and analysis is progressing well.

4) Stock market closings for – 15 OCT 19:

Dow         27,024.80    up    237.44
Nasdaq      8,148.71    up    100.06
S&P 500     2,995.68    up       29.53

10 Year Yield:     up   at    1.77%

Oil:    down   at    $52.93

13 August 2019

1) Royal Dutch Shell is building a 386 acre chemical plant to make bulk plastic. The construction project is one of the largest active construction projects in America employing over 5,000 people. The plant has hundreds of miles of pipelines to feed it petroleum and will have its own rail system with 3,300 freight cars. The new plant is expected to produce a million tons of plastic pellets each year.

2) Saudi oil company Aramco is buying a 20% share in Reliance Industries Ltd of India an oil to chemicals business. This will include the 1.24 million barrels a day Jamnagar refining complex. This is part of Aramco plan for refinery investments to double its processing network and handle as much as 10 million barrels of oil a day by 2030. Reliance has agreed to purchase 500,000 barrels of crude a day over the long term.

3) The IMF (International Monetary Fund) has warned that addition tariffs in the trade war will sharply cut Chinese growth. The IMF has already forecast a 6.2% decline in China’s growth for this year, which assumes no new tariffs. They forecast a sharp cut in China’s growth if the additional tariffs threaten are imposed on the first of September. President Trump has cast doubts on a trade deal, and indicated he might cancel the trade talks scheduled for September.

4) Stock market closings for – 12 AUG 19:

Dow               25,897.71             down    389.73
Nasdaq            7,863.41   unchanged        0.00
S&P 500           2,883.09              down     35.56

10 Year Yield:     down   at    1.64%

Oil:    down   at    $54.78

17 July 2019

1) Managing Director Christine Lagarde of the IMF (International Monetary Fund) announced her resignation to become the next head of the European Central Bank. Her resignation from the global lender will be effective the twelfth of September. Lagarde’s second five year term as Managing Director of the IMF was not due to end until July 2021.

2) The pizza giant Domino’s Pizza is seeing its business eroded by food-delivery startups. Second quarter financial reports shows Domino’s sales fell short of analyst estimates causing its stock to drop as much as 7%. Services like GrubHub, DorrDash and EuberEats are cutting into Domino’s food-delivery business in recent years, a result of aggressive promotions and discounts, with Domino’s countering by speeding up its delivery time and expanding number of locations.

3) The electronic news magazine ‘60 Minutes’ had an interview this last Sunday with venture capitalist Kai-Fu Lee about the future of artificial intelligence and China’s efforts to dominate the emerging AI markets. Mr. Lee estimates that in the next fifteen to twenty-five years about 40% of the jobs will disappear from technology displacement. This is in keeping with the recent Osborne Report forecasting that as much as 47% of the jobs will disappear in the next 20 years. An example is the Navy has mandated that new ship designs must use automation to reduce crew sizes by 20%.

4) Stock market closings for – 16 JUL 19:

Dow               27,335.63    down    23.53
Nasdaq            8,222.80    down    35.39
S&P 500           3,004.04    down    10.26

10 Year Yield:    up   at    2.12%

Oil:    down   at    $57.48

10 April 2019

1) The IMF (International Monetary Fund) has reduced their forecasted for world economic growth from 3.5% to 3.3%, which is the third reduction since last October. It forecasted 2.3% growth for the US economy, as well as reduced growth forecast for Germany and Great Britain.

2) Walmart is rolling out thousands of robots for use in their retail stores across America. These robots will automatically scan shelves and clean floors. With a million employees, Walmart is seeking ways to keep labor cost down.

3) Bank of America is raising it’s minimum wage to $20 an hour over the next two years. Starting the first of May, the rate will increase to $17 per hour. The bank has 205,000 employees.

4) 9 APR 19 Stock market closings: Markets pulled down by industrial sector.

Dow             26,150.58    down    190.44
Nasdaq          7,909.28    down      44.61
S&P 500         2,878.20    down      17.57

10 Year Yield:    down   at    2.50%

Oil:    up   at    $64.24

9 April 2019

1) In ten years, the US debt to GDP ratio will be equal (100%). The debt to GDP ratio is presently 78%, the highest since the end of World War II, but it’s anticipated to be 96% by 2028. To bring this into perspective, countries with sever economic problems such as Greece have a ratio of 188%, Italy 130%, Portugal at 120% and Spain with 97%. On the positive side, Germany has a ratio of 59%. The IMF is warning of the problem for America if the ratio is left to continue as is. A high ratio hinders a government’s ability to counter any economic downturn. America’s entitlements is the principle cause for the increase, because when Social Security was started, there were 16 workers to support each retiree, now there are just 2.6 workers.

2) European Union borrowers are eager to see how a Brexit extension will effect markets, by possibly reducing the uncertainty that Brexit has brought on. This spring, the IMF and World Bank will be meeting for their annual conference on world economic matters.

3) Tesla, the maker of electric automobiles, is starting its new quarter with another round of cuts of sales staff following poor deliveries. The company is closing some of it’s show rooms in favor of online sales. These actions are rattling investors by stoking confusion.

4) 8 APR 19 Stock market closing:

Dow                          26,341.02     down     83.97
Nasdaq                       7,953.88           up     15.19
S&P 500                      2,895.77           up       3.03

10 Year Yield:    up   at    2.52%

Oil:    up   at    $64.46

29 January 2019

1) Brexit, now on going for 2 ½ years, is dividing the British people in strife, the debate impacting and dividing family relationships across the country. The web site eHarmony reports one and a half million relationships have broken up over Brexit.

2) American retail workers face mass layoffs. In addition to the traditional after Christmas layoffs of seasonal workers, many permanent workers face significant reduction in work hours per week, if not actual layoffs in retail giants such as Amazon, Target and Walmart.

3) Stocks close lower because of Caterpillar and Nvidia announcing significantly lower profits than was expected. Caterpillar was down 9% and Nvida down 13.8%, with expectations of further poor performance in 2019. Caterpillar is considered a economic bellwether, and together with the IMF, is warning of international economies slowing down faster than expected.

4) 28 JAN 19 Stock market closing:

Dow                 24,528.22    down    208.98
Nasdaq              7,085.68    down      79.18
S&P 500             2,643.85    down       20.91

10 Year Yield:     down   at    2.74%

Oil:    up   at    $52.04

NIGERIA BIGGEST ECONOMY IN AFRICA AGAIN: TWICE IS A CHARM!!!!!!!!

nigeria

By: Economic & Finance Report

Nigeria reclaimed its numero uno status as the biggest economy in Africa again, last week. The IMF indicated that Nigeria’s GDP contracted to $415 billion, while #2 runner up South Africa had $280 billion and rounding off #3 was Egypt, (which data has not come out yet when writing this piece).

The International Monetary Fund (IMF) also indicated Nigeria should be out of their recession by early 2017. Nigeria has seen recession before; during 1982-1984 when current Nigerian President Muhammadu Buhari was military head of state then, and in 1991 when Ibrahim Babangida was also head of state at the time. -SB