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
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
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
1) China, with the second largest economy in the world, is steadily developing into a technological powerhouse that could upend the status quo. China’s ten year plan called “Made in China 2025”, has a principle goal for China to catchup, then surpass the West in various technological fields. Some consider this not only threatens the U.S. economy, but the world economy too. China has already declared they intend to be the dominate power in the world by 2050, and having the high ground in technology development is a key milestone in that quest.
2) Some consider that the stock market will likely head upwards to a new high, fueled by borrowing and money printing. With another stimulus package in the near future, it is ‘out of fashion’ to consider how the borrowed money will be paid back. The central banks, who are not elected, stand ready to print as much money as is wanted, no matter that historically this is how inflation is created and fuel. Example is the Weimar Republic (Germany) who induced their great wave of hyper inflation by printing massive amounts of money in the 1920’s, that lead the way for the Nazi’s to ascend to power. Other problems stemming from printing too much money is currency depreciation, difficulties borrowing, higher interest rates and social unrest. With other investments limited, the excess of money goes to the stock market, thus pushing the market up, and possibly into a bubble just waiting to pop!
3) The Congress remains busy crafting a second stimulus package with lots of debates what should and shouldn’t go in it, intending on having a deal worked out by the end of next week. However, this could go into August before a bill is ready to sign. A major point of contention is checks vs taxes. Should stimulus be checks like the $1,200 checks given out a few months?. If checks, then who gets them this time and how much? The other strategy is reducing payroll taxes, but this only helps those who are working. The Republicans are proposing a $1 trillion dollar relief strategy, while the Democrats propose a sweeping $3.5 trillion dollar plan. This would add to the $2.9 trillion dollar package already implemented early this year. As usual, everything is being done will little to no real analysis, instead relying on gut feelings of lawmakers in making the future of America.
4) Stock market closings for – 21 JUL 20:
Dow 26,840.40 up 159.53
Nasdaq 10,680.36 down 86.73
S&P 500 3,257.30 up 5.46
10 Year Yield: down at 0.61%
Oil: up at $41.58
1) The U.S. consumer prices has declined for the second straight month as the shutdown continues with people spending less. Prices have fallen 0.8% on a seasonally adjusted basis in April, which makes it the largest drop since December 2008. The prices are being forced down by the falling cost of gasoline and energy prices. While falling prices might at first seem like a good thing, economist say that deflation, the opposite of inflation, would be very bad news. This starts a chain reaction spurred by people not buying things, which means manufactures and producers often can’t charge enough to make the product they are trying to sell, so then they stop making products and layoff people. But food prices are climbing, with the biggest increase since February 1976 by 2.6%. The Federal Reserve tries to keep inflation at around 2%, which is considered ideal, but core inflation is likely to be below 1% for the coming year. Normally, it’s expected that a large release of money into the economy, such as the recent stimulus program, would cause inflation to increase.
2) Tim Hortons of Restaurant Brands International, says the food service industry needs to change for the near future, and possibly forever. The company is increasing its digital ordering capabilities by adding to restaurants smartphone apps with enhancements to its drive-thrus and curb service. Restaurant brands using delivery services such as pizza have seen an increase in revenues during the shutdown. The delivery service industries such as GrubHub were growing before the virus crisis, but have been given a real boost which will most likely be sustained when restrictions are lifted. Some restaurant chains are even experimenting with ‘kitchen only’ restaurants with multiple brands under the same roof providing delivery only. This could be an answer to the ‘living wage’ problem with restaurant systems using less labor thereby making a greater surplus of labor which keeps wages low.
3) The economic damage to the economy may not be over with yet, indeed there are fears that the economic crisis could still get worst. The provisions from Congress has done a fair job of sheltering the most vulnerable citizens, whose provisions will run out at the end of July. It’s unlikely that the labor market will be restored by July, so if the Congress doesn’t act, the economy could slide downward even more.
4) Stock market closings for – 12 MAY 20:
Dow 23,764.78 down 457.21
Nasdaq 9,002.55 down 189.79
S&P 500 2,870.12 down 60.20
10 Year Yield: down at 0.68%
Oil: up at $25.83
1) The U.S. Bureau of Labor’s CPI (Consumer Price Index) statistic declined by 0.42% in March, the largest decline since January 2015. The CPI is used to measure the change in the cost of a typical basket of goods, which an American would buy in a month. This downward trend of the index indicates the value of the dollar is going up, which is deflation. Normally, the dollar is the subject of inflation, with prices rising between 0.1% and 0.3% per month, which makes a 0.4% drop somewhat strange. The largest factor driving this drop is energy cost, which experts attribute about three-quarters of the decline to, but other goods such as automobiles, airline tickets, household furnishing and apparel have also dropped in cost. However, there is debates among economists that the CPI is flawed, because it is based on items selected two years ago, which people may not actually be buying much of now. It doesn’t account for quick changes in people’s buying habits.
2) Oil prices continue to climb for the fifth straight day, the longest run of daily gains in nine months. Production cuts are starting to whittle down the surplus, coupled with the coronavirus lockdowns subsiding. Morgan Stanley predicts the supply glut most likely has hit its peak, but still the glut in oil will remain for quite a while.
3) Consumer debt has reached a record high to start 2020, even as credit card balances decline. Household debt balances total $14.3 trillion dollars through March, which is a 1.1% increase from the previous quarter. A $34 billion dollar drop in credit card balances was offset by an increase of $27 billion dollars in student loans and $15 billion dollars in auto debt. Mortgage balances rose by $156 billion dollars. The decline of credit card debt is an indicator that people are spending less on consumer goods as a result of the coronavirus.
4) Stock market closings for – 5 May 20:
Dow 23,883.09 up 133.33
Nasdaq 8,809.12 up 98.41
S&P 500 2,868.44 up 25.70
10 Year Yield: up at 0.66%
Oil: up at $25.68
1) The furniture retailer Wayfair is reducing its workforce by 3% or 500 jobs. The online furniture retailer has more than 17,000 employees globally. The stock for the company has dropped more than 24% in the last twelve months. Wayfair has yet to post a profit and has been criticized for its high costs to run its business. Shipping items like sofas and coffee tables can be expensive, even more so where there’s returns.
2) Newspaper publisher conglomerate McClatchy has filed for bankruptcy. Owner of banner newspapers such as Miami Herald, Kansas City Star, Star-Telegram, News & Observer and Charlotte Observer, a total of thirty newspapers has seen its revenue slide downward for the last six years as readership of newspapers continues to decline, migrating to newer technologies for their news.
3) The U.S. national debt continues to increase at an ever increasing rate. The debt, adjusted for inflation, of 1900-1904 was $65.37 billion dollars. The debt after World War I (1919) was $329.06 billion dollars, a result of paying for the war. Then debt started dropping down to $319.35 billion dollars and by the 1929 stock market crash was down to $253.44 billion dollars, the start of the great depression. By the start of World War II, 1940, it was at $788.68 billion dollars, but at the end of the war (1945) skyrocketed to $3.69 trillion dollars, slowly drifting down to $533.19 billion dollars by 1975. But after that, it started growing again until today its now at $22.72 trillion dollars, 348 times the debt at the start of the twentieth century.
4) Stock market closings for – 13 FEB 20:
Dow 29,423.31 down 128.11
Nasdaq 9,711.97 down 13.99
S&P 500 3,373.94 down 5.51
10 Year Yield: down at 1 .62%
Oil: down at $51.52
1) The trust funds for Social Security are in trouble and will run dry by 2035. But Social Security is not going bankrupt because the program’s primary source of revenue is payroll taxes, which at present is 12.4% of pay. So even if the trust fund should run out, Social Security still would have the money to largely keep up with benefits. A much greater danger for retirees is high inflation, for historically the first to suffer from a collapsing economy are those on fixed incomes.
2) The recently signed phase one agreement with China made for a cease-fire in the trade, but leaves the tariffs largely in place, with some considering the tariffs to be the new norm in international trade. China has committed to making $200 billion dollars in purchases from America. The agreement does not address the intellectual property issues, both the forced intellectual transfers and out right theft.
3) Claims for unemployment benefits fell more than expected last week, indicating a sustained strong labor market. Claims dropped 10,000 last week to 204,000 with the labor market remaining on a solid footing, the unemployment rate holding near a fifty year low of 3.5% for December. Layoffs were in manufacturing, transportation and warehousing.
4) Stock market closings for – 16 JAN 20:
Dow 29,297.64 up 267.42
Nasdaq 9,357.13 up 98.44
S&P 500 3,316.81 up 27.52
10 Year Yield: up at 1.81%
Oil: up at $58.59
1) J. P. Morgan Chase posted profit and revenue far in excess to analysts’ expectation at the end of 2019. Fourth quarter profit was up 21% to $2.57 a share compared with $2.35 estimates of analysts. The investment bank produced record revenue for the fourth quarter. Citigroup also beat estimates for profit and revenue, their fixed income trading revenue gaining 49%.
2) Consumer prices rose at the fastest pace in eight years, in 2019. The increase was driven by higher gasoline, health care and rent prices in addition to the biggest annual advance in inflation since 2011. The consumer price index rose 0.2% in December, while economist had forecast 0.3%. The cost of living in 2019 rose 2.3% from 2.1%. Price increase for food was mild, while prices fell for used vehicles and airline fares.
3) Three of China’s automakers are considering expanding into Mexico with factories. Car makers Changan, BYD (electric cars) and Anhui Jianghuai or JAC, who already has manufacturing facilities in Mexico, but is considering expanding. The companies are considering expansion sometime this next year. No comments on if and where cars will be exported to.
4) Stock market closings for – 14 JAN 20:
Dow 28,939.67 up 32.62
Nasdaq 9,251.33 down 22.60
S&P 500 3,283.15 down 4.98
10 Year Yield: down at 1.82%
Oil: up at $58.14