13 January 2021

1) Reports are that Biden will unveil plans to spend trillions of dollars in pandemic and economic relief money this next week. Biden is introducing several members of his economic team, after data shows the U.S. economy has lost jobs for the first time in eight months as a resurgent COVID-19 pandemic has again shuttered restaurants and other businesses. Biden is calling for raising the minimum wage to $15, and for sending out $2,000 in direct cash payments. Biden claims that economic research confirms that with today’s crisis, especially with such low interest rates, taking immediate action, even with deficit financing , is going to help the economy. Biden also say they are looking into other economic relief actions that can be taken unilaterally, including extending a pause on repayments of federal student loans.

2) US naval aircraft carrier groups still rule the seas, but both Russia and China have plans to change that as they strive to expand their blue water navies, by developing new weapons that could threaten America’s dominance. For instance, it is reported that China launched two ballistic missiles that hit a moving target ship in the South China Sea thousands of miles from their launch sites. The Russian navy conducted its third test launch of it’s hypersonic anti-ship cruise missile that was launched from a frigate. The missile reached a speed of Mach 8 before hitting a target more than 200 miles away. These tests are the latest indication that American aircraft carriers, long viewed as kings of the seas, may soon face a real threat to their existence.

3) Iran has told South Korea not to politicize the seizure of their vessel, while demanding the release of $7 billion dollars in funds frozen amid U.S. sanctions. Additionally, Iran has denied all allegations that the seizing of South Korea’s tanker and its 20-member crew amounted to hostage taking, claiming instead it was Seoul who was holding Iran’s funds hostage. The vessel was seized based on an Iranian court order for ‘environmental pollution’, however, the ship’s Busan-based operator, said there was nothing to indicate that before the seizure of the vessel that Iranian authorities were probing possible violations of environmental rules.

4) Stock market closings for – 12 JAN 21:

Dow 31,068.69 up by 60.00
Nasdaq 13,072.43 up by 36.00
S&P 500 3,801.19 up by 1.58

10 Year Yield: up at 1.14%

Oil: up at $53.38

17 December 2020

1) North Dakota, a state with an early shale oil boom, expects oil production growth to stall in the next two years because of the market crash and higher environmental standards. The problem is investment money because Wall Street is showing no signs to invest in a shale boom. Investors have grown wary of the poor cash flow even before the crash, and institutional investors are shunning oil because of climate change concerns. North Dakota has limited excessive natural gas flaring from oil wells, intending to control greenhouse emissions at the expense of production. The state is expecting output to decline in November and December because of a lack of oil well completions. Oil markets are shrinking due to the loss of demand, while growth in shale oil depends on investments to replace wells that decline rapidly.

2) The Federal Reserve shifts its focus to fighting climate change, with average temperatures climbing and severe weather events happening more frequently. The Fed’s recent financial stability report includes a section on climate change, signaling a risk that climate change could pose to the financial system. Federal Reserve supervisors expect banks to identify, measure, control, and monitor all material risks, which for many banks are likely to extend to climate risks. Therefore if those dangers aren’t considered, hazards such as storms, floods, droughts or wildfires could change the value of assets suddenly, causing a shock to the system.

3) The more a person understands interest rates, inflation, risk diversification and other financial concepts, the less likely they show signs of financial fear and distraught at times of serious economic troubles. At the start of the pandemic in March, 40% of households was making under $40,000 per year lost their jobs. By April, the jobless rate had soared to 14.7% while the $1,200 direct checks and supplemental $600 federal-unemployment benefits started. Researchers asked people if they could cover a $2,000 unexpected emergency expense, and18.9% said they couldn’t meet the expense. In a test, the survey of ‘at risks participants’ correctly answered about half of the three questions about how interest rates are calculated, inflation and risk, while people in better money condition answered almost all three (2.5 on average) correctly.

4) Stock market closings for – 16 DEC 20:
Dow 30,154.54 down by 44.77
Nasdaq 12,658.19 up by 63.13
S&P 500 3,701.17 up by 6.55
10 Year Yield: down at 0.92%
Oil: up at $47.88

26 August 2020

1) The American Airlines Group Inc. will layoff 19,000 workers once the federal payroll act expires on the first of October, making for a 30% reduction in its workforce since the Convid-19 crisis. This will result in 17,500 workers furloughed and about 1,500 cuts to management staff. These cuts are forced by a 70% drop in passenger numbers. This will bring the airlines pandemic cuts to 40,000 positions since the coronavirus outbreak. Presently, American plans to fly less than 50% of its normal schedule in the fourth quarter, while their long haul international flights will be just 25% of 2019. The airlines will have 100,000 employees compared with 140,000 in March of this year.

2) Real estate investors, including some of the largest investment groups, are skipping loan payments while raising billions of dollars for new investments. While the pandemic has devalued some real estate, it has also created new targets for investors loaded with cash. It’s the age-old strategy of abandoning ‘loser investments’ to buy winners, the losers being commercial properties with businesses that don’t need as much space as before the pandemic. Property owners are more likely to walkaway when their equity has been wiped out by lower values. Restaurants and hotels properties are especially vulnerable.

3) Reverse mortgages have new appeal for older Americans because of the super low interest rates, which means more of the equity is available to the home owners since less is going towards the interest. Essentially, a reverse mortgage is like a loan, where the owner sells his property for cash, but continues living in it. This makes retirement more comfortable or even possible with the homeowner having access to his house equity without having to actually sell his home.

4) Stock market closings for – 25 AUG 20:

Dow 28,248.44 down 60.02
Nasdaq 11,466.47 up 86.75
S&P 500 3,443.62 up 12.34

10 Year Yield: up at 0.68%

Oil: up at $43.43 this will

27 July 2020

1) Another indication of the contraction of the oil business is the oil services company Schlumberger who cut 21,000 jobs or about one fifth of its 105,000 global employees. This is a direct result of an expected 25% drop in the number of oil wells drilled worldwide. Revenues fell 58% from last year for north American operations. The world wide cornavirus crisis caused a massive drop in oil demand, which collapsed the price of oil.

2) Boeing aircraft is facing another trouble, this time with their older Boeing 737 jets. The FAA was warned of corrosion which could cause dual-engine failure, and has ordered inspections. The corrosion problem is a result of hundreds of aircraft now in storage that have been idled because of the drop in air travel from the virus. The order requires aircraft that have not been operated for a week or more must be inspected which will impact about 2,000 aircraft. The corrosion is in engine valves, which has caused single-engine shutdowns which resulted from engine bleed air valves being stuck open.

3) Junk bonds are back again, but are packaged in a format met to appeal to investors, avoiding their seamy 1980s era reputation. Low interest rates driven by the Federal reserve is encouraging companies to borrow, which has lead to a record $51.5 billion dollars worth of junk bonds issued in June. Junk bonds are bonds with high yields (interest rates) but having a lot higher risk. The high risk comes from companies fiscal ability to pay out the bond on maturity or dividends. In a recessionary environment awash in cheap money, a troubled company can collapse under the weight of their debt. But extensive use of junk bonds pose the same dangers of the mortgage backed securities in 2008 with massive failing of businesses pulling the already fragile economy down.

4) Stock market closings for – 24 JUL 20:

Dow 26,469.89 down 182.44
Nasdaq 10,363.18 down 98.24
S&P 500 3,215.63 down 20.03

10 Year Yield: up at 0.59%

Oil: up at $41.34

22 July 2020

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

13 July 2020

1) Robert De Niro, the world famous actor, has had his personal finance’s badly hit by the coronavirus pandemic. He’s been forced to cut the credit limit of his ex-wife from $100,000 to $50,000 a month because of his cash flow problems. His restaurant and hotel chain, the Nobu and The Greenwich Hotel, have had huge losses over the past few months. Additionally, his earnings from the movie “The Irishman” have almost dried up. It’s reported that the actor will be lucky to make $7.5 million this year. Both the restaurant chain and hotel have been closed or partially closed for months with next to no income. The Nobu lost $3 million in April and $1.87 million in May, with De Niro forced to borrow money to pay investors $500,000 on a capital call.

2) The online retailer giant Amazon is requiring employees to remove the Tik Tok application from their phones if their device accesses Amazon email because of security concerns. Tik Tok is a video sharing app which has become the most popular social media apps in the world. But government officials and business leaders are becoming wary of the Chinese owned company. The U.S. military has already banned using Tik Tok because of threat of spying by the Chinese. A new privacy feature in iOS 14 revealed Tik Tok was accessing users’ clipboard content despite promises by the Chinese to discontinue the practice last year.

3) An underwater or upside-down mortgage occurs when the home value is lower than the mortgage. While not common, this occurs when home values decline leading to owing more than the current house value and therefore having negative equity. Factors which cause home values to rise and fall are interest rates, high rates of foreclosures and short sales in your area, and natural disasters. Underwater mortgages usually occur during an economic downturn where home values fall off. One way to become up-side down is when secondary financing (home equality loan) equals more than 100% of the home value.

4) Stock market closings for – 10 JUL 20:

Dow 26,075.30 up 369.21
Nasdaq 10,617.44 up 69.69
S&P 500 3,185.04 up 32.99

10 Year Yield: up at 0.63%

Oil: up at $40.62

3 July 2020

1) The aircraft manufacturer Boeing Aircraft is discontinuing production of it’s iconic 747 jumbo jet after a fifty year run. The last 747-8 will be completed in two years. This marks the end of an era of giant airliners with Airbus also discontinuing its A380 production. The number of routes in the world which requires a jumbo jet are few, with airline companies preferring the twin engine aircraft for long range flights. The 747 made its debut in 1970, and went on to rack up 1,571 orders over its production life, a record seconded only by the wide body 777. Boeing has lost 40$ million dollars for each 747 since 2016, with production down to just 6 units a year. The last 747 for passenger service was Air Force One. With air travel curtailed by the Covid-19 crisis, air carriers don’t expect air travel to recover fully until the mid decade, so airlines are culling out aging jetliners and four engine jumbos from their fleets to limit spending.

2) With interest rates near zero, the most used tool for the Feds to stimulate a sagging economy is becoming ineffective in reversing the pandemic induced recession. Therefore, the Feds are considering using quantitative easing or large scale assets purchases. This is where the U.S. central bank buys hundreds of billions of dollars in assets, most of which are U.S. Treasury and mortgage backed securities. By taking bonds (mostly 2 and 10 year Treasuries) off the market it replaces them with cash in the system, meaning there is now more cash available for lending to consumers, businesses and municipalities.

3) The Senate is considering a bill which would punish retailers for refusing cash payments. Retailers have been pushing for electronic payments to reduce the risk of virus contamination from contact of paying cash. The objective of the bill is to prevent disenfranchise of minorities who have limited to no banking access.

4) Stock market closings for – 2 JUL 20:

Dow 25,827.36 up 92.39
Nasdaq 10,207.63 up 53.00
S&P 500 3,130.01 up 14.15

10 Year Yield: down at 0.67%

Oil: up at $40.32

11 May 2020

1) The Money market mutual funds have traditionally been the ultimate haven for investors wanting to preserve capital, but this is increasingly difficult in a zero interest rate environment. The problem centers on having twice as much cash as typical. The money market funds have soared with assets at a record high of $4.77 trillion dollars because of the flight to safety this year by investors. Of that, about 75% of those assets are in Treasury and other government funds perceived as the lest risky and therefor least likely to actually lose value. The U.S. Treasury has issued in excess of $1.5 trillion dollars to fund the stimulus program and the loss of tax revenues. With interest rates near zero, some fund companies are waving management fees in order to preserve returns for clients, otherwise their clients would actually be losing money.

2) The rural department chain store Stage Stores, who predominantly caters to the rural areas and small to mid-size markets, is also experiencing the crunch on retailing. The company’s owners are preparing for bankruptcy , another casualty of the coronavirus pandemic. The chain has about 700 department stores in small towns and rural communities with about 13,600 full and part time employees. The classic retailer JC Penny is reportedly preparing to also file for bankruptcy including plans to permanently close a quarter of its 850 stores. The company missed a $17 million dollar debt payment and is going into default. The cruise ship line Norwegian Cruise Line in Miami has warned the company could go out of business because of the pandemic. The company has $6 billion dollars in long term debt, plus it’s faced with a huge number of clients demanding their money back for cruises already booked.

3) The U.S. Postal Service is reporting a huge loss, a direct result of the coronavirus crisis. The government owned corporation reported a $4.5 billion dollar loss for the first quarter. The USPS anticipates losses for the next 18 months amid steep declines in revenues. They have warned congress that government assistance is required if they are to continue delivering the mail. The congress has authorized the Treasury Department to lend the USPS up to $10 billion dollars as part of the $2.3 trillion dollar stimulus package, but President Trump has threaten to block that aid.

4) Stock market closings for – 8 MAY 20:

Dow 24,331.32 up 455.43
Nasdaq 9,121.32 up 141.66
S&P 500 2,929.80 up 48.61

10 Year Yield: up 0.68%

Oil: up at $26.04

23 April 2020

1) The present unemployment rate is thought to be higher than anytime during the Great Depression, raising the question if the present day recession will last as long as the Depression, which was almost ten years. While some sever recessions have been short lived, usually they are long affairs. Lowering the interest rates is a traditional tool used by the government to counter a recession and stimulate the economy, but interest rates are already near zero when the coronavirus hit, so the government didn’t have its primary tool. Many economist are considering the strategy ‘America is back open for business’ as unlikely to create a huge surge in growth. There are three other major factors to consider- 1) the other world economies are continually pulling America’s down 2) the big mess that oil is in and 3) predictions from several different experts that in the next 15 to 25 years as much as 50% of the jobs will disappear to technology. It will be difficult for employment to return to pre-coronavirus levels if jobs are continually disappearing faster than people are being rehired. One interesting point, a financial analyst is predicting that Disney World, Disneyland and their overseas parks will not be able to reopen until January 2021, and if such a cash rich company is having so much difficulty reopening, how about the multitude of smaller companies with much more limited resources?

2) U.S. automakers are taking the first steps to bring workers back and start manufacturing operations again, but are finding it easier said than done. There are negotiations with the United Auto Workers union, for the manufactures to provide protective gear, frequently sanitize equipment and take worker temperatures to prevent infection of the virus to the union members. As much as workers want to return to a paycheck, there are real fears of catching the virus. Fiat Chrysler has announced May 4 as the gradual restart date, with General Motors and Ford expected to quickly follow.

3) Reports are building that the coronavirus may cause lasting damage to some organs such as the kidneys. There are fears from reports that the virus may cause damage to the heart, lungs and possibly the liver. Furthermore, the blood from Covid-19 patients is having unprecedented blood clotting, evident by blood clots forming while trying to insert IVs or taking blood samples. Internal blood clots can be life threatening, and autopsies are finding such internal blood clots.

4) Stock market closings for – 22 APR 20:

Dow 23,475.82 up 456.94
Nasdaq 8,495.38 up 232.15
S&P 500 2,799.31 up 62.75

10 Year Yield: up at 0.62%

Oil: up at $14.23

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