1 July 2020

1) The credit worthiness of automakers has been lowered by Moody’s Investors Service, downgrading about $130 billion dollars in global automakers’ debt. Nine out of 22 global car makers have had their ratings lowered. General Motors Co. has a Baa3 rating for unsecured notes, the lowest investment grade rating and has a negative outlook. Ford Motor Co.’s senior unsecured debt is rated at Ba2, which it two notches below investment grade and also has a negative outlook. Thirteen of the automakers were not downgraded because of their better operating profiles and liquidity, but 75% have a negative outlook. World automakers were having troubles before the pandemic, but now are facing more declining auto sales and low prospects for near term improvement.

2) China has adopted a national security law that allows Beijing to override Hong Kong’s judicial system. The intent of China is to strangle and suppress political opponents in Hong Kong and subjugate the freedom of its citizens. This is another example of the re-emergence of Red China as a totalitarian state, and therefore represents a threat to surrounding nations. It strips the territory of autonomy promised under the handover agreement with Britain, with possible retaliation from America. The move by China has resulted in visa restrictions on officials from both sides, and a threat of future retaliation measures coming.

3) Fears of another virus pandemic have surface with the discovery of a new swine flu virus in Chinese pigs. The new strain, called G4 H1N1 has many of the same characteristics of H1N1 that caused the 2009 global pandemic, and can bind to, infect and replicated in tissue cells located in human airways. While not an immediate threat, the virus bears watching, but on top of the Covid-19 pandemic, the problem of controlling either outbreaks would be multiplied, especially with the now overstretched health care and hospital systems.

4) Stock market closings for – 30 JUN 20:

Dow 25,812.88 up 217.08
Nasdaq 10,058.76 up 184.61
S&P 500 3,100.29 up 47.05

10 Year Yield: up at 0.65%

Oil: up at $39.86

27 March 2020

1) The $2 trillion dollar coronavirus relief bill has been passed and Treasury Secretary Steven Mnuchin said the people should receive cash payments within three weeks. The IRS has been tasked with distributing the monies, but the agency is hobbled by obsolete technologies such as 1960’s era computers, limited staff and a small budget. So there are questions if the agency can get the job done in a timely manner, let alone in three weeks. Experts say its more like a matter of months rather than weeks for Americans to receive their check.

2) Almost 3.3 million Americans have applied for unemployment benefits this last week, more than quadruple the previous record set in 1982. This is a result of the wide spread economic shutdown from the coronavirus pandemic. This rate of layoffs is expected to accelerate as the U.S. economy sinks into a recession with the collapse of revenues for a wide range of businesses. Economist predict the nation’s unemployment rate could approach 13% by May.

3) Gold has traditionally been a panic investment which people and nations buy to protect the value of their money. The worldwide panic over the coronavirus coupled with a flood of stimulus by central banks has ignited demand for gold to store wealth. But the gold market is running into difficulties in buying. Stored in high security vaults, government mandated shut downs have left access iffy. Also, refiners of gold have been forced to close because of the virus. Transporting gold is done via airlines, but the sharp drop in air service has also made transport of the metal difficult. All these factors have put a squeeze on gold futures.

4) Stock market closings for – 26 MAR 20:

Dow 22,552.17 up 1351.62
Nasdaq 7,797.54 up 413.24
S&P 500 2,630.07 up 154.51

10 Year Yield: down at 0.81%

Oil: down at $23.18

19 February 20

1) Negative yielding debt are bonds with an interest rate below 0%. Since the peaking of the U.S.- China trade dispute, a third of all investment grade bonds have rates below 0%, for a total of $17 trillion dollars. This forces portfolio managers into riskier assets to deliver returns. But because the global economy is not growing any more, the bonds may not be saleable.

2) The Boy Scouts of America filed for bankruptcy protection under Chapter 11 in the face of 275 abuse lawsuits and another 1,400 potential cases to come. The organization has already paid out more than $150 million dollars in settlements and legal cost. Its strategy is to contain financial damage of abuse scandals and emerge as a more sustainable organization.

3) The luxury automaker JLR (Jaguar Land Rover) is facing halts in their UK production plants because of supply chain problems from the deadly coronavirus in China. The company is racing to prevent plant closures by the end of the month, going to such extreme measures as flying critical parts out of China in suitcases. Fiat Chrysler’s European plants are facing similar closures from parts shortages.

4) Stock market closings for – 18 FEB 20:

Dow 29,232.19 down 165.89
Nasdaq 9,732.74 up 1.57
S&P 500 3,370.29 down 9.87

10 Year Yield: down at 1.56%

Oil: up at $52.10

18 February 2020

1) In order to help contain the Chinese coronavirus outbreak, China’s central bank has started deep cleaning and destroying potentially infected cash. The virus appears able to survive on surfaces for many hours which is why buildings in affected areas are regularly disinfecting elevator buttons, door handles and other commonly touched surfaces. Since cash money changes hands multiple times in a day, it too is a potential media to transmit the virus. The cash is disinfected with ultraviolet light and high temperatures, then stored for seven to fourteen days before returning to circulation.

2) The price of wine is expected to drop to its lowest levels in five years, in part because of a surplus of grapes in California. Additionally, there is a decreased demand for wine, with the lower prices lasting up to three years. Vineyards began planting thousands of acres of new vines in 2016, plus more efficient harvesting methods have combined to increase the supply of grapes.

3) GM (General Motors) has decided to pull out of Australia, New Zealand and Thailand as part of their strategy to exit markets that don’t produce adequate returns on investments. The car maker has 828 employees in Australia and New Zealand and another 1,500 in Thailand which will be eliminated.

4) Stock market closings for – 17 FEB 20:

Dow 29,398.08 down 25.23
Nasdaq 9,731.18 up 19.21
S&P 500 3,380.16 up 6.22

10 Year Yield: down at 1.59%

Oil: down at $51.92

5 February 2020

1) As the coronavirus continues the slowing of China’s economy, coupled with a general slow down in world economies, world oil prices are dropping. China is the world’s largest oil importer, with speculation that if oil continues to drop, America can expect a drop in gasoline prices, possibly going below $2 a gallon.

2) The credit card company Visa is planning major changes to the rates U.S. merchants pay to accept its cards. These changes are the biggest changes in a decade, with Visa hoping to encourage people to abandon checks and cash. Higher rates are coming for transactions on e-commerce sites, while certain retailers such as real estate and education will see lower rates. Retailers have long complained about the $100 billion plus dollars they spend each year to accept electronic payments.

3) Ford Motor Co. has posted a fourth quarter loss and provided weaker than expected 2020 forecast due to continued higher warranty cost, lower vehicle volumes, lower results from Ford Credit branch, and higher investment in future transportation. This is coming at a time when Ford and other automakers are making huge investments in producing a line of electric cars and trucks. For the fourth quarter, Ford is reporting a net loss of $1.7 billion dollars, or 42 cents a share. Revenue for the fourth quarter was down 5% to $39.7 billion dollars.

4) Stock market closings for – 4 FEB 20:

Dow                   28,807.63    up    407.82
Nasdaq                9,467.97    up    194.57
S&P 500               3,297.59    up      48.67

10 Year Yield:    up   at    1.60%

Oil:    down   at    $49.45

20 January 2020

1) A year ago, Boeing Aircraft had record revenues of over $100 billion dollars, anticipating delivery of record number of aircraft including the 737 MAX jetliner. With the grounding of its 737 MAX, that has been reversed with Boeing posting losses from massive pay outs as well as lost revenues as undelivered aircraft sit waiting in its parking lots. Boeing may ultimately have $20 billion dollars in cost from the 737 MAX problem. Boeing’s problems has been a bonus for China’s airline manufacturing giving them a big advantage to gain market share.

2) India is resisting Amazon’s efforts to expand into India with an investment of $1 billion dollars, fearful of predatory business practices. The investment would bring Amazon India investment up to $6.5 billion dollars. But Amazon is meeting growing resistance, first with an Indian anti-trust investigation by Indian regulators, then protest from a confederation of Indian traders and organizations.

3) As hiring surged in November, the employment market got tighter, job openings plunged to their lowest level in nearly two years. The total vacancies is down by 561,000 to 6.8 million for the month. This is the lowest since February of 2018, the trend telling the economy has finally reached full employment. The biggest drops came in retail and construction.

4) Stock market closings for – 17 JAN 20: All three exchanges closed on record highs.

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:    up   at    $58.81

30 September 2019

1) The White House is considering putting limits on U.S. investment in China, which would aggravate the protracted trade dispute between the two largest economies in the world. Advisers are discussing ways to limit U.S. investors’ portfolio flows into China, including limiting all U.S. investment in China. One possible method being considered is to delist Chinese companies on the U.S. stock exchanges thereby limiting American’s exposure to the Chinese market.

2) Alexandria Ocasio-Cortex, the New York Representative, announced a comprehensive anti-poverty bill that would provide new protections for tenants, children, immigrants and other Americans who are increasingly vulnerable to the high cost of inequality. One part of the bill is a tenant rights bill which would significantly expand federal housing policy. This would include a cap on annual rent increases or rent control.

3) General Motors has reversed itself and reinstated health care benefits to its striking workers, as a result of sever criticism from politicians and social media. Normal procedure in strikes is for the cost of health care to shift from the company to the union. The strike of 49,000 GM workers has shut down 30 GM plants across the nation for nearly two weeks. The GM plant in Mexico has been forced to close due to parts shortages as a result of the strike.

4) Stock market closings for – 27 SEP 19:

Dow              26,820.25    down    70.87 
Nasdaq           7,939.63    down    91.03
S&P 500          2,961.79    down    15.83

10 Year Yield:    down   at    1.68%

Oil:    $56.18

9 September 2019

1) Several state attorney generals will investigate Facebook for possible stifling competition and putting users at risk. This comes after reports that Google will face antitrust investigations from state attorney generals. The investigations will center on actions that endangered consumer data, reduced the quality of consumers’ choices or increased the price of advertising. States investigating include New York, Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee and the District of Columbia.

2) President Trump unhappy at GM for decision to close four of its domestic auto plants. General Motors, which was once the giant automaker in Detroit, is now one of the smallest. GM has gone from 33 plants in the US to 29, but has an additional 27 manufacturing plants in China. Presently, GM sells more cars in China than it does in America. This accounts for $16 billion dollars in profit for GM.

3) The American consumer is carrying the U.S. economy in last quarter. The personal expenditures rose last quarter while business and residential investment, net exports and inventories have declined. There are concerns that consumers may rein in spending from fears of economic future. Global commerce is slowing, partly in response to the trade war, and without strong consumer spending it’s hard to see alternate sources of economic growth.

4) Stock market closings for – 6 SEP 19:

Dow               26,797.46         up     69.31
Nasdaq            8,103.07    down    13.75
S&P 500           2,978.71          up      2.71

10 Year Yield:    down   at    1.55%

Oil:     up   at    $56.73

3 September 2019

1) Gold is renowned for being a panic investment, something that investors move their money into when fearing that sever financial troubles are coming. Investors are worried about political uncertainty that plagues world markets, and are pushing gold prices up to record highs. Real yields in the US have fallen to about zero which makes gold especially appealing as a safe haven.

2) The Price of oil falls as the trade war deepens stoking concerns over growth. Principal cause for concern is the trade war and the deterioration of manufacturing in China. Oil prices is considered a gage of economic health because slower growth means there will be less demand for oil, so prices drop. Furthermore, since oil is bought and sold as futures commodities, the price reflects anticipation of near future economic state of the world.

3) Owners of 98,000 Volkswagen AG U.S. vehicles which had fuel economy labels overstating efficiency will ask a U.S. judge for $26 million dollars. The EPA said the German automaker must forfeit greenhouse gas emissions credits and lower the fuel economy ratings on these vehicles after using software to falsify fuel efficiency ratings.

4) Stock market closings for – 2 SEP 19:

Markets closed for holiday.