24 September 2020

1) California’s annual bout of fires has just added a new dimension to the state’s history. The Creek Fire has become the state’s single most massive wildfire in history by burning 286,519 acres in Fresno and Madera counties. Ignited on September the fourth, it has so far destroyed 855 structures and damaged 71 others. There are now 50 major fires across the West coast this week, so far claiming 26 fatalities, while consuming 2.2 million acres. There are forty crews with 3,100 personnel who are fighting the fires, but only about 32% of the Creek fire blaze has been contained. No estimates yet of just how much monetary damages the state has suffered.
2) As the remnants of Sally continue moving across the southeastern United States, the first estimates are in for the damages. Sally made landfall as a category 2 storm near Gulf Shores, Alabama bringing a storm surge that caused major flooding in places like Pensacola with several feet of water. Damages are expected to cost upwards of $2 billion dollars. NOAA’s aerial imagery is being evaluated to more accurately determine the extent of flooding and damages in Florida and Alabama. Major beach erosion is also apparent too.
3) Tesla’s much touted Battery Day appears to have disappointed most of the average people, with Tesla (TSLA) stock tumbling down 8.6% in midday trading, on track for its lowest close in two weeks. Investors fear that promised new batteries will take years to fully develop and be available for automobiles. Tesla unveiled a new battery design that is 56% cheaper and more efficient for use in automobiles, which should be a big step towards the viability of fully electric cars. Additionally, the company announced a future robot car for $25,000 that will be fully autonomous, and available in the next three years. The new battery technology will enable sleeker affordable cars that can travel much longer distances on a single charge. Investors had expected announcements of two big innovations, the first one is a ‘million mile’ battery that would be good for ten years or more, as well as a cost reduction, a target specified as dollars per kilowatt-hour, which would finally drop the price of an electric vehicle below that of a gasoline car.
4) Stock market closings for – 23 SEP 20:
Dow 26,763.13 down 525.05
Nasdaq 10,632.98 down 330.65
S&P 500 3,236.92 down 78.65
10 Year Yield: up at 0.68%
Oil: up at $39.59

22 September 2020

1) Bad news from the conronavirus continuing to pile in with a just-released report that 60% of the small businesses that have closed because of the virus, and will never open again. Of nearly 163,700 businesses that have closed since March 1, about 98,000 say they’ve shut their doors for good. This is a 23% increase from July. About 32,100 of these businesses are restaurants, with close to 19,600, or about 61%, closing permanently. The National Restaurant Association says 100,000 restaurants have closed, either permanently or long-term, with a lose of $240 billion in sales this year. Restaurants operate on razor-thin margins even in the best of times, and so are less likely to make it through the disruption. Consumers are spending less on dining-out, while the disposable income for Americans is shrinking. Retail stores are also struggling with about 30,400 shopping and retail establishments closing since March 1, and of these 17,500, or 58% of them are permanent.

2) Many of the workers now working at home, are engaged in day trading to counter boredom for both entertainment and profits, but with growing fears that this trend could end badly. Most of these individual investors do not have the wealth, time or temperament to make money and sustain losses for any period of time. Major companies can have big rallies on the market, only to suddenly turn around with big losses. These casual investors are competing with large investors who have technology that allows them to trade on information before most people have time to read about it. In the long run, small investors, with about 30 stocks, have only a 40% chance of doing as well as the overall market.

3) The incredibly low interest rates have caused a rush of home sales in 2020 as people take advantage of the low interest rate, and in turn all these new mortgages have flooded the bond market as investors scoop them up. But it’s not just home sales, because 69% of the new mortgages are refinances of old mortgages. Many of these mortgages are then sold to government sponsored agencies such as Fannie Mae, Freddie Mac and Ginnie Mae, who then repackage the loans into mortgage backed bonds or securities. These bonds often have higher returns than traditional Treasurys. Additionally, the bonds are often backed by government guarantees meaning there is little risk to the investors.

4) Stock market closings for – 21 SEP 20:
Dow 27,147.70 down 509.72
Nasdaq 10,778.80 down 14.48
S&P 500 3,281.06 down 38.41
10 Year Yield: down at 0.67%
Oil: down at $39.72

18 September 2020

1) The batteries in electric cars don’t last forever, so therefore they must be replaced from time to time. That leaves defunct batteries which must be disposed of. One company engaged in the recovery and recycling of electric vehicle batteries, as well as other lithium-ion batteries and e-waste, is Redwood Materials run by former Tesla executive Mr. Staubel. Amazon is investing in Redwood Materials as part of Amazon’s $2 billion dollar Climate Pledge Fund. The retail giant Amazon is a major consumer of batteries including its own growing fleet of electric logistics vehicles. In recycling, the company is already recovering most of the metal, lithium, nickel and cobalt from batteries.
2) Some are calling for publicly owned companies to include ‘climate related risks’, since climate change will have a major effect on a companies’ profits and the value of their assets. Therefore, investors want companies to publish these factors in their annual financial reports in accordance to the guide lines from the International Accounting Standards Board. Accounting standards play a key role in calculation of a company’s profits, solvency and remunerate senior executives. Therefore, this information is relevant when judging a company’s likely prospects.
3) Commercial properties in the Asia-Pacific arena is suffering as investors flee the market. Global investors have reduced their spending on commercial real estate in the Asia Pacific area disproportionately compared with other world areas. The total volume of commercial property acquisitions, such as office, retail and hotels, is about 65% of levels in the last two years. The shift is due in part from the Convid-19 crisis. Another fear is the increasing troubles from China across the realm, as China strives to dominate the world by 2050.
4) Stock market closings for – 17 SEP 20:
Dow 27,901.98 down 130.40
Nasdaq 10,910.28 down 140.19
S&P 500 3,357.01 down 28.48
10 Year Yield: down at 0.68%
Oil: up at $40.96

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

6 August 2020

1) Rocket Companies Inc., the parent company of Rocket Mortgage and Quicken Loans, is trying to raise $2 billion dollars with an IPO (Initial Public Offering) after an initial capital target of $3.3 billion dollars. The reduction in the number of shares offered is believed to be because of push back from investors, who considered the valuation of the company as to high. This is based on the company being more of a consumer based company rather than a technology based company. The downsizing may signal that the IPO market’s rebound is straining as the coronavirus pandemic deepens in America.

2) Entertainment giant Disney has announced that its streaming service Disney+ (pronounced Disney plus) has surpassed 60 million subscribers, which is well ahead of Disney’s target. Disney forecasted having 60 to 90 million subscribers by 2024, fueling speculation that Disney+ has won the first stage of the streaming wars. Netflix presently has 193 million paying subscribers, but with Disney+, which was just launched last November less than a year ago, it’s clear that Disney is very rapidly gaining on Netflix, and liable to be passed by Disney in the near future. More importantly, Disney should reach profitability very soon too, something hard for new streaming services to do.

3) The ‘Services PMI’ index from the Institute for Supply Management, posted its second monthly gain in July. This indicated that despite the rising number of Covid-19 cases, the services economy keeps recovering. There is a continued weakness in the international component of services with worries of how the international economy will eventually effect America’s recovery. Investors remain focused on earnings and hopes of a vaccine to push the economy upwards more. There is still the looming question of how many of the small businesses will survive the pandemic, and therefore how much of the economy will be changed by their demise.

4) Stock market closings for – 5 AUG 20:

Dow 27,201.52 up 373.05
Nasdaq 10,998.40 up 57.23
S&P 500 3,327.77 up 21.26

10 Year Yield: up at 0.54%

Oil: up at $42.20

5 August 2020

1) The FAA (Federal Aviation Administration) has issued a 36 page document detailing the fixes and training that Boeing needs to implement so the 737 MAX can return to commercial service. The document was in the works before the planes were grounded in the spring of 2019, a result of two air crashes. There were few requirements that Boeing management wasn’t already aware of, and it’s considered a milestone in the certification process. The document only applies to 737 MAX aircraft flying in the U.S., and it is expected the changes will be adopted by aviation regulators around the world. Once done, all 737 MAX jets will undergo an operational readiness flight prior to returning each airplane to service. The European Union Aviation Safety Agency is waiting on doing its flight test as the FAA moves ahead.

2) The oil company giant Exxon Mobil Corp., is seeking the dismissal of a climate change lawsuit brought on by the Massachusetts attorney general. The lawsuit alleges that Exxon defrauded consumers and investors by the company’s public position on climate change, that Exxon hid its early knowledge of climate change and misled investors about the projected financial impact of global warming on its business. Exxon claims the law suit amounts to improper retaliation against the company over its views on climate change. The bases for Exxon’s challenge is the state’s anti-Slapp law which prohibits the use of litigation to punish a defendant for statements on matters that are under consideration by a legislative or judicial body.

3) The Department of Labor has come down hard on social investing or EAG, proposing rules that strongly limit such activities for private pension plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). They consider that pension fund investing is not the place to solve the ills of the world, that it is unlawful for a fiduciary to sacrifice return or accept additional risk to promote a public policy, political or any other nonpecuniary goal.

4) Stock market closings for – 4 AUG 20:

Dow 26,828.47 up 164.07
Nasdaq 10,941.17 up 38.37
S&P 500 3,306.51 up 11.90

10 Year Yield: down at 0.52%

Oil: up at $41.53

4 August 2020

1) Tailored Brands, who owns Men’s Wearhouse and Jos. A. Bank, has filed for bankruptcy, becoming the latest retailer to succumb to the pandemic. The Covid-19 has wiped out demand for office attire forcing the layoffs of 20% of its workforce and closing up to 500 stores. Lord & Taylor, one of the oldest department stores in America has also filed for bankruptcy. It has started liquidating 19 of its 38 stores. In the first half of 2020, more than 3,600 companies have filed for bankruptcy, with experts predicting that things are only going to get worse. Retail names such as Justice, Ann Taylor, Lane Bryant, Luck Brand, J.C. Penny, Brooks Brothers, Sur La Table, Neiman Marcus, Tuesday Morning, Tailored Brands, GNC and J. Crew have gone into bankruptcy. Such a large number of retailers in trouble can only signal a fundamental change in the American economy.

2) The airline industry in America is facing a round of layoffs in the near future without additional federal aid to save jobs. The airlines received $32 billion dollars in federal payroll support from the CARES Act, with the condition of no layoffs until 30 September, and the anticipation of air traveling increasing by then. But this hasn’t occurred, so as the end of September approaches, layoffs loom. The airline unions have been pushing for an extension in payroll support to preserve the jobs sector of the airlines. American Airlines and United Airlines warn that more than 60,000 employees risk losing heir jobs when the aid terms expire. Other airlines like Alaska, Sprint and Frontier also warn of upcoming layoffs.

3) The owner of 7-Eleven is buying Marathon Petroleum’s Speedway gas stations for $21 billion dollars in cash. This will increase the present 9,800 convenience store chains by another 4,000. Investors were unnerved by the steep price for the deal, with shares falling nearly 9%. Like many other retailers, the chain has also been hit hard by the coronavirus pandemic, with profits down significantly. Another acquisition that finalized is T-Mobile buying Sprint, with the Sprint brand name disappearing from the American business scene.

4) Stock market closings for – 3 AUG 20:

Dow 26,664.40 up 236.08
Nasdaq 10,902.80 up 157.52
S&P 500 3,294.61 up 23.49

10 Year Yield: up at 0.56%

Oil: down at $40.76

28 July 2020

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

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

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