4 February 2020

1) All ready shaken by the trade war, China is now being racked by the coronavirus, with fears of the virus pushing the Chinese markets down by $393 billion dollars on the first day of trading since the Lunar New Year. This is an 8% drop on the Shanghai composite index, the biggest drop in more than four years. This is despite the biggest cash injection of China’s financial system since 2004. Additionally, commodities contracts have all posted sharp drops, a strong indication of an economic slowdown.

2) The shopping malls are dying as shopping habits of consumers change over to the internet. It’s estimated that 25% of American malls will shut their doors by 2022, and more of the 9,300 retail stores that closed in 2019 were in malls. Mall owners are searching for ways to halt the trend of shrinking retailing in malls, including buying major retail companies such as Forever 21 and Aeropostale.

3) As traditional brick-and-mortar stores continue its slide downwards, a number of companies are considered at risk of bankruptcy this next year. Stores like Neiman Marcus ply their way in red ink, including J. Crew, Francesca’s, Rite Aid, JCPenny, Pier 1, Dressbarn, Destination Maternity, Men’s Wearhouse and Stein Mart. Companies heavy into cloths and fashion ware are the ones struggling the most to avoid the bankruptcy courts.

4) Stock market closings for – 3 FEB 20:

Dow              28,399.81    up    143.78
Nasdaq          9,273.40    up     122.47
S&P 500         3,248.92    up       23.40

10 Year Yield:    unchanged   at    1.52%

Oil:    down   at    $49.91

10 January 2020

1) HP’s board has rejected Xerox’s $33 billion dollar takeover bid, for the same reason as Xerox’s previous offer, that the proposal significantly undervalues HP. Xerox first moved to acquire HP in November, but was rejected because HP stock holders would lose much of their value in the company. HP is a 2015 spinoff of giant Hewlett-Packard who has a market value of $300 billion dollars that dwarfs Xerox’s value of 7.7 billion dollars.

2) Mack Trucks, the manufacturer of large commercial trucks, announced plans to layoff 305 employees, which is about 13% of their payroll. After two years of high volumes of production, marked demand has dropped so the company must adapt to the lower demand. There are expectations of the truck market in America being down 30% this next year.

3) The American consumer continues to shun the traditional big department stores. Despite the monster holiday shopping season, America’s biggest department stores still lost money. This is a trend that has been in progress for several years as typified by Sears’ decline. Department stores such as JCPenny, Kohl’s and Macy’s continue to decline with dropping sales and store closings. Consumers are now going to big box stores and the internet commerce to save money, signaling a fundamental change in American consumerism.

4) Stock market closings for – 9 SEP 20:

Dow              28,956.90    up    211.81
Nasdaq           9,203.43    up      74.18
S&P 500          3,274.70    up      21.65

10 Year Yield:    down   at    1.86%

Oil:    down   at    $59.59

27 December 2019

1) The Permian Basin continues to experience difficulties producing oil, becoming increasingly gassy as drilling slows down. This undercuts profits for producers at a time when investors are demanding better returns. The region has long been plagued with a massive glut of gas which crude producers must sometimes pay to have hauled away or burn in the open air. This problem is intensifying as wells age and fewer new wells are drilled.

2) Oil prices rise to a three month high because of optimism on supply. The stage is set for the biggest monthly gain in almost a year on speculation that supplies are shrinking. Prices are up almost 12% for this month and are now higher since the mid-September high. The U.S. stockpiles have dropped 7.9 million barrels this last week, while Russia cut their crude output with a reduction of 240,000 barrels a day for December. Oil has surged about 36% for this year.

3) American retailers continue to struggle while some are actually thriving. The once giant Sears has fallen into bankruptcy having closed over 3,000 stores. Other major retailers in decline are Blockbuster Video, Radioshack, Victoria’s Secret, the Gap, JCPenny, Toys R Us and Borders Books. Retailers such as TJ Maxx, Amazon, Walmart, Target, Dollar General, Costco and Ross have flourished in the peril waters of American consumerism.

4) Stock market closings for – 26 DEC 19:

Dow                28,621.39    up    105.94
Nasdaq             9,022.39    up      69.51
S&P 500            3,239.91    up      16.53

10 Year Yield:    down   at    1.90%

Oil:    up   at     $61.68