17 January 2020

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

14 January 2020

1) Ford Motor Company’s sales in China has declined for the third straight year, falling by 26.1%. The company has been trying to revive sales in China after the decline started in 2017 and plans to introduce thirty new models in the next three years, with a third being electric models. General Motors has also experienced a decline in sales of 15% this last year.

2) One of the largest suppliers of parts to Boeing’s 737 MAX, Spirit AeroSystems, is laying off 2,800 workers. Based in Wichita Kansas, will eliminate 20% of its workforce. Smaller layoffs will happen at its facilities in Tulsa and McAlester, with half its annual sales from parts for the 737 MAX. Since last February, Spirit’s stock has fell from a high of $100 a share to $71.50 on news of the layoffs.

3) Expectations are that the U.S. will remove China from its list of currency manipulators two days before the signing of initial U.S. – China trade agreement. Part of the agreement is that both nations will not devalue its currency to gain a competitive advantages of exports. Labeling China a currency manipulator was viewed largely as a symbolic action.

4) Stock market closings for – 13 JAN 20: Stocks are up 495% in the past decade.

Dow             28,907.05    up    83.28
Nasdaq          9,273.93    up    95.07
S&P 500         3,288.13    up    22.78

10 Year Yield:    up   at    1.85%

Oil:    down   at    $58.12

17 December 2019

1) The aircraft manufacturer Boeing Aircraft has announced it is bringing production of the 737 MAX to a temporary halt the first of January. Boeing is America’s largest manufacturing exporter and the largest component of the Dow Jones industrial average, so there are fears that Boeing’s decision will send shockwaves through the American economy. Boeing will redeploy workers on the MAX production line to other projects therefore avoiding layoffs and furloughs. After the aircraft’s grounding nine months ago, Boeing has continually encountered hurdles with domestic and global regulators.

2) Stocks closed at record highs on Monday, their fourth straight gain, a result of the Phase One trade deal between China and the U.S., clearing the way for Wall Street to end a banner year. A further positive note is strong economic data out of China, topping expectations, with American economic data showing positive signs too.

3) For the last few years, sprits distillers have seen explosive growth, a result of a tax cut from the Craft Beverage Modernization and Tax Reform Act. But this tax cut is due to expire on 31 December, resulting in a 400% increase in Federal liquor tax, which would put the brakes on the distilling business. Renewing the tax break is running into congressional dysfunction and partisan fighting over taxes and spending.

4) Stock market closings for – 16 DEC 19:

Dow              28,235.89    up    100.51
Nasdaq          8,814.23    up      79.35
S&P 500         3,191.45    up       22.65

10 Year Yield:    up   at    1.89%

Oil:    up   at    $60.19

16 December 2019

1) The Trump administration has reached a trade deal in principle with China. Reportedly, the United States has offered to cut existing tariffs on Chinese goods by as much as 50%, while also suspending new tariffs that are scheduled to become effective on Sunday. This is a bid to secure a “Phase One” trade deal. The 50% tariff reduction would be on $375 billion dollars of Chinese goods, and $160 billion dollars in goods scheduled to become effective on the fifteenth of December.

2) The natural gas boom has fizzled because of a glut in U.S. gas with sinking profits. Hydraulic fracturing has uncorked a lucrative new source of natural gas supply, with billions of dollars poured into export terminals to ship gas to China and Europe. But the drop in gas prices has caused a bust with energy companies shutting down drilling rigs, filing for bankruptcy protection and slashing the value of shale fields. The supply of gas has far outstripped demand and the over-supply likely to remain for several more years.

3) The number of applications for unemployment jumped to more than a two year high last week, but experts don’t think this signals a coming round of layoffs. Claims are up by 49,000 for a seasonally adjusted 252,000 for the week ending the seventh of December. The previous week, claims had dropped to 203,000, which was a seven month low. In the same period, the government reported adding 266,000 new jobs to the economy.

4) Stock market closings for – 12 DEC 19:

Dow                   28,132.05    up    220.75
Nasdaq               8,717.32    up      63.27
S&P 500              3,168.57    up       26.94

10 Year Yield:    down   at    1.90%

Oil:    up   at    $59.48 +0.30

7 October 2019

1) As part of its restructuring plan, HP announced they will cut about 7,000 to 9,000 jobs, resulting in an estimated savings of about $1 billion dollars. While HP expects to incur labor and non-labor cost of about $1 billion dollars, they expect to generate at lease $3 billion dollars of free cash flow. As of 31 October 2018, HP had world wide employment of about 55,000 workers.

2) Consumer spending has been the bright spot in an economy showing signs of weakening on multiple fronts, in particular manufacturing. Economists worry if consumer spending will continue to prop up the economy, saying that the up coming Christmas season will be a test. Issues such as trade, interest rates, global risk factors and political rhetoric are where confidence can be eroded by deterioration of these items.

3) The new Costco in Shanghai China reports membership of more than 200,000 as compared to an American average of 68,000 per store. Costco will open a second Shanghai location in early 2021. The first day opening, the store was so swamped with customers, that the doors had to be closed for four hours to limit the number of people inside to safe limits.

4) Stock market closings for – 4 OCT 19:

Dow                  26,573.72    up    372.68
Nasdaq               7,982.47    up    110.21
S&P 500              2,952.01    up      41.38

10 Year Yield:    down   at    1.52%

Oil:    up   at    $53.01

3 October 2019

1) Despite positive last quarters, both General Motors and Ford Motor company’s are concerned about the U.S. auto market taking a turn for the worse. Shares for the two automakers, as well as Fiat Chrysler, fell because of smaller figures for the quarter, although smaller than market analysis projected. There are also concerns of the overall impact from a slowing U.S. and international economies with the impact it would have on new car sales.

2) For the second day, the stock markets nose dived with the Dow losing more than 800 points these last two days. Fears of an economic recession cause the Dow to lose 490 points on Wednesday, with indications that manufacturing is slowing down, and even though manufacturing accounts for only 10% of the economy, investors see this as an indication that the economy is contracting soon with a possible recession in the near future.

3) With the markets in decline, there is a lot riding on the up coming job numbers this Friday. Fears of a coming recession could be reinforced with poor job numbers signaling that a recession is nearing. So far, there is little evidence of layoffs on the rise despite scattered reports that more companies are cutting jobs.

4) Stock market closings for – 2 OCT 19:

Dow           26,078.62    down    494.42
Nasdaq        7,785.25    down   123.44
S&P 500       2,887.61    down     52.64

10 Year Yield:    down   at    1.60%

Oil:    down   at    $52.47

9 July 2019

1) America now has such a surplus of natural gas, that it’s being burned off instead of sold and used. The problem isn’t a lack of a market to sell to, rather it is insufficient distribution infrastructure. There isn’t enough pipeline capacity to get the gas from the oil fields to customers. In West Texas, enough gas is burned off each day to fuel every house in Texas. Natural gas prices are negative in some areas as producers pay people to take the gas off their hands.

2) The international banking giant Deutsche Bank is getting out of the investment banking by closing its equities business. This restructuring will result in posting a $3.1 billion dollar loss for the second quarter and an overall loss of $8.3 billion dollar into 2022. Additionally, there will be a loss of 18,000 jobs or one fifth of their labor force.

3) The summer labor force of teenagers is shrinking as American youth opt for summer school and extracurricular activities. Only about 40% of highschool age kids are working during their summer vacations, compared to more than 60% in the twentieth century. This leaves businesses with a dilemma of find enough workers, especially those business which are more active in the summer months and need that extra short term labor boost. Much of this shift is because of increased emphasis on education for the young, who opt for summer school and summer college prep programs instead of earning some pocket money.

4) Stock market closings for- 8 JUL 19:

Dow         26,806.14    down    115.98
Nasdaq      8,098.38    down      63.41
S&P 500     2,975.95    down      14.46

10 Year Yield:    down   at    2.03%

Oil:    down   at    $57.54

3 July 2019

1) The U.S. economy has entered its 121st month of economic growth setting a new record. Some experts are saying the real economic recovery may only be in its infancy. It’s just this last year that the gross domestic product caught up with estimates of its potential. Periods when GDP exceed potential are when workers typically enjoy the greatest wage gains. There are concerns of a changing environment with global trade disputes and other risks slowing down the economy.

2) Another daily newspaper has announce it is closing down, in what this year has been a rash of daily newspaper closing as well as massive layoffs. The Vindicator of Youngstown Ohio, which just celebrated its 150th anniversary, will cease publication the end of August, with 144 people losing their jobs. Virtually all daily newspapers have had deep cuts in staff these last couple of years, giving credence to the prediction that all the daily newspapers in America will be gone in ten years, displaced by newer mass media technologies.

3) The Payless ShoeSource is going out of business, closing all of its 2,500 retail stores. Once the largest and most successful family owned business in the country, the chain is succumbing to competition from big-box stores and on-line retailers. Founded in the 1960s, its demise could be the largest retail liquidation in history. Payless strategy uses customer self help allowing a minimal labor force of one manager and a couple of cashiers.

4) Stock market closings for- 2 JUL 19:

Dow               26,556.14    up    19.32
Nasdaq            7,958.05    up    45.06
S&P 500           2,926.73    up    12.95

10 Year Yield:    down   at    1.98%

Oil:    up   at    $56.66

1 July 2019

1) Consumer spending increased in May as well as prices creeping up too. Both point to a slowing economic growth and benign inflation pressures. These two facts gives the Federal Reserve more reason to cut interest rates next month. Inflation is under the 2% target for this year with a projected 1.5% verses 1.8% originally expected. Consumer spending is about two thirds the U.S. economy.

2) Consumerism is changing fast, with a push to ‘no cashier checkouts’. Amazon Go stores are pushing the technology where sales payment is made automatically just by picking out items and walking out the door. E-commerce and on-line shopping continue their assault on traditional brick and mortar stores. Another strategy is showrooms in place of stores that allow the customer to try out products prior to purchasing them. Finally, drone delivery allows getting your purchases at home in less time than it takes to drive to and from a store. All these new technologies are coming together with increased profits by reducing labor cost.

3) The weekly jobless claims has increased more than expected, although there is no sign of significant layoffs as the economy slows down. Unemployment claims were 227,000 up by 10,000. The economy is slowing with manufacturing sliding down and the trade deficient widening as consumer confidence ebbs.

4) Stock market closings for- 28 JUN 19: Results from bank stress test edged markets up. Best June performance since 1938.

Dow            26,599.96    up    73.38
Nasdaq         8,006.24    up    38.49
S&P 500        2,941.76    up    16.84

10 Year Yield:    down   at    2.00%

Oil:    down   at    $58.20

23 May 2019

1) British Steel, Britain’s second biggest steel maker, collapsed on Wednesday. This leaves 5,000 jobs directly at risk, while also threatening another 20,000 at suppliers. The company had been seeking a $95 million dollar loan to cover losses suffered because of European orders lost from the uncertainty of Brexit. European steel manufactures have been under pressure from Chinese steel manufactures, with Europe taking antidumping measures against China.

2) The collapse of airline Wow Air is having a detrimental effect on Iceland’s economy. The airline had turn tourism into Iceland’s major economic boom which pulled Iceland out of its financial collapse over a decade ago. In addition, Iceland has suffered a disastrous fishing season. With Wow Air out of business, tourism is expected to drop dramatically.

3) The Dollar General store chain is making its millions of profit via catering to those in the lower economic strata. About 57% of Dollar General’s customers come from households of less than $49,000 yearly income, with 30% less than $25,000. The company has been able to sidestep the recent meltdown of retailing that has ravaged other big retailers, despite having a minimum of e-commerce.

4) 22 MAY 19 Stock market closings:

Dow             25,776.61    down    100.72
Nasdaq         7,750.84     down      34.88
S&P 500        2,856.27     down        8.09

10 Year Yield:    down   at    2.39%

Oil:     down   at    $61.32