29 June 2020

1) Microsoft is permanently closing almost all of its stores across the nation and world. Just like other retail outlets, Microsoft had to shutter all its stores due to the coronavirus pandemic. There are 83 stores worldwide of which 72 are in the U.S., however only four will remain open in the world. The stores allowed people to try out software and hardware offered by Microsoft including laptop computers. No news if there will be any layoffs or how many, the stores are moving to the digital realm, which will absorb many of the store employees. The physical stores generated negligible retail revenue for Microsoft.

2) As oil prices reach the magic $40 a barrel, shale fracking is starting to reawaken to pump oil. The number of fracking crews had bottomed out at 45 last month, but is now back up to 78 this last week. There had been roughly 400 fracking crews before the decline in oil prices started. The drilling of new oil wells remains on hold with a 70% slump, making for the lowest number of active drilling rigs since 2011.

3) Nike is warning its employees of coming layoffs, but these layoffs will not effect store employees. The layoffs are expected to come in two waves, the first this July followed in the fall with a the second wave. These layoffs come amid reports of poor earnings, with sales down 38% giving a net loss of $790 million dollars when the Convid-19 virus forced closing of most of its stores. This compares with nearly a billion dollars in earnings for the same time last year. Nike has 76,700 employees, but it’s not know yet how many will lose their jobs. All wasn’t bad for Nike, with their online sales skyrocketing 75%, with e-sales accounting for 30% of Nike’s total business.

4) Stock market closings for – 26 JUN 20:

Dow 25,015.55 down 730.05
Nasdaq 9,757.22 down 259.78
S&P 500 3,009.05 down 74.71

10 Year Yield: down at 0.64%

Oil: down at $38.16

19 June 2020

1) Kroger, the largest supermarket chain in the U.S., has been surprised by a 92% gain in its e-commerce sales. The giant has lagged behind its competitors like Walmart, Amazon and Target with e-commerce, but the coronavirus has provided the motivation for people to use the service to stay at home and do their cooking during the pandemic. The grocer has been working hard to expand into the electronic marketing area, including working with a robotics company for automated ‘stores’ to fill orders for delivery. With the pandemic changing shopping habits of Americans, now is the time for Kroger to establish its position for the future. The question now is can Kroger maintain this increased sales of e-commerce as the virus crisis subsides. Kroger had $41.55 billion dollar revenues compared with $37 million a year ago.

2) Looking back at the 100 days of the Convid-19 crisis and shutdown, we find the American economy has endured an extraordinary upheaval. Americans have endured over 2.1 million people suffering with Covid-19 which resulted in 117,000 deaths. The closing of non essential businesses sent the economy crashing into a deep recession, with record numbers of layoffs and a skyrocketing unemployment rate. This in turn made for record drops in household spending and manufacturing. Businesses such as automobile manufacturing, the airlines and hotels came to a near complete standstill. Small businesses such as restaurants were stopped dead in their tracks with fears than a large portion would not survive. The feds cut the interest rates to near zero, while pumping in trillions of dollars to stabilize the economy and support businesses until recovery starts.

3) Unemployment claims for last week were 1.5 million more people, up from the expected 1.3 million. This is the thirteenth straight week that claims were above one million. The elevated claims continue even as the country starts to open up and resume business. The real question is how many of those jobs will return and how many will be replaced by technology. Times of economic stress is when automation makes significant inroads as companies look for ways to cut cost to survive.

4) Stock market closings for – 18 JUN 20:

Dow 26,080.10 down 39.51
Nasdaq 9,943.05 up 32.52
S&P 500 3,115.34 up 1.85

10 Year Yield: down at 0.69%

Oil: up at $38.84

4 June 2020

1) The stock market continues to climb, with some saying this signals the end of the recession. The S&P 500 has a return of 37.7% over the past 50 trading days, which is the largest 50 day rally in history. This rally is attributed to the quick response of the Federal Reserve, with a record $2 trillion dollar federal stimulus package. Another factor is the unlimited asset purchases by the Federal Reserve. While the shutdown depressed retail and airlines businesses, other parts of the economy saw a boost, such as Netflix, Amazon and Facebook. But there is still the record high of over 40 million workers idled by the pandemic, while the weakening in the Chinese’s economy coupled with the tensions between China and America could have a telling effect to the economic recovery.

2) There are fears of another round of layoffs in the later part of 2020, amid questions of where the economy will go in the next six to twelve months. Businesses are now reluctant to expand and hire new people, and may decide to contract thus being better able to weather economic hard times. There is also the unspoken problem of continued automation taking jobs as AI (Artificial Intelligence) and automation that experts predict will continual to sap jobs for the next decade. Automation gives companies an added advantage in surviving when the economy slows down, but a second wave of layoffs may trigger that slowdown.

3) The giant movie theater chain AMC has announced they doubt they can remain in business after the effects of the coronavirus shutdown. The company has problems with their liquidity, their ability to generate revenue and the timeline for reopening its theaters. The chain expects to lose $2.1 to $2.4 billion dollars for the first quarter, with the second quarter to be even worst. With all its theaters closed down, AMC is generating zero revenues. The major problem in reopening is having enough cash for operations until cash starts coming in again, and there is still questions of when theaters will be able to open again, especially if there are flare-ups of the virus.

4) Stock market closings for – 3 JUN 20:

Dow 26,269.89 up 527.24
Nasdaq 9,682.91 up 74.54
S&P 500 3,122.87 up 42.05

10 Year Yield: up at 0.76%

Oil: down at $36.75

3 June 2020

1) The economic activity for the second quarter is down, while more than half the GDP (Gross Domestic Product) is now showing a 52.8% drop. Consequently, the personal consumption expenditures is expected to fall 58.1%, which makes up 68% of the nation’s GDP. The current recession is unique in that it was lead by the services sector instead of the traditional manufacturing or construction sectors.

2) Because of the Convid-19 shutdown, the retail industry has a mountain of apparel stock piling up in stores, distribution centers, warehouses and shipping containers. Those retailers now face the difficult decisions of what is best to do with this overstock and choked supple chain. Their options are to keep it in storage, hold sales, offload to ‘off price’ retailers who then sell at deep discounts or move it to online resale sites. None of these options are ideal, but they do limit the damage to company’s bottom line. For apparel that isn’t so fashion sensitive, such as underwear, t-shirts and chinos, warehousing for a short time to wait for demand to return is a viable option. But storing inventory cost money. The opposite strategy is to hold sales and sell stock to the off-price retailers. The ‘in store’ sales is usually better because dumping in bulk to the discounters usually brings only pennies on the dollar for retailers. This amounts to huge losses for the retailer. The most lucrative option is moving merchandise to online re-sellers who take a commission on sales, however this is largely only open for high end brands. No matter what options a retailer takes, it all spells out large losses for them because of the pandemic.

3) Southwest Airlines is offering buyout packages and temporary paid leaves to employees in an attempt to ensure survival, in anticipation of a slow recovery. The airline company has not imposed any layoffs or furloughs in its 49 year history, and while overstaffing isn’t tied to 100% capacity levels, it has never faced the drastic drop in passenger service as now seen with the pandemic. Therefore, Southwest if seeking to voluntarily reduce workforce as softly as possible.

4) Stock market closings for – 2 JUN 20:

Dow 25,742.65 up 267.63
Nasdaq 9,608.38 up 56.33
S&P 500 3,080.82 up 25.09

10 Year Yield: up at 0.68%

Oil: up at $36.90

20 May 2020

1) Just three months after filing for bankruptcy, the Pier 1 retail chain is closing down all its retail store outlets as soon as possible. This drastic action is blamed on store closure from the pandemic and failure to find a buyer. After modeling several options for remaining in business, they found liquidation was the best option to maximize Pier 1’s assets. Plans are to sell its remaining inventory, website and intellectual property. Once a large seller of home goods, the company has suffered severely from online retailers such as Amazon and Wayfair, while big box stores such as Target and Walmart have increased their marketing of home goods products. The fifty-eight year old retailer joins several other big name store chains now in bankruptcy, in what appears to be a fundamental change in consumerism.

2) The damage to employment continues to spread, starting with 1 million public sector workers possibly losing their jobs. All governments are seeing a drop in revenue from businesses being shut down because of the coronavirus. With limited money- cities, counties and states are facing layoffs of their workers until things improve. Restaurants have loss 417,000 jobs to closure. The low wage workers account for 86% of job losses, while over two hundred hospitals have laid off staff because of elective procedures being suspended to accommodate Covid-19 patients, because hospitals have experienced cash crunches.

3) The ride sharing service Uber has had steep revenue losses from the pandemic shutdown, and so announced another 3,000 layoffs to bring their total layoffs to 6,700 or 25% of its workforce. It’s anticipated this action will save the company more than $1 billion dollars annually. Additionally, the company is reorganizing into transportation (Uber Works) and food delivery (Uber Eats).

4) Stock market closings for – 19 MAY 20:

Dow 24,206.86 down 390.51
Nasdaq 9,185.10 down 49.72
S&P 500 2,922.94 down 30.97

10 Year Yield: down at 0.71%

Oil: down at $31.86

15 May 2020

1) There are growing fears of another economic bomb about to go off. A popping of the housing bubble, much like the 2008 bubble collapse of the housing market, may happen as early as July. Last time, the collapse of the housing market played out over four years, but for the pandemic, the rate could be much faster, as is being seen with the stock market. Home sales have been languishing, especially with the treat of the virus and people reluctant to let strangers tour their homes with possible infections. It is estimated that 15% of homeowners will fall behind on their mortgages and this would mean more delinquencies than during the Great Depression. This in turn is causing a tightening of lending standards which could continue even after the crisis subsides. All this makes for a bubble waiting to burst.

2) Delta Air Lines Inc. has announced they plan to retire their fleet of eighteen Boeing 777 jumbo jets, and will replace them with Airbus SE aircraft. This constitutes another major financial blow to the beleaguered aircraft manufacture struggling with their 737 MAX troubles from over a year ago. Delta attributes the early retirement of their 777 fleet to the pandemic impact and the need to economize with newer fuel efficient aircraft.

3) Growing fears of a slow recovery is beginning to show cracks in the markets as investor’s anticipation of a quick recovery of the economy fades. For weeks, the hopes that the massive stimulus of $3 trillion dollars would spur a relatively quick recovery later in the year, coupled with a hot rebound of the stock market despite the massive numbers of layoffs, but now hope is fading. The growing economic uncertainty of just how many people can restart their lives amid the uncertainty of controlling the virus, plus the dangers of opening up too early, is causing investors to rethink their view of how the economy will fair in the next few months, even the next few years.

4) Stock market closings for – 14 MAY 20:

Dow 23,625.34 up 377.37
Nasdaq 8,943.72 up 80.55
S&P 500 2,852.50 up 32.50

10 Year Yield: down at 0.62%

Oil: up at $27.98

5 May 2020

1) Apparel retailer J. Crew is filing for bankruptcy, with other struggling retailers expected to succumb this year too, big retailer names like Sears and J.C. Penny. J Crew is considered to be the first retail casualty of the pandemic with others expected to quickly follow. The pandemic has caused numerous stores to be closed, laying off hundreds of thousands of employees and losing most of their sales. The big retail stores were struggling before the virus hit, with people backing away from consumerism and now after the coronavirus shutdown, people are spending little other than for groceries and daily essentials. With further declining retail revenues, more stores will close with more layoffs. Furthermore, Americans’ appetite and ability to shop continues to decline, so it looks very dismal for a major segment of the American economy, which in turn will be a burden on other segments of the economy continually pulling the rest down.

2) The service sector of the economy is also experiencing troubles in what appears to be an emerging new economy for America. Gold’s Gym International is seeking bankruptcy protection as it struggles with debt after the prolong shutdown from the virus. With the shrinking of people’s disposable income, that is the money they have left after essential spending like food, housing and transportation, the non essential businesses of the service economy are finding it harder to survive.

3) General Electric is eliminating as many as 13,000 jobs in its jet engine business, another casualty of the coronavirus devastation to the aviation segment of the economy. With airline manufactures, such as Boeing building fewer airliners, there is less demand for new jet engines. This means a 25% reduction on GE’s aviation work force with little near future likelihood of those jobs returning, indeed if the recession deepens, more jobs may be lost. Like Boeing, GE aviation was having troubles before the virus hit.

4) Stock market closings for – 4 MAY 20:

Dow 23,749.76 up 26.07
Nasdaq 8,710.72 up 105.77
S&P 500 2,842.74 up 12.03

10 Year Yield: down at 0.64%

Oil: up at $21.33

29 April 2020

1) The ‘consumer confidence index’ dropped in April by the largest amount on record. The index dropped from 118.8 in March to 86.9, while the ‘present conditions index’ plunged from 166.7 to 76.4, its 90 point drop the largest on record. The ‘expectations index’, which is based on the future outlook, improved slightly from 86.8 to 93.8. The sharp drops are a result of the sudden massive unemployment from the shelter in place orders met to contain the coronavirus. But business is stirring with retailers starting to open up again. Simon Property Group, which is the largest mall owner in the U.S., is opening 49 of its malls and outlet centers in May across the country.

2) Another housing economic crisis could be building for the near future. The mortgage market has been disrupted with millions of borrowers having to postpone payments because of the pandemic and shelter in place, a result of massive layoffs. While some mortgage companies are allowing deferment of payments during the business shutdown, there’s the rising question of how to make up those payments after returning to work. Experts expect a repeat of the 2008 fiscal crisis with mortgages, because borrowers are already stretched thin financially, now having extra debt, but not the resources to service it. There could be another wave of foreclosures coming.

3) As nations scramble to get cash for economic stimulus efforts, they are selling off bonds at a frantic rate, much of it being bought by central banks. This is particularly true for the Asian bond market, with many experts saying this hasn’t come too soon, despite the long term risks. This frenzy in government selling bonds has cause a ‘whip-saw’ reaction in yield rates. Many central banks could be in big trouble if stimulus spending fails to avoid economic recovery, or worst yet an economic collapse.

4) Stock market closings for – 28 APR 20:

Dow 24,101.55 down 32.23
Nasdaq 8,607.73 down 122.43
S&P 500 2,863.39 down 15.09

10 Year Yield: down at 0.61%

Oil: up at $13.27

24 April 2020

1) The American unemployed continue to climb with an additional 4.4 million for last week. This brings the five week total of more than 26 million workers now unemployed in America, or about 16% of the labor force. Nearly one in six workers have lost their jobs in the last few weeks. But because of lags in the reporting system, these numbers don’t fully show the extent of the problem. With people needing money to pay rents, mortgage, buy food and pay utilities, state governments are facing increasing pressure to retract the ‘shelter at home’ orders and forced closing of businesses, despite dangers of virus flare-ups. Experts warn such moves could undo all the containment that’s been accomplished at the economic cost of the last five weeks. To make things worst, layoffs are expected to continue, that we have not reached the unemployed plateau yet. State, county and city workers may form the next wave of layoffs as tax revenues needed to pay salaries plunge from the pandemic.

2) The clothing retailer Gap, has warned that its existing cash reserves may not be enough to continue operations, something that mirrors the predicament of so many American businesses, especially small businesses. The company says it must take further actions to find liquidity over the next twelve months, including job cuts and new debt financing. The chain has stopped paying rent for its stores, thereby amassing an additional debt of $115 million dollars. Its stock has fallen nearly 60% this year.

3) The coronavirus pandemic is spawning another economic consequence- lawsuits! Carnival Corp. is facing suits from several passengers who claimed they weren’t warned of the high risk from virus onboard ships. Wells Fargo, Bank of America, JP Morgan Chase and US Bancorp are being sued by small businesses who missed out on coronavirus rescue loans. Even universities are threaten with lawsuits for reimbursements of tuition, fees and housing. Judging from past disasters, it’s expected that more lawsuits will emerge in waves, as people seek someone to blame for their misfortunes while opportunistic attorneys capitalize on the crisis.

4) Stock market closings for – 23 APR 20:

Dow 23,515.26 up 39.44
Nasdaq 8,494.75 down 0.63
S&P 500 2,797.80 down 1.51

10 Year Yield: down at 0.61%

Oil: up at $16.72

21 April 2020

1) The second wave of unemployment is coming after an unprecedented spike in layoffs from the cornonavirus ‘stay at home’ orders. But while businesses will soon start rehiring workers, many will take the opportunity to replace their workers with cheaper and more contingent labor. The crisis will accelerate trends towards industry consolidation that reduces potential employers, automation, which replaces human labor, and worker precarity when convenience of employers and customers entirely overrides the well being of workers. Further aggravating employment will be the large number of small businesses expected to succumb to the recession leaving fewer employment opportunities. Also, the force isolation is changing people’s buying habits with more online shopping, delivery services and self service kiosks. These methods of automation also represent cost cutting methods, which companies will cultivate to make more wide spread. All this promises to make the second round even harsher.

2) Oil prices continue their downward spiral, with futures at record lows as investors worry about lack of storage and the world economy. German and Japanese data indicates a bleak global economy, which will in turn pull America’s down. Despite measures being taken to reduce the supply, the glut will continue for the foreseeable future. Numerous statistics and prices point to a continual crisis for the world and American economies.

3) Restaurants are particularly hard hit by the coronavirus economy, with more than 8 million workers having lost their jobs, about two-thirds of the restaurant labor force. About four in ten restaurants have closed, while many others struggle to stay afloat by providing curbside service. The National Restaurant Association is asking for more monies to support survival of restaurants during this period of government enforced business closure. Like so many other small businesses, the future for many restaurants is looking very doubtful.

4) Stock market closings for – 20 APR 20: Oil drops from $18.12 for Friday to -$16.10, almost a complete inversion in price.

Dow 23,650.44 down 592.05
Nasdaq 8,560.73 down 89.41
S&P 500 2,823.16 down 51.40

10 Year Yield: down at 0.63%

Oil: down at -$16.10