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

20 March 2020

1) Today, more coronavirus concerns have surfaced that most airlines will go bankrupt soon without government bailouts. The virus has shut global aviation down because of virus outbreaks as well as travel restrictions that are intended to contain the virus. Within weeks, many airlines will need government help to avoid bankruptcy. Major U.S. airlines are seeking $50 billion dollars in financial assistance because of the steep falloff in U.S. travel demand. Estimates are for $25 billion dollars in grants, $25 billion dollars in loans and significant tax relief to survive.

2) Monday markets opened with another sharp downfall of all three major markets despite the Federal Reserve embarking on a massive monetary stimulus campaign to curb the slowing economic growth from the coronavirus. Shortly after opening, trading was halted for fifteen minutes from a ‘circuit breaker’ triggered by the S & P 500. The U.S. central bank has launched a massive $700 billion dollar quantitative easing program designed to help cushion the economic downside from the virus. The Dow was down 11% while both the Nasdaq and S & P fell more than 10%.

3) As fears grow of a world economic downturn, which will put economic stress on the U.S. economy, people are becoming concerned about their jobs. American workers may lose their jobs by the millions as the effects of the virus ripple through the financial system, the impact being devastating. The disease has spread rapidly around the world with whole nations shutting down as well as major cities. It’s unknown just what the impact will be for the world economy, when major economic areas isolate themselves from the system, even for a few weeks. Many segments of the economy are reporting significant problems which can lead to further problems across the U.S. and world economy. All this translates into layoffs, at a time when the young people of America have limited opportunities.

4) Stock market closings for – 19 MAR 20:

Dow 20,087.19 up 88.27
Nasdaq 7,150.58 up 160.73
S&P 500 2,409.39 up 11.29

10 Year Yield: down at 1.12%

Oil: up at $25.08

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

17 February 2020

1) Surging demand for sugar is causing global supply shortages. With changing diets and lifestyles the demand for sugar has drastically increased in third world nations. For instance, Southeast Asia has had an eleven fold increase in demand. Global sugar prices have increased 12% this last year with the commodities trader ED&F Man Holdings Ltd. forecasting a world sugar deficit this year of about 10%.

2) Financial analyst forecast a number of traditional brick-and-mortar retailing chains will go bankrupt this year. Renowned names such as J.C. Penny, Pier 1 Imports, Rite Aid, Neiman Marcus, Stein Mart and the nutrition chain GNC are expected to continue their downward slide with many not surviving until the next Christmas. For the past several years or more, these name brand chains have be contracting with store closings and layoffs as they struggle to adapt to a new consumer environment.

3) While e-commerce is largely blamed for the demise of shopping malls and traditional brick-and-mortar stores, with online shopping growing tremendously over the last twenty years, expanding from $5 billion dollars per quarter to $155 billion dollars. Presently, e-commerce represents only 11% of the total retail sales. More than 70% of retail spending is in categories that has been slow or impossible for internet sales to captures such as automobiles, gasoline, home improvement and garden supplies. Inroads in drugs and pharmacy sales are being made, as well as food and drink from food delivery services.

4) Stock market closings for – 14 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: up at $52.25

24 January 2020

1) After two friendly attempts to merge with HP, Xerox is launching a hostile takeover bid. Xerox will nominate eleven new directors to replace all of HP board members, thus leaving Xerox in control of the company. HP claims that Xerox’s proposal significantly undervalues HP and creates risk for the HP shareholders, while Xerox claims combining the similar companies will create significant cost savings.

2) The number of claims for unemployment benefits for mid January rose slightly, but layoffs remain near a fifty year low. There are no signs of the strongest U.S. labor market in decades deteriorating. The number of people actually collecting unemployment benefits has fallen by a small amount. The U.S. economy is still growing but at a slower rate.

3) Fair Isaac Corp. announced changes on their scoring of consumer credit, the making of their FICO score. Soon, they will start scoring consumers with rising debt levels and those who fall behind on loan payments with lower scores. The changes will create a bigger gap between consumers considered good and bad credit risks. Also, scores are considering bank account balances and utilities payments. The new FICO changes reflect a shift in U.S. lenders’ confidence in the economy.

4) Stock market closings for – 23 JAN 20:

Dow              29,160.09    down    26.18
Nasdaq           9,402.48          up    18.71
S&P 500          3,325.54          up      3.79

10 Year Yield:    down   at    1.74%

Oil:    down   at    $55.66

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