29 October 2020

1) One major factor in the spread of Covid-19 virus, is the portability of societies, the degree which people are moving about and interacting with each other with ease. This is a major cause of the spread of infectious disease. Now with the surge of coronavirus in Europe, Germany and France, they are planning to restrict movement of people for at least a month, coming close to the stringent lockdowns of the spring as European leaders seek to rein in a resurgent pandemic outbreak. Spain, Italy, the U.K., Greece and Portugal reported record numbers of new cases on Wednesday. Asia, Singapore and Hong Kong could start a planned ‘travel bubble’ as soon as next month. This also means restrictions of travel for migrant workers, which in turn means restricting their ability to make money, where much is sent back home to families to support their subsistence.

2) Boeing Aircraft company, a major manufacture of airliners, will cut 7,000 more jobs amid the pandemic, almost doubling its planned job cuts. The coronavirus pandemic has prolonged the grounding of Boeing’s 737 Max jet, thus dimming prospects for financial recovery. Executives are abandoning their forecast that Boeing will stop burning cash next year and so they are now forced to eliminate an additional 7,000 jobs. That will bring the expected losses from layoffs, retirements and attrition to 30,000 people, or 19% of the pre-pandemic workforce, by the end of 2021.

3) Taiwan’s microcircuit manufacture United Microelectronics Corp. has pledged its assistance to the U.S. in a high-profile trade-secrets prosecution of Chinese chipmaker Fujian Jinhua Integrated Circuit Co. UMC has pleaded guilty Wednesday in federal court as part of a deal with U.S. prosecutors. Prosecutors agreed to drop serious charges of economic espionage and conspiracy for theft of proprietary information from Idaho-based Micron Technology Inc. UMC instead admitted to trade-secret theft and agreed to pay a $60 million dollar fine. Prosecutors haven’t publicly detailed the cooperation they are seeking from UMC against Fujian

4) Stock market closings for – 28 OCT 20:
Dow 26,519.95 down 943.24
Nasdaq 11,004.87 down 426.48
S&P 500 3,271.03 down 119.65

10 Year Yield: unchanged at 0.78%

Oil: down at $37.69

26 October 20

1) The renewable energy industry is possibly getting a boost from New York’s East River, which is set to become the testing ground for a technology that generates electricity from the tides by using tiny turbines. Verdant Power, a New York based marine energy technology company, is installing three small underwater turbines in the river that will generate electricity from the actions of the tide. The test system will feed power to Consolidated Edison Inc.’s grid. For years there has been other attempts to draw power from marine energy, but its adoption has been stymied by high costs and mechanical issues. The turbines use 16 foot diameter rotors which are expected to have 35 kilowatts of capacity each, about four times more than a typical U.S. residential rooftop solar system. The key to success is reducing the cost, but at 10 cents a kilowatt-hour, it’s still more than twice the cost of wind and solar power.

2) The oil giant Exxon Mobil, is still reeling from the massive oil bust, and so is now having to lay off workers after all. When the rounds of layoffs in the oil industry started last May, Exxon had no plans to lay off employees. But economic realities have force a reversal of that position, because other measures to control operating cost have not been sufficient to weather the downturn. Exxon’s market value has dropped by 66 percent from $418 billion dollars and has recently been removed from the Dow Jones Industrial index, a group of 30 key stocks that serves as a benchmark indicator of the U.S. stock market. Fears that the oil and gas industry will never recover fully from the pandemic are dismissed, the company saying that developing countries around the world will continue to rely on affordable and abundant fossil fuels for decades to power their economies. It’s projected that oil and gas will make up about 50 percent of the global energy mix by 2040, down from around 60 percent today.

3) China shows increasing aggressiveness with threats of retaliation, if U.S. arms sale to Taiwan proceed, sales worth more than a billion dollars. Failure to do so would “compel the Chinese side to fight back resolutely,” a Chinese statement said. America is selling 135 precision land attack missiles, plus associated equipment and training to Taiwan to improve its defense capabilities. Taiwan isn’t the only pacific neighbor fearing China’s belligerent stance, for Japan is planning to build a missile defense system at sea despite facing mounting costs. Japan’s Aegis Ashore systems is meant to intercept missile strikes from westward. Japanese officials are considering several proposals, including putting Aegis on platforms resembling oil rigs, or on converted merchant ships or naval vessels because of safety issues for civilians. Japan has also launched its first high technology submarine, one of a coming fleet, to protect Japan from China’s aggressive threats.

4) Stock market closings for – 23 OCT 20:

Dow 28,335.57 down 28.09
Nasdaq 11,548.28 down 42.28
S&P 500 3,465.39 down 11.90

10 Year Yield: down at 0.84%

Oil: down at $39.78

7 October 2020

1) Ikea, the big Swedish world wide modular furniture manufacture, has experienced a surge in sales from the pandemic as people turned homes into offices and schools. Their online sales are up 45% over the last 12 months to August, with 4 billion visits to their website. Outdoor furniture is the fastest growing category, followed by office furniture. While many of their stores were forced to close from the virus, their online sales remain high even as stores reopen. The furniture retailer has added 6,000 new employees world wide to make a total work force of 217,000. Online sales account for about one fifth of total sales.

2) Job openings in America fell in August for the first time in four months, indicating a moderation in hiring as the crisis continues. Available positions slipped down to 6.49 million from July’s 6.7 million. These numbers do not include recalls from layoffs or positions that are offered only internally. However, layoffs and discharges are at a low for August, although there are still 13.6 million Americans unemployed, which means there are about 2 unemployed competing for each job opening. There are fewer vacancies in construction, retail and health care industries, while vacancies increased for manufacturing, food service and government.

3) Federal reserve Chairman Jerome Powell says America is on the long road to economic recovery from the pandemic induced recession, but still there are other problems on the horizon. There are fears of the economy shifting into reverse once again, especially if a resurgence of the virus comes with cold weather . . . the flue season. Such a resurgence could significantly limit economic activity leaving many unemployed stranded with no jobs for many more months. Powell is calling for the passing of the second stimulus bill presently being debated in the Congress. He considers the risk of pouring too much money into the economy far lower than the risk of not spending enough, despite the already sky high federal budget. While he considers the debt is on an unsustainable path, and has been for some time, but this is not the time to address it.

4) Stock market closings for – 6 OCT 20:

Dow 27,772.76 down 375.88
Nasdaq 11,154.60 down 177.88
S&P 500 3,360.95 down 47.68

10 Year Yield: down at 0.74%

Oil: up at $39.83

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

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