1) Speculation abounds over what the next stimulus package will have, such as extended income support for the unemployed and underemployed. New temporary subsidies for low wage workers. Cheap loans for small and medium size businesses with additional support for state and local governments. Cost estimates for a second stimulus program range from one to two trillion dollars. But like the first stimulus package, no one is offering ideas how this money will be paid off, especially if economic expansion doesn’t materialize.
2) The worlds fastest super computer is now Japan’s Fugaku supercomputer developed by Riken and Fujitsu with backing from the Japanese government. It has a speed of roughly 415.53 petaflops, which is 2.8 times faster than the US Summit supercomputers at 148.6 petaflops. The Fugaku was under development for six years and will start full time operation by April 2021, although it has been pressed into service in the coronavirus crisis, running simulations on how droplets would spread in office spaces with partitions. Previously, the fastest supercomputers have belong to America and China.
3) The sales of existing homes has dropped in May, a result of the coronavirus impact on the economy. The sales of existing homes in May fell 9.7% compared with April, which makes for an annual decline of 26.6%. This is the largest decline since 1982 when interest rates were 18%. There remains a shortage of housing which is helping to uplift the market, and therefore the economy as soon as the crisis has subsided.
4) Stock market closings for – 22 JUN 20:
Dow 26,024.96 up 153.50 Nasdaq 10,056.48 up 110.35 S&P 500 3,117.86 up 20.12
1) The Independent Restaurant Coalition estimates that 85% of the independent restaurants may go bust by the end of 2020. The independent restaurants comprise 70% of all the restaurants in America. These restaurants rely more heavily on dine-in revenue, which the franchise chains don’t because of their drive up and take out business is well established, while also having a corporate safety net or support system to fall back on. It will be a long time before dine-in revenue returns to pre-pandemic levels because independents depend on densely packed dinning rooms to generate sufficient revenue to meet expenses, something that social distancing prevents. Most owners just don’t have the cash reserves to survive.
2) J.C. Penny stores will begin their ‘going out of business’ sales having just received bankruptcy court approval to begin liquidation sales at those stores closing permanently. There are 242 stores closing leaving about 600 stores to continue. Sales could start as early as this weekend. J.C. Penny is the largest company to file for Chapter 11 bankruptcy since the pandemic started. Penny faces a crucial deadline of 15 July for a business plan, which without one, the company is expected to pursue a sale instead, which could mean total liquidation.
3) Some are proposing negative interest rates for U.S. bonds as some European countries are doing. The rational for negative interest rates is they spur economic growth, which is controversial among economist with evidence that it really works being mixed. Lowering interest rates encourages businesses and individuals to invest and spend more, which helps the economy grow. The doubts about negative interest rates is companies and individuals would rather hold cash which cost nothing rather than pay to park their money in the bank. This encourages the money to be loan out rather than be parked, which often means riskier loans. While there are studies made of how effective negative interest rates are, so far the results are mixed.
4) Stock market closings for – 12 JUN 20:
Dow 25,605.54 up 477.37 Nasdaq 9,588.81 up 96.08 S&P 500 3,041.31 up 39.21
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
1) Jerome H. Powell, the Federal Reserve Chair, said the U.S. economy is in an emergency, which is deteriorating with alarming speed. His remark comes after unveiling over $2 trillion dollars in new loans to keep the economy afloat, a result of the coronavirus shutdown. America is moving from the lowest unemployment in fifty years to a very high unemployment in just weeks. Claims for unemployment aid is now up to 17 million and still climbing as more businesses fight to survive. It is expected the U.S. economy may shrink by more than 30% between April and the end of June. The Fed will soon begin purchasing up to $750 billion dollars in corporate loans from big businesses who have a low investment grade, in the hopes of preventing their bankruptcy bringing further damage to the American economy. The Feds are making a wide range of loans to various size businesses which it doesn’t expect to get paid for. No one is making estimates on how extensive this will ultimately be to the American economy.
2) Although Saudi Arabia and Russia have reached an agreement on limiting oil production, it’s not yet known just how large those reductions are going to be, so oil prices had turned negative while awaiting details of OPEC+ cuts in oil production. The general consensus is each nation will cut production by 10 million barrels a day, but with world oil consumption way down because of the pandemic, it’s not certain if the OPEC+ cuts will have much effect, especially for U.S. domestic oil production (shale oil).
3) The Treasury Secretary Steven Mnuchin considers it may be possible for the U.S. to be open and back to business next month, considering it’s just a matter of medical considerations. The administration is doing everything possible for business to resume as soon as the ‘all clear’ is sounded and they have the necessary liquidity to operate. The president is forming a second taskforce charged with addressing the economic devastation which the virus has wrought and take measure to resume economic activity as soon as possible.
4) Stock market closings for – 9 APR 20:
Dow 23,719.37 up 285.80 Nasdaq 8,153.58 up 62.67 S&P 500 2,789.82 up 39.84
1) The FCC (Federal Communications Commission) will vote later this month on rules requiring all providers of phone service to implement automatic call blocking. This automatic technology will block illegal robocalls, that is, the automatic calling of people with a prerecorded message or to connect the person to a salesman. This will give phone and cable companies until June 20, 2021 to implement. This blocking technology is called STIR/SHAKEN protocol that authenticates the origin of a call and can automatically block it if it’s from an illegal robocaller.
2) The U.S. credit markets of bonds are suffering their worst day in a decade as fears increase over the spreading coronavirus and it’s possible effects on corporate income as well as their ability to repay debt. Bonds of American Airlines Group Inc. dropped to near distressed levels as companies worldwide canceled business travel. Other travel related bonds, such as rental car and cruise line companies, as well as energy companies, their bonds and loans fell further towards distressed levels. The selling off of bonds triggered a surge in derivative indexes that investors use to hedge against losses. The week has seen the most cash in at least ten years being withdrawn from funds buying corporate bonds and loans.
3) There are fears that the unraveling of the Saudi-Russia alliance will cause the biggest plunge of oil prices since 2015. Talks between members of the OPEC+ collapsed in Vienna, with members free to pump oil without any restrictions starting next month. The collapses is a result of Russia’s refusal to accept Saudi Arabia’s proposal for output cuts aimed at offsetting the coronavirus crisis’s impact on demand. Oil futures have plunged about 9% in New York and London.
4) Stock market closings for – 6 MAR 20:
Dow 25,864.78 down 256.50 Nasdaq 8,575.62 down 162.98 S&P 500 2,972.37 down 51.57
1) Analyst say Netflix, the video streaming service, must lower its prices in 2020 to avoid lost of millions of its U.S. customers because of the rising competition. It is suggested that Netflix must add a second lower priced service to compete with Disney+, Apple+, Hulu, CBS All Access and Peacock, otherwise they risk losing four million U.S. subscribers. Since Netflix’s balance sheet cannot withstand lower revenues, the company must create a pricing tier that has lower monthly cost, but still support advertising revenue.
2) Mortgage lenders are warned to brace for a downturn, with Fannie Mae and Freddie Mac pulling back on some mortgages meant to make home ownership more affordable. They are reducing the proportion of loans they back to borrowers with small down payments. This tamping down on risk is to limit their defaults thereby producing greater profits.
3) Morgan Stanley, the investment bank giant, is cutting about 1,500 jobs globally in a year end push for efficiency. The cuts are more in the technology and operations divisions, but include executives in sales, trading and research operations including several managing directors. These reductions amount to about 2% of the firm’s workforce with a charge between $150 to $200 million dollars in its fourth quarter.
4) Stock market closings for – 10 DEC 19:
Dow 27,881.72 down 27.88 Nasdaq 8,616.18 down 5.64 S&P 500 3,132.52 down 3.44
1) Several high profile companies have missed their third quarter earnings, making analysts worry if a long feared earnings recession may be getting closer. Earnings missed from expectations are FedEx by 3%, McDonald’s 5%, Caterpillar 8% and Boeing 30%. Texas Instruments has given a very poor revenue guidance for the fourth quarter of 11% below consensus. This quarter, 83% of reporting companies have beaten expectations by 4.2% average, so earnings misses by large companies is fairly rare.
2) Walmart will start its holiday sales earlier this year, starting this Friday at midnight. This is about a week earlier than last year. Retailers are facing a short holiday shopping season this year, which is just 26 days between Thanksgiving and Christmas. This is about a week shorter than the same period last year.
3) Car prices have been rapidly increasing, leaving consumers having a hard time affording new vehicles. This forces buyers to take out long term auto loans making a further burden on hard pressed consumers. The average new car purchase price in the U.S. is $36,718 with interest rates at about 6%, which is up 2% from 2017. A decade ago, the average price for a new car was $23,900, while average wages has remained static.
4) Stock market closings for – 23 OCT 19:
Dow 26,833.95 up 45.85 Nasdaq 8,119.79 up 15.50 S&P 500 3,004.52 up 8.53
1) Trump’s Venezuela oil sanctions has put Russia’s massive loans at risk. With loans of over $7 billion dollars from Russia, which were to be repaid in crude oil delivers instead of currency, Russia faces ‘no payment’ until the sanctions are lifted.
2) Because of the increased production of oil in the US and imports from Canada, the use of oil carrying trains is increasing after having declined. Pipe lines are unable to carry the increasing volumes of oil to refineries.
3) Italy is now in negative economic growth for the second quarter, with no prospects of reversal in the near future.
4) 31 JAN 19 Stock market closings:
Dow 24,999.67 down 15.19 Nasdaq 7,281.74 up 98.66 S&P 500 2,704.10 up 23.05
This week’s podcast episode Bizman Bassey (Sammy BE), James Lymon, and Jon “Magic Don” Sterling on the boards; had the great pleasure of interviewing Lawrence Franklin (1st cousin to musical extroidainaire Kanye West).
Law came on the show to discuss millennials taking hold of real estate and real estate investing. How important it is to invest in real estate and have ownership in real estate properties, especially for millennials in this day and age.
He spoke on financial gains in investing and we also threw some Kanye West questions in there; in which he gave us some great answers to.
Mr. Steven Mnuchin was confirmed and sworn in as the new US Treasury Secretary Monday evening, February 13, 2017. Secretary Mnuchin who takes the helm of the Treasury Dept from his predecessor Mr. Jack Lew, was a former executive at Goldman Sach’s (which seems to be a prerequisite in attaining the Treasury post; past Goldman Sach alum who have garnered at the helm of Treasury have been people such as Robert Rubin, and Henry Paulson).
Secretary Mnuchin was also a Hollywood financier in the past, helping to assist in financing big blockbuster movies; as well as taking conservatorship of IndyMac, turning the loan entity, which happened to go bankrupt into a profit, before selling it for billions. -SB