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

28 Auguest 2020

1) The decay of the worlds airline industry is reaching out past the airline companies themselves, with jet engine maker Rolls-Royce announcing a $7 billion dollar lost for the first half of 2020. Rolls-Royce gets paid by the hours their engines are flown on airliners, and with the massive drop in air travel from the pandemic, the company’s revenues have drastically dropped leaving its survival in doubt. The company is being forced to sell assets to meet its cash needs, so they are reducing eleven of their locations to just 6, with the loss of 9,000 jobs. Stock dropped 9% on the news of reorganization which was already down 66% since the start of the virus crisis.

2) Not all of the retail industry is bleak news, with Abercombie & Fitch outperforming expectations in the second quarter. While the apparel company did lose ground in the last quarter, it performed better than analyst expected, with sales down by 17%, nevertheless their earnings per share made remarkable gains over last year. This is a result of aggressive costs reductions earlier in the quarter when the company slashed expenses by $200 million dollars by reducing salary expenditures and skipping dividends. Success in their e-commerce operations has also pushed up the revenues and promises to add more as people go to online for more of their shopping.

3) Another small indication that manufacturing is returning to America is Roche Holding AG plans to move its glucose testing strips manufacturing plant from Pueto Rico, where it has operated for about 40 years. The company is streamlining its operations by combining the plant with its other existing facilities. The move will cost 200 jobs in Peuto Rico, which has a number of other drug and medical device manufacturing plants.

4) Stock market closings for – 27 AUG 20:

Dow 8,492.27 up 160.35
Nasdaq 11,625.34 down 39.72
S&P 500 3,484.55 up 5.82

10 Year Yield: up at 0.75%

Oil: down at $42.96

20 August 2020

1) Boeing Aircraft has received its first 737 MAX orders since 2019, from Enter Air, a Polish charter airline that exclusively uses only Boeing airplanes. They have ordered two 737 MAX with an option to order two more. With the option, this would bring its MAX fleet to ten aircraft. Frzegorz Polaniecki, the general director and board member of Enter Air, said he’s convinced the 737 MAX will be the best aircraft in the world for many years to come. This order for two aircraft pales in comparison to Boeing’s July net negative order of 836 aircraft, but it’s a start in the right direction. Cancellation of Boeing aircraft sales have far outpaced new orders this year because of the pandemic. The last six months, Boeing has faced a combination of problems specific to Boeing and the pandemic.

2) The Federal Reserve is lowering their estimate for economic growth over the second half of the year. The Reserve presents its forecast at the central bank’s eight interest rate committee meetings in a year. The reduced forecast is because they expect the rate of recovery in the Gross Domestic Product and the rate for reducing unemployment to be slower than previously expected. Reduction of the unemployment depends on the reopening of businesses, which in turn is depended on the pandemic.

3) According to Bank of America, moving manufacturing out of China could cost U.S. and European companies $1 trillion dollars over five years. Companies in over 80% of global sectors have experienced supply chain disruptions during the pandemic, so many are widening the scope of their reshoring plans. The shift to return manufacturing back to home countries has been spurred on by the Convid-19 crisis. Supporting companies will also benefit with the increase of economic activity by having manufacturing return.

4) Stock market closings for – 19 AUG 20:

Dow 27,692.88 down 85.19
Nasdaq 11,146.46 down 64.38
S&P 500 3,374.85 down 14.93

10 Year Yield: up at 0.68%

Oil: up at $42.79

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

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

26 February 2020

1) Global trade experiences its first full-year drop since the financial crisis, with weaker world growth and a manufacturing recession taking their toll. The spread of the coronavirus, with its impact on businesses and households, is increasingly pulling world economics down. While the decline isn’t huge, it is the first since 2009 and follows growth of more than 3% in 2018. The virus has shut off huge areas of China causing the closing of factories and now is spreading internationally.

2) The markets continue to follow the Dow’s thousand point drop with more large loses. To add to the financial worries, bond yields are slipping down, raising concerns that the global economy is slowing significantly because of the spreading coronavirus. There is heavy buying of treasuries in order to shelter money, with the ten year Treasury yield traded at 1.32%, an all time low, with the thirty year bond yield also reaching a record low. Analysts are already cutting their earnings estimates for the first quarter, further dampening hopes for better near term growth.

3) Retail giant Amazon has opened its first Go Grocery store in Seattle. The automated store is cashierless where customers walk in, and get what they want, and on walking out, computer and sensors electronically charging their purchases. The store is over 10,000 square feet and has about 5,000 items including fresh produce, meats and alcohol. This is just another example of the grocery retailers efforts to automate their operations and reduce labor costs.

4) Stock market closings for – 25 FEB 20: Dow is down 1900 points in two days and some experts fear the markets are 500 points away from being a correction.

Dow 27,081.36 down 879.44
Nasdaq 8,965.61 down 255.67
S&P 500 3,128.21 down 97.68

10 Year Yield: down at 1.33%

Oil: down at $50.10

20 January 2020

1) A year ago, Boeing Aircraft had record revenues of over $100 billion dollars, anticipating delivery of record number of aircraft including the 737 MAX jetliner. With the grounding of its 737 MAX, that has been reversed with Boeing posting losses from massive pay outs as well as lost revenues as undelivered aircraft sit waiting in its parking lots. Boeing may ultimately have $20 billion dollars in cost from the 737 MAX problem. Boeing’s problems has been a bonus for China’s airline manufacturing giving them a big advantage to gain market share.

2) India is resisting Amazon’s efforts to expand into India with an investment of $1 billion dollars, fearful of predatory business practices. The investment would bring Amazon India investment up to $6.5 billion dollars. But Amazon is meeting growing resistance, first with an Indian anti-trust investigation by Indian regulators, then protest from a confederation of Indian traders and organizations.

3) As hiring surged in November, the employment market got tighter, job openings plunged to their lowest level in nearly two years. The total vacancies is down by 561,000 to 6.8 million for the month. This is the lowest since February of 2018, the trend telling the economy has finally reached full employment. The biggest drops came in retail and construction.

4) Stock market closings for – 17 JAN 20: All three exchanges closed on record highs.

Dow          29,348.10    up    50.46
Nasdaq       9,388.94    up    31.81
S&P 500      3,329.62    up     12.81

10 Year Yield:    up   at    1.84%

Oil:    up   at    $58.81

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

6 January 2020

1) The U.S. manufacturing sector contracted the most in December, more than for a decade. Order volumes crashed to a near eleven year low with factory employment falling for a fifth straight month. The index of national factory activity fell to 47.2 last month from 48.1 for November and is the lowest reading since June 2009. A value of 50 or above indicates expansion, while below is contraction.

2) The electric auto maker Tesla sold more cars in 2019 than the two previous years combined. Tesla sold 367,500 cars in 2019, although its on the low end of the 360,000 to 400,000 cars the company estimated at the beginning of 2019. Its newly opened plant in China will sell its Model 3 automobile in China thus avoiding transport and import cost. China promises to be a major increase in Tesla sales for next year.

3) Despite worries by experts expecting a decline of spending by American consumers, many consider the consumer will keep the economy humming through the next year. This Christmas shopping season appears it will set new records in spending, despite trade tensions, Washington being absorbed in impeachment and oil prices creeping up. With the economy always on the minds of voters, a good economy bodes well for incumbents with 2020 being a presidential election year.

4) Stock market closings for – 3 JAN 20:

Dow              28,634.88    down    233.92
Nasdaq            9,020.77    down       71.42
S&P 500         3,234.85    down      23.00

10 Year Yield:    down   at    1.79%

Oil:    up   at    $63.04

18 December 2019

1) Walt Disney’s Star War’s empire has been fading at the box office with many fans finding the new offerings less than anticipated. The last chapter of the Star Wars series, The Rise of Skywalker, is being heavily promoted to halt the financial slide. In playing up the nostalgia aspects and the fact that this will be the last Star Wars release for years, they are trying to reverse the downward slide of the franchise, which Walt Disney purchased from George Lucas for $4 billion dollars in 2012.

2) Ford Motor Company plans to invest more than $1.45 billion dollars in two of its manufacturing facilities in Detroit, to make electric, autonomous and sports-utility vehicles. The new manufacturing will add 3,000 jobs, with Ford saying it will invest $11 billion dollars to make forty new hybrid and fully electric vehicles by 2022.

3) Fears continue that Boeing’s halting of the 737 MAX production could have serious impact on the U.S. economy next year. This production halt is anticipated to go until March and April of next year. Presently, Boeing has 400 airplanes in storage awaiting delivery. The production halt will impact everything from airlines to parts manufacturers, with a supply chain consisting of hundreds of firms and tens of thousands of workers. This widely diversified economic network makes forecasting the total economic impact of Boeing very difficult.

4) Stock market closings for – 17 DEC 19:

Dow                  28,267.16    up    31.27
Nasdaq             8,823.36    up       9.13
S&P 500            3,192.52   up        1.07

10 Year Yield:    unchanged   at    1.89%

Oil:    up   at    $60.54