25 January 2021

1) Janet Yellen, the Secretary of the Treasury nominee, has given up her hawkishness on budgets, arguing there’s sufficient wiggle room to keep running fiscal deficits. Therefore, she’s committed to working to pass Biden’s proposed $1.9 trillion dollar bill. Yellen reaffirmed the commitment to flexible exchange rates, that the value of the U.S. dollar and other currencies should be determined by markets. The dollar weakness reflects the success of policy-makers in flooding domestic and foreign markets with liquidity during the COVID-19 panic. The large chunk of foreign firms that borrows and invoices in dollars is benefitting from the current dollar downturn, and the pandemic should reinforce the Fed’s impressive capacity to act as the global lender of last resort. But even with reserve-currency status, the dollar can weaken. And a weak dollar will make it harder to run current-account deficits year-in, year-out.

2) Regulators fear a new and potentially larger wave of defaults that could send banks scrambling to cover losses, where weaker ones might need government help to survive. The European Central Bank has warned that bad loans in the eurozone could soar to 1.4 trillion euros, more than during the aftermath of the financial crisis, especially if the economy contracts more than expected. The oversize exposure of banks by small businesses is part of Europe’s economic fabric. Companies with fewer than 250 employees account for 99.8% of all firms and two-thirds of all private-sector jobs in Europe. Small businesses in the U.S. also have economic weight, but they tend to be bigger. About half of Europe’s workforce is employed by firms with less than 50 people, compared with about a 25 in America.

3) There are reports that the Air Force has secretly designed, built, and flown a brand-new fighter jet. Furthermore, the mysterious new plane is already breaking records, but virtually nothing is known about the new plane … other than it exists. Experts did not expect a new fighter for another decade. The Air Force must now consider how it will buy the new fighter as it struggles to acquire everything from intercontinental ballistic missiles to bombers. The Air Force built the new fighter under its Next Generation Air Dominance (NGAD) program. More amazingly, the Air Force developed the new fighter in about a year, which is a staggeringly short time by modern standards, a process that took 10 years with the F-35.

4) Stock market closings for – 22 JAN 21:
Dow 30,996.98 down by 179.03
Nasdaq 13,543.06 up by 12.15
S&P 500 3,841.47 down by 11.60
10 Year Yield: down at 1.09%
Oil: down at $51.98

8 Janury 2021

1) The price of oil advanced as shrinking U.S. crude inventories added to expectations of a tighter global supply outlook after Saudi Arabia surprised the markets by pledging to reduce production for the next two months. Gasoline demand is falling to its lowest level since late May, spelling trouble for refining margins as a tighter global crude balance and straggling demand crimp profits for processing a barrel of oil. Saudi Arabia has decided to reduce crude output in February and March as part of an OPEC+ supply agreement. With the outlook for crude oil supply suddenly looking tighter, the oil options markets have grown less bearish.

2) A top scientist explains why a more infectious coronavirus variant is a bigger problem than a deadlier strain, with the deadly coronavirus having now mutated. One variant, called B.1.1.7, is more infectious, and has forced the UK into national lock down, with the variant having also been discovered in several US states, as well as other countries around the world. However, the new variant does not appear to be more deadly, so existing vaccines should also work against it. A really severe disease that one person gets won’t necessarily have as much impact as a lesser disease which a huge number of people get. While not any more deadly the new mutant B.1.1.7 is much more infectious, and is to blame for the surging numbers of people infected, filling up UK hospitals that forced the national lock down. It is estimated to have a 71% higher growth rate than other variants.

3) North Korea’s supreme ruler Kim Jong Un has announced a military expansion, but it is unclear if Pyongyang plans to ramp up its nuclear program too. This could put pressure on the incoming Joe Biden administration just when it is most vulnerable. North Korea plans to boost its military capacities in defiance of international sanctions, as well as a new five-year economic plan, admitting the previous program has failed. It’s unclear just what the military expansion will involve.

4) Stock market closings for – 7 JAN 21:

Dow 31,041.13 up by 211.73
Nasdaq 13,067.48 up by 326.69
S&P 500 3,803.79 up by 55.65

10 Year Yield: up at 1.07%

Oil: up at $50.91

Oil: up at $50.48

17 December 2020

1) North Dakota, a state with an early shale oil boom, expects oil production growth to stall in the next two years because of the market crash and higher environmental standards. The problem is investment money because Wall Street is showing no signs to invest in a shale boom. Investors have grown wary of the poor cash flow even before the crash, and institutional investors are shunning oil because of climate change concerns. North Dakota has limited excessive natural gas flaring from oil wells, intending to control greenhouse emissions at the expense of production. The state is expecting output to decline in November and December because of a lack of oil well completions. Oil markets are shrinking due to the loss of demand, while growth in shale oil depends on investments to replace wells that decline rapidly.

2) The Federal Reserve shifts its focus to fighting climate change, with average temperatures climbing and severe weather events happening more frequently. The Fed’s recent financial stability report includes a section on climate change, signaling a risk that climate change could pose to the financial system. Federal Reserve supervisors expect banks to identify, measure, control, and monitor all material risks, which for many banks are likely to extend to climate risks. Therefore if those dangers aren’t considered, hazards such as storms, floods, droughts or wildfires could change the value of assets suddenly, causing a shock to the system.

3) The more a person understands interest rates, inflation, risk diversification and other financial concepts, the less likely they show signs of financial fear and distraught at times of serious economic troubles. At the start of the pandemic in March, 40% of households was making under $40,000 per year lost their jobs. By April, the jobless rate had soared to 14.7% while the $1,200 direct checks and supplemental $600 federal-unemployment benefits started. Researchers asked people if they could cover a $2,000 unexpected emergency expense, and18.9% said they couldn’t meet the expense. In a test, the survey of ‘at risks participants’ correctly answered about half of the three questions about how interest rates are calculated, inflation and risk, while people in better money condition answered almost all three (2.5 on average) correctly.

4) Stock market closings for – 16 DEC 20:
Dow 30,154.54 down by 44.77
Nasdaq 12,658.19 up by 63.13
S&P 500 3,701.17 up by 6.55
10 Year Yield: down at 0.92%
Oil: up at $47.88

JACK MA’S ANT GROUP DOES NOT GET PUBLIC IPO… YET..STOPPED BY CHINA

By: Economic & Finance Report

Jack Ma’s Ant Group IPO was supposed to be going public on the Shanghai Stock Exchange recently, but has been halted by the Chinese government for disagreements between the Chinese government and Jack Ma (AliBaba/Ant Group’s co founder).

The IPO was listed to raise over $37 billion dollars USD, making it the biggest share sale in the history of the global stock markets. Saudi Arabia’s Aramco holds the biggest share offering title; currently with its share offering last December 2019, raking 29.4 billion dollars USD. The spectators will have to wait and see, if or when the IPO will go public -SB

Image Credit: MoneyControl.com

5 November 2020

1) Even with the election stagnated, waiting on the counting of votes to find the winner, the markets were already climbing despite the final results could be days away. The Dow Jones industrial average whipsawed overnight, despite the uncertainty which usually depresses the markets. Nevertheless, the Dow climbed to a peak of over 700 points, with the Standard & Poor’s 500 index and Nasdaq also surging upward. The state of the Senate is also in doubt with neither side having a solid majority, another source of uncertainty. Voter turnout is expected to be the highest in more than a century. Experts expect volatile markets for the coming days, and maybe weeks until the election results are finalized. While bonds have dropped in their yield as expected, oil continues to gain in price. Even the foreign markets are showing an upward trend.

2) China’s new therapy for Alzheimer’s begins a much-anticipated U.S. study, the latest effort in the multibillion-dollar search for an effective treatment for the incurable disease. The drug made by Shanghai Green Valley Pharmaceutical Co. plans a $600 million dollar global Phase III trial. The U.S. Food and Drug Administration gave its approval in April to study whether the drug can produce lasting cognitive improvement among patients in the mild and moderate stage of the debilitating neurodegenerative disorder. The trial will have 2,046 people across China, the U.S. and Europe, the first 600 expected to start in the next six months. The first patients will begin taking the drug in four weeks.

3) Nearly 140 million votes have been cast in the 2020 elections, the most ever in a US presidential election, exceeding 2016’s record of 137.1 million. About 100 million people have voted ahead of Election Day, or about 73.4% of the total votes cast nationwide in 2016. The increased number of early votes is a result of heightened public-health concerns of coronavirus pandemic with in-person voting on Election Day. Several states have taken measures to expand early voting and access to mail-in ballots.

4) Stock market closings for – 4 NOV 20:

Dow 27,847.66 up by 367.63
Nasdaq 11,590.78 up by 430.21
S&P 500 3,443.44 up by 74.28

10 Year Yield: down at 0.77%

Oil: up at $39.11

9 September 2020

1) It’s not just American businesses who are feeling the effects of the Covid-19 crisis from reduced sales, American charities are also suffering a major drop in revenues for the same reason. With the recession straining household budgets, people are less able to contribute resulting in charities losing billions of dollars since this spring. Furthermore, traditional money raising methods such a concerts, festivals and galas have been canceled or scaled back to a fraction of their previous size. Many charities are now working to make the holiday season productive to make up shortfalls in revenue.

2) The repressiveness of the Hong Kong police was further exposed when police chased down and tackled a 12 year old girl in a shopping mall. Video footage of several police officers pinning the hapless girl down on the floor went viral worldwide with a public outcry over the excess use of force against political dissenters. The incident touched off angry shouts from onlookers. The police tactics are being criticized as an indiscriminate treatment of children who are not taking part in protest. The girl complained she felt targeted because of her age, that being young has become a crime in Hong Kong, further increasing concerns that the regime is targeting their young for repression.

3) The markets continue their decline after a five week winning streak as investors begin to worry about stretched valuations. The decline is being lead by the technology stocks, which has met a heavy decline for the tech-heavy Nasdaq. Remarks by President Donald Trump to decouple the U.S. economy from China further added to the market’s jitters. The high flying technology company Tesla has suffered it worst one day loss since March with an 18% drop in the price of its stock.

4) Stock market closings for – 8 SEP 20:

Dow 27,500.89 down 632.42
Nasdaq 10,847.69 down 465.44
S&P 500 3,331.84 down 95.12

10 Year Yield: down at 0.68%

Oil: oil down $36.62

SPECULATION:CHINA MAY DUMP U.S. TREASURIES BECAUSE OF CURRENT TENSIONS WITH U.S.

By: Economic & Finance Report

It is speculated that China may dump more of its U.S. treasuries because of the current tensions between China and the United States. China currently holds $1.07 trillion dollars worth of U.S. treasuries.

China has been unloading some of their treasuries throughout the 2020 year, but that does not necessarily mean that they will unload their “whole deck of cards”. If China were to use the “nuclear option” in unloading their treasuries; the global markets would react haphazardly to such a scenario. -SB

Image Credit: Sott.net

4 September 2020

1) For first time since World War II the U.S. government’s debt will nearly equal the size of the entire American economy. By the end of 2020, the amount of debt owed by the United States will be about 98% of the nation’s gross domestic product with a debt that is about three times the 2019 level. The huge surge in debt is a result of the Congress spending an additional $3 trillion dollars in emergency funding since March, a result of the economic downturn from the coronavirus crisis. This is why some members of Congress and the White House have balked at approving an additional $2 trillion dollars in spending in view of the weak economy coupled with having little promise of improving soon. Few experts believe the Congress is likely to do something to reduce the deficit in the short term, all the while unemployment remains near 10 percent. Interest rates are low, which makes it less costly for the federal government to borrow. In addition to increase emergency spending, tax revenues fell as business slowed and many people lost their jobs.

2) After a steady increase in the markets, setting new records for highs, the stock markets took a sudden nose dive. This was caused by a massive and sudden sell off of the technology sector. The tech stocks had been on a ten day winning streak then a sudden overnight change which caught everyone by surprise. The Nasdaq dropped almost 600 points while the Dow was down 800 points. Market experts are left wondering what will come next, especially with the next jobs report for August coming out.

3) The pace of rehiring is expected to slow in August, so the economy will likely add fewer jobs than in July, while workers continue to be laid off. Because of the pandemic, America lost about 22 million jobs in March and April. In May through July, about 9.3 million jobs came back, so we are still short about 12 to 13 million jobs. Part of this is a result of so many small businesses having gone bust, so it will take a long time to replace those businesses and therefore replace the jobs they had. Economic turmoil is when technology displacement is prevalent as business seek the means to survive by reducing labor cost (eliminating jobs).

4) Stock market closings for – 3 SEP 20:

Dow 28,292.73 down 807.77
Nasdaq 11,458.10 down 598.34
S&P 500 3,455.06 down 125.78

10 Year Yield: down at 0.62%

Oil: down at $41.03

25 August 2020

1) With the two storms in the Gulf of Mexico, off shore oil production rigs have been forced to suspend operations and evacuate their crews until the bad weather passes. This curtailment in oil production has caused oil futures to rise as much as 1.3%. The shutdown has closed 58% of crude oil output, or more than 1 million barrels a day. Additionally, oil refineries along the Gulf coast have shut down their operations until the oil returns. But still, the storms are anticipated to have little real damage to onshore and offshore oil production facilities, and so a quick recovery in the markets is anticipated.

2) About one third of companies are anticipating having half or more of their employees work remotely after the Convid-19 crisis ends. While previously, 1 in 30 companies had anticipated continuing work at home after the crisis passed, surveys now show it’s 1 in 3. The pandemic has forced companies across the world to rethink how they do business, with 72% saying they offer flexibility around hours and work scheduling. While 49% have implemented flexible policies on how work is done and what technology is used.

3) The Covid-19 pandemic has accelerated the shift to e-commerce by five years. In many ways, the pandemic has reshaped our world, with our shopping habits being one of the prime ways. The fears of contracting the virus is forcing more people to shop online in the safety of their homes instead of going out into crowds of people to the traditional brick and mortar stores. This is causing the department stores to accelerate their decline. Sales of stores have declined by 25% in the first quarter of 2020, which grew to a 75% decline in the second quarter. Department stores are expected to decline by over 60% for the full year, while e-commerce is expected to grow by nearly 20%.

4) Stock market closings for – 24 AUG 20:

Dow 28,308.46 up 378.13
Nasdaq 11,379.72 up 67.92
S&P 500 3,431.28 up 34.12

10 Year Yield: up at 0.65%

Oil: down at$42.39

12 June 2020

1) The markets took a sharp drop over fears of another shutdown as the number of Convid-19 cases began rising from states starting to opening up for business. The Dow Jones dropped over 1,800 points, closing on the worst day sell-off since March. It appears that this pandemic is going to linger longer than was anticipated. Texas has reported three consecutive days of record breaking Covid-19 hospitalizations. Nine counties in California are reporting spikes in hospital admissions from the virus. The U.S. now has topped 2 million cases in this pandemic. Also, oil prices have taken a sharp downward slide.

2) Inventories of unsold diamonds are increasing, with the five largest diamond producers having stockpiled excess inventories of about $3.5 billion dollars and could go as high as $4.5 billion dollars. World wide demand for diamonds has plummeted, with the renowned diamond supplier De Beers reporting diamond sales in May of about $35 million dollars, compared to last year’s $400 million dollars. The world wide lock down has closed jewelry stores across the world thereby reducing sales to a small fraction of normal. The diamond market resembles the diamond slump of the 2008 financial crisis.

3) More than 1.5 million Americans filed new jobless claims for the first week of June, again decreasing from the previous week of 1.9 million. This is in contrast to the 6.9 million claims in April, with a stead decline each week since then. There was 2.5 million jobs added to the American economy, largely due to 2.7 million workers returning from furloughs. Still, more than 40 million Americans have lost their jobs because of the pandemic forcing shutdowns of so many businesses across America. But the gradual improvement of employment is boosting hopes for a quick economic recovery, however, there remains the problem of technology displacement of jobs. In times of economic stress, businesses are seeking ways and means to cut operating cost, and that gives a niche for entry of new technologies that eliminate the human. Experts in Artificial Intelligence estimate that as much as 50% of the jobs will disappear in 15 to 25 years.

4) Stock market closings for – 11 JUN 20: The stock market is like a rectal thermometer- it’s rude and crude but surprisingly effective at showing sickness.

Dow 25,128.17 down 1861.82
Nasdaq 9,492.73 down 527.62
S&P 500 3,002.10 down 188.04

10 Year Yield: down at 0.65%

Oil: down at $36.17