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

22 June 2020

1) Oil has passed$40 a barrel, continuing a slow but steady recovery. This could be signaling a reawakening of the U.S. shale oil production. This rally allows the oil industry some breathing room with its high debt burden as the shale oil industry seeks to rebuild after the worst price collapse in a generation. This is far different than earlier this year when oil producers were paying to have their oil taken away. OPEC+ continues efforts to re-balance the global oil market, now abundantly clear that everyone loses in a price war.

2) More encouraging economic news with Ford Motor and Fiat Chrysler returning to pre-coronavirus pandemic production schedules in their American plants. Ford plans to fully return to production levels by July 6 while also ramping up their production facilities in Mexico. Although not given any firm dates, Fiat Chrysler is also returning to former production levels as rapidly as possible.

3) Experts are predicting the restaurant business, as we know it, is coming to an end because of the Convid-19 crisis. The industry generates $900 billion dollars a year, employs 15 million people, which is 15 times more than the airline business, which many are so concerned about now. Estimates vary widely of 20 to 80% of the privately own restaurants succumbing to the pandemic. The big franchise restaurant chains are expected to mostly survive and continue, but the independents are expected to fade out. One factor is change, which is coming too fast for small operations to adapt and keep pace with. The general consensus is that the business was in trouble long before the pandemic, struggling with poor working conditions, very thin profit margins, low wages and increasing competition. But it’s not just the restaurants themselves, for behind them is farming, distribution, suppliers and commercial real estate. It’s apparent that the demise of a significant number of independent restaurants will spell a significant change to the American business environment.

4) Stock market closings for – 19 JUN 20:

Dow 25,871.46 down 208.64
Nasdaq 9,946.12 up 3.07
S&P 500 3,097.74 down 17.60

10 Year Yield: unchanged 0.70%

Oil: up at $39.43

16 June 2020

1) The markets sank Monday, down by 762 points, when the news of the Feds bond-buying plan became known, reversing the selling to buying which raised the Dow up 150 points. The downward slide was from fears of a second round of the Convid-19 virus with the possibility of more economic damage. The plan is for the Federal Reserve to buy individual corporate bonds, on top of the exchange traded funds it is already buying. This is a move to ease credit conditions to further stimulate the economy. The program can buy up to $750 billion dollars worth of corporate credit, which the Feds can buy on the secondary market, individual bonds that have maturities of five or less years. Bonds is how corporations typically fund their operations and expansion using debt, and this program will ease debt for corporations allowing them to grow more and provide jobs.

2) The oil giant BP (British Petroleum) has signaled to investors that the economic shock of the pandemic will reverberate for years. This in turn means less gas and oil needed by the world in the future. The company is expected to write down $17.5 Billion dollars of its oil and gas holdings this next quarter, meaning they are worth less in the future than what they are worth today. The coronavirus pandemic has caused steep declines in demand for gas and oil worldwide, and this is expected to last for a number of years. This write down is in the approximate class of the Deepwater horizon disaster in the Gulf of Mexico, which was $32 billion dollars.

3) Britain’s Brexit, the planned exit of Britain from the European Union, has been overshadowed by the world wide pandemic, but nevertheless Brexit trade talks have continued. But the talks have reached an impasse. Britain left the union at the end of January, but had not reached agreements on traded with the other European countries. Although Britain left the union, the two economies have continued operating as before Brexit, so there has been little changed in trading. But this is only to the end of the year, and with Britain a major trader of goods with Europe, it’s important to reach agreements before that time comes. One major point of contention is how future disagreements will be adjudicated or arbitrated.

4) Stock market closings for – 15 JUN 20:

Dow 25,763.16 up 157.62
Nasdaq 9,726.02 up 137.21
S&P 500 3,066.59 up 25.28

10 Year Yield: unchanged at 0.70%

Oil: up at $37.07

8 June 2020

1) The oil cartel OPEC+ and Russia address extending record oil production cuts with the intent to force noncompliant members to also comply with the curbs in production. The cartel had previously agreed to a 9.7 million barrels per day cut during May and June in an effort to prop up oil prices which collapsed because of the coronavirus crisis. Those cuts are due to tapper to 7.7 million barrels from July to December. But sources say that Saudi Arabia and Russia have agreed to extend the deeper cuts until the end of July and possibly until August. The cost of oil is a prime factor in determining the health of a country’s economy, and therefore the world economy.

2) A surprise to everyone was the U.S. jobless rate dropped in May as hiring rebounded. This signals that the economy is picking up faster than expected from the damage of the coronavirus pandemic. The jobless rate fell from 14.7% to 13.3% in May, while economist had expected the rate to rise to 19%. Canada is also experiencing a reversal in joblessness too. This is with a possible resurgence of Covid-19 with a second wave of infections, and a resulting second crash of the economy and businesses. However, the unemployment rate is the highest since the Great Depression.

3) After the federal government made assurances on March 23, that it would make borrowing easier for American corporations, the food service giant Sysco Corp sold $4 billion dollars of debt. But then not long after, the company laid off one third of its workforce, or about 20,000 people, while their stock holders continued to receive dividends. As the virus spread in April and May, the federal promise spurred sale of corporate bonds with borrowing by top rated companies for a record $1.1 trillion dollars for the year, twice the previous year. Companies like Sysco, Toyota , Omnicom Group and Cinemark Holdings borrowed billions of dollars then fired workers. This calls into question of how the promise to purchase corporate debt helped preserve American jobs. While the feds have yet to buy a single corporate bond, their promise threw the bond marked into a frenzy to buy bonds.

4) Stock market closings for – 5 JUN 20: Job report sent markets skyrocketing.

Dow 27,110.98 up 829.16
Nasdaq 9,814.08 up 198.27
S&P 500 3,193.93 up 81.58

10 Year Yield: up at 0.90%

Oil: up at $38.97$2,531.81

27 May 2020

1) The local economies of oil country are being hit hard by the shale oil bust as royalties from oil pumped have shrank to near insignificance. While the oil bust has erased tens of thousands of jobs, while drying up local tax revenues, it has also greatly reduced the inflow of money to local economies from the royalties being paid out. There are about 12 million U.S. mineral owners collecting royalties for oil and gas extracted from their land. Royalties range from 12.5% to 25% of the value of gas and oil pumped, with the average oil land owner collecting about $500 dollars a month.

2) The coronavirus pandemic is causing more economic troubles with increased prices at supermarkets. The virus caused unprecedented demand, the shutdown of some food manufacturing facilities and the need for more labor to assemble orders for pickup and delivery are adding to costs of the grocery business. Since supermarket’s get all their money from the checkout lanes, this translates into higher grocery prices. Some say the grocery business will never be the same again. Furthermore, with demand driven so high by the pandemic, stores have no need to offer incentives and sales. This demand has been felt up the supply chain further increasing cost. One note, the pickup and delivery business of groceries has been catapulted ahead bringing automation to the grocery business closer.

3) The New York Stock Exchange has started a phased reopening of its trading floor, having been closed for two months because of the pandemic crisis. The NYSE has been limited to all electronic trading since March 23 in a measure to prevent the spread of the virus. But there will be fewer floor brokers, and they will wear face masks and do social distancing. Nevertheless, many brokers will continue to do their jobs remotely with electronics, and stay away from the trading floor. Another example of how American business has been changed by the need to keep people spaced apart, even isolated in order to halt the spread of the virus.

4) Stock market closings for – 26 MAY 20:

Dow 24,995.11 up 529.95
Nasdaq 9,340.22 up 15.63
S&P 500 2,991.77 up 36.32

10 Year Yield: up at 0.70%

Oil: up at $34.18

19 May 2020

1) The managing director Kristalina Georgieva of the IMF (International Monetary Fund) says the Fund is likely to revise downward its forecast of a 3% contraction of the GDP (Gross Domestic Product) for 2020. In turn, this will most likely cause a revision of the IMF’s forecast for a partial recovery of 5.8% in 2021. This means a longer time for a full economic recovery from the virus crisis. The IMF had forecasted that the business closures to slow the virus would throw the world into the deepest recession since the 1930’s Great Depression.

2) Gold markets have risen to their highest in more than seven years, a result of the Federal Reserve saying stocks and asset prices could suffer a significant decline as a result of the coronavirus crisis. The economic recovery could go to the end of 2021, depending on the arrival of an effective vaccine. Owning gold is considered to be a safe haven in times of economic turmoil, able to retain its value when other assets are sinking in value. Other precious metals such as silver, platinum and palladium are also experiencing a swing upward in price, but since these are commodities, their value may drop in a slower economy and reduced industrial demand.

3) The price of oil is above $30 a barrel for the first time in two months as U.S. and other country producers continue to cut production in order to restore the balance of the oil market. The world wide shut downs from the virus has drastically reduced the demand for oil world wide, with the world’s storage capacity quickly filling to maximum capacity, and for a time, producers having to pay to have their oil production removed. While the price of oil is still too low to salvage the shale oil (fracking) business in America, it still bodes well for the U.S. and world economies. Nevertheless, expectations are it will be well into the next year for the oil markets to be fully restored. Oil futures contracts that are due in June, show few signs of a resulting plunge in oil prices as when the May contracts came due and investors had to pay others to take their oil away.

4) Stock market closings for – 18 MAY 20:

Dow 24,597.37 up 911.95
Nasdaq 9,234.83 up 220.27
S&P 500 2,953.91 up 90.21

10 Year Yield: up at 0.74%

Oil: up at $32.21

7 May 2020

1) The bust in the Texas oil fields is the worst in memory, says the billionaire Russell Gordy. The coronavirus pandemic has triggered an unbelievable collapse in crude oil prices that is sinking fortunes across Texas, with no clear way out visible in the near future. Texas accounts for 9% of the nations GDP (Gross Domestic Product), so as oil pulls Texas’ economy down, it will undoubtably pull the nations down too. In the past, declining energy prices have helped the U.S. economy, but this time its likely to cut into investment and employment. Texas may lose 1.3 million jobs by June, as the virus puts an end to the U.S. shale oil revolution, which may spill into a broader downturn for Texas, that will also drag the rest of the country down too. Furthermore, Americans are driving and flying much less, which has reduced the demand for oil, bringing on a crisis in storage for the oil surplus. There are expectations that home prices will decline during the remainder of this year and into the next. This in turn will impact the construction industry.

2) As a result of the pandemic, the mortgage industry is implementing reforms that will be long lasting in terms of how lenders operate and how consumers obtain financing. It’s anticipated that digital mortgage processing will become more prevalent as people seek to minimize contact with others. Relators are seeing as much as a 500% increase in home video tours. Reports are that many people are seeing involuntary credit reductions and even terminations of their credit cards as banks seek to reduce their exposure to risk in a troubled economy where jobs are at risk of elimination. This means a further reduction on consumer spending.

3) Disney has seen a 91% plunged of it profits last quarter, a direct result of the coronavirus crisis. The operating profits in Disney’s parks lost about $1 billion dollars to add to a total loss of $1.4 billion dollars in total operating income. Disney has had to close its Walt Disney World and Disneyland theme parks, plus its Disney Stores and the suspension of its cruises and disruptions of its supply chain . However, its new video streaming service Disney Plus grew 26% to 33.5 million subscribers last quarter with revenues up 260%

4) Stock market closings for – 6 MAY 20:

Dow 23,664.64 down 218.45
Nasdaq 8,854.39 up 45.27
S&P 500 2,848.42 down 20.02

10 Year Yield: up at 0.71%

Oil: down at $24.35

6 May 2020

1) The U.S. Bureau of Labor’s CPI (Consumer Price Index) statistic declined by 0.42% in March, the largest decline since January 2015. The CPI is used to measure the change in the cost of a typical basket of goods, which an American would buy in a month. This downward trend of the index indicates the value of the dollar is going up, which is deflation. Normally, the dollar is the subject of inflation, with prices rising between 0.1% and 0.3% per month, which makes a 0.4% drop somewhat strange. The largest factor driving this drop is energy cost, which experts attribute about three-quarters of the decline to, but other goods such as automobiles, airline tickets, household furnishing and apparel have also dropped in cost. However, there is debates among economists that the CPI is flawed, because it is based on items selected two years ago, which people may not actually be buying much of now. It doesn’t account for quick changes in people’s buying habits.

2) Oil prices continue to climb for the fifth straight day, the longest run of daily gains in nine months. Production cuts are starting to whittle down the surplus, coupled with the coronavirus lockdowns subsiding. Morgan Stanley predicts the supply glut most likely has hit its peak, but still the glut in oil will remain for quite a while.

3) Consumer debt has reached a record high to start 2020, even as credit card balances decline. Household debt balances total $14.3 trillion dollars through March, which is a 1.1% increase from the previous quarter. A $34 billion dollar drop in credit card balances was offset by an increase of $27 billion dollars in student loans and $15 billion dollars in auto debt. Mortgage balances rose by $156 billion dollars. The decline of credit card debt is an indicator that people are spending less on consumer goods as a result of the coronavirus.

4) Stock market closings for – 5 May 20:

Dow 23,883.09 up 133.33
Nasdaq 8,809.12 up 98.41
S&P 500 2,868.44 up 25.70

10 Year Yield: up at 0.66%

Oil: up at $25.68

1 May 2020

1) The numbers are in for the weekly jobless claims, with another 3.84 million people losing their jobs. This brings the total to over 30 million in the past six weeks. Expectations were for about 3 million, so the news was not upsetting. The claims peaked at 6.87 million so officials feel the worst is over with declines each week since, but still this has been the worst employment crisis in U.S. history. While some states are starting to bring their economies back on line, much of the key American infrastructure remains on lockdown. Predictions are for the second quarter to decline worse than anything America has ever seen. The unemployment rate is anticipated to be about 15.1%.

2) The crash of the oil market continues across the globe, with the American shale or fracking oil industry being hit the hardest. The shale oil industry had been fueled by lots of easy money, almost unlimited borrowing allowing companies to dramatically ramp up production, despite what the market demand was. Many companies had been in trouble before the coronavirus hit, and that combined with the Russian and Saudi Arabia oil dispute, oil prices have dropped by three-quarters since early January. There is $43 billion dollars of energy junk bond defaults coming in 2020 with hundreds of oil companies facing bankruptcy. The problem isn’t just American, with Shell Oil Co. announcing a cut in their dividends for the first time since World War II. Finally, the pandemic appears to be making fundamental changes to the oil market and consumption so the oil market may never fully recover.

3) The virus pandemic has adversely affected more than just traditional businesses, large and small. Dirty money from the illegal drug business is piling up in Los Angeles because the money laundering systems has also been put on hold by ‘closing orders’ of non-essential businesses. The businesses used by the drug trade to launder their money have been forced to close up, thereby ceasing operations leaving the drug dealers with growing stacks of cash that cant be used until cleaned.

4) Stock market closings for – 30 APR 20:

Dow 24,345.72 down 288.14
Nasdaq 8,889.55 down 25.16
S&P 500 2,912.43 down 27.08

10 Year Yield: down at 0.62%

Oil: up at $18.64

28 April 2020

1) The economic woes of the coronavirus may not be over yet. Forecast are that the U.S. economy later this year could contract at a faster rate than for the Great Depression, with a 30% contraction of the second quarter. Durable goods have plunged 14.4% in March as the economy came to a near halt, while the unemployment rate for the same time rose 4.4%. The number of people losing jobs in the last five weeks is 26.4 million, which has wiped out all the job gains made after the Great Recession.

2) Oil continues its troubles, sliding down in price with fears of it reaching zero again. There remains a critical shortage of storage for bulk oil, so there’s no place to put new oil pumped up, and that drives the price of futures down. Oil prices plunged nearly 25% at the start of the week amid fears of limited storage. Global energy demand has fallen drastically from the pandemic shutting factories and putting limits on travel around the world, leaving a glut of oil. With the world economy down, there isn’t any light at the end of the tunnel, and therefore not much hope that the oil glut will ease significantly in the foreseeable future.

3) Fannie Mae and Freddie Mac have announced that borrowers who skip mortgage payments (called forbearance status) due to the coronavirus pandemic won’t have to make lump-sum repayments when the crisis is over. The administration is encouraging other mortgage lenders to adopt similar policies to avoid undue stress to the people and economy during a recovery. Almost 6% of borrowers have delayed making mortgage payments as of April 12, up from 3.7% a week earlier. It’s still not clear just when or how forbearance status will be granted to a borrower, thus allowing the deferment of payments to a later date.

4) Stock market closings for – 27 APR 20:

Dow 24,133.78 up 358.51
Nasdaq 8,730.16 up 95.64
S&P 500 2,878.48 up 41.74

10 Year Yield: up at 0.66%

Oil: down at $12.93