1 October 2020

1) After two previous recalls for Mustangs and Super Duty pickups, Ford has announced a third recall of nearly every new vehicle it sells today, a total of about 620,246 vehicles for dysfunctional (blank picture) backup cameras. All 2020 models are being recalled, the Ford Explorer, F-150 pickups, Mustang, Transit, Super Duty pickups, Expedition, Escape, Range and Edge. The only exception is the Ecosport. All have defective back up camera systems that can go dark or have a flickering image. Backup cameras are federally mandated, and therefore Ford vehicles don’t comply with Federal Motor Vehicle Safety Standards and therefore must be repaired.
2) Disney has announced it is laying off 28,000 employees in the U.S., a direct result of the pandemic’s effects on its theme parks. The laid-off employees comprise 67% of their part time workers and will affect Disney’s Parks, Experiences and Products unit. The parks and resorts division has more than 100,000 U.S. employees. On shutting down its theme parks globally this spring, Disney’s profits dropped a whopping 91% for the first three months of 2020. The theme parks have been impacted, a result of the limited capacity from physical distancing requirements and the continued uncertainty of the duration of the pandemic.
3) Nigeria is overhauling its State Oil Company and may sell a stake in the company. Nigeria is Africa’s biggest crude oil producer so the sale of shares is a big deal. The Nigerian government seeks to establish a commercially oriented and profit driven national petroleum company, which generates about half of the government’s revenue and more than 90% of its export earnings. The company has for years been a tool for political patronage to cronies, with its closed operations fueling corruption. Being a publicly traded company sheds the cloak of secrecy by opening the books for inspection thereby making corruption more difficult and likely to be detected.
4) Stock market closings for – 30 SEP 20:
Dow 27,781.70 up 329.04
Nasdaq 11,167.51 up 82.26
S&P 500 3,363.00 up 27.53
10 Year Yield: 0.68% up 0.03
Oil: up at $39.86

15 September 2020

1) The old, almost extinct vinyl record album technology for music has surpassed the newer high technology CD music media this year, by selling $129.9 million compared to $232.1 million dollars for vinyl records. This is the first time vinyl has outsold CDs since the 1980’s. About 8.8 million records were sold with 10.2 million CDs, so number wise CD’s are still ahead. Overall, the music industry now is center on digital downloads, digital subscription and streaming services such as Spotify, Apple Music and YouTube with revenues up 12% overall. The recorded music for the first six months of 2020 was $5.6 billion dollars so combined vinyl and CD’s are just a small fraction of the total business.

2) Amazon is hiring again expecting to fill 100,000 part time and full time openings across the U.S. and Canada. This is in addition to 33,000 technology and corporate jobs announced just a week ago, many paying six figure salaries. The 100,000 labor jobs pay at least $15 an hour with a $1,000 sign up bonuses in some cities. Amazon is opening 100 new buildings this month because of the pandemic fueled sales surge with increase home delivery, as shopping habits shift to e-commerce. Market value for Amazon is now at $1.6 trillion dollars and continues climbing.

3) Oil giant BP (British Petroleum) says the demand for oil may have peaked last year, that global market for crude oil might never recover from the coronavirus pandemic. The company considers there are three scenarios for energy demand, all of which forecast a decline in demand for oil over the next thirty years. 1) ‘Business as usual’ oil demand increases slightly after the pandemic crisis passes, then plateaus around 2025 finally it declines after 2030. 2) Governments take more aggressive steps to curb carbon emissions, 3) there are significant shifts in societal behavior, both leading to a decline in oil demand. All point to a shift in the world economic system with a significant decline in growth for many countries.

4) Stock market closings for – 14 SEP 20:

Dow 27,993.33 up 327.69
Nasdaq 11,056.65 up 203.11
S&P 500 3,383.54 up 42.57

10 Year Yield: unchanged at 0.67%

Oil: down at $37.38

11 September 2020

1) The new jobless numbers indicate the U.S. job losses persist with claims higher than was forecasts. Jobless claims were unchanged at 884,000 for last week, with the total number of people on unemployment rising by 93,000 to a total of 13.4 million people. Prior to the pandemic, new claims were about 212,000 a week with 1.7 million people on unemployment. What is concerning is the pace of layoffs has not slowed with the economy opening up, adding to fears of a second round of Convid-19 outbreaks. It appears that millions of Americans are heading for long term unemployment with most running out of unemployment benefits after 26 weeks.

2) Quantafuel AS, a Norwegian company established in 2014, who makes diesel fuel from plastic waste, is a success having tripled its value, which is now at $1 billion dollars. This is a time when the world is struggling over what to do with the monumental qualitites of plastic waste that continues to grow at an alarming rate. Even more welcomed is Quantafuel addressing the demand for fuel oils. Their process is more environmentally friendly than incineration of plastic. The company is increasing the production of its present plant and has plans to build additional plants with the goal of boosting production 100 fold in the next decade. No doubt, the Chinese will be showing great interest in this process because of their very limited oil resources.

3) One side effect of the coronavirus pandemic is limiting efforts to root out slavery across the world, because companies and investors are unable to visit factory floors in many countries. Even before the pandemic started, there was an estimated 40 million people working in slave like conditions, with the economic shock of the virus making people more vulnerable to exploitation. Companies are facing increasing legal obligations to ensure their supply chain doesn’t include slave labor.

4) Stock market closings for – 10 SEP 20:

Dow 27,534.58 down 405.89
Nasdaq 10,919.59 down 221.97
S&P 500 3,339.19 down 59.77

10 Year Yield: down at 0.68%

Oil: down at $37.00

18 August 2020

1) A good sign for the U.S. economy, the American shale oil companies plan to restore nearly all oil production by the end of the third quarter. This will return production to nearly what it was when the shut down came resulting in the oil crash. As oil prices raised to $30 to $40 per barrel range, oil production started to rise. By September, nearly all of the production is expected to be restored. There were fears that shutting down shale oil wells prematurely could hamper future production, but nearly all of the restarted wells are producing normally because of a buildup of pressure. Most companies report a smooth return of operations.

2) Pizza Hut is closing up to 300 locations as part of a deal between the pizza chain and its largest franchisee, NPC International, who is filing for bankruptcy. These will be under performing restaurants, mostly with dine in facilities. The franchisee will put its remaining 927 Pizza Hut locations up for sale. NPC also operates nearly 400 Wendy’s restaurants, but has had to file for chapter 11 protection because of its $1 billion dollar debt. In recent years, Pizza Hut has drawn away from the dine-in business and concentrated more on delivery and takeout. Final determinations has not been made as to which locations will close or when.

3) In an indication of just how quickly the virus can pop up, the Oklahoma State sorority Pi Beta Phi has had 23 members test positive for the coronavirus, resulting in the entire sorority being put in quarantine. So far, none of the girls have been hospitalized and any who are ill are experiencing minor effects from the virus. The sorority members moved into the sorority house (off campus) between August 2 and 6, with all testing negative for the Covid-19. Then on 11 August, a small group of members who reside outside the house joined the chapter for a short informal gathering at the house. Within just a few days, the members in the sorority house tested positive. There has been a major spike in the pandemic, with the number of cases surpassing the previous peak levels on 31 of May, with 78% of new cases in the Sun Belt states.

4) Stock market closings for – 17 AUG 20:

Dow 27,844.91 down 86.11
Nasdaq 11,129.72 up 110.42
S&P 500 3,381.99 up 9.14

10 Year Yield: down at 0.68%

Oil: up at $42.77

11 August 2020

1) Online retailer giant Amazon is considering taking over closed department stores in some malls to use as warehouses in their distribution system. Amazon is in talks with Simon Property Group, America’s largest mall owner, to convert J.C. Penny and Sears stores into distribution hubs for package delivery. Simon malls have 63 J.C. Penny and 11 Sears stores available. With many traditional brick-and-mortar stores in collapse, such a deal would make sense for both Amazon and Simon. Amazon is looking for more space closer to where customers live to help with its one day delivery strategy, while Simon needs cash rich tenants to bolster their business.

2) A report that outlines the three potential future movies in the Star Trek franchise has been released. The movies for Star Trek follow-on’s have been in limbo since the 2016’s Star Trek Beyond. There are three potential projects being considered for possible production, including a Tarantino’s Star Trek movie. The first movie by Noah Hawley (Fargo and Legion creator) is centered on a pandemic story line using a brand new cast, but is now on pause. The second is a movie by Tarantino, of Pulp Fiction fame, as writer, but not necessary directing it. Something of a take on of a prior Star Trek episode, it would be largely an earthbound 1930’s gangster setting. The third is a far more traditional Star Trek with the recent stars Chris Pine and Zachary Quinto. The next few weeks is expected to yield the fate of the Star Trek franchise.

3) Latest job numbers show 1.8 million new jobs created last month to give a 10.2% unemployment rate. This is another coming down of the rate, a good sign for the economy. This leaves 43% unemployed of the 22 million people who lost their jobs from the pandemic, so the economy is still a long way from a full recovery. Fears are that it will be a long time before full recovery, what with the large number of small businesses that have succumb to the Covid-19 crisis with subsequent loss of jobs. The continual struggling price of oil indicates a still weak international economy.

4) Stock market closings for – 10 AUG 20:

Dow 27,791.44 up 357.96
Nasdaq 10,968.36 down 42.63
S&P 500 3,360.47 up 9.19

10 Year Yield: up at 0.57%

Oil: up at $41.99

3 August 2020

1) Another sign of how badly the pandemic has wrecked the world economy is the huge losses that Exxon Mobil and Chevron have reported for the second quarter. The losses were even worst than Wall Street expected. Both stocks were the biggest losers in the Dow. Exxon lost $1.1 billion dollars with Chevron losing $8.3billion dollars. Oil is a principle component in a modern economy, and therefore a strong indicator of how an economy is doing.

2) Another internet satellite system has been approved by the FCC (Federal Communications Commission). Amazon’s Project Kuiper is a network in the sky of 3,236 satellites which will provide broadband internet access with the restriction that it doesn’t interfere with previously authorized satellite ventures. Amazon plans to invest $10 billion dollars in the project to compete with SpaceX, OneWeb and Telesat systems. Service will begin once the first 578 satellites have been launched. It’s expected service will begin sometime before 2026.

3) High tech giant Google has announced they are formally extending work from home until the summer of 2021. The extension will affect about 200,000 employees to include contractors and full time workers, including operations off shore. Most of the other tech companies have set at home working until the end of this year, but Google’s announcement fuels speculation if other companies will follow suit and extend their at home work schedule. Google was one of the first companies to implement work at home policy in an effort to prevent the spread of the coronavirus.

4) Stock market closings for – 31 JUL 20:

Dow 26,428.32 +114.67 +0.44%
Nasdaq 10,745.28 +157.46 +1.49%
S&P 500 3,271.12 +24.90 +0.77%

10 Year Yield: 0.54% -0.00 —

Oil: down at $40.43

27 July 2020

1) Another indication of the contraction of the oil business is the oil services company Schlumberger who cut 21,000 jobs or about one fifth of its 105,000 global employees. This is a direct result of an expected 25% drop in the number of oil wells drilled worldwide. Revenues fell 58% from last year for north American operations. The world wide cornavirus crisis caused a massive drop in oil demand, which collapsed the price of oil.

2) Boeing aircraft is facing another trouble, this time with their older Boeing 737 jets. The FAA was warned of corrosion which could cause dual-engine failure, and has ordered inspections. The corrosion problem is a result of hundreds of aircraft now in storage that have been idled because of the drop in air travel from the virus. The order requires aircraft that have not been operated for a week or more must be inspected which will impact about 2,000 aircraft. The corrosion is in engine valves, which has caused single-engine shutdowns which resulted from engine bleed air valves being stuck open.

3) Junk bonds are back again, but are packaged in a format met to appeal to investors, avoiding their seamy 1980s era reputation. Low interest rates driven by the Federal reserve is encouraging companies to borrow, which has lead to a record $51.5 billion dollars worth of junk bonds issued in June. Junk bonds are bonds with high yields (interest rates) but having a lot higher risk. The high risk comes from companies fiscal ability to pay out the bond on maturity or dividends. In a recessionary environment awash in cheap money, a troubled company can collapse under the weight of their debt. But extensive use of junk bonds pose the same dangers of the mortgage backed securities in 2008 with massive failing of businesses pulling the already fragile economy down.

4) Stock market closings for – 24 JUL 20:

Dow 26,469.89 down 182.44
Nasdaq 10,363.18 down 98.24
S&P 500 3,215.63 down 20.03

10 Year Yield: up at 0.59%

Oil: up at $41.34

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