31 March 2020

1) Oil prices have crashed to an eighteen year low as coronavirus lockdowns cascaded through the world economies, which have drastically cut oil demand. The surplus in oil stocks is ballooning amid the Saudi Arabia and Russia’s dispute over struggle for oil control. The slump in petroleum based products has shut down refineries around the world. Prices are on track for the worst quarter on record. There are no signs of Saudi Arabia and Russia’s dispute being resolved as Saudi Arabia increases its production to further increase surpluses of oil thereby dropping oil prices more.

2) The coronavirus pandemic is expected to drive March auto sales off a cliff, from consumer confidence dropping and shuttered dealerships across much of the country. It’s expected that April may be as bad as or worst than March. Sales forecast for March has dropped 37% and April could be off between 50% and 60%. States under ‘stay at home’ orders have seen an 80% drop in auto sales.

3) With millions of Americans already laid off, fears among experts that job losses could be as high as 47 million to give an unemployment rate of 32%. The loses are a result of government induced economic freeze to contain the spread of the virus. A record 3.3 million Americans have filed initial jobless claims for the week ending 21 March of this year, with an estimated 66.8 million workers consider to be in jobs at high risk for layoff. With a loss of 47 million jobs, the unemployment rolls would rise to 52.8 million, or more than three times the peak number of unemployment in the 2008 Great Recession.

4) Stock market closings for – 30 MAR 20:

Dow 22,327.48 up 690.70
Nasdaq 7,774.15 up 271.77
S&P 500 2,626.65 up 85.18

10 Year Yield: down at 0.67%

Oil: down at $20.28

27 March 2020

1) The $2 trillion dollar coronavirus relief bill has been passed and Treasury Secretary Steven Mnuchin said the people should receive cash payments within three weeks. The IRS has been tasked with distributing the monies, but the agency is hobbled by obsolete technologies such as 1960’s era computers, limited staff and a small budget. So there are questions if the agency can get the job done in a timely manner, let alone in three weeks. Experts say its more like a matter of months rather than weeks for Americans to receive their check.

2) Almost 3.3 million Americans have applied for unemployment benefits this last week, more than quadruple the previous record set in 1982. This is a result of the wide spread economic shutdown from the coronavirus pandemic. This rate of layoffs is expected to accelerate as the U.S. economy sinks into a recession with the collapse of revenues for a wide range of businesses. Economist predict the nation’s unemployment rate could approach 13% by May.

3) Gold has traditionally been a panic investment which people and nations buy to protect the value of their money. The worldwide panic over the coronavirus coupled with a flood of stimulus by central banks has ignited demand for gold to store wealth. But the gold market is running into difficulties in buying. Stored in high security vaults, government mandated shut downs have left access iffy. Also, refiners of gold have been forced to close because of the virus. Transporting gold is done via airlines, but the sharp drop in air service has also made transport of the metal difficult. All these factors have put a squeeze on gold futures.

4) Stock market closings for – 26 MAR 20:

Dow 22,552.17 up 1351.62
Nasdaq 7,797.54 up 413.24
S&P 500 2,630.07 up 154.51

10 Year Yield: down at 0.81%

Oil: down at $23.18

24 March 2020

1) The International Monetary Fund stated the global recession caused by the coronavirus pandemic could be worse than the global financial crisis of 2008-9. However, the world economic output should recover in 2021 because of the extraordinary fiscal actions already being taken by many countries and their central banks. But for a 2021 recovery, countries need to prioritize containment and strengthen health systems.

2) The U.S. is entering a recession, but the ultimate fear is a protracted malaise akin to a depression. Some prominent economy watchers are drawing comparisons to the Great Depression, although falling short of forecasting another one, based on the fact that the world has not seen a synchronized interruption in economic output in decades as was seen with the Great Depression. The U.S. will suffer a huge economic contraction as businesses close and Americans stay home, with some estimates that the economy will have the worst quarter since 1947.

3) Most U.S. small businesses have only days to stay afloat amid the coronavirus crisis. Only about half of the 30 million small businesses in America have a 15 day cash reserve needed to survive. The shelter in place orders have cut business revenues to near zero almost over night. Particularly hard hit is the service industries such as restaurants, landscaping, personal services and salons. These small businesses employ about 60 million people, or half of American’s work force. Many of the businesses were already operating on razor thin margins before the virus crisis. With so little cash reserves, they are forced to immediately reduce hours or layoff employees to survive.

4) Stock market closings for – 23 MAR 20:

Dow 18,591.93 down 582.05
Nasdaq 6,860.67 down 18.84
S&P 500 2,237.40 down 67.52

10 Year Yield: down at 0.76%

Oil: up at $24.24

13 March 2020

1) The popular theme parks Disneyland and Disney World have been closed until April because of the threat of coronavirus. The closure commences on 14 March, but the hotel resort will remaining open until 16 March to allow guess to make travel arrangements for returning home. Walt Disney Co. will continue to pay cast members during the closure. Disney Cruise Line will suspend all new departures beginning Saturday until the end of the month. At this time, it is uncertain how adversely this will financially effect Walt Disney Co.

2) A global recession, driven by the coronavirus pandemic, may result because of the flow of goods, services and people becoming more restricted. In the past day, President Trump has restricted travel from Europe, Italy has closed almost every shop, India suspended most visas and Ireland partially shut down. Many sporting events have been closed to public spectators with major lost of revenues. Many nations fear a contraction, with China the first in decades, thus ending the 11 year expansion. The Federal Reserve’s emergency interest rate cut of March 3 failed to boost investor’s confidence.

3) The Federal Reserve has announced its plan to ease market strain and halt its downward spiral. The Feds will offer a huge injection of liquidity to the Treasury market to counter market dysfunction. Government bonds are liquid assets making them the easiest thing to sell in turbulent times when investors need to raise cash. The New York Feds have been buying Treasury bills in what is called repurchase agreements or repos. This added liquidity is intended to bring stability to the markets and arrest the downward movements.

4) Stock market closings for – 12 MAR 20: The markets continue their drastic downward spiral.

Dow 21,200.62 down 2,352.60
Nasdaq 7,201.80 down 750.25
S&P 500 2,480.64 down 260.74

10 Year Yield: up at 0.85%

Oil: down at $30.88

12 March 2020

1) The WHO (World Heath Organization) has declared the coronavirus to be a pandemic, which in turn has cause the markets to make another plunge after its apparent recovery on Tuesday. The number of coronavirus cases world wide is now in excess of 100,000 with more than 1,000 in the U.S. The central banks in other western nations are cutting their interest rates in an attempt to minimize the effects of the virus and avoid a world wide economic slowdown. At present, there doesn’t seem to be an end to the markets volatility.

2) The United Kingdom is levying an additional 2% tax on big high tech companies starting the first of April. Call the ‘digital services tax’, it will levy a tax on the revenues from search engines, social media services and online marketplaces used by British citizens, but it only applies to companies making more than $650 million dollars and derive more than $35 million dollars revenue from UK users. This will encompass companies like Amazon, Apple, facebook and Google. The EU (European Union) is considering a similar tax, but with a 3% rate.

3) Oil production in the U.S. is expected to drop as a result of the dramatic collapse in oil prices. This would be the first decline in output since 2016 as drillers are cutting back on capital spending. Oil prices are below $35 a barrel, well below the breakeven price for most American shale fields. Oil prices have been pushed down by the economic impact of the coronavirus plus Saudi Arabia and Russian failing to agree on limited oil production.

4) Stock market closings for – 11 MAR 20 Stocks down 20% from their high.

Dow 23,553.22 down 1464.94
Nasdaq 7,952.05 down 392.20
S&P 500 2,741.38 down 140.85

10 Year Yield: up at 0.82%

Oil: down at $33.12