14 July 2020

The restaurant chains were in trouble before the pandemic struck, which is now driving many out of business. Big well known names such as Steak ‘n Shake, which has closed 50 of its restaurants permanently and is trying to sell off the remaining 300 as franchises. Fuddruckers, a subsidiary of Luby’s, is closing 17 restaurants to leave 40, while Red Robin is closing up. The wine and burger Sinburger is closing 18 to leave just 8 restaurants. Wendy’s 400 franchises are in trouble, as well as 1,200 Pizza Huts, both icons of eating out. Although not as well know, Roy Rogers is closing.

2) Wall Street is bracing for some bad numbers from the big banks this week, from huge drops in their profits. The mass unemployment, waves of bankruptcies and the pandemic crisis coupled with near zero interest rates is leaving banks like JP Morgan Chase, Bank of America, Wells Fargo and Citigroup with an expected drop in profits of 50%. The banks are expecting significant loans to go bust and so are setting aside cash to weather the eventuality. Banks around the world could ultimately suffer a credit loss of trillions of dollars. Banks make money off the spread between interest charged on loans and that paid on deposits, but with the near zero interest rate, that spread is very narrow leaving less profits.

3) The tech giant Google intends to invest $10 billion dollars in India over the next five to seven years to grow the company’s business in a fast growing market. Google plans to partner up with other companies in India, as well as investing in its infrastructure, operation and ecosystem and startup scene. The company will focus on artificial intelligence in health, education and agriculture. They will open digital services for locals so they can use their own languages such as Hindi, Tamil and Punjabi. India has a population of more than 1 billion people, with half of them not yet online. The more people on the internet, the more customers Google has for its services.

4) Stock market closings for – 13 JUL 20:

Dow 26,085.80 up 10.50
Nasdaq 10,390.84 down 226.60
S&P 500 3,155.22 down 29.82

10 Year Yield: up at 0.64%

Oil: down at $39.25

13 July 2020

1) Robert De Niro, the world famous actor, has had his personal finance’s badly hit by the coronavirus pandemic. He’s been forced to cut the credit limit of his ex-wife from $100,000 to $50,000 a month because of his cash flow problems. His restaurant and hotel chain, the Nobu and The Greenwich Hotel, have had huge losses over the past few months. Additionally, his earnings from the movie “The Irishman” have almost dried up. It’s reported that the actor will be lucky to make $7.5 million this year. Both the restaurant chain and hotel have been closed or partially closed for months with next to no income. The Nobu lost $3 million in April and $1.87 million in May, with De Niro forced to borrow money to pay investors $500,000 on a capital call.

2) The online retailer giant Amazon is requiring employees to remove the Tik Tok application from their phones if their device accesses Amazon email because of security concerns. Tik Tok is a video sharing app which has become the most popular social media apps in the world. But government officials and business leaders are becoming wary of the Chinese owned company. The U.S. military has already banned using Tik Tok because of threat of spying by the Chinese. A new privacy feature in iOS 14 revealed Tik Tok was accessing users’ clipboard content despite promises by the Chinese to discontinue the practice last year.

3) An underwater or upside-down mortgage occurs when the home value is lower than the mortgage. While not common, this occurs when home values decline leading to owing more than the current house value and therefore having negative equity. Factors which cause home values to rise and fall are interest rates, high rates of foreclosures and short sales in your area, and natural disasters. Underwater mortgages usually occur during an economic downturn where home values fall off. One way to become up-side down is when secondary financing (home equality loan) equals more than 100% of the home value.

4) Stock market closings for – 10 JUL 20:

Dow 26,075.30 up 369.21
Nasdaq 10,617.44 up 69.69
S&P 500 3,185.04 up 32.99

10 Year Yield: up at 0.63%

Oil: up at $40.62

10 July 2020

1) There are predictions of a relentless heat wave to blanket the U.S. for the next several weeks. This heat wave is just starting in the South, but is expected to move north and east with 100 degree plus temperatures across Ohio Valley and into the Mid-Atlantic areas. The National Weather Service forecast record high temperatures from Friday to Tuesday with as much as 75 record highs broken. But the question isn’t how high the temperatures will get, but for how long? It is expected temperatures during the multiple week span will have only a few days of normal temperatures. These high temperatures are caused by heat domes, sprawling areas of high pressure bringing hot and dry conditions for days. Such phenomena have economic impacts such as high electricity consumption.

2) Walmart is reportedly close to launching Walmart+ in July, a membership program that closely resembles Amazon Prime. The service cost $98 per year and includes same-day delivery, fuel discounts and other perks. Originally to open this last spring, it was delayed because of the pandemic. Walmart has nearly 3,300 store pickup locations and more than 1,850 stores offer same day grocery delivery.

3) The Supreme Court ruled that the eastern half of Oklahoma can be considered Native American territory. The case originated from a conviction of Jimcy McGirt, a Native American, who claims his state conviction in 1997 for rape, should be overturned because Oklahoma lacks jurisdiction, that the Indian reservation had not been properly terminated by the Congress. This would mean the federal government would have jurisdiction, so McGirt would be subject to federal criminal laws instead of Oklahoma. The ruling effects half of Oklahoma and 1.8 million residents. Oklahoma fears the decision will create civil, criminal and regulatory turmoil.

4) Stock market closings for – 9 JUL 20:

Dow 25,706.09 down 361.19
Nasdaq 10,547.75 up 55.25
S&P 500 3,152.05 down 17.89

10 Year Yield: down at 0.60%

Oil: up at $39.59

9 July 2020

1) In a move that shows just how much troubled the airline industry is, United Airlines is sending out layoff warnings to half of its U.S. staff, or about 36,000 employees. The world’s airline industry has be devastated by the coronavirus crisis, with the prospects for recovery in air travel dimming in just the past two weeks because of a rise in infections. The ‘36,000 people’ is a worst case scenario, with United striving to minimize layoffs through things like early retirement packages. Air travel had plunged 95% from March to April, and has been making a slow recovery. Still air travel is down 70%.

2) After more than fifteen months since being grounded for safety, Boeing’s 737 MAX is finally getting close to winning approval to fly again. But it’s not expected the aircraft will actually start carrying passengers until late this year at the earliest. Now with a history of missed deadlines, neither Boeing or the FAA (Federal Aviation Administration) will say when the airplane will be approved to fly passengers. But after the aircraft is certified, there will still be months of training before the 737 MAX can actually operate. The good news is the test flights signal the certification is nearing its end. Once the U.S. has granted approval, Boeing will start the process of certification in a number of other countries which the 737 will operate out of. Plus, the 400 aircraft built during the grounding will need to be modified and tested before they can be delivered. The biggest question is how much and how long the airline industry will need to recover from the pandemic.

3) President Trump is threatening to cut off funding for schools that do not reopen this fall. It’s unclear just how the federal government could exert significant financial pressure on states and local school systems. The President is also in disagreement with Centers for Disease Control and Prevention’s guidelines for their reopening.

4) Stock market closings for – 8 JUL 20:

Dow 26,067.28 up 177.10
Nasdaq 10,492.50 up 148.61
S&P 500 3,169.94 up 24.62

Year Yield: up at 0.65%

Oil: up at $40.93

7 July 2020

1) Research by the Wall Street firm UBS, predicts that as many as 100,000 brick and mortar retail stores in the U.S. will close by 2025. Because of the pandemic, retailers are closing store locations permanently at an un-precedent rate. But this closure was going on before the coronavirus shutdown, with shoppers embracing other ways to buy such as e-commerce and picking up products at stores purchased online. This is in addition to large traditional retailers going into bankruptcy. This prediction is in keeping with the 9,800 stores already closed this year, with 25,000 stores predicted to close by the end of 2020. The retail sector has already lost 1.2 million jobs between March and June. This opens questions if the present hyper-consumerism economy can continue.

2) With the continued threat of the pandemic and a slowdown of reopening of economies in states, evictions are likely to skyrocket as jobs remain scarce. This is because a backlog of eviction cases is beginning to move through the court system. Millions of people had been counting on federal aid and eviction moratoriums to remain in their homes, but now fear of being thrown out is mounting. This situation is further aggravated as the enhanced unemployment benefits run out at the end of July. The enhanced unemployment and $1,200 stimulus payment had been supporting households this spring. There are 110 million people living in rental households with 20% at risk of eviction by the end of September.

3) The food delivery service Uber has acquired rival Postmates, despite Uber not having become a profitable enterprise yet. This should make Uber a stronger competitor to its main rival Doordash. The food delivery sector is undergoing a major consolidation this year, people jumping from service to service to find the best deal. With this acquisition, Uber gets a bigger share of the market with 31% of the business with DoorDash the largest at 44%.

4) Stock market closings for – 6 JUL 20:

Dow 26,287.03 up
Nasdaq 10,433.65 up
S&P 500 3,179.72 up

10 Year Yield: 0.68%

Oil: up at $40.59

6 July 2020

1) Newest job report is out with America gaining 4.8 million jobs as people return from the shutdown to work again. This gives an unemployment rate of 11.1%, which is still in the recession category, but is coming down over time. These returning jobs were mostly in the restaurant, hotel and retail sectors. There remains the question of how many restaurant jobs will finally return, with significant numbers of privately own businesses failing financially because of the shutdown.

2) The cornerstone of Ford’s reorganization, its F series Ford pickups, has dropped 22% in sales. Most of these are the F-150 full size pickups, with a new version just recently released. Total Ford sales are down 33.3%, with Ford executives making it clear just how critical the F-150 is to the future of Ford. Before the pandemic crisis set in, Ford had implemented a major restructuring of its operations intent on remaining a strong profitable company, and had expected to pay for this plan in part with the strong sales of the F-150. The F series models have been a part of Ford’s product line since 1948.

3) It’s reported that the developing world loses billions of dollars in money from migrant workers. These migrant workers range from Polish farmhands in the fields of southern France, to Filipino workers on cruise ships in the Caribbean, almost all of them losing their jobs because of the pandemic shutdown. These workers routinely sent cash home, so the third world economy is suffering too. Migrant workers comprise tens of millions of Indians, Filipinos, Mexicans and others from the developing countries, who sent a record $554 billion dollars back home last year. This is more than three times the development aid from foreign governments. Family members depend on this cash to pay for food, fuel and medical care. This drop in money sent home is four times the fall in the 2008 Great Recession.

4) Stock market closings for – 3 JUL 20:

Dow 25,827.36 up 92.39
Nasdaq 10,207.63 up 53.00
S&P 500 3,130.01 up 14.15

10 Year Yield: down at 0.67%

Oil: unchanged $40.32 back home

3 July 2020

1) The aircraft manufacturer Boeing Aircraft is discontinuing production of it’s iconic 747 jumbo jet after a fifty year run. The last 747-8 will be completed in two years. This marks the end of an era of giant airliners with Airbus also discontinuing its A380 production. The number of routes in the world which requires a jumbo jet are few, with airline companies preferring the twin engine aircraft for long range flights. The 747 made its debut in 1970, and went on to rack up 1,571 orders over its production life, a record seconded only by the wide body 777. Boeing has lost 40$ million dollars for each 747 since 2016, with production down to just 6 units a year. The last 747 for passenger service was Air Force One. With air travel curtailed by the Covid-19 crisis, air carriers don’t expect air travel to recover fully until the mid decade, so airlines are culling out aging jetliners and four engine jumbos from their fleets to limit spending.

2) With interest rates near zero, the most used tool for the Feds to stimulate a sagging economy is becoming ineffective in reversing the pandemic induced recession. Therefore, the Feds are considering using quantitative easing or large scale assets purchases. This is where the U.S. central bank buys hundreds of billions of dollars in assets, most of which are U.S. Treasury and mortgage backed securities. By taking bonds (mostly 2 and 10 year Treasuries) off the market it replaces them with cash in the system, meaning there is now more cash available for lending to consumers, businesses and municipalities.

3) The Senate is considering a bill which would punish retailers for refusing cash payments. Retailers have been pushing for electronic payments to reduce the risk of virus contamination from contact of paying cash. The objective of the bill is to prevent disenfranchise of minorities who have limited to no banking access.

4) Stock market closings for – 2 JUL 20:

Dow 25,827.36 up 92.39
Nasdaq 10,207.63 up 53.00
S&P 500 3,130.01 up 14.15

10 Year Yield: down at 0.67%

Oil: up at $40.32

2 July 2020

1) The airline industry is one of the hardest hit segments of the economy from the pandemic, with an estimated 36% drop in traffic this year. But the International Air Transport Association is warning that it could worsen with a 53% drop if boarder curbs on emerging market countries and the U.S. remain in place. The U.S. – EU (European Union) air travel market generates $29 billion dollars a year is threaten by the ban on non essential flights from the U.S. as the EU attempts to avoid an resurgence of the virus. Air travel was down over 90% for April and May, with little prospects for improvement in the near future, leaving the future of air carriers in doubt too.

2) The maker of electric automobiles Tesla has become the world’s most valuable automaker, surpassing Toyota’s for the first time on record. Tesla’s valuation is roughly $206.5 billion dollars compared with Toyota’s valuation of about $202 billion dollars. This underscores the vast investor enthusiasm for the automaker, which has yet to turn a profit on an annual basis. While it’s valuation exceeds Toyota, its car production of 103,000 cars lags far behind Toyota’s production of 2.4 million vehicles. The valuation comes from the stock in the company, with investors piling money in since there aren’t any other electric vehicles investments available, with Tesla stock soaring to $1,135 per share.

3) Electricity bills are set to surge this summer because of millions of Americans sheltering in place. This added demand will mean higher electricity costs for months to come. This will mean an additional $30 to $40 per month on electric bills in cities like New York and Philadelphia. Increases are anticipated to be highest for the northeast area of the country, decreasing when going westward. This comes when people’s finances are already stretched tight because of the coronavirus crisis.

4) Stock market closings for – 1 JUL 20:

Dow 25,734.97 down 77.91
Nasdaq 10,154.63 up 95.86
S&P 500 3,115.86 up 15.57

10 Year Yield: up at 0.68%

Oil: down at $39.71

1 July 2020

1) The credit worthiness of automakers has been lowered by Moody’s Investors Service, downgrading about $130 billion dollars in global automakers’ debt. Nine out of 22 global car makers have had their ratings lowered. General Motors Co. has a Baa3 rating for unsecured notes, the lowest investment grade rating and has a negative outlook. Ford Motor Co.’s senior unsecured debt is rated at Ba2, which it two notches below investment grade and also has a negative outlook. Thirteen of the automakers were not downgraded because of their better operating profiles and liquidity, but 75% have a negative outlook. World automakers were having troubles before the pandemic, but now are facing more declining auto sales and low prospects for near term improvement.

2) China has adopted a national security law that allows Beijing to override Hong Kong’s judicial system. The intent of China is to strangle and suppress political opponents in Hong Kong and subjugate the freedom of its citizens. This is another example of the re-emergence of Red China as a totalitarian state, and therefore represents a threat to surrounding nations. It strips the territory of autonomy promised under the handover agreement with Britain, with possible retaliation from America. The move by China has resulted in visa restrictions on officials from both sides, and a threat of future retaliation measures coming.

3) Fears of another virus pandemic have surface with the discovery of a new swine flu virus in Chinese pigs. The new strain, called G4 H1N1 has many of the same characteristics of H1N1 that caused the 2009 global pandemic, and can bind to, infect and replicated in tissue cells located in human airways. While not an immediate threat, the virus bears watching, but on top of the Covid-19 pandemic, the problem of controlling either outbreaks would be multiplied, especially with the now overstretched health care and hospital systems.

4) Stock market closings for – 30 JUN 20:

Dow 25,812.88 up 217.08
Nasdaq 10,058.76 up 184.61
S&P 500 3,100.29 up 47.05

10 Year Yield: up at 0.65%

Oil: up at $39.86