1) The U.S. Department of Justice has launched an antitrust investigation into the practices of renowned credit card company Visa regarding debit-card transactions. The DOJ is looking into the rules for routing transactions, both in stores and online. In its suit against Visa last year, the Justice Department claimed Visa already possesses monopoly power in the market for online debit-card transactions, arguing that roughly 70% of such transactions in the U.S. are routed over the firm’s network. At the heart of the Justice Department’s issues with Visa is the 2010 law known as the Durbin Amendment, which requires banks to include two networks on their debit cards. Merchants are then supposed to be given the choice of routing over a major network versus a smaller alternative such as Pulse, Star or NYCE. Those alternative networks can be cheaper for merchants.
2) The Federal Reserve stated that while the U.S. economy has been steadily rebounding from the pandemic recession, the recovery is far from complete and needs continued support from the Fed. About half the 20 million jobs that were lost to the pandemic have been recovered, and the outlook is brightening as vaccinations are more widely administered. The central bank’s policymakers forecasts are sharply upgraded, with the economy expected to accelerate quickly this year. At the same time, their forecast showed that the benchmark rate remains near zero through 2023, despite concerns in financial markets about potentially higher inflation.
3) Flipping houses in America is an easy way to make a quick buck. With the real-estate market red hot, profits on flips are at a record high, averaging some $66,000 per home. There are more than 60 banks and other financing companies catering to flippers. Memories of the 2007 real-estate bust are fading, and with interest rates on most fixed income investments still so paltry, lenders are desperate for anything that provides higher returns. The 7.9% average annual rate on a fix-and-flip loan is more than twice the 3.09% rate that a bank can earn on a 30-year mortgage. But there aren’t that many houses to purchase, the inventory of existing homes for sale is at its lowest since 1999, so now more flippers are chasing fewer transactions. Almost 68% of all home flippings last year sold for $300,000 or less.
4) Stock market closings for – 19 MAR 21:
Dow 32,627.97 down by 234.33 Nasdaq 13,215.24 up by 99.07 S&P 500 3913.10 down by 2.36
1) The American Airlines Group Inc. will layoff 19,000 workers once the federal payroll act expires on the first of October, making for a 30% reduction in its workforce since the Convid-19 crisis. This will result in 17,500 workers furloughed and about 1,500 cuts to management staff. These cuts are forced by a 70% drop in passenger numbers. This will bring the airlines pandemic cuts to 40,000 positions since the coronavirus outbreak. Presently, American plans to fly less than 50% of its normal schedule in the fourth quarter, while their long haul international flights will be just 25% of 2019. The airlines will have 100,000 employees compared with 140,000 in March of this year.
2) Real estate investors, including some of the largest investment groups, are skipping loan payments while raising billions of dollars for new investments. While the pandemic has devalued some real estate, it has also created new targets for investors loaded with cash. It’s the age-old strategy of abandoning ‘loser investments’ to buy winners, the losers being commercial properties with businesses that don’t need as much space as before the pandemic. Property owners are more likely to walkaway when their equity has been wiped out by lower values. Restaurants and hotels properties are especially vulnerable.
3) Reverse mortgages have new appeal for older Americans because of the super low interest rates, which means more of the equity is available to the home owners since less is going towards the interest. Essentially, a reverse mortgage is like a loan, where the owner sells his property for cash, but continues living in it. This makes retirement more comfortable or even possible with the homeowner having access to his house equity without having to actually sell his home.
4) Stock market closings for – 25 AUG 20:
Dow 28,248.44 down 60.02 Nasdaq 11,466.47 up 86.75 S&P 500 3,443.62 up 12.34
1) Another drop in applications for unemployment benefits is giving hope for the economy. For the week ending 1 August, there were 1.19 million jobless claims, down by 249,000 claims. Total unemployment is now at 16.1 million, the lowest since April. But even with continual drops, the claims are still five times the pre-crisis levels. More than decreasing claims is needed for the economy to improve, for much more hiring is required. There are fears of conditions improving so sluggishly, that the effects of the crisis become increasingly permanent. With the resurgence of the pandemic, there are signs of the economy stalling in what is already a fragile economy.
2) The Covid-19 crisis is fueling the need for high speed internet access, and rural America is responding with their electric and telephone co-ops using loans from the federal government. Subscribers are getting speeds up to 1 gigabit per second, with some planning for speeds up to 10 gigabits per second. Rural areas have the duel problem of low population densities and long distances, so its not economically feasible for private companies to install systems. The only alternative is satellite internet systems.
3) The Bank of England is warning of the potential risk of what’s called the ‘shadow banks’ in amplifying the volatility of unstable economies. Funds in investments like pension funds, investment funds like real estate investment trusts and money market funds are increasingly absorbing the cash once kept in banks, but are not as secure in times of crisis as traditional banks. This makes it harder for businesses to access their money when needed most. The non-banks impact in a financial turmoil is being assessed, lead by the Bank of England.
4) Stock market closings for – 6 AUG 20:
Dow 27,386.98 up 185.46 Nasdaq 11,108.07 up 109.67 S&P 500 3,349.16 up 21.39
1) The American economy last quarter is the worst on record, with a 32.9% annual rate contraction (April – June). American business ground to a halt from the pandemic lockdown this spring, leaving the country in its first recession in eleven years. This wipes out five years of economic gains in just months. From January to March, the GDP (Gross Domestic Product) declined by an annualized rate of 5%. While the unemployment is declining as states open up from the shutdown, there are still about 15 million unemployed workers. Americans are spending less money during th lockdown, partly because of lost of jobs. Consumer spending is the biggest driver of the economy, and it declined at an annual rate of 34.6% for the second quarter.
2) While Walmart has posted surging sales for each month, it is still taking cost savings measures. The retailer has laid off hundreds of workers including store planning, logistics, merchandising and real estate. Also, Walmart is reorganizing its 4,750 stores by consolidation of divisions and eliminating some regional manager roles. Walmart is performing well because of high demand and low prices during the pandemic. The company isn’t opening as many new stores in the U.S. anymore, so Walmart doesn’t need as many people to find new locations and so design them.
3) Job postings in technology are 36% down from 2019 levels. This is attributed to increased competition, low priority in hiring and uncertainty over the pandemic. Therefore, the tech industry is also feeling the economic effects of the coronavirus pandemic. Sending a very significant portion of its workers remote to work at home, there were predictions tech jobs would lead the recovery with increase job numbers. The ‘work at home’ was thought to show tech jobs might be available outside the traditional hubs. Neither has proved to be true. In short, the tech jobs are faring worst than the overall economy.
4) Stock market closings for – 30 JUL 20:
Dow 26,313.65 down 225.92 Nasdaq 10,587.81 up 44.87 S&P 500 3,246.22 down 12.22
1) As the coronavirus continues the slowing of China’s economy, coupled with a general slow down in world economies, world oil prices are dropping. China is the world’s largest oil importer, with speculation that if oil continues to drop, America can expect a drop in gasoline prices, possibly going below $2 a gallon.
2) The credit card company Visa is planning major changes to the rates U.S. merchants pay to accept its cards. These changes are the biggest changes in a decade, with Visa hoping to encourage people to abandon checks and cash. Higher rates are coming for transactions on e-commerce sites, while certain retailers such as real estate and education will see lower rates. Retailers have long complained about the $100 billion plus dollars they spend each year to accept electronic payments.
3) Ford Motor Co. has posted a fourth quarter loss and provided weaker than expected 2020 forecast due to continued higher warranty cost, lower vehicle volumes, lower results from Ford Credit branch, and higher investment in future transportation. This is coming at a time when Ford and other automakers are making huge investments in producing a line of electric cars and trucks. For the fourth quarter, Ford is reporting a net loss of $1.7 billion dollars, or 42 cents a share. Revenue for the fourth quarter was down 5% to $39.7 billion dollars.
4) Stock market closings for – 4 FEB 20:
Dow 28,807.63 up 407.82 Nasdaq 9,467.97 up 194.57 S&P 500 3,297.59 up 48.67
1) Present Trump has renewed his threats to impose tariffs on imported cars from Europe, citing that the European Union is even more difficult to do business with than China. His comments signals he is turning his attention to renegotiating trade deals with the bloc. Automobiles have been at the center of trade tensions for the past couple of years.
2) The millennials own just 4% of American real estate by value, much less than the 32% which baby boomers owned. This comparison is with approximately the same media age of the two groups, meaning the millennials are far behind the baby boomers economically. While millennials may close that gap in the next four years, it’s unlikely they will reach 20% ownership, still far behind the baby boomers.
3) There is a rash of retail store closings after the holiday season, due to sales slump. Fashion retailer Express is closing 91 stores, Bed Bath & Beyond is closing 60 , Schurman Retail Group is closing its Papyrus and American Greeting stores for a total of 254 locations in the next four to six weeks. Express is the latest in a serious of fashion retailers to close, part of the struggle of malls to compete in the new retail arena. Last year, retailers Forever 21 filed for bankruptcy, with Charlotte Russe and Payless ShoeSource going out of business.
4) Stock market closings for – 22 JAN 20:
Dow 29,186.27 down 9.77 Nasdaq 9,383.77 up 12.96 S&P 500 3,321.75 up 0.96
Financial investment power house Goldman Sach (GS); is in negotiations to aquire B&B Hotels and all its subsidiary chains. They will be acquiring the chain from PAI Partners (French hospitality investment firm).
The purchase will happen in the latter part of 2019. The deal is supposed to be worth around $2.2 billion (USD). B&B Hotels has over 486 hotels (in total). The company was founded in 1990 and operates in the hospitality market in countries such as Brazil, Morrocco, and many Euro countries.
GS merchant banking division will be pursuing the close of the transaction, which is supposedly going to happen later this year (2019). -SB
See new posting below, “EFR PODCAST EP. #28: TARIFF WARS”
1) Oil prices continue to increase as supplies decrease in part because of the Iran sanctions which come into full force on 4 November. Fears are that oil prices will reach $100 in the near future.
2) Amazon announces raising their minimum wage to $15 per hour. This will effect 250,000 full and part time Amazon workers, plus another 100,000 seasonal workers. Target will raise their minimum wage to $11 per hour while Walmart will raise their’s to $12 per hour.
3) The Hudson Yards, at $25 billion, is the most expensive real-estate development in US history, as well as one of the largest. Once completed, there will be 18 million square feet.
4) 2 OCT 18 Stock price closings: Every major retailer stock prices closed down in response to Amazon.
Dow 26,773.94 up 122.73
Nasdaq 7,999.55 down 37.76
S&P 500 2,923.43 down 1.16
New posted article below titled “SIRIUS XM TO BUY PANDORA”
1) The CEO Musk of Tesla is threatened by a law suit from the SEC over Musk’s public statement that he intended to take the company private causing a sharp increase in Tesla’s stock price with resulting chaos. The SEC also seeks to banned Musk from running any publicly held company.
2) Boeing aircraft has partnered up with Saab aircraft to win a $9.2 billion dollar contract for the Air Force’s next training jet to replace the 50 year old T-38.
3) Home mortgage rates have reached a 7 year high as the days of easy money seem to be coming to an end.
4) 27 SEP 18 Stock market closings:
Dow 26,439.93 up 54.65
Nasdaq 8,041.97 up 51.60
S&P 500 2,914.00 up 8.03
New article posted below titled “CHINA LOOKING TO REFORM AFTER GROWING TIT 4 TAT WITH U.S.”
1) Real wages remained stagnant, with household incomes $4,000 less than 16 years ago. This despite an expanding economy, with record stock prices, soaring corporate profits and a giant stimulus tax cuts.
2) The new tax cuts were suppose to depress housing prices to further stimulate the economy. However, after nine months, the downward shift of prices has not materialized. While the housing market is showing signs of weakness, in particular in new construction, prices continue to climb.
3) Many experts continue to warn of a coming recession. They base their premise on the unemployment reaching a cusp limit, the yield curve flattening, increasing inflation rate, decline in home sales, a rise in credit card debt and late payments, and finally the economic cycle suggests a contraction.
4) 31 AUG 18 Stock price closings:
Dow 25,964.82 down 22.10
Nasdaq 8,109.54 up 21.17
S&P 500 2,901.52 up 0.39