22 October 2020

1) Many consider the next economic crisis to be the growing profusion of empty retail space, as tenants stop paying rent and reduce their offices, leaving commercial real estate in a pinch. Commercial real estate is in trouble, the $15 trillion dollar market is threatened with decline, and the longer the pandemic persists the more ill effects on hotels, retailers and office buildings, therefore the more difficult it is for property owners to meet their mortgage payments. The widespread downgrades, defaults and eventual foreclosures, coming from companies like J.C. Penney, Neiman Marcus and Pier 1 filing for bankruptcy, has retail properties losing major tenants with nothing to replace them. Motels and hotels are running below 50 percent occupancy, with the stimulus bill having no provisions to prop them up, the government hoping the commercial mortgages will just heal by themself.

2) The Justice Department is accusing the internet giant Google of illegally protecting its monopoly over search and advertising. The company is accused of building an illegal monopoly over parts of the internet. The Justice Department accused Google of building a monopoly over central parts of the internet. The main concern is Google working with other major internet companies to channel the internet to Google’s search engine, as the default search engine, by Google providing the engine to include in other company’s products through exclusive business contracts and agreements. The government contends that Google has used anti-competitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising and general search text advertising which is the cornerstones of its empire. It is considered this will be a major test of the antitrust law. A victory for the government could remake one of America’s most recognizable companies and the internet economy.

3) NASA OSIRIS-REx spacecraft mission has successfully touched down on the asteroid Bennu to bring a rock-soil sample back to earth for analysis. The van-size spacecraft briefly touched down on a landing site the width of a few parking spaces. It collected a sample between 2 ounces and 2 kilograms, then the spacecraft backed away to safety. Bennu is a boulder-studded “rubble pile” asteroid shaped like a spinning top and is as tall as the Empire State Building. If everything runs smoothly, the spacecraft and its prized sample will begin the long journey back to Earth next year and land the sample on Earth in 2023.

4) Stock market closings for – 21 OCT 20:

Dow 28,210.82 down 97.97
Nasdaq 11,484.69 down 31.80
S&P 500 3,435.56 down 7.56

10 Year Yield: up at 0.82%

Oil: down at $40.00

21 October 2020

1) The drought in the western U.S. is the biggest in years and is predicted to worsen during the coming winter months. The drought is a major reason for the record wildfires in California and Colorado. Further damage can come from depleted rivers, the stifling of crops and diminished water supplies. Elevated temperatures have dried out the soil, exacerbating the drought and making fire weather conditions sever. New Mexico is also in extreme drought conditions with rivers running dramatically low, which feed the aquifers, and neighboring Arizona is also in a deep drought. The drought is extending into Wyoming, Idaho and Montana with little relief in sight for most. Human caused climate change is increasing the likelihood of precipitation extremes on both ends of the scale, including droughts as well as heavy rainfall events and resulting floods. A study in the journal ‘Science’ found that the Southwest may already be in the midst of the first human-caused megadrought in at least 1,200 years, which began in the year 2000.

2) The Federal government has indicted six Russian military officers for massive worldwide cyber attacks. The six Russian military intelligence officers have been involved in high-profile cyberattacks on the electric power grid in Ukraine, the 2017 French elections and the 2018 Pyeong Chang Winter Olympics. The 50-page indictment details the computer intrusions and malware attacks mounted over the past five years by Unit 74455 of the GRU, the Russian military intelligence agency. No other country has weaponized cyber capabilities as maliciously or irresponsibly as Russia, deploying destructive malware from November 2015 through October 2019 in efforts to undermine or retaliate against foreign nations and organizations around the world.

3) American workers are being laid off a second time as the Covid-19 again ripples through the economy. As the second wave engulfs the economy, eight months after the first hit to the economy, Americans are still being laid off en masse by companies like Disney, the U.S. airlines, retailers and MGM Resorts. Even companies such as Allstate insurance is laying off people, 4,000 getting their pink slips. But for some workers, a second layoff so soon leaves them with no benefits, while the Paycheck Protection Program has run out. The hospitality and food-service jobs were unstable before the pandemic, but with many of those jobs now gone, many face a bleak future.

4) Stock market closings for – 20 OCT 20:

Dow 28,308.79 up 113.37
Nasdaq 1,516.49 up 37.61
S&P 500 3,443.12 up 16.20

10 Year Yield: 0.80%

Oil: up at $41.31

14 September 2020

1) With 13 million Americans unemployed and their unemployment benefits running out, many will have only seasonal jobs to turn to. But with such wide spread unemployment, getting hired for seasonal work wont be easy. With the coming holidays, seasonal jobs traditionally mushroom with major companies already hosting hiring events to fulfill their temporary ranks. Companies like Michael’s will hire over 16,000 temporary people, with UPS expecting to hire over 100,000 for holiday package delivery. Retailers doing e-commerce, such as Amazon or Walmart are expected to need many seasonal workers and therefore are good places for job seekers to apply.

2) Fears are growing that the coronavirus crisis could cause a double dip recession, that the recession could end up looking like a roller coaster of ups and downs. The upsurge in virus cases is eroding consumer confidence and leading to renewed limits on certain businesses. Economic recovery can bloom then fade away only to repeat again. Some economic factors point to a recovery, yet others point downwards, with the picture further complicated by the ‘what ifs’ of the coronavirus and just how it will play out, where a second wave of the virus could be just as economically disruptive as the first one, maybe even more so. Additionally, a significant portion of the economy has been destroyed. Half the businesses in America are small businesses and at the start of the crisis, about half of those had cash reserves of just fifteen days or less . . . meaning by now they have gone bust! No one knows what the repercussion from such massive losses of business will ultimately have on the economy in general.

3) Mechanical breakdown insurance, which isn’t an extended warranty, but rather is insurance that pays for mechanical auto repairs of a car’s power train, much as accident insurance pays for the repair of body damage. It will have some amount for a deductible, then pays the remainder of a mechanic’s bill for repair, both labor and parts. Usually, any mechanic can be used. Most major insurance companies who offer auto insurance will also offer breakdown insurance too. Prices range from $20 to $100 a year.

4) Stock market closings for – 11 SEP 20:

Dow 27,665.64 up 131.06
Nasdaq 10,853.54 down 66.05
S&P 500 3,340.97 up 1.78

10 Year Yield: down at 0.67%

Oil: up at $37.39

30 July 2020

1) First Walmart then Target and Dick’s Sporting Goods and now Best Buy have announced they will be closed on Thanksgiving, with more retailers expected to follow suit. The decision is in response to the coronavirus pandemic. Traditionally, Thanksgiving Day is the kick off of Black Friday sales, where retailers offer their lowest sales prices as the kickoff of the Christmas shopping season. But this also draws large crowds, something that goes against public health guidelines for social distancing. Instead, retailers will be offering their big sales online.

2) The spending habits of millennials had been credited with the decline of traditional consumer products, but now seem to be reversing for comebacks. Things like golf, starter homes and canned tuna are now on the rise, in part because of the covid-19 crisis. Some other products now on the rise is beer, mayo and cereal to name a few. More indications of how economic times in America are ever changing and becoming more unpredictable.

3) The pandemic crisis has sent the U.S. Postal Service into a fiscal tailspin, with President Trump saying he would not support a financial bailout until the Postoffice reformed its pricing of package deliveries for large on-line retailers like Amazon. But the federal government is preparing a $10 billion dollar loan to the Postoffice to continue services. This loan is part of the proposed $2 trillion dollar pandemic relief package passed in March, but the President said he wont spend the money until the USPS agrees to raise its prices. Much of the online retail business is dependent on the USPS to deliver their goods via mail delivery.

4) Stock market closings for – 29 JUL20:

Dow 26,539.57 up 160.29
Nasdaq 10,542.94 up 140.85
S&P 500 3,258.44 up 40.00

10 Year Yield: down at 0.58%

Oil: up at $41.32

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

25 June 2020

1) There are ten companies that may not make it through the summer. These are high brand names of Hertz, J.C. Penney, Pier 1 Imports, Tuesday Morning, J. Crew, Neiman Marcus, Gold’s Gym, Tailored Brands (Men’s Warehouse and Jos. A. Banks) and Diamond Offshore Drilling, which are all in bankruptcy now. The high number of retailers shows the ongoing retail apocalypse with the retail sector, which had already hit before the pandemic by falling sales, lower costumer traffic and too many stores. Retail was near the edge of collapsed with last years Christmas holiday shopping doing little to boost business, especially those located in malls. Last year, 9,500 retail stores closed, with estimates of 15,000 stores closing for good in 2020. This may indicated a fundamental shift in America’s economy, a shift away from hyper-consumerism to something else besides a service based economy. Shopper visits to stores are about half of last year’s numbers, and that’s with businesses reopening after more than two months on lockdown.

2) Fears continue to grow that we are not finished with the Convid-19 crisis yet, as the number of new cases continues to increase. This is happening with states and cities easing their shutdown measures to reopen the economy to start a recovery. The seven day average of new virus cases has swung up 30% from a week ago. It was hoped the warm weather would suppress the virus spread as it does with the flu, but if the virus is resurrecting, then the shutdown may need to returned with the resulting economic impact.

3) The Ford Motor Co., who is in the process of its global restructuring plan and paying off debt related to the coronavirus pandemic, is betting its future on its new line of pickups. Ford is offering its popular F-150 model in traditional internal combustion engines, new hybrids and all electric versions. The Ford F-150 has been the country’s top selling truck for more than 40 years, the best selling for the last consecutive 38 years. Their F-150 is a key part in Ford’s plans to profitably grow their business, to help in the $11 billion restructuring cost and pay off the $20 billion dollars in new debt.

4) Stock market closings for – 24 JUN 20:

Dow 25,445.94 down 710.16
Nasdaq 9,909.17 down 222.20
S&P 500 3,050.33 down 0.96

10 Year Yield: down at 0.68%

Oil: down at $38.07

26 May 2020

1) Sales of homes in the U.S. have dropped their biggest drop in nearly 10 years, because of the coronavirus crisis in April. The upending of the labor market and the broader economy has undercut demand for housing. Sales of existing homes have plunged 17.8% with existing home sales making up about 90% of U.S. home sales. In addition, April showed a record collapse in homebuilding and permits. With unemployment up past 38 million people and still climbing, it’s expected the home sale market will remain depressed for long after the pandemic crisis is over. The problem is further exasperated by a four month inventory of homes where a six to seven month supply is considered a healthy balance between supply and demand.

2) More contraction of consumerism with more retailers announcing closing of stores. The retailers Victoria’s Secret and Bath & Body Works will be permanently closing about 300 stores in America and Canada. With the young people of America having fewer good job opportunities and less disposable income, the hyper-consumerism economy born in the seventies is finding it harder to sustain itself, raising questions of what economic model might replace the present one . . . and what the job future would be for the young.

3) Companies have been borrowing at a rampant pace to shore up their liquidity during the pandemic. The wireless carrier AT&T is joining in with a new bond sale of $12.5 billion dollars of unsecured bonds in five parts. The intent is to take advantage of a global rally in credit to refinance their outstanding debt. Their 40 year security has a yield 250 basic points over the Treasuries. In the last few years, AT&T has been reducing its debt of nearly $200 billion dollars now down to $164 billion dollars, most of the debt coming from its acquisitions of Time Warner Inc and DirectTV.

4) Stock market closings for – 22 MAY 20:

Dow 24,465.16 down 8.96
Nasdaq 9,324.59 up 39.71
S&P 500 2,955.45 up 6.94

10 Year Yield: down at 0.66%

Oil: down at $33.56

22 April 2020

1) Many retailers have closed their stores because of the COVID-19 outbreak. Analysts think that over the coming years, many of these stores will remain closed for good. Analysts forecast that 100,000 stores will close by fiscal 2025, the hardest hit will be the apparel retailers accounting for 24,000 closures. Most retail categories will be impacted, with consumer electronics to see about 12,000 closures, while home furnishings and grocery retailers will each have about 11,000 closures. The most insulated retailers are those that have fared best during the pandemic, including Walmart, Target and Costco Wholesale. Home Depot and Lowe’s, plus dollar stores such as Dollar General and off-price retailers like Ross Stores and TJ Maxx are also well-positioned to survive. The once powerful department stores, which were the shopping meccas that anchored malls and main streets, are now considered in their death throes with very few expected to survive.

2) As oil futures continue to slide down, the extra oil is being stored in giant ocean supertankers as oil traders scramble to find places to keep their product. There is now 160 million barrels of oil which is being stored on tankers, a record amount. The previous record was 100 million barrels during the 2009 financial crisis. A large portion of this oil is stored in about 60 super tankers called very large crude carriers (VLCC) which can hold up to 2 million barrels each. Every conceivable place to store oil is being explored, while also the U.S. government is replenishing its strategic reserves stored in old underground oil fields.

3) The Bank of America is expecting gold prices to rise to $3,000 an ounce amid the deepening world economy, which is more than 50% above the existing price record. Much of this is driven by fears that the Federal government is just printing money for the trillions of dollars being spent to counter the stopped economy because of the coronavirus. The feeling being that the ‘feds can’t print gold’ and so it will hold its value. Historically, gold has been a ‘panic investment’, a safe heaven for hard economic times, a hedge against money dropping in value.

4) Stock market closings for – 21 APR 20:

Dow 23,018.88 down 631.56
Nasdaq 8,263.23 down 297.50
S&P 500 2,736.56 down 86.60

10 Year Yield: down at 0.57%

Oil: up at $13.12

20 April 2020

1) The coronavirus pandemic and subsequent ‘sheltering in place’ is changing the American supermarkets. Online shopping of groceries had been somewhat of an awkward luxury service, that was growing ever so slowly, despite efforts of retailers to promote the new service. But the lockdown, stay at home orders have catapulted the service forward by up to a fifty times (not percent) increase in usage. Stores have been left struggling to meet the demand with many unable to keep up with that demand. When the pandemic ends, it will have forever changed the supermarket for many Americans, for once customers have used and got use to the service, then they will most likely continue using online grocery shopping, at least in part. But online shopping eliminates one of the big mainstays of modern supermarkets, the psychology of shopping with the browsing and impulse buying. The counter to this is automation which reduces the staff and labor cost of traditional retail stores, just as Amazon has done with dry goods.

2) The Chinese maker of driverless cars, Pony.ai, has launched a delivery service in Irvine California using its robot cars to deliver to people stuck at home from the virus. Teaming up with the e-commerce site Yamibuy, orders from Yamibuy get delivered to the customers homes. Each car can deliver between 500 to 700 packages a day. A year ago the company launched a robo-taxi service in Irvine, but with the ‘shelter in place’ order, their taxis were repurposed for deliveries.

3) Everyone is baffled over how the stock market continues to hold, even climbing, with what is happening today. For example-
a) Unemployment is now at 22 million and still climbing
b) Threat of large numbers of businesses going bankrupt
c) Recession starting, which most expect will last at least 12 months
d) Automation expected to eliminate up to 50% of jobs in 15 to 25 years
e) Global coronavirus cases surpass 1.5 million and continue growing
At a time when the markets would normally be crashing down from all the uncertainty, what is holding them up? Experts think because of the quick reaction of the government in passing the $2.2 trillion dollar economic stimulus waylaid market fears by showing something is being done. Also, Warren Buffett’s axiom, “Be fearful when others are greedy, and be greedy only when others are fearful.” Finally, the ‘social distancing’ measures seems to be controlling the virus, thereby lessening its economic effects in the long run.

4) Stock market closings for – 17 APR 20:

Dow 24,242.49 up 704.81
Nasdaq 8,650.14 up 117.78
S&P 500 2,874.56 up 75.01

10 Year Yield: up at 0.65%

Oil: down at $18.12

10 March 2020

1) Monday markets opened in a steep downward spiral from sell offs, driven by the coronavirus fears, followed by the sharp drop in oil prices. The Dow dropped 2,000 points, with a massive sell off of both the S&P 500 and Nasdaq, which triggered a key market circuit breaker that halted trading for fifteen minutes. There are widespread fears over the economic impact of low oil prices, with some experts fearing oil prices down to $20 a barrel. Gold prices crossed the $1,700 dollar an ounce, hitting the highest since December 2012. The banks are hard pressed as the interest continues to sink, cutting into their margins.

2) Experts speculate that the Feds will cut the interest rate to zero in the next few months in an effort to forestall a downturn of the economy. The entire U.S. yield curve fell below 1% for the first time in history on expectations that the Federal Reserve will cut rates to zero in the next few months. Some speculate the Feds may adopt a negative rate just as some European countries have, such as Germany’s -1%.

3) While checkout-free with cashless supermarkets is now a novelty, Amazon expects this technology to spread to other retailers. Amazon has announced it plans to license its automated checkout technology to other retailers, telling of several other companies that have already signed up for the technology. The technology has been proven with cashless convenience stores across America and with Amazon’s new Go-supermarkets. The technology represents another significant step in retail automation.

4) Stock market closings for – 9 MAR 20: The stock market is like a rectal thermometer- it’s rude and crude, but surprisingly effective in showing a sick economy.

Dow 23,851.02 down 2013.76
Nasdaq 7,950.68 down 624.94
S&P 500 2,746.56 down 225.81

10 Year Yield: down at 0.50%

Oil: down at $30.24