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

24 July 2020

1) The parent company of Ann Taylor and Lane Bryant clothing chains, the Ascena Retail Group Inc., will close more than half its stores, a total of more than 1,000 stores. The troubled retailer was struggling like many other retailers to remain afloat, but the Covid-19 crisis tipped the scales into bankruptcy. Ascena has about 40,000 employees and there’s the expectation of cutting its 2,800 stores down to just 1,200 with significant losses of jobs. The chapter 11 will erase about $1 billion dollars in debt from its $12.5 billion dollars of liabilities, which includes $1.6 billion dollars of funded debt. Retailers have been among the hardest hit by Covid-19 lockdowns coupled with online shopping, which drained revenues and pushed so many retailers into bankruptcy.

2) Almost 16,000 restaurants have closed permanently from the Covid-19 pandemic, an indication of just how deeply the virus has affected the food industry, especially the restaurants. So far, about 60% of the restaurant closures have been permanent, with the number increasing with time. Restaurants now surpass the retail industry in the highest total business closures since the start of the pandemic. Bars and the night life industry has met the same fate, with 5,454 total business closures of which 2,429 are considered permanent closures, or 44% lost.

3) There is mounting evidence that America’s fragile economic recovery is faltering even as the pandemic seems to be leveling out. Reservations for restaurants are waning, air traffic is leveling off and foot traffic at stores is dwindling again. With rising infections in California, Texas and Florida, there is a growing sense that the recovery is fading. Small businesses have suffered the worst, having limited cash reserves and ability to obtain loans, and therefore are failing at record numbers. To compound the problem, there is weaker spending by consumers. Hopes for a real recovery depend more and more on an effective vaccine being created and available. Until there is one, there appears little hope that the economic will make any real lasting progress towards recovery.

4) Stock market closings for – 23 JUL 20:

Dow 26,652.33 down 353.51
Nasdaq 10,461.42 down 244.71
S&P 500 3,235.66 down 40.36

10 Year Yield: down at 0.58%

Oil: down at $41.21

28 May 2020

1) The aircraft manufacture Boeing is laying off almost 12,000 workers this week, a result of the coronavirus crisis impact on the aircraft company. Boeing, which is the largest exporter in the U.S., is trimming its workforce by about 10% which include international locations. It is anticipated the airline industry will take some years to recover with air travel dropping a whopping 95% because of the virus, and major airlines canceling the majority of their domestic flights while suspending nearly all international flights. The company suffered a major set back with its 737 MAX grounding that resulted in near record number of order cancellations for passenger jets with zero new orders in April. This has been Boeing’s worst year in decades.

2) The discount home goods retailer Tuesday Morning has filed for bankruptcy, a result of the prolong store closings from Covid-19. The lost revenues created an insurmountable financial hurdle in a company that was thriving before the pandemic. The chain is closing 230 of its nearly 700 US stores across America. The first phase of closures of 130 stores will begin this summer. This is in line with another home goods retailer, Pier 1, which filed for bankruptcy in February, another casualty of the virus.

3) More than one in every six young workers have stopped working because of the coronavirus pandemic world wide. There are fears that young workers (15 to 28 years old) could face the inability to get proper training or gain access to jobs long after the pandemic ends, maybe even deep into their careers. Of those still working, about 23% report reduction in the number of hours they work. For 178 million young workers around the world, more than 40% are in the food services and hospitality industries, which is the hardest hit sector from the virus. Three fourths of the young workers are in informal jobs or casual labor. In addition, many companies in the U.S. are cutting salaries of those who still have a job, trying to remain in business, which will reduce discretionary income that will further slow economic recovery.

4) Stock market closings for – 27 MAY 20:

Dow 25,548.27 up 553.16
Nasdaq 9,412.36 up 72.14
S&P 500 3,036.13 up 44.367

10 Year Yield: down at 0.68%

Oil: down at $32.22

5 May 2020

1) Apparel retailer J. Crew is filing for bankruptcy, with other struggling retailers expected to succumb this year too, big retailer names like Sears and J.C. Penny. J Crew is considered to be the first retail casualty of the pandemic with others expected to quickly follow. The pandemic has caused numerous stores to be closed, laying off hundreds of thousands of employees and losing most of their sales. The big retail stores were struggling before the virus hit, with people backing away from consumerism and now after the coronavirus shutdown, people are spending little other than for groceries and daily essentials. With further declining retail revenues, more stores will close with more layoffs. Furthermore, Americans’ appetite and ability to shop continues to decline, so it looks very dismal for a major segment of the American economy, which in turn will be a burden on other segments of the economy continually pulling the rest down.

2) The service sector of the economy is also experiencing troubles in what appears to be an emerging new economy for America. Gold’s Gym International is seeking bankruptcy protection as it struggles with debt after the prolong shutdown from the virus. With the shrinking of people’s disposable income, that is the money they have left after essential spending like food, housing and transportation, the non essential businesses of the service economy are finding it harder to survive.

3) General Electric is eliminating as many as 13,000 jobs in its jet engine business, another casualty of the coronavirus devastation to the aviation segment of the economy. With airline manufactures, such as Boeing building fewer airliners, there is less demand for new jet engines. This means a 25% reduction on GE’s aviation work force with little near future likelihood of those jobs returning, indeed if the recession deepens, more jobs may be lost. Like Boeing, GE aviation was having troubles before the virus hit.

4) Stock market closings for – 4 MAY 20:

Dow 23,749.76 up 26.07
Nasdaq 8,710.72 up 105.77
S&P 500 2,842.74 up 12.03

10 Year Yield: down at 0.64%

Oil: up at $21.33

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

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

29 January 2020

1) Amazon it pushing hard to establish its Kuiper broadband internet access satellite system. The planned satellite system will have 3,236 satellites in polar orbits to form a mega-constellation system in low earth orbit that will provide broadband internet service for billions of people around the world who are currently being under served. Amazon is pushing the FCC for expeditious granting of application for system. SpaceX and One Web have also started their planned mega-constellation satellite system.

2) North Korea’s economy is largely hidden from the world because it’s one of the most secretive nations. But it’s known the economy is struggling because of its isolationism, where the average worker makes less than $2,000 a year with much of its population undernourished. Citizens are paying as much as $12,000 to defect.

3) Boeing Aircraft has secured over $12 billion dollars to finance its 737 MAX crisis. Loans from over a dozen banks will shore up Boeing’s balance sheet until deliveries of its 737 MAX can resume with resulting revenues coming in. This is at least $2 billion dollars more than Boeing originally sought, making the loans a vote of confidence of its future. The loan is a delayed-draw loan, meaning the company may not use it immediately.

4) Stock market closings for – 28 JAN 20: Markets rebound from threat of coronavirus.

Dow                      28,722.85    up    187.05
Nasdaq                  9,269.68    up     130.37
S&P 500                 3,276.24    up       32.61

10 Year Yield:    up   at    1.64%

Oil:    up   at    $53.98

11 December 2019

1) Analyst say Netflix, the video streaming service, must lower its prices in 2020 to avoid lost of millions of its U.S. customers because of the rising competition. It is suggested that Netflix must add a second lower priced service to compete with Disney+, Apple+, Hulu, CBS All Access and Peacock, otherwise they risk losing four million U.S. subscribers. Since Netflix’s balance sheet cannot withstand lower revenues, the company must create a pricing tier that has lower monthly cost, but still support advertising revenue.

2) Mortgage lenders are warned to brace for a downturn, with Fannie Mae and Freddie Mac pulling back on some mortgages meant to make home ownership more affordable. They are reducing the proportion of loans they back to borrowers with small down payments. This tamping down on risk is to limit their defaults thereby producing greater profits.

3) Morgan Stanley, the investment bank giant, is cutting about 1,500 jobs globally in a year end push for efficiency. The cuts are more in the technology and operations divisions, but include executives in sales, trading and research operations including several managing directors. These reductions amount to about 2% of the firm’s workforce with a charge between $150 to $200 million dollars in its fourth quarter.

4) Stock market closings for – 10 DEC 19:

Dow            27,881.72    down    27.88
Nasdaq         8,616.18    down      5.64
S&P 500        3,132.52    down      3.44

10 Year Yield:    unchanged   at    1.83%

Oil:    up   at    $59.09

6 December 2019

1) Boeing says significant additional regulatory requirements may cause additional delays in returning Boeing’s 737 MAX to commercial service and in turn may cause the company to cut or even halt production. Boeing does not expect 737 MAX order cancellations to have an impact on revenues or earnings citing the size of 737 backorder.

2) Saudi Arabia has just completed the biggest initial public offering in history, which raised $25.6 billion dollars from sales of shares in its giant state owned oil monopoly. Three billion shares were sold at $8.53 a share. Aramco is valued at roughly $1.7 trillion dollars, making it the most valuable publicly traded company in the world. Saudi Arabia plans to wean their economy off an oil only base.

3) The Dollar General retailer chain is opening almost twenty stores a week, while thousands of other retail stores are expected to close this next year. So far, the retailer has opened 925 stores this year, with 1,000 opened by the end of 2020. Presently, they have 16,000 retail outlets, and estimate that three quarters of the U.S. residents live within five miles of a Dollar General store. Revenues continue to increase with sales rising 8.9% to nearly $7 billion dollars over the last three months compared to the same period last year.

4) Stock market closings for – 5 DEC 19:

Dow           27,677.79    up    28.01
Nasdaq        8,570.70    up      4.03
S&P 500       3,117.43    up      4.67

10 Year Yield:    up   at    1.80%

Oil:    up   at    $58.33

18 October 2019

1) New home construction has dropped from a twelve year high in September, although single home construction rose for a fourth straight month. This indicates the housing market remains supported by lower mortgage rates even as economy slows. Housing starts declined 9.4% last month as construction in the volatile multi-family housing segment dropped.

2) The Prime Minister of the United Kingdom announced a great new Brexit deal. The proposed exit plan goes before the U.K. parliament this Saturday, the EU (European Union) claimed the deal was a fair and balance one. Parliament must vote approval before the deal can be accepted, however, this time the Conservative party is now committed to this deal and not a ‘no-deal’ and so will campaign for a majority support.

3) The employees for the bank Goldman Sachs will receive the lowest pay in the last ten years. This is a result of software systems doing more and more of the company’s business, another example of technology displacement. The bank set aside 35% of its revenues for staff compensation and benefits this year, the lowest rate since 2009, with an average employee earning of $246,000 less than half of the $527,000 from last year.

4) Stock market closings for – 17 OCT 19:

Dow           27,025.88    up    23.90
Nasdaq        8,156.85    up    32.67
S&P 500       2,997.95    up      8.26

10 Year Yield:    up   at    1.76%

Oil:    up   at    $54.05