26 June 2020

1) General Motors is eliminating 700 factory jobs in Tennessee as a result of low sales, which they are blaming on the Convid-19 crisis. This is the third shift at their Spring Hill assembly plant, leaving 3,000 workers still employed. This plant makes Cadillac XT5 and XT6 SUVs plus the GMC Acadia. This is another sign of the weakness in auto demand, a result of record job loss coupled with people working at home and therefore putting less wear on their old cars. The GM plant for building truck engines remains unchanged, since they were working just two shifts to start with.

2) The nation wide retailer Macy’s is cutting nearly 4,000 corporate jobs, about 3% of its overall workforce. The pandemic has taken a toll on the department store chain, just like so many other traditional chain retailers. This move will save the company about $630 million dollars per year, amid a quarterly net loss of $652 million dollars. Macy’s was struggling long before the pandemic because of competition from lower priced retailers such as Walmart, T.J. Maxx and Target.

3) The U.S. GDP (Gross Domestic Product) shrank by 5% for the first quarter, compared to an increase in the previous quarter of 2.1%, prior to the coronavirus pandemic onset. This drop is attributed to a decrease in personal consumption expenditures (PCE) because people are spending less. The real gross domestic income decreased 4.4% as compared to a 3.1% increase in the fourth quarter of last year.

4) Stock market closings for – 25 JUN 20:

Dow 25,745.60 up 299.66
Nasdaq 10,017.00 up 107.84
S&P 500 3,083.76 up 33.43

10 Year Yield: down at 0.67%

Oil: up at $39.18

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

23 June 2020

1) Speculation abounds over what the next stimulus package will have, such as extended income support for the unemployed and underemployed. New temporary subsidies for low wage workers. Cheap loans for small and medium size businesses with additional support for state and local governments. Cost estimates for a second stimulus program range from one to two trillion dollars. But like the first stimulus package, no one is offering ideas how this money will be paid off, especially if economic expansion doesn’t materialize.

2) The worlds fastest super computer is now Japan’s Fugaku supercomputer developed by Riken and Fujitsu with backing from the Japanese government. It has a speed of roughly 415.53 petaflops, which is 2.8 times faster than the US Summit supercomputers at 148.6 petaflops. The Fugaku was under development for six years and will start full time operation by April 2021, although it has been pressed into service in the coronavirus crisis, running simulations on how droplets would spread in office spaces with partitions. Previously, the fastest supercomputers have belong to America and China.

3) The sales of existing homes has dropped in May, a result of the coronavirus impact on the economy. The sales of existing homes in May fell 9.7% compared with April, which makes for an annual decline of 26.6%. This is the largest decline since 1982 when interest rates were 18%. There remains a shortage of housing which is helping to uplift the market, and therefore the economy as soon as the crisis has subsided.

4) Stock market closings for – 22 JUN 20:

Dow 26,024.96 up 153.50
Nasdaq 10,056.48 up 110.35
S&P 500 3,117.86 up 20.12

10 Year Yield: up at 0.70%

Oil: up at $41.13

17 June 2020

1) As restaurants start to reopen, they are finding a serious problem- it takes cash to reopen again, cash that many don’t have in the bank. The cost of food, staff, cleaning and training for new sanitary protocols is proving daunting, with one independent owner calculating he needs $80,000 cash to reopen. The suppliers are facing a similar problem since many of their restaurant customers still own them money, but need supplies on credit to reopen, so many suppliers are threatened with bankruptcy too. And if that’s not enough, restaurants that had opened in some major cities are threatened with another shutdown as the virus pandemic re-emerges again, and so not only face another loss of sales revenue, just when they need the money the most, but also have additional cash outlays for reopening. The closing of restaurants has shed more than 8 million jobs.

2) In a month filled with economic bad news, retail sales have posted their largest monthly jump upwards ever. With the cornonavirus lockdown coming to an end, consumers are out shopping again making a 17.7% headline gain including food sales, which beat the previous record of October 2001. Clothing and accessories were the biggest gains of 188%. This gain reverses the 16.4% plunged from a month ago. While very encouraging, the economy still has a lot to regain.

3) There is a faster than expected turnaround in home buyer demand, after a sharp drop-off at the start of the coronavirus pandemic. The National Association of Home Builders/Wells Fargo Housing Market Index jumped 21 points in June to 58, where above 50 indicates a positive market. In April, the index dropped a record 42 points to 30. Builders report increase demand for families seeking single family homes in inner and outer suburbs featuring lower density neighborhoods.

4) Stock market closings for – 16 JUN 20:

Dow 26,289.98 up 526.82
Nasdaq 9,895.87 up 169.84
S&P 500 3,124.74 up 58.15

10 Year Yield: up at 0.76%

Oil: up at $37.76

MAJOR TECH COMPANIES ARE BETTING ON PODCASTS….

By: Economic & Finance Report

Major technology companies such as Spotify, Apple, BarStool Sports, and Amazon, are racking up their check books in investing in podcast shows and networks.

Amazon is utilizing Audible to attain podcast shows, while Apple is using its Apple TV shows and other Apple products for podcasting viability. BarStools Sports which began as a sporting blog, has utilized its strong sports platform in the podcasting space.

Over 100 million people in the United States listen to podcast shows, one way or another. The number seems to be increasing on rolling average basis according to analysts estimates. The way that traditional radio has been digressing, don’t be surprised as podcasting surpassing the new normal. -SB

_Listen to the #EFRPodcast & #TheCastPodcast shows on the cloud, soundcloud.com/Economic-FinanceReport

18 May 2020

1) The federal government has warned that the financial sector faces significant vulnerabilities because of the coronavirus pandemic. Both businesses and households are struggling with fragile finances and will be for the foreseeable future. So far, the banking system has withstood the initial downturn, but there are significant risk if the virus crisis proves to be lengthy and/or more sever than hoped for. The financial stress will continue to build if the crisis persists from households and businesses being deprived of wages and revenues. No sectors would be immune from the risk they face from default on debt, being forced to sell off assets, bankruptcy or having value of assets dwindled. Forceful early interventions have been effective in resolving liquidity stresses. There are fears that what might start out as a cash crunch could spiral into something worse, that few if any parts of the economy are safe.

2) The retail industry has been devastated by the coronavirus crisis with April sales diving down 16.4% (Manufacturing is also down by 13.7%) with major retailers such as J.C. Penny, J Crew and Neiman Marcus filing for bankruptcy recently. However, discount retail chains such as Dollar General and Aldi seem to be thriving as consumers cut back on discretionary spending while continuing to spend on food and household essentials. The Dollar style stores are gaining because of their low prices and close proximity to customers, with people buying things they have run out of between their larger routine shopping trips. In recent years, the Dollar style stores have significantly increased their number of stores thereby enabling them to capture more retail sales from the traditional retailers.

3) Some are predicting that the pandemic has permanently changed the auto industry, with some automakers made stronger while others are left too weak to survive. The pressure from the electric automobiles will become stronger with fewer conventional automakers able to make the transition. There are fears that people have discovered they need to travel much less, that they can get a surprisingly amount done from home. This translates into lower demand for automobiles. Demand for new cars was expected to be low before the pandemic, now things are expected to get very brutal for survival of some automakers.

4) Stock market closings for – 15 MAY 20:

Dow 23,685.42 up 60.08
Nasdaq 9,014.56 up 70.84
S&P 500 2,863.70 up 11.20

10 Year Yield: up at 0.64%

Oil: up at $29.78

27 April 2020

1) People are tantalized by the incredibly low oil prices, thinking only of lower gas prices. But economically, there is much more to oil and its low price. First, there is the destruction of America’s shale oil (fracking) industry, which has made us independent of foreign oil. There are fears that if oil doesn’t pick up, then the world could see a major shift in global power. The economies of several nations are very dependent on oil sales, the revenue being the bulk of their GDP. For instance, Saudi Arabia’s oil revenues account for 60 percent of its GDP (Gross Domestic Product), two-thirds of its budget, and nearly three-quarters of its exports. For Russia, one-third of its GDP is petroleum, half its budget, and two-thirds of its exports. The turbulent Middle East has states with greater dependence on oil: including Iran, Iraq, Qatar, and Kuwait. For America, oil accounts for only 8% of our GDP. The coronavirus pandemic has drastically reduce oil consumption world wide, and if it’s slow in returning to pre-pandemic levels, some countries could find themselves in serious financial and geopolitical trouble, with their influence waning and other nations displacing them in the world pecking order. It’s anyone guess how things could settle out and in whose favor.

2) Amazon has been using data about independent sellers on its platform to develop competing products, which their stated policies forbid. Such practices would give the online retailer tremendous advantage in competing against similar products, but is using proprietary information. Information includes total sales, vendor cost for Amazon’s marketing and shipping, and how much Amazon made on each sale, and other non-public information.

3) President Trump stated he would veto an emergency loan for the U.S. Postal Service if the USPS didn’t immediately raise its prices for package delivery. The President considers package delivery prices need to be four times the present charges. He has been critical of the USPS for years, considering the postal service problems are a result of mismanagement.

4) Stock market closings for – 24 APR 20:

Dow 23,775.27 up 260.01
Nasdaq 8,634.52 up 139.77
S&P 500 2,836.74 up 38.94

10 Year Yield: down at 0.60%

Oil: up at $17.18

9 April 2020

1) The electric auto maker Tesla announced it is furloughing workers as well as cutting employee salaries as a result of the coronavirus shutdown of its facilities. Furthermore, the virus pandemic has slashed demand for cars and forced several other automakers to furlough workers. Barring any significant changes, Tesla plans to resume normal operations on May 4. Salary reductions will start on April 13 and remain in place until the end of the second quarter. Workers salaries are cut by 10%, directors by 20% and vice presidents by 30%. The company considers it has sufficient cash reserves to weather the shutdown.

2) Nuro’s driverless delivery vehicles has received another approval. California’s DMV has given a permit for Nuro to operate in specific parts of Santa Clara and San Mateo counties. While test have been permitted since 2017, a human monitor was required, but these vehicles will be fully autonomous having no humans. This is another step in the rapidly changing retail market, which is embracing wide spread automation in its sales, as robots become more involved in consumerism activities.

3) The number of deaths projected for the coronvirus has been lowered, but there are fears of a ‘second wave’ to follow. The pandemic model has scaled back its projected death toll by 26% to 60,000 however, if social distancing practices are not maintained, a second wave of infections may ensue. So far, about 400,000 coronavirus cases have been reported with roughly 13,000 deaths. But even the revised forecast suggest months of infection troubles for the United States. About 94% of the population has been ordered to stay at home.

4) Stock market closings for – 8 APR 20:

Dow 23,433.57 up 779.71
Nasdaq 8,090.90 up 203.64
S&P 500 2,749.98 up 90.57

10 Year Yield: up at 0.76%

Oil: up at $26.14

30 March 2020

1) A second virus shock wave is already hitting China’s factories as European factories are delaying orders and asking for delays in payments as the coronavirus sweeps across Europe closing their factories. These are cutting off orders to Chinese factories just as they were beginning to come back to life, a double hammer blow to China’s economy. Estimated April to May sales are expected to be down as much as 40% from last year. This is raising grave doubts about the world’s second largest economy being able to repair damage and return to its pre-virus station.

2) The Index of Consumer Sentiment dropped to 89.1 in March, the lowest level since October 2016, a three year low. It is the fourth largest in nearly 50 years. Further declines is dependent on the success of curtailing the spread of the virus and how soon households receive funds from the government stimulus. To date, there are 540,000 cases of coronavirus with America overtaking China and Italy with the most cases having a total of 85,000.

3) The Department of Justice is investigating the credit scoring firm FICO for possible antitrust violations. There are three other major credit companies: Equifax, Experian and TransUnion. FICO is the only scoring model accredited by mortgage loan companies Fannie Mae and Freddie Mac. The DOJ investigation comes after TransUnion’s antitrust countercase against FICO. The lenders determine which credit scoring system is utilized on a loan application, not the consumer or loan applicant.

4) Stock market closings for – 27 MAR 20:

Dow 21,636.78 down 915.39
Nasdaq 7,502.38 down 295.16
S&P 500 2,541.47 down 88.60

10 Year Yield: down at 0.75%

Oil: down at $21.84

31 January 2020

1) Hallmark Greeting Cards is suffering a downturn in the brick-and-mortar retail industry, closing sixteen of its retail outlets across America. Social media is crushing the card business, so it’s no longer a viable business. People use to buy and send cards all the time, but now it’s all online. This is just another indicator of how the retail business is changing, more people doing their shopping on line.

2) Franchise businesses remain a popular strategy for people to start their own business, giving them the benefit of an established brand. About two-thirds of Americans say they want to start a small business, but fears of failure stop most, with good reason. About half the small business startups fail within five years, and two-thirds within ten years. Most businesses do not fail because they don’t make a profit, but rather because of insufficient cash flow problems.

3) Independent grocery stores and regional supermarket chains, who are already facing brutal competition and shrinking profits, now face losing a valuable source of sales- the food stamp recipients. New rules for SNAP (Supplemental Nutrition Assistance Program) could eliminate 700,000 people from eligibility. Loss of sales could result in reduce orders from suppliers, reducing labor in stores or the closing of stores. Grocery stores have a profit margin of only about 1 % to 2% leaving little room for changes in their sales volume.

4) Stock market closings for – 30 JAN 20:

Dow              28,859.44    up    124.99
Nasdaq          9,298.93    up      23.77
S&P 500         3,283.66    up      10.26

10 Year Yield:    down   at    1.56%

Oil:    down   at    $52.87