8 Janury 2021

1) The price of oil advanced as shrinking U.S. crude inventories added to expectations of a tighter global supply outlook after Saudi Arabia surprised the markets by pledging to reduce production for the next two months. Gasoline demand is falling to its lowest level since late May, spelling trouble for refining margins as a tighter global crude balance and straggling demand crimp profits for processing a barrel of oil. Saudi Arabia has decided to reduce crude output in February and March as part of an OPEC+ supply agreement. With the outlook for crude oil supply suddenly looking tighter, the oil options markets have grown less bearish.

2) A top scientist explains why a more infectious coronavirus variant is a bigger problem than a deadlier strain, with the deadly coronavirus having now mutated. One variant, called B.1.1.7, is more infectious, and has forced the UK into national lock down, with the variant having also been discovered in several US states, as well as other countries around the world. However, the new variant does not appear to be more deadly, so existing vaccines should also work against it. A really severe disease that one person gets won’t necessarily have as much impact as a lesser disease which a huge number of people get. While not any more deadly the new mutant B.1.1.7 is much more infectious, and is to blame for the surging numbers of people infected, filling up UK hospitals that forced the national lock down. It is estimated to have a 71% higher growth rate than other variants.

3) North Korea’s supreme ruler Kim Jong Un has announced a military expansion, but it is unclear if Pyongyang plans to ramp up its nuclear program too. This could put pressure on the incoming Joe Biden administration just when it is most vulnerable. North Korea plans to boost its military capacities in defiance of international sanctions, as well as a new five-year economic plan, admitting the previous program has failed. It’s unclear just what the military expansion will involve.

4) Stock market closings for – 7 JAN 21:

Dow 31,041.13 up by 211.73
Nasdaq 13,067.48 up by 326.69
S&P 500 3,803.79 up by 55.65

10 Year Yield: up at 1.07%

Oil: up at $50.91

Oil: up at $50.48

7 January 2021

1) Chinese stocks listed in the U.S., including China Telecom Corp. and Pinduoduo Inc., fell on the prospect of further American sanctions. This decline was led by a group of Chinese telecommunications stocks after the New York Stock Exchange said it will delist three companies to comply with a U.S. executive order. While the companies are mostly traded in Asia, their stocks are also traded domestically. But an order from President Trump barred American investments in China-based firms that are affiliated with the military. However, there is now talk of the order being modified or even rescinded.

2) Reportedly, Chinese cities are going dark as the country faces shortages of coal, which is a major Australian export, as authorities limit power usage, citing the shortage of coal. Analysts said prices of the commodity in the country have shot up due to the reported crunch with some tying the shortages and blackouts to the unofficial ban on Australian coal. In turn, prices of the commodity have shot up due to the reported crunch. The reports also follow rising trade tensions between Beijing and Canberra, leading some analysts to tie the coal shortages and blackouts to the unofficial ban on Australian coal. Relations between the two nations have soured since last year because Australia supported an international inquiry into China’s handling of the coronavirus pandemic. Coal is just one in a growing list of Australian goods that China is targeting. China is the world’s largest coal consumer and its greatest source of coal imports was Australia.

3) Shale oil needs more than $50 a barrel to be profitable, something that is now a possibility because of Saudi Arabia’s pledge for a big supply cut in their oil production. But Joe Biden wants to ban new fracking in New Mexico, an area that has emerged as the ‘go-to’ spot for drillers desperate to squeeze as much crude from the ground without bleeding cash. The price was above $50 before the pandemic sent oil markets crashing, forcing over 40 explorers into bankrupt. It will take at least three months for shale producers to ramp up production, because that would involve decisions on new drilling and getting well-completion crews together, which puts their operations well into the new Biden administration.

4) Stock market closings for – 6 JAN 21:
Dow 30,829.40 up by 437.80
Nasdaq 12,740.79 down by 78.17
S&P 500 3,748.14 up by 21.28
10 Year Yield: up at 1.04%
Oil: up at $50.48

4 December 2020

1) Exxon has announced that it will dramatically mark down the value of its natural gas properties, a result of the slow oil price recovery. The plan is to take a non-cash charge of $17 to $20 billion dollars, which is a massive hit for a company who has long opposed to taking writedowns. Exxon erred when it acquired XTO Energy, a natural gas giant, for $41 billion dollars in late 2009. Now, about half of that purchasing value has now been erased. The natural gas market is depressed with the price of gas now less than half of what it was when Exxon purchased XTO Energy. Other oil companies such as Chevron, BP and Shell have also taken massive write downs. This write down also means that Exxon will limit its near term capital spending in gas

2) Failed talks have exposed a dangerous fissure at OPEC’s core, which its partners are quietly working to repair. Diplomatic efforts center around Saudi Arabia and the United Arab Emirates on how much crude oil to pump in the coming new year. OPEC rescued the oil market this year, after an unprecedented slump in oil prices, by slashing production to compensate for the demand decline because of the pandemic. But with oil prices down for so long, many OPEC member countries life blood revenues are down which impairs operations of those governments. This puts a lot of pressure on individual countries to break away and pump without any restrictions or quotas to get the monies they need. Privately, some OPEC members are talking about even leaving the cartel and going their own way with oil.

3) During the Thanksgiving holiday week, fewer Americans applied for unemployment benefits, thereby reversing an uptick in jobless claims over the previous two weeks. But still unemployment claims remain historically high, indicating many companies are continuing to lay off workers, despite the economy recovering from the impact of the coronavirus. Some 712,000 people applied for unemployment benefits, a drop of 75,000 from the week before. Another 288,000 applied for Pandemic Unemployment Assistance, a special program for self-employed and gig workers, as well as others who don’t qualify for regular state unemployment. In addition, millions are struggling to find work during the pandemic. All told, about 20 million people are now receiving some type of jobless aid, with 12 million set to lose their benefits the day after Christmas unless Congress agrees to extend funding.

4) Stock market closings for – 3 DEC 20:

Dow 29,969.52 up by 85.73
Nasdaq 12,377.18 up by 27.82
S&P 500 3,666.72 down by 2.29

10 Year Yield: down at 0.92%

Oil: up at $45.64

JACK MA’S ANT GROUP DOES NOT GET PUBLIC IPO… YET..STOPPED BY CHINA

By: Economic & Finance Report

Jack Ma’s Ant Group IPO was supposed to be going public on the Shanghai Stock Exchange recently, but has been halted by the Chinese government for disagreements between the Chinese government and Jack Ma (AliBaba/Ant Group’s co founder).

The IPO was listed to raise over $37 billion dollars USD, making it the biggest share sale in the history of the global stock markets. Saudi Arabia’s Aramco holds the biggest share offering title; currently with its share offering last December 2019, raking 29.4 billion dollars USD. The spectators will have to wait and see, if or when the IPO will go public -SB

Image Credit: MoneyControl.com

8 June 2020

1) The oil cartel OPEC+ and Russia address extending record oil production cuts with the intent to force noncompliant members to also comply with the curbs in production. The cartel had previously agreed to a 9.7 million barrels per day cut during May and June in an effort to prop up oil prices which collapsed because of the coronavirus crisis. Those cuts are due to tapper to 7.7 million barrels from July to December. But sources say that Saudi Arabia and Russia have agreed to extend the deeper cuts until the end of July and possibly until August. The cost of oil is a prime factor in determining the health of a country’s economy, and therefore the world economy.

2) A surprise to everyone was the U.S. jobless rate dropped in May as hiring rebounded. This signals that the economy is picking up faster than expected from the damage of the coronavirus pandemic. The jobless rate fell from 14.7% to 13.3% in May, while economist had expected the rate to rise to 19%. Canada is also experiencing a reversal in joblessness too. This is with a possible resurgence of Covid-19 with a second wave of infections, and a resulting second crash of the economy and businesses. However, the unemployment rate is the highest since the Great Depression.

3) After the federal government made assurances on March 23, that it would make borrowing easier for American corporations, the food service giant Sysco Corp sold $4 billion dollars of debt. But then not long after, the company laid off one third of its workforce, or about 20,000 people, while their stock holders continued to receive dividends. As the virus spread in April and May, the federal promise spurred sale of corporate bonds with borrowing by top rated companies for a record $1.1 trillion dollars for the year, twice the previous year. Companies like Sysco, Toyota , Omnicom Group and Cinemark Holdings borrowed billions of dollars then fired workers. This calls into question of how the promise to purchase corporate debt helped preserve American jobs. While the feds have yet to buy a single corporate bond, their promise threw the bond marked into a frenzy to buy bonds.

4) Stock market closings for – 5 JUN 20: Job report sent markets skyrocketing.

Dow 27,110.98 up 829.16
Nasdaq 9,814.08 up 198.27
S&P 500 3,193.93 up 81.58

10 Year Yield: up at 0.90%

Oil: up at $38.97$2,531.81

1 May 2020

1) The numbers are in for the weekly jobless claims, with another 3.84 million people losing their jobs. This brings the total to over 30 million in the past six weeks. Expectations were for about 3 million, so the news was not upsetting. The claims peaked at 6.87 million so officials feel the worst is over with declines each week since, but still this has been the worst employment crisis in U.S. history. While some states are starting to bring their economies back on line, much of the key American infrastructure remains on lockdown. Predictions are for the second quarter to decline worse than anything America has ever seen. The unemployment rate is anticipated to be about 15.1%.

2) The crash of the oil market continues across the globe, with the American shale or fracking oil industry being hit the hardest. The shale oil industry had been fueled by lots of easy money, almost unlimited borrowing allowing companies to dramatically ramp up production, despite what the market demand was. Many companies had been in trouble before the coronavirus hit, and that combined with the Russian and Saudi Arabia oil dispute, oil prices have dropped by three-quarters since early January. There is $43 billion dollars of energy junk bond defaults coming in 2020 with hundreds of oil companies facing bankruptcy. The problem isn’t just American, with Shell Oil Co. announcing a cut in their dividends for the first time since World War II. Finally, the pandemic appears to be making fundamental changes to the oil market and consumption so the oil market may never fully recover.

3) The virus pandemic has adversely affected more than just traditional businesses, large and small. Dirty money from the illegal drug business is piling up in Los Angeles because the money laundering systems has also been put on hold by ‘closing orders’ of non-essential businesses. The businesses used by the drug trade to launder their money have been forced to close up, thereby ceasing operations leaving the drug dealers with growing stacks of cash that cant be used until cleaned.

4) Stock market closings for – 30 APR 20:

Dow 24,345.72 down 288.14
Nasdaq 8,889.55 down 25.16
S&P 500 2,912.43 down 27.08

10 Year Yield: down at 0.62%

Oil: up at $18.64

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

10 April 2020

1) Jerome H. Powell, the Federal Reserve Chair, said the U.S. economy is in an emergency, which is deteriorating with alarming speed. His remark comes after unveiling over $2 trillion dollars in new loans to keep the economy afloat, a result of the coronavirus shutdown. America is moving from the lowest unemployment in fifty years to a very high unemployment in just weeks. Claims for unemployment aid is now up to 17 million and still climbing as more businesses fight to survive. It is expected the U.S. economy may shrink by more than 30% between April and the end of June. The Fed will soon begin purchasing up to $750 billion dollars in corporate loans from big businesses who have a low investment grade, in the hopes of preventing their bankruptcy bringing further damage to the American economy. The Feds are making a wide range of loans to various size businesses which it doesn’t expect to get paid for. No one is making estimates on how extensive this will ultimately be to the American economy.

2) Although Saudi Arabia and Russia have reached an agreement on limiting oil production, it’s not yet known just how large those reductions are going to be, so oil prices had turned negative while awaiting details of OPEC+ cuts in oil production. The general consensus is each nation will cut production by 10 million barrels a day, but with world oil consumption way down because of the pandemic, it’s not certain if the OPEC+ cuts will have much effect, especially for U.S. domestic oil production (shale oil).

3) The Treasury Secretary Steven Mnuchin considers it may be possible for the U.S. to be open and back to business next month, considering it’s just a matter of medical considerations. The administration is doing everything possible for business to resume as soon as the ‘all clear’ is sounded and they have the necessary liquidity to operate. The president is forming a second taskforce charged with addressing the economic devastation which the virus has wrought and take measure to resume economic activity as soon as possible.

4) Stock market closings for – 9 APR 20:

Dow 23,719.37 up 285.80
Nasdaq 8,153.58 up 62.67
S&P 500 2,789.82 up 39.84

10 Year Yield: down at 0.73%

Oil: down at $23.19

6 April 2020

1) Across the world, truckers are having a difficult time in their role of delivering food stocks to the people. In America, truck drivers are finding it more difficult to operate, unable to find places to eat, with restaurants shut down and their rigs too big to go to the drive-thru lanes. They are unable to find places to sleep, shower or even clean toilet facilities. Nevertheless, the food supply chain continues to struggle to get the necessary food to the people.

2) With the government announcement that we are now in a recession, questions abound how long will it last? For the ‘08 recession, it took more than a decade to recover. One major obstacle facing a recovery, from a near total shutdown of the economy, is the small businesses. Half the businesses in the American economy are classed as small businesses, and half of those have less than fifteen days cash reserves, which means a significant number of American businesses will not survive the virus shutdown. This will leave millions of workers scrambling to find work and therefore will greatly hinder a recovery.

3) Oil prices have rallied from news that the Saudi Arabia – Russia price war may be coming to an end with agreements to cut back oil production by ten million barrels a day. Oil is the keystone to economic vitality with oil prices needing to be above about $40 a barrel for shale oil to be profitable so America can remain oil independent.

4) Stock market closings for – 3 APR 20:

Dow 21,052.53 down 360.91
Nasdaq 7,373.08 down 114.23
S&P 500 2,488.65 down 38.25

10 Year Yield: down at 0.59%

Oil: up at $29.00

3 April 2020

1) Unemployment claims have jumped twice the previous week’s numbers, with 6.6 million Americans filing for benefits. This brings the last two weeks total of new unemployed to 10 million. The speed and scale of job losses are unprecedented. The record for loses in a month had been 695,000 in 1982. The coronavirus has wiped out more jobs in two weeks than were lost in the worst months of the last recession. Companies based on white-collar workers, have been able to keep their people working with work at home, but as revenues dry up, it’s questionable how long before they too will be forced to start layoffs. The growing number of laid off workers unable to pay their bills could well lead to a cascade of further layoffs and business failures.

2) While the price of oil has always had an effect on the equities, the recent plunged has had a more profound effect and therefore causing the roller-coaster volatility of the markets. This dramatized how very central oil is to the entire modern world. Stabilizing the oil prices would greatly help stabilizing the markets, and therefore the whole world economic system. Central to this is for Russia and Saudi Arabia to end their price war and resume limiting production. But central to this is Russia’s desire to damage American domestic oil production by destroying the shale oil companies, which would reduced American’s influence in the world especially in the middle east where Russia is very active.

3) Already wracked by fiscal problems from decline of the milk product markets, dairymen now suffer a further decrease in their market as a result of the coronavirus crisis. This is a result of restaurants, schools and other food service outlets reduced to stopping operations and therefore not needing milk products. The dairy industry is still producing, but doesn’t have anyplace to sell their milk, so the industry is asking the government to increase its purchases of dry milk, butter and cheese.

4) Stock market closings for – 2 APR 20:

Dow 21,413.44 up 469.93
Nasdaq 7,487.31 up 126.73
S&P 500 2,526.90 up 56.40

10 Year Yield: down at 0.63%

Oil: up at $24.90