11 November 2020

1) President Trump’s administration is readying new sanctions against Iran as the clock runs out before Joe Biden’s inauguration, who has said he wants to return the U.S. to the 2015 nuclear deal. These planned sanctions are being worked out in conjunction with Israeli high government officials. These sanctions make it more difficult to return to the 2015 nuclear agreement. Reportedly, these sanctions are separate from the Iranian nuclear program, instead they are linked to its ballistic missile program, assistance to terror organizations and human rights violations. Joe Biden said he would rejoin the deal if Iran returns to holding up its end of the deal following Tehran’s departure from the agreement rules after Trump pulled out and instituted sanctions on the country.

2) Some are forecasting the US economy could be set for a significant surge in growth as consumers start to spend the money they saved during the COVID-19 pandemic. In the past, when the personal-savings rate has been this high, economic growth has surged. There is more than $2.5 trillion dollars of sidelined savings that is the fuel for explosive growth. The savings rate spiked to 35% earlier this year, as the economy went into a recession, and now sits at 15%, which is above the historic average. The surge in housing has led to a shortage of common consumer goods, so inventories are the lowest ever. Therefore, the economic recovery won’t be entirely reliant on another round of fiscal stimulus. It only takes a bit more confidence to produce a healthy advance in the economy.

3) Biden’s victory could end up reshaping the U.S. energy sector in years to come, although the president-elect may have limited room to maneuver given that the control of the Senate remains unclear. The president-elect has pledged to spend trillions of dollars to speed up the transition from fossil fuels, slash emissions and curb climate change. Biden has also promised to ban new fracking on federal lands, which he may try to achieve via an executive order. Such a move would limit shale companies’ operations in several states. Biden is expected to block new drilling permits on federal lands, something he could do via an executive order. Moved to clamp down on the oil industry’s emissions by reversing Trump’s relaxation of environmental regulation, which most likely increases the cost of producing, transporting and processing hydrocarbons. America’s energy future may mean less LNG exports, increase emphasis on renewables, decline of coal usage, impact on USMCA, use of fuel ethanol, and the goal to eliminate carbon emissions from the power sector by 2035.

4) Stock market closings for – 10 NOV 20:
Dow 29,420.92 up by 62.95
Nasdaq 11,553.86 down by 159.93
S&P 500 3,545.53 down by 4.97
10 Year Yield: up at 0.97%
Oil: up at $41.86

18 August 2020

1) A good sign for the U.S. economy, the American shale oil companies plan to restore nearly all oil production by the end of the third quarter. This will return production to nearly what it was when the shut down came resulting in the oil crash. As oil prices raised to $30 to $40 per barrel range, oil production started to rise. By September, nearly all of the production is expected to be restored. There were fears that shutting down shale oil wells prematurely could hamper future production, but nearly all of the restarted wells are producing normally because of a buildup of pressure. Most companies report a smooth return of operations.

2) Pizza Hut is closing up to 300 locations as part of a deal between the pizza chain and its largest franchisee, NPC International, who is filing for bankruptcy. These will be under performing restaurants, mostly with dine in facilities. The franchisee will put its remaining 927 Pizza Hut locations up for sale. NPC also operates nearly 400 Wendy’s restaurants, but has had to file for chapter 11 protection because of its $1 billion dollar debt. In recent years, Pizza Hut has drawn away from the dine-in business and concentrated more on delivery and takeout. Final determinations has not been made as to which locations will close or when.

3) In an indication of just how quickly the virus can pop up, the Oklahoma State sorority Pi Beta Phi has had 23 members test positive for the coronavirus, resulting in the entire sorority being put in quarantine. So far, none of the girls have been hospitalized and any who are ill are experiencing minor effects from the virus. The sorority members moved into the sorority house (off campus) between August 2 and 6, with all testing negative for the Covid-19. Then on 11 August, a small group of members who reside outside the house joined the chapter for a short informal gathering at the house. Within just a few days, the members in the sorority house tested positive. There has been a major spike in the pandemic, with the number of cases surpassing the previous peak levels on 31 of May, with 78% of new cases in the Sun Belt states.

4) Stock market closings for – 17 AUG 20:

Dow 27,844.91 down 86.11
Nasdaq 11,129.72 up 110.42
S&P 500 3,381.99 up 9.14

10 Year Yield: down at 0.68%

Oil: up at $42.77

22 June 2020

1) Oil has passed$40 a barrel, continuing a slow but steady recovery. This could be signaling a reawakening of the U.S. shale oil production. This rally allows the oil industry some breathing room with its high debt burden as the shale oil industry seeks to rebuild after the worst price collapse in a generation. This is far different than earlier this year when oil producers were paying to have their oil taken away. OPEC+ continues efforts to re-balance the global oil market, now abundantly clear that everyone loses in a price war.

2) More encouraging economic news with Ford Motor and Fiat Chrysler returning to pre-coronavirus pandemic production schedules in their American plants. Ford plans to fully return to production levels by July 6 while also ramping up their production facilities in Mexico. Although not given any firm dates, Fiat Chrysler is also returning to former production levels as rapidly as possible.

3) Experts are predicting the restaurant business, as we know it, is coming to an end because of the Convid-19 crisis. The industry generates $900 billion dollars a year, employs 15 million people, which is 15 times more than the airline business, which many are so concerned about now. Estimates vary widely of 20 to 80% of the privately own restaurants succumbing to the pandemic. The big franchise restaurant chains are expected to mostly survive and continue, but the independents are expected to fade out. One factor is change, which is coming too fast for small operations to adapt and keep pace with. The general consensus is that the business was in trouble long before the pandemic, struggling with poor working conditions, very thin profit margins, low wages and increasing competition. But it’s not just the restaurants themselves, for behind them is farming, distribution, suppliers and commercial real estate. It’s apparent that the demise of a significant number of independent restaurants will spell a significant change to the American business environment.

4) Stock market closings for – 19 JUN 20:

Dow 25,871.46 down 208.64
Nasdaq 9,946.12 up 3.07
S&P 500 3,097.74 down 17.60

10 Year Yield: unchanged 0.70%

Oil: up at $39.43

19 May 2020

1) The managing director Kristalina Georgieva of the IMF (International Monetary Fund) says the Fund is likely to revise downward its forecast of a 3% contraction of the GDP (Gross Domestic Product) for 2020. In turn, this will most likely cause a revision of the IMF’s forecast for a partial recovery of 5.8% in 2021. This means a longer time for a full economic recovery from the virus crisis. The IMF had forecasted that the business closures to slow the virus would throw the world into the deepest recession since the 1930’s Great Depression.

2) Gold markets have risen to their highest in more than seven years, a result of the Federal Reserve saying stocks and asset prices could suffer a significant decline as a result of the coronavirus crisis. The economic recovery could go to the end of 2021, depending on the arrival of an effective vaccine. Owning gold is considered to be a safe haven in times of economic turmoil, able to retain its value when other assets are sinking in value. Other precious metals such as silver, platinum and palladium are also experiencing a swing upward in price, but since these are commodities, their value may drop in a slower economy and reduced industrial demand.

3) The price of oil is above $30 a barrel for the first time in two months as U.S. and other country producers continue to cut production in order to restore the balance of the oil market. The world wide shut downs from the virus has drastically reduced the demand for oil world wide, with the world’s storage capacity quickly filling to maximum capacity, and for a time, producers having to pay to have their oil production removed. While the price of oil is still too low to salvage the shale oil (fracking) business in America, it still bodes well for the U.S. and world economies. Nevertheless, expectations are it will be well into the next year for the oil markets to be fully restored. Oil futures contracts that are due in June, show few signs of a resulting plunge in oil prices as when the May contracts came due and investors had to pay others to take their oil away.

4) Stock market closings for – 18 MAY 20:

Dow 24,597.37 up 911.95
Nasdaq 9,234.83 up 220.27
S&P 500 2,953.91 up 90.21

10 Year Yield: up at 0.74%

Oil: up at $32.21

7 May 2020

1) The bust in the Texas oil fields is the worst in memory, says the billionaire Russell Gordy. The coronavirus pandemic has triggered an unbelievable collapse in crude oil prices that is sinking fortunes across Texas, with no clear way out visible in the near future. Texas accounts for 9% of the nations GDP (Gross Domestic Product), so as oil pulls Texas’ economy down, it will undoubtably pull the nations down too. In the past, declining energy prices have helped the U.S. economy, but this time its likely to cut into investment and employment. Texas may lose 1.3 million jobs by June, as the virus puts an end to the U.S. shale oil revolution, which may spill into a broader downturn for Texas, that will also drag the rest of the country down too. Furthermore, Americans are driving and flying much less, which has reduced the demand for oil, bringing on a crisis in storage for the oil surplus. There are expectations that home prices will decline during the remainder of this year and into the next. This in turn will impact the construction industry.

2) As a result of the pandemic, the mortgage industry is implementing reforms that will be long lasting in terms of how lenders operate and how consumers obtain financing. It’s anticipated that digital mortgage processing will become more prevalent as people seek to minimize contact with others. Relators are seeing as much as a 500% increase in home video tours. Reports are that many people are seeing involuntary credit reductions and even terminations of their credit cards as banks seek to reduce their exposure to risk in a troubled economy where jobs are at risk of elimination. This means a further reduction on consumer spending.

3) Disney has seen a 91% plunged of it profits last quarter, a direct result of the coronavirus crisis. The operating profits in Disney’s parks lost about $1 billion dollars to add to a total loss of $1.4 billion dollars in total operating income. Disney has had to close its Walt Disney World and Disneyland theme parks, plus its Disney Stores and the suspension of its cruises and disruptions of its supply chain . However, its new video streaming service Disney Plus grew 26% to 33.5 million subscribers last quarter with revenues up 260%

4) Stock market closings for – 6 MAY 20:

Dow 23,664.64 down 218.45
Nasdaq 8,854.39 up 45.27
S&P 500 2,848.42 down 20.02

10 Year Yield: up at 0.71%

Oil: down at $24.35

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

17 April 2020

1) The troubles of the shale oil industry, and their decline, are well known, but another much less know part of these economic troubles is the multitude of suppliers who no longer have someone to sell to. Drilling and producing shale oil is an intensive industrial operation requiring a mired of mechanical and chemical supplies consumed in the operation, and there are a large number of suppliers for these items who depend on the oil industry for their business. With the low oil prices, shale oil companies have been forced to abandon drilling. Since the start of 2019, the oilfield service sector has lost almost 50,000 jobs, with the near future forecast to be even worst. As the oil companies file for bankruptcy, large oil service providers such as Schlumberger, Halliburton and Baker Hughes are left being owed millions of dollars with little hope of recovering those debts.

2) The method of calculating the percentage of unemployment rate may not be an accurate indicator of the present calamity which has struck the American job market because only those looking for work are counted in the calculation. Many of the recent 20 million unemployed are not looking for work, rather they are waiting for their former jobs to return, and so they are not being counted as unemployed in the often quoted percent unemployed number. A better indicator is the ‘employment to population’ ratio, which is the number of people working to the total population. This ratio had been at about 60% in January, but has dropped to 52% in April. But by any measure, the unemployment is a serious problem, that promises to get worst as the recession continues and automation makes inroads in replacing jobs with machines.

3) The large retailers, who were already in trouble before the coronavirus, are now being ravaged by the shutdown with many looking at bankruptcy. Big names such as J.C. Penny, Neiman Marcus and Macy’s have little to no revenues, yet still have their fix cost of operations such as loan debt, rents, utilities and taxes which still must be paid yet sales for department stores have dropped 24% with the sales for clothes down 51%. Their survival is dependent on how much cash reserve they have and when their largest loans mature and must be paid in full. This may herald a major change to the retailing business of America.

4) Stock market closings for – 16 APR 20:

Dow 23,537.68 up 33.33
Nasdaq 8,532.36 up 139.19
S&P 500 2,799.55 up 16.19

10 Year Yield: down at 0.61%

Oil: down at $19.75

16 April 2020

1) With many of the big box stores under siege from store closings and bankruptcies, the U.S. retail sales has suffered a record drop in March. In turn, factory outputs have declined by the most since 1946, as part of the coronavirus economic contraction in the first quarter. The drop is the sharpest rate in decades despite the measures taken to prop up the economy. People are now making comparisons to the Great Depression of 1930’s, considering this recession will be as deep if not deeper than that depression. People are losing jobs by the millions, and one question is how many of those jobs will return and how many will be taken by technology displacement. Last month, retail sales plunged 8.7%, the biggest decline since 1992 when government began taking numbers. Restaurants and bars are included in the retail decline with a drop of 26.6% last month, although grocery and health care rose. Consumer spending has dropped sharply with forecast of a 41% decline for second quarter. Consumer spending accounts for more than two thirds of the U.S. economic activity.

2) The price of oil has fallen below $20 per barrel because of predictions of a record slump in world demand. In April, global oil demand is expected to fall by 29 million barrels a day from last year. This is oil demand levels that was last seen in 1995. The U.S. had been oil independent for several years now, because of its domestic shale oil production, but for this oil to be profitable to extract, oil prices must be above $40 a barrel. With oil prices forecast to be low for the foreseeable future, the shale oil industry is in dire straights.

3) Time when companies are under stress, such as during a recession, provides impudence for them to reorganize and streamline their operations. By adapting to a new environment through restructuring of a company, they are able to reduce operating cost, thereby being better able to survive. Recession brings layoffs and furloughs, so companies seek to get work done with fewer people, usually by using new technologies. Consequently, those jobs are gone, never to return, when the economy returns to health.

4) Stock market closings for – 15 APR 20:

Dow 23,504.35 down 445.41
Nasdaq 8,393.18 down 122.56
S&P 500 2,783.36 down 62.70

10 Year Yield: down at 0.64%

Oil: down at $20.15

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