Breaking News: Tesla Inc market value has now surpassed both legendary Ford Motors and General Motors company market values combined.
January 8, 2020 (Wednesday) Tesla Inc had a market cap of $89 billion, approx 2 more billion dollars then Ford Motors ($50 billion) and General Motors ($37 billion) combined.
Many of Tesla Inc’s attributes for rising market cap has to be with a profitable 3rd quarter the electrical auto maker had; also surpassing auto deliveries in the Chinese market, while also having its stock more then double over the past few months. These all seem to be contributing factors to its increased market cap currently.
With all the accolades Tesla has achieved, there are skeptics in the investment community who believe the company will not able to sustain cash flow nor provide more profitability in the next few years.
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
1) The bond trading has gone from zero to $88 billion dollars in two years because of technology enabled portfolio trading that brings the same speed to the bond market as for stock traders. Bond trading used to take hours of pen and paper work, but now the same thing only requires seconds to do electronically. Most trades are between $100 million and $200 million dollars. The rate of change in the bond market these last few years has been stunning.
2) The struggling company WeWorks announced it plans to lay off at least 4,000 people, roughly one third of its 12,500 work force, a part of its five year plan for recovery from near bankruptcy. But some analyst WeWorks financial troubles come form its failed IPO (Initial Public Offering) in September which left the company with massive losses of $1.25 billion dollars.
3) The board of directors for HP has unanimously rejected the take over bid from Xerox, which they considers significantly undervalues HP and therefore isn’t in the best interest of its shareholders. The board also had concerns about the impact of outsize debt which could devalue the merged company. News has sent stocks for both companies down. HP does recognize the potential benefits of consolidation and therefore remains open to exploring future mergers. Both companies are in the process of cost cutting programs with HP laying off up to 9,000 workers.
4) Stock market closings for – 18 NOV 19:
Dow 28,036.22 up 31.33 Nasdaq 8,549.94 up 9.11 S&P 500 3,122.03 up 1.57
1) An FAA (Federal Aviation Administration) official states that Southwest Airlines should ground 49 of its airliners that had repairs failing to meet legal standards. The official claims there is a high likelihood of a violation of a regulation, order or standard, so the FAA must take immediate action to revoke the certification of the planes. Aircraft in questions is the Boeing 737 NG which were previously owned by foreign carriers, saying inspections should be speeded up, but fall short of grounding the aircraft.
2) Dean Foods, America’s largest milk producer, is filing for bankruptcy. The 94 year old company has struggled in recent years because Americans are drinking less cows milk. In 2019, sales are down 7%, while for the first half of the year, profits are down 14%, with Dean’s stock dropping 80% in a year. The company is straddled with debt and is unable to fully fund its pensions.
3) The retail giant Walmart is experiencing internal strife over its e-commerce operation with the corporate culture of traditional marketing. Apparently, Walmart’s management doesn’t have a real understanding of the complex technology of e-commerce. The impact of Walmart’s plunge into online retailing has reduced Walmart’s already thin profit margins, which are at historic lows. Some high profile acquisitions and other strategic moves have cratered and talented executives on both sides have departed.
4) Stock market closings for – 12 NOV 19:
Dow 27,691.49 unchanged Nasdaq 8,486.09 up 21.81 S&P 500 3,091.84 up 4.83
Alibaba Holdings LTD (BABA) surpassed earnings expectations. The Asian e-commerce giant, stated that their retail business and their cloud business, were huge components in their earnings viability, while also beating estimates.
Their retail commerce business (BABA) spurned over $14 billion USD in revenue, while thier (BABA) cloud business did over $1 billion USD in revenue. At the end of the Friday Oct. 31, 2019 business day, BABA’s stock was up over 3%. Not a bad day for a major Chinese e-commerce business..SB
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
1) Goldman Sachs, the investment bank, is starting a three year, $100 million dollar plan to overhaul its stock trading platform. The project, which is named Atlas, is aimed at the world’s largest quant hedge funds with the intent of shaving milliseconds off trades. The quantitative hedge fund investment has become a cutthroat business as other firms have been winning a larger share of a shrinking pie, and Goldman Sachs realizes they have been falling behind the technology race. They must make a strong effort to push forward the technology of electronic trading to maintain their market position.
2) As trade talks continue in Shanghai between China and America, President Trump has imposed an additional 10% tariff on $300 billion dollars worth of Chinese imports. These imports are due to start on the first of September. This does not include the $250 billion dollars already tariffed at 25%. The President blames the Chinese for imposing the tariff, saying China is not following through their promise to buy more American agricultural products and not doing more to stem sales of synthetic opioid fentanyl.
3) Lowe’s, the home improvement retailer, has told thousands of its workers that their jobs are being eliminated. The company will out source the jobs of maintenance and assembly workers to third party companies. These workers assembly products such as wheelbarrows and grills, claiming this will allow store associates to spend more time on the sales floor serving customers. Lowe’s employs 190,000 full time and 110,000 part time workers.
4) Stock market closings for – 1 AUG 19:
Dow 26,583.42 down 280.85 Nasdaq 8,111.12 down 64.30 S&P 500 2,953.56 down 26.82
1) Technology displacement is graphically illustrated by the print news media with over 2,000 newspapers having closed in the last fifteen years. Once among the largest employers in America, new technologies have continually reduced the work force of newspapers, especially after World War II with the rapid expansion of the electronic news media. Almost all the newspapers in America have financial troubles leaving their future in doubt. The electronic news media has also suffered massive loss of jobs over the decades as new technologies allow operations with fewer people.
2) Over production of eggs has created an oversupply of the food stuff, forcing prices down until producers are losing money. Exports have been down 12% further aggravating the oversupply situation, with the average cost for a dozen eggs now $1.20, which is 26% lower than a year ago. But experts consider the price has reached its low and will soon start creeping up.
3) California’s wine industry is suffering from the trade war with China imposing a 93% tariff on American wine products. This tariff has pushed the price of wine out of reach for most of China’s population, thus drastically reducing exports. This has dropped U.S. wine exports to China by 25% in 2018 with California accounting for more than 90% of America’s wine sales overseas. China is America’s fifth largest market.
4) Stock market closings for – 23 JUL 19:
Dow 27,349.19 up 177.29 Nasdaq 8,251.40 up 47.27 S&P 500 3,005.47 up 20.44
1) News for budding entrepreneurs. Each year, roughly 30,000 new consumer products are introduced to the market place, but 95% of them fail. The primary reason for failure is lack of preparation, of not understanding the ‘product life cycle’. The life cycle is the time from inception to obsolescence the product experiences. As a product goes through its life cycle, the sales and profit margins will fluctuate, so you must adjust your marketing mix accordingly. The subject is complex and extensive, and a new entrepreneur should spend time researching and understanding the topic before investing in a new product venture.
2) AT&T and Microsoft announced they have agreed on a cloud deal worth more than $2 billion dollars. AT&T will use Microsoft’s Azure cloud service for its computing needs and Office 365 software for its 268,000 people. Additionally, the two companies will work together on edge computing with Microsoft technology deployed alongside AT&T’s up coming 5G network and applications requiring extremely small delays in passing data back and forth such as real time control systems applications.
3) The debt of America is about to hit a record high, a result of cheap money and soaring debt, which has fueled the decade long economic expansion and bull market. There are raising fears of what could happen if there is a shift in the fragile economic balance. The total American debt, both public and private amounts to nearly $70 trillion dollars, with the economy about $21 trillion dollars in size. Difficulties could arise if America should experience a recession with both government and private sectors having trouble meeting their repayments.
4) Stock market closings for – 17 JUL 19: Disappointing quarterly reports pulled the markets down.
Dow 27,219.85 down 115.78 Nasdaq 8,185.21 down 37.59 S&P 500 2,984.42 down 19.62
1) Consumer spending increased in May as well as prices creeping up too. Both point to a slowing economic growth and benign inflation pressures. These two facts gives the Federal Reserve more reason to cut interest rates next month. Inflation is under the 2% target for this year with a projected 1.5% verses 1.8% originally expected. Consumer spending is about two thirds the U.S. economy.
2) Consumerism is changing fast, with a push to ‘no cashier checkouts’. Amazon Go stores are pushing the technology where sales payment is made automatically just by picking out items and walking out the door. E-commerce and on-line shopping continue their assault on traditional brick and mortar stores. Another strategy is showrooms in place of stores that allow the customer to try out products prior to purchasing them. Finally, drone delivery allows getting your purchases at home in less time than it takes to drive to and from a store. All these new technologies are coming together with increased profits by reducing labor cost.
3) The weekly jobless claims has increased more than expected, although there is no sign of significant layoffs as the economy slows down. Unemployment claims were 227,000 up by 10,000. The economy is slowing with manufacturing sliding down and the trade deficient widening as consumer confidence ebbs.
4) Stock market closings for- 28 JUN 19: Results from bank stress test edged markets up. Best June performance since 1938.
Dow 26,599.96 up 73.38 Nasdaq 8,006.24 up 38.49 S&P 500 2,941.76 up 16.84