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

9 September 2020

1) General Chuck Yeager, died at age 97, was remembered Monday as America’s greatest Pilot in a tweet attributed to his wife, Victoria Scott D’Angelo. After breaking the sound barrier, Yeager continued to break records and returned to combat. He was a double ace with 11.5 aircraft shot down and became an ‘ace in a day’ by shooting down 5 or more aircraft in a single day. After World War II, in 1947, he became the first man to fly faster than the speed of sound by flying the Bell X-1. In 1953 he flew more than 1,600 mph in the Bell X-1A. He also flew combat missions in both the Korean and Vietnam wars. Chuck Yeager had flown 361 different types of aircraft and flew 10,131.6 hours during his career, retiring from the Air Force in 1975.

2) With just 24 days to make a deal, the Brexit negotiators are finding the situation very gloomy for a trade deal, with talks now on a ‘knife’s edge’ again. The British and European teams are struggling to craft a free-trade agreement so the two sides can continue the orderly movement of goods and services across the English Channel. Otherwise, Britain and Europe will enforce new customs duties, tariffs, border checks, and quotas on goods, therefore increasing prices and fully ending the era of the free and frictionless trade. The major obstacle is the European access to fish in British waters, despite the fisheries accounting for just a small fraction of Britain’s gross domestic product. The Europeans are also pressing to maintain a “level playing field,” to keep Britain from undercutting worker protections or granting large state subsidies to British businesses, thus giving the U.K. firms unfair advantages.

3) Oil prices fell from a 9-month high while the dollar strengthened. Consumption in Asia remains robust, while other markets are soft or declining. Crude oil prices now look to be heavily dependent on how quickly Covid-19 vaccines can be rolled out. OPEC+ is facing more potential supply challenges, with Libya continuing to ramp up production while Iran prepares to raise oil exports with expectations that America will ease some sanctions under a Joe Biden presidency.

4) Stock market closings for – 8 DEC 20:

Dow 30,173.88 up by 104.09
Nasdaq 12,582.77 up by 62.83
S&P 500 3,702.25 up by 10.29

10 Year Yield: down at 0.91%

Oil: down at $45.60

8 December 2020

1) Experts forecast that a rising stock market and a weak dollar will keep going hand in hand in the near future. The movements of the past month are consistent with movements between equities and the dollar observed this year, which is at its strongest level since before the global financial crisis. Additionally, the seesaw relationship between the dollar and equities is getting more intense, so a rapidly falling currency serves as fodder for stock-market bulls, who are expecting this pattern to endure for some time. Stocks saw a historic rise in November, with the Dow Jones Industrial Average logging its biggest monthly rise since January 1987, as major indexes hit all-time highs. At the same time, the dollar fell 2.3%, its worst month since a 4.2% fall in July and its worst November since 2006. A weaker dollar is often seen as supportive to equities.

2) Boeing Aircraft Co. is considering an equity sale and other ways to ease its debt burden that has soared to $61 billion this year, a result of the worst slump in aviation history. Additionally, Boeing will cut back on production of its 787 Dreamliner from six down to five planes a month by mid-2021. The company has sufficient reserves to see it through months of tumult until coronavirus vaccines are widely distributed. Boeing is prepared to speed up deliveries of 450 of its 737 MAX planes that it built but couldn’t deliver during the global grounding. Therefore undelivered aircraft are starting to stack up around Boeing’s factories and in a storage lot in the California desert, and so it will take the manufacture through 2021 to clear them from its inventory.

3) Negotiations for Britain to exit the European Union continue as the dead line nears. The fundamental differences between the two sides remain over a ‘level playing field’ of the standards the U.K. must meet to export into the bloc, how future disputes are resolved and the fishing rights for EU trawlers in U.K. waters. Ireland finds itself in a difficult place with the most to lose from a no-deal exit. Speed is now of the essence since the 27 EU member states have to unanimously support any deal. Both sides will suffer economically from a failure to secure a trade deal, but most economists think the British economy would take a greater hit. The main problem is how Britain wrests itself free of EU rules with the bloc’s insistence that no country, should get easy access to EU’s market by undercutting its high environmental and social standards.

4) Stock market closings for – 7 DEC 20:

Dow 30,069.79 down by 148.47
Nasdaq 12,519.95 up by 55.71
S&P 500 3,691.96 down by 7.16

10 Year Yield: down at 0.93%

Oil: down at $45.66

30 November 2020

1) Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, warns that Americans should ‘double down’ on COVID-19 precautions as we reach the final stretch before the first vaccines. Over the past two weeks, Pfizer, BioNTech, and Moderna have released promising results from their phase 3 testing of Covid-19 vaccine candidates, so now there is the light at the end of the tunnel. Test show the vaccines are 90 to 95% effective against the Covid-19 virus. But while trials give reason for hope, case numbers and deaths from this week have been more sobering with 166,272 new cases per day plus an average of about 1,200 deaths per day. Dr. Fauci warns that across the globe, people were feeling ‘covid fatigue,’, and after months of quarantine, they are becoming tired of social distancing and other public health measures.

2) An internal government analysis warns that the U.S. government stands to lose more than $400 billion dollars from the federal student loan program, approaching the size of losses incurred by banks during the subprime-mortgage crisis. The Education Department, looked at $1.37 trillion dollars in student loans held by the government at the start of the year, then concluded that students will pay back $935 billion dollars in principal and interest, but this will still leave the American taxpayers stuck for $435 billion dollars. The losses are far steeper than prior government projections. Last year the Congressional Budget Office estimated that the student-loan program would cost taxpayers $31.5 billion dollars, including administrative costs. After decades of ‘no questions asked lending’, the government has piled up a toxic debt. By comparison, private lenders lost $535 billion dollars from subprime-mortgages of the 2008 financial crisis.

3) Metals stocks are rising with shares of United States Steel leading the sector with a 21.3% gain and steelmaker Cleveland-Cliffs up 10.1%, while Aluminum Corporation of China is up 11.3%. The rise is driven by an expected resurgence of car demand in the U.S. causing a global steel price surge at the same time as the U.S. steel market is enduring acute shortages in supply. Aluminum is a metal that automakers have been known to employ as an alternative and hence why Aluminum makers are also on the rise. Currently neither U.S. Steel nor Cleveland-Cliffs are a cash-generating enterprise, while Aluminum Corporation of China has generated a cool $1 billion dollars in real cash profit over the past year.

4) Stock market closings for – 27 Nov 20:
Dow 29,910.37 up by 37.90
Nasdaq 12,205.85 up by 111.44
S&P 500 3,638.35 up by 8.70
10 Year Yield: down at 0.84%
Oil: down at $45.29

23 July 20

1) The business community of America is facing a national coin shortage, making it even more difficult for the retail sector to function. Across the country, restaurants, grocery stores, and retail outlets are posting signs near their cash registers and drive thru windows asking people to pay with credit cards or exact change. This shortage is a result of the spreading coronavirus closing businesses that crippled economic activity in the U.S., so the circulation of coins dropped off significantly. Furthermore, the U.S. Mint who manufactures the nation’s coinage supply, has decreased staffing because of the pandemic, thus reducing the availability of coins.

2) New research has directly connected the explosive growth of passive investing to deteriorating corporate performance over the long haul. Companies with higher passive ownership spent more on stock repurchases, but saw worse financial outcomes. Passive investment can allow opportunistic management behavior with negative effects of future company performance. Companies with high passive ownership are less monitored, therefore allowing management to act unhindered in their own best interest. Passive ownership is a result of investing by mutual and ETF funds who track indexes instead of actively manage counterparts.

3) The government has placed orders for up to 600 million doses of Covid vaccine to Pfizer and BioNTech. The U.S. health officials have agreed to pay $1.95 billion dollars for 100 million doses of a vaccine. Nations around the world have begun ordering vaccines that are still being tested in an effort to halt the spread of the virus. To date, the coronavirus has killed 600,000 people around the world. It is planned the vaccine will be free to U.S. citizens.

4) Stock market closings for – 22 JUL 20:

Dow 27,005.84 up 165.44
Nasdaq 10,706.13 up 25.76
S&P 500 3,276.02 up 18.72

10 Year Yield: down at 0.60%

Oil: up at $41.90