9 January 2020

1) The result of the Iranian missile attack on gas prices is expected to be minimal. Oil prices did briefly surge on Tuesday on news of the attacks fueling fears of a Middle East war between Iran and America, spiking 4% to top oil prices of $65 a barrel, but slipped down to 1.3% early next day. Some are expecting gas prices across the nation to rise five to ten cents per gallon over the next several days.

2) Data for the fourth quarter indicated 2019 will show strong growth, which will most likely lead into a strong growth for 2020. The GDP (Gross Domestic Product) growth for the fourth quarter is estimated to be 2.3%, better than the 2.1% growth for the third quarter. This would close out the GDP growth for 2019 at 2.4%, down from the 2.9% growth of 2018, but still enough to put fears of a recession to rest.

3) Walmart has unveiled its latest technology to counter Amazon and Kroger in the grocery battle- a grocery picking robot. The automated grocery system is called Alphabot and is designed to pick and pack orders as much as ten times faster than a human. The robot will allow Walmart to rapidly expand its capacity to fill orders for ‘demand on online’ grocery shopping. The Alphabot is a 20,000 square foot facility built onto present stores consisting of about 30 small cubic robots inside a giant shelving system, which can pick and pack products from a selection of 4,500 items.

4) Stock market closings for – 8 JAN 20:

Dow               28,745.09    up    161.41
Nasdaq            9,129.24    up      60.66
S&P 500           3,253.05    up      15.87

10 Year Yield:    up   at    1.87%

Oil:    down   at    $59.98

27 December 2019

1) The Permian Basin continues to experience difficulties producing oil, becoming increasingly gassy as drilling slows down. This undercuts profits for producers at a time when investors are demanding better returns. The region has long been plagued with a massive glut of gas which crude producers must sometimes pay to have hauled away or burn in the open air. This problem is intensifying as wells age and fewer new wells are drilled.

2) Oil prices rise to a three month high because of optimism on supply. The stage is set for the biggest monthly gain in almost a year on speculation that supplies are shrinking. Prices are up almost 12% for this month and are now higher since the mid-September high. The U.S. stockpiles have dropped 7.9 million barrels this last week, while Russia cut their crude output with a reduction of 240,000 barrels a day for December. Oil has surged about 36% for this year.

3) American retailers continue to struggle while some are actually thriving. The once giant Sears has fallen into bankruptcy having closed over 3,000 stores. Other major retailers in decline are Blockbuster Video, Radioshack, Victoria’s Secret, the Gap, JCPenny, Toys R Us and Borders Books. Retailers such as TJ Maxx, Amazon, Walmart, Target, Dollar General, Costco and Ross have flourished in the peril waters of American consumerism.

4) Stock market closings for – 26 DEC 19:

Dow                28,621.39    up    105.94
Nasdaq             9,022.39    up      69.51
S&P 500            3,239.91    up      16.53

10 Year Yield:    down   at    1.90%

Oil:    up   at     $61.68

21 November 2019

1) For 80 years Boeing Aircraft has operated as an ‘association of engineers’, but this changed in 2001 when the upper management who came from MacDonnel Douglas (a failed company), elected to move Boeing’s corporate headquarters to Chicago. The rational was upper management shouldn’t be close to a principal business, because the corporate center is inevitably drawn into day to day business operations. With this, Boeing became a financially driven business instead of engineering driven, with decision based on cost cutting instead of safety. This has resulted in the 737 MAX fiasco now being played out.

2) Apple has started construction of its $1 billion dollar campus in Austin Texas, which is beside its new MacBook Pro laptop manufacturing facility. The 3 million square foot campus will have 5,000 employees with capacity to grow to 15,000. Currently, Apply employs 7,000 people in Austin. This is seen as another move by Apple to limit its manufacturing in China.

3) Walmart is redesigning its grocery department in order to counter impending competition to traditional brick-and-mortar from online giant Amazon. Already the country’s largest grocer, Walmart will widen aisles, add low profile displays in the produce departments, an organic shop and update signage throughout its stores. These changes are expected to be improvements for the customers and workers.

4) Stock market closings for – 20 NOV 19:

Dow               27,821.09    down    112.93
Nasdaq           8,526.73    down      43.93
S&P 500          3,108.46    down       11.72

10 Year Yield:    down   at    1.74%

Oil:    up   at    $57.09

13 November 2019

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

10 Year Yield:    down   at    1.91%

Oil:    up   at    $56.78

8 November 2019

1) Bill Gates, the Microsoft co-founder, says he’s happy to pay his share of taxes, but expressed consternation over Elizabeth Warren’s proposals to tax America’s wealthy. He considers the presidential hopeful is not very open minded to consider his concerns. Warren’s wealth tax proposal is 2% annual levy on household wealth above $50 million dollars with an additional 1% tax on wealth above $1 billion dollars. She estimates this would cover 75,000 tax payers raising $2.6 to $2.75 trillion dollars over a ten years.

2) Stores are starting their Black Friday sales earlier this year, in part because the holiday shopping season is six days shorter. Retailer Target will begin online Black Friday sale on Thanksgiving morning, with stores opening their doors at 5 p.m. and remaining open through 1 a.m. the next day. On Black Friday, their stores open at 7 a.m.. Other retailers such as Walmart started their holiday shopping season last October.

3) Xerox is offering HP a takeover bid of $22 per share. The bid consists of 77% cash and 23% stock which would be $17 in cash and 0.137 Xerox shares for each HP share. If accepted, the deal would generate about $2 billion dollars in cost synergies with HP stock holders owning 48% of the company. HP has announced job cuts between 7,000 and 9,000 by the end of fiscal 2022. HP is worth $29 billion dollars and is more than three times the size of Xerox in terms of market cap.

4) Stock market closings for – 7 NOV 19:

Dow                 27,674.80    up    182.24
Nasdaq              8,434.52    up      23.89
S&P 500             3,085.18    up        8.40

10 Year Yield:    up   at    1.93%

Oil:    up   at    $57.07

6 November 2019

1) The money-markets have about $3.4 trillion dollars invested, and the large pile of cash could push the already soaring markets higher. The money-markets have grown by $1 trillion dollars over the last three years because of higher money-market rates, concerns of the ten year economic expansion and the ageing of the bull market. But despite the double digit gains this year, that cash remains in the money-markets amid concerns of an economic slowdown, investors wanting the safe bet of having a large cash reserve. Many fear the markets are at an unstable high and a reversal could occur at any time.

2) The U.S. trade deficit for September has falling to its lowest level in five months with imports dropping more sharply than exports. America has a rare surplus of petroleum, which has traditionally been a major source of imports. The import-export difference shrank 4.7% to $52.5 billion dollars, down from the August deficit of $55 billion dollars, with the deficit with China creeping down 0.6% to $31.6 billion dollars.

3) The Bank of America announced it will pay a $20 dollar minimum wage in 2020, a year earlier than planned. This will raise wages for more than 208,000 of its U.S. employees. The higher pay for retail bankers is becoming crucial with the increasingly competitive job market. Other main street banks have also raised their minimum wage, such as Citigroup and JP Morgan Chase. Other major companies including Amazon, Walmart, Target and McDonald’s have also increased their minimum pay.

4) Stock market closings for – 5 NOV 19:

Dow              27,492.63         up    30.52
Nasdaq           8,434.68         up      1.48
S&P 500          3,074.62    down      3.65

10 Year Yield:    up   at    1.87%

Oil:    up   at    $57.27

1 November 2019

1) The international auto makers Fiat-Chrysler and Peugeot, which is owned by PSA group of France, have agreed to merge. This deal will create one of the world’s largest auto makers by volume, having a market value of $48.4 billion dollars. The focus on the Jeep sport-utility vehicles and RAM trucks account for the majority of Fiat-Chrysler’s profit, helping to offset the Fiat brand.

2) New data shows that low income people are more likely to shop at Family Dollar and Dollar General than at Walmart, the traditional retailer for the poor. Low income is considered those with household incomes below $50 thousand dollars. The data was obtained by measuring location data from 50 million mobile devices. The Dollar General chain has 16,000 stores in 44 states and the Dollar Tree has 15,115 stores in the U.S. and Canada, while Walmart has 4,700 stores.

3) Five months of protests has brought Hong Kong’s economy into a recession with a sharp contraction in the third quarter. The economy is being driven completely by social events, so traditional economic measures to reverse a recession, such as cutting interest rates, should have little effect. So far, the city hasn’t seen significant capital outflow from the unrest, something many feared when protest demonstrations started. One major factor in determining if Hong Kong will recover is how soon mainland Chinese tourist will return. There is no signs of the protest coming to an end.

4) Stock market closings for – 31 OCT 19:

Dow            27,046.23    down    140.46 
Nasdaq         8,292.36    down      11.61
S&P 500        3,037.56    down        9.21

10 Year Yield:    down   at    1.69%

Oil:    down   at    $54.16

30 October 2019

1) Humana, the health insurance giant, is laying off more than 800 people. These layoffs are from its operations in several states, their intent is to trim payroll by 2%, starting this week. Humana is taking a series of measures in 2020 aimed at improving productivity and position the company for long term sustainable success. This need to cut expenses is driven by the anticipated $1 billion dollar non-deductible health insurance fee or HIF, which Humana must pay in 2020.

2) The retail mammoth Amazon is making further inroads into the grocery retailing business by offering free delivery of groceries to its Prime members. These will include services like Amazon Fresh and Whole Foods Market using time portals of one and two hour delivery windows. Fresh grocery delivery service is expanding into new cities. This new delivery strategy is expected to circumvent other retailers such as Walmart.

3) The ride sharing company Lyft is introducing Lyft Pink, a monthly membership for riders that gives a 15% discount as well as other perks. Unlike previous discount programs which only applied for a certain number of rides, this discount will have no limits. While Lyft Pink will launch later this year, you can sign up for the service now.

4) Stock market closings for – 29 OCT 19:

Dow              27,071.42    down    19.30
Nasdaq           8,276.85    down    49.14
S&P 500          3,036.89    down      2.53

10 Year Yield:    down   at    1.84%

Oil:    down   at    $55.52

25 October 2019

1) Another wave of technology displacement is sweeping across America, with 32 stores getting rid of their cashiers and checkout lanes. For the last decade or so, there has been an increasing incident of self checkout facilities appearing in stores. Driven by Amazon’s marketing model, retailers are experimenting with ways and methods to dispense with the labor cost from check out clerks. The ‘one of a kind’ Sam’s Club Now is really an incubator to develop the technologies for automated check out systems in stores. Walmart has its Scan & Go app, Kroger its Scan Bag & Go service and fast food chains such as McDonald’s, Pizza Hut and burger King have kiosk systems for ordering.

2) California is not seeing the expected revenues for legalization of cannabis for personal use. After three years of legalization, the anticipated windfalls have failed to materialize a result of regulations and a robust black market cutting into legal sales. The legal market has produced just a fraction of what the state had anticipated, while legal growers who invested millions to cultivate the product are not seeing any profits. Growers must pay a number of fees to the government annually, which cut heavily into their profits.

3) If China signs a partial trade deal with the U.S., it will buy at least $20 billion dollars of agricultural products in a year. This would take China’s farm goods imports back to the levels of 2017, before U.S. imposed tariffs, which once removed might actually push imports up to as much as $40-$50 billion dollars a year. China has already issued waivers for 10 million tons of soybean purchases this week, and is considering an additional 4-5 million tons of grains.

4) Stock market closings for – 24 OCT 19:

Dow           26,805.53    down    28.42
Nasdaq        8,185.80          up    66.00
S&P 500       3,010.29          up      5.77

10 Year Yield:    up   at    1.77%

Oil:    up   at    $56.15

24 October 2019

1) Several high profile companies have missed their third quarter earnings, making analysts worry if a long feared earnings recession may be getting closer. Earnings missed from expectations are FedEx by 3%, McDonald’s 5%, Caterpillar 8% and Boeing 30%. Texas Instruments has given a very poor revenue guidance for the fourth quarter of 11% below consensus. This quarter, 83% of reporting companies have beaten expectations by 4.2% average, so earnings misses by large companies is fairly rare.

2) Walmart will start its holiday sales earlier this year, starting this Friday at midnight. This is about a week earlier than last year. Retailers are facing a short holiday shopping season this year, which is just 26 days between Thanksgiving and Christmas. This is about a week shorter than the same period last year.

3) Car prices have been rapidly increasing, leaving consumers having a hard time affording new vehicles. This forces buyers to take out long term auto loans making a further burden on hard pressed consumers. The average new car purchase price in the U.S. is $36,718 with interest rates at about 6%, which is up 2% from 2017. A decade ago, the average price for a new car was $23,900, while average wages has remained static.

4) Stock market closings for – 23 OCT 19:

Dow         26,833.95    up    45.85
Nasdaq      8,119.79    up    15.50
S&P 500     3,004.52    up      8.53

10 Year Yield:    down   at    1.76%

Oil:    up   at    $55.88