20 March 2020

1) Today, more coronavirus concerns have surfaced that most airlines will go bankrupt soon without government bailouts. The virus has shut global aviation down because of virus outbreaks as well as travel restrictions that are intended to contain the virus. Within weeks, many airlines will need government help to avoid bankruptcy. Major U.S. airlines are seeking $50 billion dollars in financial assistance because of the steep falloff in U.S. travel demand. Estimates are for $25 billion dollars in grants, $25 billion dollars in loans and significant tax relief to survive.

2) Monday markets opened with another sharp downfall of all three major markets despite the Federal Reserve embarking on a massive monetary stimulus campaign to curb the slowing economic growth from the coronavirus. Shortly after opening, trading was halted for fifteen minutes from a ‘circuit breaker’ triggered by the S & P 500. The U.S. central bank has launched a massive $700 billion dollar quantitative easing program designed to help cushion the economic downside from the virus. The Dow was down 11% while both the Nasdaq and S & P fell more than 10%.

3) As fears grow of a world economic downturn, which will put economic stress on the U.S. economy, people are becoming concerned about their jobs. American workers may lose their jobs by the millions as the effects of the virus ripple through the financial system, the impact being devastating. The disease has spread rapidly around the world with whole nations shutting down as well as major cities. It’s unknown just what the impact will be for the world economy, when major economic areas isolate themselves from the system, even for a few weeks. Many segments of the economy are reporting significant problems which can lead to further problems across the U.S. and world economy. All this translates into layoffs, at a time when the young people of America have limited opportunities.

4) Stock market closings for – 19 MAR 20:

Dow 20,087.19 up 88.27
Nasdaq 7,150.58 up 160.73
S&P 500 2,409.39 up 11.29

10 Year Yield: down at 1.12%

Oil: up at $25.08

10 February 2020

1) China has announced a 50% cut in its tariffs on $75 billion dollars worth of imports from America. This is in response to last months U.S. tariff cuts on $120 billion dollars on China imports to America. This is all part of the ‘phase one’ trade deal between China and the U.S. to normalize trade between the two nations.

2) The Department of Transportation (DOT) and the National Highway Traffic Safety Administration (NHTSA) have approved a regulatory exemption for Nuro’s next generation of self driving delivery vehicles they call R2. This exemption will allow testing on public roads for deliveries to customer’s homes. The R2 is a zero occupant vehicle. After public road testing, Nuro will begin the first driverless deliveries in Houston with partners Walmar and Domino’s.

3) The internet retail giant Amazon will hire 15,000 new employees in Seattle to work in a new 43 story tower now being planned, with construction expected to be completed by 2024. Amazon now has 789,000 workers in the world, a 23% increase from a year ago. Amazon has also expanded in New York City by leasing 335,000 square feet of office space, and in northen Virginia’s Crystal City they’re building a second headquarters.

4) Stock market closings for – 6 FEB 20: All three markets set record highs as fears of coronavirus fears subside.

Dow 29,379.77 up 88.92
Nasdaq 9,572.15 up 63.47
S&P 500 3,345.78 up 11.09

10 Year Yield: unchanged at 1.64%

Oil: down at $51.09

14 January 2020

1) Ford Motor Company’s sales in China has declined for the third straight year, falling by 26.1%. The company has been trying to revive sales in China after the decline started in 2017 and plans to introduce thirty new models in the next three years, with a third being electric models. General Motors has also experienced a decline in sales of 15% this last year.

2) One of the largest suppliers of parts to Boeing’s 737 MAX, Spirit AeroSystems, is laying off 2,800 workers. Based in Wichita Kansas, will eliminate 20% of its workforce. Smaller layoffs will happen at its facilities in Tulsa and McAlester, with half its annual sales from parts for the 737 MAX. Since last February, Spirit’s stock has fell from a high of $100 a share to $71.50 on news of the layoffs.

3) Expectations are that the U.S. will remove China from its list of currency manipulators two days before the signing of initial U.S. – China trade agreement. Part of the agreement is that both nations will not devalue its currency to gain a competitive advantages of exports. Labeling China a currency manipulator was viewed largely as a symbolic action.

4) Stock market closings for – 13 JAN 20: Stocks are up 495% in the past decade.

Dow             28,907.05    up    83.28
Nasdaq          9,273.93    up    95.07
S&P 500         3,288.13    up    22.78

10 Year Yield:    up   at    1.85%

Oil:    down   at    $58.12

2 December 2019

1) Deere & Co., the famous manufacture of green and yellow tractors, reported lower earnings blaming trade tensions and poor weather in the U.S. farm belt. Last year’s difficult growing and harvesting conditions have made farmers cautious about investing in new farm equipment. Sales of the construction and forestry division are expected to be down by 10% to 15%, while agricultural is down 5% to 10% next year.

2) Texas oil explorers say predictions of shale production isn’t reflecting the industry’s slowdown. Producers are being starved of funding, stocks have plunged and little interest in public offerings, which may cause a downturn to be more enduring. Seeking to cut costs, drillers have laid off 1,000 workers. There are predictions that U.S. oil production growth will flatten as early as 2021. There is a rapid decline of shale well production, partly a result of placing wells too close together.

3) Global manufacturing has been dragging the world economy down this last year. Weak auto sales have added to the problem, with China’s auto market the worst with a 11% decline in sales. Slow auto sales have cut production at auto plants, with Audi cutting 7,500 jobs. U.S. dealerships are struggling to clear inventory for the new year, with a 12% rise in incentive spending in November, compared to a typical 4%.

4) Stock market closings for – 29 NOV 19:

Dow         28,051.41    down    112.59
Nasdaq      8,665.47    down      39.70
S&P 500     3,140.98    down      12.65

10 Year Yield:    up   at    1.78%

Oil:    down   at    $55.42

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

19 November 2019

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

10 Year Yield:    down   at    1.81%

Oil:    down   at    $56.94

7 November 2019

1) The Oklahoma energy company Chesapeake Energy, who helped pioneer America’s shale natural gas revolution, is now warning that it may not survive the era of cheap gas it helped usher in. In a filing to the Securities and Exchange Commission, the company stated that if depressed prices persist, there is substantial doubt if it can survive. Fracking made it a natural gas powerhouse, at one time the number two natural gas producer, but now it is drowning in $10 billion dollar debt.

2) The U.S. productive has fallen for the first time since 2015. American productivity fell 0.3% in the third quarter, after two quarters of healthy gains, while productivity had increased 1.4% in the past year, about two-thirds of its long run average. Additionally, the low unemployment rate is driving up labor costs by forcing companies to pay more for workers, a trend that could eventually raise inflation. Labor cost rose at 3.6% in the third quarter, up 3.1% for the past year.

3) SoftBank Group Corp. reported an enormous loss from investments in the two money losing startups WeWork and Uber Technologies Inc. SoftBank reported a loss of $6.5 billion dollars after writedowns in WeWork and other investments, the first such loss in 14 years. The massive losses were incurred when WeWork’s IPO failed leaving the startup company cash starved so SoftBank had to extend a $9.5 billion dollar rescue package and take an 80% stake in the company.

4) Stock market closings for – 6 NOV 19:

Dow           27,492.56         up       0.07
Nasdaq        8,410.63    down    24.05
S&P 500       3,076.78          up      2.16

10 Year Yield:    down   at    1.81%

Oil:    down   at    $56.39

28 October 2019

1) The telecommunications giant AT&T is making its belated entry into the streaming video business to compete with Netflix, Apple and Disney. AT&T plans to reach about 80 million subscribers globally, 50 million in the United States by 2025. HBO Max is expanding its customer base into the streaming market through AT&T wireless. AT&T also owns the satellite service DirecTV.

2) The UAW (United Auto Workers) has approved a new contract with GM (General Motors) which ends the six week strike. GM is calling back technicians to prepare the plants to resume production, with production resuming as early as Monday at some plants. The new contract gives workers a series of wage increases and a path for temporary workers to become permanent employees. Permanent workers can earn as much as $32 an hour.

3) The U.S. government has ended its 2019 fiscal year with the largest deficit since 2012. Gains in tax receipts were offset by higher spending and growing debt service payments. The budget deficit has widened to $984 billion dollars, which was 4.6% of the nation’s gross domestic product. Last years deficit was $779 billion dollars and 3.8% of the GDP. Defense, healthcare and social security programs are a major source for driving the deficit, with worries that these expenditures will not be sustainable.

4) Stock market closings for – 25 OCT 19:

Dow             26,958.06    up    152.53
Nasdaq          8,243.12    up      57.32
S&P 500         3,022.55    up      12.26

10 Year Yield:    up   at    1.80%

Oil:    up   at   $56.63

17 October 2019

1) GM (General Motors) and UAW (United Auto Workers) have reached a tentative agreement to end the month old strike of auto workers. This agreement doesn’t bring an immediate end to the strike, because the workers must vote on the agreement first, which means the picket lines will remain in place for at least the next few days.

 2) Weak retail sales figures are casting gloom over the future of the economy. The retail sales for America fell for the first time in seven months in September, on top of the weakness in manufacturing bringing fears of a weakening economy spreading. This is in addition to moderate job growth and weak service sector activity. This all opens the door for the Federal Reserve to cut interest rates again later this month. Consumer spending accounts for more than two-thirds of the economy, so any slowdown in this area indicates a general slow down of the economy.

3) The FCC (Federal Communications Commission) has given the go ahead for the merger of T-Mobile and Sprint. The vote was split along party lines. This merger combines the third and fourth largest U.S. wireless carriers and has been in the process for approval since April of 2018.

4) Stock market closings for – 16 OCT 19:

Dow              27,001.98    down    22.82
Nasdaq          8,124.18    down    24.52
S&P 500         2,989.69    down       5.99

10 Year Yield:    down   at    1.75%

Oil:    up   at    $52.97

15 October 2019

1) There are fears that the manufacturing segment is in trouble and may contract for the third straight month. This in turn could drag down the U.S. GDP (Gross Domestic Product) in the third and fourth quarters. Three factors are causing this down turn- the trade war with China, the GM (General Motors) strike and Boeing’s 737 MAX problems stopping deliveries and slowing production.

2) In the recent past, the online retailer giant Amazon has been unable to compete with traditional retailers when selling single items costing less than a few dollars, because the shipping cost is more than the single item cost such as toothpaste, deodorant or a simple brush. Customers had to buy these items as add-ons to make the $25 minimum for free shipping. But these items are now available for free shipping with Amazon’s Prime shipping. This could make for a significant challenge to other retailers such as Walmart, Target and CVS.

3) GM is attempting to end the month long strike of the UAW (United Auto Workers) by making direct appeal to the workers. The company has lost more than a $1 billion dollars so far, and is making several promises to the workers trying to circumvent the union’s leadership. The UAW has increased strike pay from $250 to $275 per week with union members allowed to hold other jobs as long as it doesn’t interfere with their picket duty.

4) Stock market closings for – 14 OCT 19:

Dow            26,787.36    down    29.23
Nasdaq         8,048.65    down      8.39
S&P 500        2,966.15    down       4.12

10 Year Yield:    down   at    1.73%

Oil:    down   at    $53.50