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

19 September 2019

1) The Federal Reserved voted for a quarter percent drop in the interest rate, bringing the ire of President Trump in a tweet, complaining the Feds lack the guts and vision to cut more. But the board surprised everyone by its divided vote, three of the members voted against a policy decision, while seven voted for it. This is considered an indication of how uncertain things are and just what the economic future holds. In response, the stock markets fell over the news of just a quarter percent rate reduction.

2) Some fear that parallels in the market signal the coming of another recession. These parallels include an inverted yield curve with the stock markets making new highs in July, followed by a correction in August, then a rally in early September. Additionally, growth is slowing. These same signs occurred in 2007 prior to sliding into a sever recession. All that is needed is a trigger such as the world oil supply.

3) As a result of the UAW (United Auto Workers) strike, GM (General Motors) announced 1,300 layoffs in their Oshawa plant in Canada. This is because GM plants in the US are shut down and unable to deliver needed parts and assemblies to the Canadian plant. This shows that the strike is spreading to other units of the automakers business.

4) Stock market closings for – 18 SEP 19:

Dow             27,147.08         up    36.28
Nasdaq          8,177.39    down      8.62
S&P 500         3,006.73          up      1.03

10 Year Yield:    down   at    1.79%

Oil:    $58.25

25 July 2019

1) Boeing Aircraft, the manufacture of the now grounded 737 MAX, has not ruled out further reductions or even shutting down production of its 737 MAX. Boeing had cut production of its best selling jet from 52 per month to 42, a 20% reduction. For its second quarter, Boeing has expended $1.01 billion dollars in cash as a result of the grounding, compared to the $4.3 billion dollars of free cash it had on hand last year. With deliveries on hold, Boeing isn’t receiving payments while also footing the cost of aircraft being stored waiting for re-certification.

2) With the commodity prices of coffee bottomed out and depressed incomes, coffee growers in Guatemala are facing a crisis. This crisis is made worse with threats of tariffs on Guatemala over undocumented migrants. Additional remittance fees and sanctions could spell disaster for Guatemala’s principle export if implemented, which in turn may actually exacerbate the flow of migration as small growers are forced out of business and head north.

3) The food giant Kraft Heinz, faced with a large corporate debt, has been exploring methods to pay down that debt by selling off some of its brands, so it can focus on its staple brands such as Heinz ketchup. But the sale of Maxwell House coffee, Breakstone’s sour cream and cottage cheese and Plasmon baby food, has glean lukewarm response from potential buyers. For years, the giant has been run by a ‘cost focused’ management team, but now management considers the company should be driven more by growth. The soup giant Campbell soup faced the same problems earlier this year.

4) Stock market closings for – 24 JUL 19:

Dow              27,269.97    down    79.22
Nasdaq           8,321.50          up    70.10
S&P 500          3,019.56          up    14.09

10 Year Yield:    down   at    2.05%

Oil:    up   at    $55.94

29 November 2018

1) America had the fastest expanding GDP by growing 3.5% in the third quarter. The Feds hint that they might hold interest rates at present level, which would further stimulate growth.

2) There are threats of a partial government shutdown next week over funding for the border wall, the shutdown coming one week from this Friday.

3) Google is facing a $4 billion dollar fine for using smart phones to track people without their consent.  Last May, Europe passed regulations controlling the use of digital technology with people, which allows them to level such a large fine. The American Congress is considering similar legislation to regulate the digital industry.

4) 28 NOV 18   Stock market closings:   Biggest Dow rally in eight months.

Dow                    25,366.43            up         617.70
Nasdaq                 7,291.59            up         208.89
S&P 500                2,743.79            up           61.62

10 Year Yield:      down    at     3.04%

Oil:     up    at     $50.52

26 November 2018

1) The government released a report on climate change and the adverse effects to be expected.  The US GPD may decline as much as 10% by 2100. It acknowledge that the US is not the only driving force of global warming, as of now, not a single G20 country is meeting their climate targets.  The costs of climate change could reach hundreds of billions of dollars annually, with agriculture predominate where farms may produce 75% less corn and 25% less soybeans.

2) The Dow may drop another 2,000 points before market selling is done.  The US economic growth could be cut in half this next year over fears of consumer demand declining.

3) A family feud threatens Campbell’s dynasty as soup sales tank, with one cousin complaining to another cousin that he didn’t have any confidence in the company management, which precipitated a feud.  Shareholders vote next Thursday, that will determine if Campbell’s will remain a family dynasty.

4) 23 NOV 18    Stock market closings:     Drop in oil prices causes drop in stock markets.

Dow                         24,285.95         down         178.74
Nasdaq                      6,938.98         down            33.27
S&P 500                     2,632.56         down            17.37

10 Year Yield:      down   at    3.05%

Oil:    down   at    $50.39

20 November 2018

New article posted below, titled “Recession Worries?”

1) China-United States APEC summit ends without a joint statement, a result of US-China tensions.  US warns other Asian nations about investing in Chinese infrastructure, specifically China’s ‘Belt and Road’ project, and becoming overwhelmed with debt.

2) Survival of four major retailers may be determined by sales this Christmas season. Sears, JC Penny and Barnes & Noble, and while Toys-‘R’-Us has already closed all its stores, it is trying to capitalize on its name brand.

3) The volatile stock markets give fears among older retirees of a possible crash, resulting in lost of their savings.  The baby boomer’s savings have not recovered from the 2008 crash.

4) 19 NOV 18    Stock market closings:   Stock market dragged down by major losses of five large technology companies.

Dow                       25,017.44               down      395.78
Nasdaq                    7,028.48               down      219.40
S&P 500                   2,690.73               down         45.54

10 Year Yield:    down   at    3.06%

Oil:    up   at    $57.40

Recession Worries?

Some analyst are claiming the good economic indicators we are seeing today are really portents of a recession.

James Lyman BSAE, BSEE, MSSM

Fears of another recession are particularly acute for the millennials and Z-generation, because in general, they are the first to suffer the most from an economic downturn.  This was seen in the 2008 downturn and is a consequence of our service economy, where for so many Americans, their economic value is as consumers, rather than substantive contributors to society.  As consumers, they are particularly vulnerable to any economic downturn . . . to a recession.  So what is causing some economic experts to think we may soon have a recession?

Some point to the fact that for the last 10 recessions in America, a recession quickly followed when the economy hits full employment. In other words, when the unemployment rate reaches a minimum cusp . . . in as little as a few months the economy starts a down slide.  The average time between when the cusp occurs and when the recessions starts is just 3.8 months, and for 3 downturns it was just 1 month after, with the longest being 10 months.  This trend started in 1950, a time when automation was starting to make inroads in American society, and a decade or so before the decline of manufacturing in America started. Therefore, we must view this hypophysis with the realization that the environment was changing, and that this may have had a profound effect.

But the problem with using this correlation as a predictor is it’s all hindsight.  To know if a recession is nearing, you must know when you’ve actually reached the cusp.  This April, the unemployment was down to 3.9 percent, a 17-year low, but since then it’s dropped to 3.7% and may well continue down.  There’s no way of knowing when the cusp has been reached until the unemployment rate starts back up.  But with the rate already one of the lowest, there’s less and less chance it will go much lower.

A low employment rate indicates that the labor force is fully utilized, but why would that indicate the onset of a recession?  What’s the forcing function? What’s the relationship?  Without knowing that, using this empirical relationship could be erroneous.  For one thing, the hypotheses assumes a constant environment, specifically when it doesn’t consider the growing obsolescence of people, and their displacement by technology.  This is an important consideration for our hyper-consumerism economy, because displacement of workers means fewer consumers and therefore a shrinking economy.  A shrinking economy, for whatever reason, is the basic ingredient for a recession.  So it’s safe to say, that the good economic indicators we are presently seeing, will most likely not continue for long, regardless of which political entity is in power.

Even though the past performance of a system is no guarantee of how that system will react in the future, you can’t just ‘out-of-hand’ dismiss the correlation of low unemployment cusp and the onset of a recession.  This next unemployment low may not foretell the onset of a recession, but then again, it may just as well happen as seen with the last ten recessions.  We can’t know with any certainty until after the fact.  While President Trump has created a stimulating environment for American business and the economy, there are a number of factors in which neither he, or anyone else has control over, that can bring an end to that stimulation.  The instability of world economies in Europe and Asia to start with. China’s blend of communism and capitalistic economics is showing to be more and more unstable.  If China’s down slide continues, what effects will that have on our economy?  Again, there’s no way of knowing until after the fact.

The millennials and Z-generation are the first to feel and suffer in a recession, mainly because so many of them now have ‘shallow’ jobs requiring little to no skills.  People who’s work hours can easily be reduced when business slows, or simply laid off.  In turn, with reduced income their effect as consumers is reduced, and that in turn further exacerbates an economic downturn.

Possibly the cusp in unemployment isn’t a forcing function, rather it is an artifact of other forces causing a downturn, that in turn results in unemployment starting to rise again to form that cusp.  This would make the validity of the hypophysis more palatable and hence acceptable.  There are other indicators that economic problems may be just over the horizon, such as the contraction of the big box stores, the foundation of hyper-consumerism.  Also there are problems with house sales declining, rising mortgage rates and a decline in house prices.  The rising US debt is adding further pressure on the economy to support what many consider unsustainable.  And finally, the frailty of so many world economies presents a major threat to the US economic viability.  A sever downturn of the fragile economies such as Greece, Spain or Italy could start a chain reaction that also pulls America’s economy down.

But even if the millennials and Z-generation know of a coming recession, what can they do to protect themselves?  Well, first of all, minimize personal debt as much as possible, and that starts right now. Just because things are booming now, that doesn’t mean you have to go out and buy things on credit.  Shop the same as when times aren’t so rosy.  If at all possible, save up and pay cash. The personal debt factor, more than anything else, is what causes people their biggest problems in a recession, especially if looking for new work.

Be more flexible by increasing skills and education now, particularly technical skills such as mathematics and science.  This is the twenty-first century, not the eighteenth or nineteenth century, and eighteenth century people have far fewer opportunities in this century.  Try and avoid careers directly involved in hyper consumerism, since consumerism is usually the first to feel the effects of a recession.  In other words, try and stay off the thin ice.

More than anything else, thinking ahead can do more
than anything else, in weathering a recession.

15 November 2018

1) European markets are slipping downwards as a result of Germany and Japan’s contracting economies.

2) Bayer is now facing nine thousand lawsuits over the safety of their Roundup weedkiller as a carcinogen.

3) A very rare large pink diamond, weighing an almost unheard of 19 carats has sold for $50 million dollars. Pink diamonds are almost always less than 1 carat weight.

4) 14 NOV 18    Stock market closings:

Dow                25,080.50            down         205.99
Nasdaq             7,136.39            down           64.48
S&P 500            2,701.58            down           20.60

10 Year Yield:     down   at    3.12%

Oil:     up   at     $56.00

14 November 2018

1) For the twelfth straight trading day oil prices have dropped, the steepest in 3 years.  US oil inventories are at record high.

2) Tesla’s Gigafactory produces more battery packs for electric vehicles than all the rest of the world combined.  Presently, Tesla is producing battery packs for $116 per kilowatt-hour while the average cost from other manufactures is $146 per kilowatt-hour.  Tesla expects cost to continue dropping.

3) While unemployment dropped to 3.7%, the cost of living has risen 14% over the last 3 years.  The median home price is up 21% over the same period.

4) 13 NOV 18    Stock market closings:  Volatile market fails to rebound.

Dow                                25,286.49                down        100.69
Nasdaq                             7,200.88                      up            0.01
S&P 500                            2,722.18                 down           4.04

10 Year Yield:       down   at    3.14%

Oil:         down   at      $55.61

7 November 2018

1) Ford Motor Co. is making great inroads in the Indian auto market after investing $2 billion dollars in India, such as opening 100 new dealerships in the last 18 months.  This has resulted in profits for the first time in a decade.

2) Chinese stocks are sending warning signals about China’s economy with stocks closing lower.  In a trade war, China was counting on its powerful domestic-consumption engine to provide protection for investors in the nation’s stocks, but that’s not working out so well.  China’s domestic consumer suppliers are reporting lower earnings than expected.  China’s consumers just aren’t spending as they had been.

3) 6 NOV 18     Stock market closings:

Dow                    25,635.01    up    173.31
Nasdaq                 7,375.96    up      47.11
S&P 500                2,755.45    up      17.14

10 Year Yield:    up   at    3.21%

Oil:     down   at    $61.78