[Market Madness] Edition 0059
Fed fears
Well folks, the markets are timid today, in anticipation of the Fed’s actions following the FOMC meeting today. To get yourself prepared, here are 6 things that you can keep your eye on too, courtesy of the FT.
The major U.S. indices opened down again, with the exception of the NASDAQ, which is dancing just over 10,000 - setting new all-time highs the longer it climbs upward.
Downward pressure on markets comes as investor’s are afraid for Powell’s economic update and projections moving forward. This will likely include internal projections and data that the Fed analysts have been crunching for a while now, trying to make heads and tails of what has been going on since the last meeting.
Did you miss yesterdays’s piece? No worries! Get it right here and catch up on the madness.
Fundamentals
Wednesday Close:
Dow Jones Industrial Avg: -1.04%
S&P 500: -0.53%
NASDAQ: +0.67%
US 10 YR: 0.783% | 98 5 / 32
Crude OIL: $38.84
Market Madness Portfolio: +0.32%
COVID 19 Global Cases: 7,399,969
Indices Overseas:
FTSE 100: +0.09%
Nikkei: +0.15%
Hang Seng: -0.03%
Amazon and Goldman’s small business credit line
Amazon is partnering with Goldman Sachs to provide its U.S.-based merchants with a digital credit line to assist them in tough times. Goldman Sachs (through its digital bank division, Marcus) will be reaching out to sellers on Amazon for credit lines up to $1 million. These credit lines will act exactly like a business card from Amazon, with fixed rates ranging from 6.99% to 20.99% APR. Originally, Amazon was considering a multitude of credit issuers in a marketplace style connection between borrowers and lenders. This would have included other partners in addition to G.S., but opted to partner with one giant after similar plans had been drawn between the two firms for some time now.
The pairing of these two giants comes at little surprise to analysts of each company, as they partnered together for Amazon’s purchase of Whole Foods. The move also comes as a huge benefit to Goldman Sachs, as they were seeking avenues to expand its partnerships. Recently, Goldman Sachs partnered with Apple to launch their Apple Card, a first of its kind payment offering designed entirely around the Apple ecosystem.
By gaining data on thousands of Amazon merchants, Goldman can improve its lending models and accelerate its push into Main Street finance. For most of its 150-plus year history, the bank has focused on Wall Street clients and the ultra-wealthy. The bank started its Marcus business in 2016 to diversify from the capital markets-heavy businesses that generate most of its revenue. (excerpted from article)
This move between Amazon and G.S. comes at a great time for the two as a partnership, seeking to expand and diversify their offerings and truly increase their ‘one-stop-shop’ potential.
While Goldman is a late arrival to retail finance, it shouldn’t be dismissed. After four years, the bank has $80 billion in deposits and $7 billion in loans, and there are signs it is gaining momentum. The upheavals caused by the rise of fintech and more recently, the coronavirus pandemic, could provide an opening for it to exploit its advantages.
“On the one hand, we are a bank with a balance sheet, with the ability to lend, and manage risk effectively,” Ismail said. “On the other hand, we’re doing this with all the benefits of being a start-up, i.e. no legacy technology, no legacy business models.” (excerpted from article)
Goldman is a strong name in banking, going back to nearly the very beginning, and its expansion into a very uncertain and unpredictable industry shows a drive by Goldman to innovate and expand their own brand definition.
I’d recommend following up with this as time progresses, as this will be an interesting partnership to watch evolve, pending all goes well.
Yours truly, the Fed
The much anticipated FOMC rate decision and press conference kept investors on edge all day. Mostly, we are getting much of the same and what many predicted; the Federal Funds Rate is going to hold tight at the range 0 to 0.25% for the foreseeable future. Mr. Powell also suggested that he and the other members of the FOMC are not predicting another rate increase through the year 2022.
“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent.” (excerpted from FOMC meeting notes)
The Fed is also looking to maintain its current pace for asset purchases ($80 billion in Treasuries and $40 billion in mortgage securities (net of maturing issues) per month) to continue providing a backstop and help sustain future economic growth. This sent a strong signal that the Fed is going to continue to do whatever is necessary for however long they anticipate needed to provide assistance.
Much of this information is still fresh and being digested by onlookers and investors alike. More will come from these notes moving forward, as well as a greater analysis by me after having more time to look over the notes myself.
Read more here. Grab the Fed Statement Tracker to see what has changed since the last meeting here.
Quick Takes
Starbucks records a loss of $3 billion in revenue this past quarter due to COVID 19 shutdowns. (via CNBC)
Former department store executive predicting one-third of American malls to close by 2021. (via CNBC)
The settlement from Equifax’s latest security breach is ‘skimpy’ to plaintiffs. (via WSJ)
J&J to bring a human vaccine trial for COVID 19 to July, ahead of original schedule. (via FT)
The onset of COVID 19 in tandem with a very mild winter sets the stage for the biggest fall in global natural gas demand of nearly 4%. (via FT)
Retail investors betting on Chapter 11 bounce backs. (via FT)
Qatar energy minister says the Saudi-Russia oil price war was a ‘very big mistake.’ (via CNBC)
Penny stocks are up, on average, 80% in the past week. (via CNBC)
Reader’s Corner
The reader took time away from the markets to revisit an old favorite novel of theirs. If you have an interest in crime thrillers, please enjoy Ghostman by Roger Hobbs.
General Banter
As an aside, when I signed up for Robinhood and received my free stock, I got a share of Cloudera ($CLDR). It is becoming really cool because news broke yesterday of private equity interests in the firm, signalling a going private transaction. It would be a first for me owning a share of a company that is looking to be bought out by a private equity shop. Read more here.
Behind the Madness
Thank you again for checking in.
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