[Market Madness] Edition 0115
What a week
Well that all happened really quickly
Administrative topics and a general market recap
Well folks, it has been a tidal wave of a week in every respect. Much of the week became lost the second Donnie told the world he’s got COVID 19 but don’t be fooled, there was a lot of other things that happened this week. We started the week scratching our heads at two adults fight in a sandbox during the first presidential debate, and we ended the week a little more confused about what the rest of the year holds.
U.S. indices did well this week, closing out Q3 with some considerably large gains. Asia was down and Europe was up on the week. Energy is still a weak spot when looking across market sectors. Airlines are cutting furloughed employees and crude oil has gone below $40/barrel again, both of which suggest that energy demand is going to have a long road ahead if it wants to get back to pre-covid levels. Despite the gloomy outlook in the industry, that has not stopped firms looking to conduct business ventures at relatively cheap levels. Shale producers Devon Energy and WPX Energy announced a merger this week.
Elsewhere, the USD index ($DXY) declined on the week, in sentiment with the bad geopolitical news with Donnie and such. The uncertainty resulting from that led to a rise in value of gold as well.
Here are some general themes that we will cover off on in this edition:
Debt and Macroeconomics
Jobs and Consumer Spending
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In the meantime, if you are interested in my thought process throughout the week as I collect news and ideas for the Sunday publication, please check out my Walling page where I brainstorm and mind-map each week’s edition!
Fundamentals
Where did the markets end last week?
U.S. Indices 5 Day Performance
Dow Jones: +1.87%
S&P 500: +1.54%
NASDAQ: +1.48%
Asia and Europe 5 Day Performance
Nikkei 225: -0.75%
Hang Seng: -1.19%
FTSE 100: +1.02%
DAX: +1.76%
Rates, Spot Prices, and ‘Good to Knows’
U.S. Dollar Index: 93.81
US 10 YR: 0.698%
Crude OIL: $37.01
Spot Gold: $1,898.70
Market Madness Portfolio: +8.30% YTD
TEDRATE: 0.12
LIBOR (3 month): 0.234%
COVID 19 Global Cases: 34,952,349 (updated Oct. 4, 2020)
Economic Update
Since this week was calm with respect to the level of market-specific news, we will take the time to assess the economic conditions as we enter Q4 2020. First, let’s start with jobs.
In September, we closed out Q3 with a below expected jobs report for the month. The economy added 661,000 new jobs which is well below the Wall Street expectation of 800,000. Despite the disappointing number, the total level of unemployment fell below 8% (now, we sit at 7.9%). Below is the breakdown of which industries gained and lost jobs in September.
Looking at the bigger picture, here is where all the industries stand since February when 2020 really started to go downhill.
As we can see, there is still an incredibly large amount of work that needs to be done to get back to where we started. Luckily, we all understand (or should understand) that this won’t be fixed overnight and that we need to get the virus under control before we can fully reopen industries. As we have discussed before, it will be essential to follow these jobs reports in the months and even years to come as it is still unknown how many of these job losses will turn permanent and not just temporary for state closures.
Another area of economic data that is important to watch is consumer spending and income. The August personal income report showed a 2.7% decline which is being partially attributed to the reduction in enhanced unemployment benefits. Despite the shrinking benefits, workers are still left with little choice if their business is closed and new unemployment files still hover around 800,000 each week. The Labor Department totals 12 million workers on regular state unemployment programs across the states.
Consumer spending showed a little increase throughout the Summer months, but still remains depressed below pre-covid levels, another challenge for the economy as we look ahead. However, the biggest elephant in the room that we need to take time to discuss is the major debt levels that exist within the U.S. even before COVID 19 took over. That’s our next story.
Read more here, here, and here.
Debt Dilemmas
Let’s address the debt dilemmas that exist here in the U.S. (which are not only isolated to the U.S., but this is primarily a domestic newsletter).
(If you follow the line at the right end of the chart, it goes right off the chart and stops at the moon.)
Is this bad? Well, I’m not an expert but I’d venture to say that it is not great if you are in debt greater than the value of what you produce. If you are an individual and your debts are greater than your income, you are in a world of financial hurt. But things are different when you are a nation, particularly a nation with the capacity to print currency. Let’s also remember that desperate times call for desperate measures, which is exactly the policy mentality that was taken with the first round of stimulus.
If you are wondering what the consumer side looks like, here you go:
The problem here is that consumers are expected to divert income toward ‘beneficial economic activity’ which is primarily seen through going out and spending the hard earned money on goods and services that you need and want. However, as we can see here, the first responsibility of both seasoned adults and post-university adults is reducing their large debt burdens. Particularly on the post-university side, the expectation is that these are the adults who are supposed to be generating large amounts of beneficial economic activity. Instead, the focus is on paying down 6 figures of debt on a degree which has been deemed necessary as the ticket of entry for many career paths.
As for the corporate side, many large corporates have benefitted from the large-scale purchasing activity by the Fed, keeping their long term bonds afloat and the low-interest rate environment attractive to take on more debt.
Debt is a major part of a capitalism-based economy, and we’ve not seen what would be considered ‘the limit’ yet. Once we do, we will know.
Read more here.
Quick Takes
To fill in the gaps
K-Pop takes on Wall Street with label’s upcoming IPO. (via CNBC)
Race breakdown across corporate’s top executives. (via WSJ)
West coast wildfires devastate California’s wine country. (via WSJ)
More on COVID 19 vaccine trial participants. (via CNBC)
Goldman Sachs acquires another credit card partner, GM. (via WSJ)
The woes surrounding Trevor Milton and Nikola continue. (via CNBC)
COVID 19 cases tick upward in New York and other states. (via WSJ)
Speaking of supply chains, the pork industry is still in ‘survival mode.’ (via WSJ)
JPMorgan to pay $290 million to resolve probes on suspected market manipulation. (via WSJ)
A recap of the first presidential debate, if you can stomach any more of it. (via WSJ)
The in-app purchase fight continues, this time with Google. (via CNBC)
TikTok download ban blocked by Judge. (via WSJ)
COVID 19 has taken over 1 million lives globally. (via CNBC)
JPMogran makes a big market bet. (via CNBC)
The New York Times Trump tax leak report. (via NY Times)
Uber wins back temporary London operating license. (via CNBC)
Pelosi continues to push stimulus bills. (via CNBC)
Donnie and the First Lady test positive for COVID 19 among other cabinet members. Donnie transported to Walter Reed Hospital for treatment. (via WSJ)
General Banter
What’s on my mind
This new crossroads with Donnie contracting and spreading COVID 19 will be a really interesting one. Some close watchers of the presidential campaign by Donnie warned of his upcoming “October surprise” as the road to election day got closer. I don’t know if this was the surprise we were talking about, but a surprise nonetheless. Regardless, I think his contraction will shift the narrative on “hoax virus” and that no one is safe from COVID 19. As an aside, whoever has the task of this contact tracing, good luck to you; this one is a mess.
Reader’s Corner
A place for suggestions
The reader found a really interesting new newsletter, “In Gold We Trust,” to be rather interesting. Read about it and consider signing up here.
Here is the 2020 edition: In Gold We Trust report 2020 Extended
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Behind the Madness
You’ve made it through the madness. I’ve worked really hard to ensure that you leave this page having learned something, and I hope that benefits you in your daily adventure. Thank you again for checking in.
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In the meantime, if you are interested in my thought process throughout the week as I collect news and ideas for the Sunday publication, please check out my Walling page where I brainstorm and mind-map each week’s edition!
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