Week Ending 8/28/2020


The market was up every day as US stocks put in their best week since early July, advancing by 3.17% while international markets were up by 2.09%. Equities were helped by Federal Reserve Chairman Jerome Powell, who indicated he would let inflation run higher for longer, and keep interest rates low. All we can say is be careful what you wish for. The Fed’s game plan should be good for gold and bad for the dollar, gold was up by 1.4% and the dollar was down by 1% for the week.

The Dow Jones Industrial Average made some changes, adding Salesforce, Amgen, and Honeywell and dropping Exxon, Raytheon, and Pfizer.

Consumer spending was up by 1.9% in July, down from 6.2% in June and 8.6% in May.

As businesses realized that a return to normalcy is not around the country, a second wave of layoffs is beginning. Companies that have announced layoffs are Salesforce (1,000), United Airlines (possibly 53,000 workers will be affected), MGM Resorts (18,000), and American Airlines (17,500).

BankruptcyData.com reported that a record 45 US companies with assets greater than $1 billion have filed for Chapter 11 bankruptcy, exceeding the 38 by this time in 2009. “We are in the first innings of this bankruptcy cycle,” said Ben Schlafman, COO at the website, “It will spread far across industries as we get deeper into the crisis. It’s going to be a bumpy ride.”

While the market goes higher and higher with no end in sight, Liz Ann Sonders, chief investment strategist at Charles Schwab, wrote on Twitter that the put-to-call ratios measured by 5, 10, an 30-day moving averages are now at the lowest levels since 1999-2000.

The Republicans nominated Trump so the race is now on. Biden has been comfortably leading in every poll and this is his election to lose, but the Republicans see an opening and will try to take advantage of the violence and riots in the cities, and the lack of a forceful Democratic response, as the reason to give Trump another four years. This angle gives Trump at least some hope, as the betting odds have narrowed in recent days but still give Biden a 52 to 48 edge according to Real Clear Politics.



Week Ending 8/21/2020


The S&P 500 completed the most improbable of comebacks by hitting a new high on Tuesday and then closing on Friday at another high, up by 0.73% for the week. A combination of massive government stimulus and hopes for a quick recovery brought the benchmark to a new record from being down 35% on March 23. The previous peak, on February 19, to the new peak Tuesday, was only 126 trading days, making it the fast recovery from a bear market ever.

One possible note of worry is the negative divergence in the advance-decline line of the S&P (the green line) versus the index (the blue line), indicating the rally is being propelled by fewer and fewer stocks. Traditionally, that is considered a warning sign. But the divergence may not be long enough to mean anything at this time.

Tech stocks have led the way during the market comeback, the Nasdaq is up 26.1% this year. And Apple and Tesla have led tech. Apple is up 71% for the year and was up 8% this past week., its market cap now exceeds $2 trillion. Tesla was up 24% for the week. 24% for the week, which is crazy and is now up 800% over the past year. Tesla is valued at about $1 million per vehicle delivered. Compare that to GM which is valued at $10,000 per vehicle delivered.

Both Apple and Tesla apparently are being helped by stock splits planned for later in the month. Apple is set to split 4-for-1 and Tesla 5-for-1. Nevermind that a stock split does not confer any new value in the shares, but that doesn’t seem to matter. This feels like one of those moments in history when historians look back and say this was a signal of an out of control mania.

Or maybe it isn’t. Tesla obviously has many fans including Gary Black, former CEO of Janus Capital Group, Black argues Tesla only sells at 65x 2022 earnings in line with Amazon (53x), Lululemon (58x), ServiceNow (63x) and Salesforce (58x), all companies with a lower growth potential than Tesla. As for Apple, Dan Ives of Wedbush Securities says that “We still believe many on the Street are underestimating the massive pent-up demand around this supercycle for Apple [iphones]”.

Despite the rally, many investors think it makes no sense at all, at least in comparison to the fundamentals, and attribute the higher prices to a Fed gone wild with stimulus, historically low-interest rates, an expected Covid vaccine, and a hoped-for fast recovering economy.

At least one area of the economy is booming, which is housing. The Home Builders’ housing index came in at 78 in August, matching the highest reading in the index’s 35-year history. Low-interest rates and a shift to suburban living are driving the index higher.  Housing starts were up by 23% in July, the best monthly advance since October of 2016. Revenue at Home Depot was up by 23% and at Lowes by 30% in Q2.

The strong housing reports ran counter to most of the other economic measures last week. Weekly jobless claims rose back above one million, and the Fed indexes that measure manufacturing activity in New York and Philadelphia both came in lower than expected.


Covid numbers continue to decline in the US and hotspots like Florida, at least for now, and are following a bell chart pattern. Past pandemics have seen a second surge in cases in the fall and early winter, but for now, the trends are good.


The Democrats made it official and nominated Joe Biden for President and Kamala Harris for Vice President. The Republicans are up next.


Week Ending 8/7/2020


Stocks advanced around the world with the US up by 2.59% and international stocks by 2.23%. Bonds were flat.

Employers added 1.763 million jobs and the unemployment rate fell to 10.2% in July, showing that the economy continues to improve, however, the rate of job improvement has slowed. In May, 2.7 million jobs were added and in June, there were an additional 4.8 million jobs. Overall, total jobs are down 13 million from February. 30 million people are still receiving jobless benefits.

The IMF projects that the economy in Latin America will fall by 9.4% this year, the worst decline ever, and it will take until 2023 to recover to pre-pandemic levels. That compares to 3% for developing countries and 8% for the US. Millions who climbed out of poverty are threatened. The United Nations said the number of poor people could rise by 45 million to 230 million, and the number of extremely poor can increase by 28 million to 96 million.

Trump is exerting pressure on Tik Tok, a social media platform owned by a Chinese company, to sell itself to Microsoft or be closed down. Chinese state media describe it as a “smash and grab”. On Monday, Trump then insisted that the US government be given a percentage of the sale price! Then on Friday, Trump issued an Executive Orders that seeks to prevent Americans from using the platform, effective in 45-days. You just cannot make this up.

Lord & Taylor filed for bankruptcy. L&T is the oldest US department store at 194 years.


Week Ending 7/31/2020


US equities were up by 1.74% while international stocks fell by 0.78%. Second-quarter GDP fell by a seasonally adjusted 32.9%. It was the biggest drop since World War II when the government started to record the numbers. The number reflects an annualized rate and assumes that the huge decline in output will continue for the year, which will likely not happen. Nevertheless, it shows just how huge a hit the economy took by essentially shutting down for a couple of months. And that was with massive stimulus. Joseph Carson, the former chief economist for AllianceBernstein, estimates that the Federal Reserve and the US government put close to $5 trillion dollars into the economy, roughly matching the nominal GDP of $4.85 trillion. But even with that, GDP fell dramatically. Clearly showing how important a normally functioning economy, with healthy businesses, is to the success of the country. But the 33% decline in the US appears to be better than what happened in Europe, preliminary GDP numbers show Germany with a 35% decline and the other Eurozone majors each declining by more than 40%.

The unemployment numbers are showing that the spike in Covid cases is starting to slow the economy again. The number of initial claims for unemployment increased for the second straight week, up by 12,000 to 1.43 million, and the number of people receiving unemployment increased by 867,000 to $17 million, that increase ended a downward trend that had started in March.

Kodak, which most people probably thought went out of business 10 or more years ago, is still around and popped up on traders’ radar this week. The company filed for bankruptcy in 2012 and has had negative cash flow every year since. The company was selling for $2 per share on Wednesday when it announced that the federal government would loan them $765 million for the manufacture of generic drug ingredients. The Robin Hood investors jumped on it and the stock popped to as high as $60 on Thursday. Another example of the frothiness in this market.