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Coke Loses 28% in Sales8/30/2020 Image: Monica Silva on Unsplash
Stadiums and their surrounding restaurants and bars are suffering mightily from lockdowns due to the plague. Were you aware? This also means Coca-Cola isn't moving weight or curb serving the way it normally does. 4,000 employees in the US, Canada, and Puerto Rico have been offered separation packages in an effort to consolidate costs. COKE will open at 278.49 USD tomorrow.
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Apple on its Way to Eating Solo8/30/2020 Image: Ismail Hamzah on Unsplash
Fortnite and producers of other applications have sued or threatened to sue Apple over its alleged monopoly in its App Store. Apple charges up to 30% commission for paid applications and companies like Fortnite have tried workarounds by having users pay within the game, thus avoiding Apple's paywall. A threat to delist an app is akin to having college football players practice all summer, follow all the quarantine rules, and then tell them weeks before their season is scheduled to start that the entire conference is forbidden to play. Amazon got involved in April by allowing Apple to stream its Prime content using the same payment system iOS users have already set up. Other developers want the same deal. Apple's 2019 revenue was 260 billion USD.
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Cruises Without Buffets Means Tragedy8/30/2020 Image: UY VO on Unsplash
Royal Caribbean Group and Carnival Corporation suffered massive drops in revenue from 2019 second quarter with losses of 94% and 85% respectively. There is optimism, however, as cruise companies are betting on loyal customers' short term memories. They've responded and recovered from other outbreaks on ships by adjusting processes and people flow and this time will be different only because of heightened awareness. The buffet line may disappear forever and move to a single direction lunch lady cafeteria model. This will put a major cramp in the cruisewear collection from the attic and vacationers will likely complain via their WiFi package on these ships designed to get away from everything. RCL will open at 70.12 USD and CCL will start at 17.21 USD tomorrow.
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Flexible Average Inflation Is A Thing8/30/2020 Image: Zhuo Zhang on Unsplash
Chairman Powell said last week at the Federal Reserve conference in Jackson Hole, Wyoming, that the central bank will aim for 2% inflation in an effort to increase market growth and employment rates in a sustainable matter. Flexible average inflation targeting allows the Fed to adjust the inflation rate quickly. 2% is their sweet spot because it reflects confidence in investors to speculate responsibly while also not stifling economic activity. By controlling the money supply, the Fed can make decisions to bring the inflation rate to the acceptable band. If inflation needs to raise, they'll release more money into the economy. Inflation also devalues debt. 2019 saw the Fed on a listening tour gauging the impacts of the proposed policy. Your favorite plumber and his producer were not consulted.
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Is Employment Tied to Mental Health?8/23/2020 Image: Ethan Hu on Unsplash
In an effort to not bum you out this beautiful Sunday morning, we'll make it brief. For one example, Colorado went from a record low unemployment rate of 2.5% in February 2020 to a record high unemployment rate of 12.2% just two months later. Lowlights from a Centers for Disease Control and Prevention (CDC) June 24 - 30 survey of > 5,000 adults include:
No witty comment here.
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Image: Simon Ray on Unsplash
Computer manufacturer Lenovo is backordered 3 million laptops. That's just one company. The trade war with China has impacted remote learning for children as school districts scramble for units. 1,100 districts in California claimed they were short 300,000 computers. Best Buy, a popular US electronics mega company that used to have a CD section to be admired, has 33 of 36 Chromebooks out of stock on their website. Chromebooks are the popular affordable option. Students with middle class parents are less exposed as household income will cover the cost of a computer for now. Business and governments have come to understand during the plague how critical supply chain management is. Maybe your favorite purchasing agent has a point when he says, "We could be doing this better," and, "I'm concerned about our exposure here." USD/CNH will open at 6.920 today.
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Debt is for Growing, not Recovering8/23/2020 Image: Greta Punch on Unsplash
2020 has seen more junk bonds issued than any other year ever. The cash used to finance these bonds is now tied up by larger companies that, you know, are large enough to issue bonds. This means there's a shortage of money for small businesses to borrow. Is there a relationship between this behavior and what happened with massive musical acts taking PPP loans? Debt is supposed to be for speculation: machines, warehouse space, racking, technology, top talent, permits, etc. ROIs are part of the debt plan. Because money is cheap to buy (what's the Fed's interest rate again?), the risk upfront doesn't match the long term liability for debtors. The 16 year old taking the 20 USD Andrew Jackson bill from his landlord father will spend it faster on a girl as an "investment" than on an oil change. Your assignment today is to learn about EBITDA.
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Uber Gets Lyfted8/23/2020 Image: Photo by Robert Anasch on Unsplash
Uber and Lyft remain in California, for now. The appellate court extended the last week's Thursday deadline to this week's Tuesday to submit written orders on how they will comply with AB5, the California bill that passed this time last year requiring gig workers to become employees and bring with them the burden (payroll, benefits, taxes, etc.) that accompanies that classification. During a plague in which people have laid out heavy cash for fresh meal in a box companies like Blue Apron (APRN is up 377% since March), they're still paying a premium for Uber Eats which has buoyed the ride sharing company this summer. Proposition 22, to be voted on this November, seeks to exempt drivers from the AB5's jurisdiction. The legalese is complicated but it has to do with a company's normal way of doing business which is why delivery drivers are in the gray right now. Doordash and Instacart are involved in this legal fight as well. The dog days of summer have some executives sweating in heavy air conditioning and sandals while others get creative with hot dogs and ramen.
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Eurozone GDP Down 12.1%8/16/2020 Image: Maryna Yazbeck on Unsplash
The second quarter was not friendly to our mates in Europe. The consensus is the lockdowns across the continent crushed the economic soul of said continent. "Exports increased 11.2 percent on month and imports grew 5.7 percent in June." EUR/USD will open at 1.184 today.
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Uber Grumpy8/16/2020 Image: Thought Catalog on Unsplash
Uber and Lyft are grumpy. California's Assembly Bill 5 passed last year classifying their drivers as employees and not independent contractors. Last week, the ride sharing companies said they would leave California until they can restructure their business model. Proposition 22 will be voted on in November and exempts these drivers from Assembly Bill 5. What a mess. One argument for hope is that if they leave, Californians will miss the ride sharing services. The same way we miss our favorite bands when they don't tour for five years, the scarcity, or absence in this case, will create even more demand. To better explain the gap in understanding of how any business works, we'll leave this here: “'The cash in your pocket is not what you’re actually making,' said Moore, who’s an activist with Rideshare Drivers United, which has pushed for Uber and Lyft to reclassify drivers."
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Wake Me Up If September Ends8/16/2020 Image: Bruno Abatti on Unsplash
Sure, November. But at this rate, we're happy just to get through the day still intact. October is expected to bring more clarity and Pam and Jim air high fives to Brexit as details get locked in. GBP has been on a wild ride the past few years but more stability is expected when everything is final end of 2020. Uh huh. Banks are now less negative with the looming deal. GBP/USD will open at 1.3079 today.
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USD/JPY vs NASDAQ 1008/9/2020 Image: Yahoo!
NASDAQ 100 dropped 1.15% Friday and risk aversion may support JPY. With the ongoing trade war with China, the next looming "stimulus" (the government doesn't stimulate anything) bill, and America's insatiable appetite to spend money it doesn't have, the haven across the Pacific will see some activity this week. USD/JPY will open at 105.904 today.
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Image: Dominik Vanyi on Unsplash
Platinum is used in dentistry, catalytic converters, cellular telephones, and Matt's wedding ring. Carmakers in the '50s spiked demand for the valuable metal and a deep mine can last 30 years. With 170,000 people working in platinum mining in South Africa, it's a major industry that is hurting right now. With the plague, infrastructure, and political turmoil, demand (and confidence by mine speculators) is down. Electric vehicles don't require catalytic converters. However, don't tell Tesla owners where the real pollution is in manufacturing their software, err, cars. Platinum Belt is a shinier term than Rust Belt in the US. XPT/USD will open at 964.750 today.
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Rwanda GDP Shrinking8/9/2020 Image: maxime niyomwungeri on Unsplash
Standard and Poor, more recognizable as S&P, assigns credit risk to companies and countries. This data and math are used by financial institutions and retail traders throughout the world. Rwanda, a beautiful country with some of the friendliest people in the world, is experiencing a shrinking GDP presently at -4.20% and 10.30% inflation. S&P assigned a B+ credit rating and a negative outlook to the small African nation of 8 million people. This makes borrowing money more expensive. USD/RWF will open at 935.360 today.
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Manufacturing is Cool8/9/2020 Image: Crystal Kwok on Unsplash
Industrial nations cannot rely on only consumer spending. They have to make parts and equipment for companies so they can make parts and equipment for consumers. Germany's factory demand returned in June to 90% of pre-plague levels. Industrial production was up 8.9% for that month as well. With 5.6 million on unemployment benefits, that's nearly the entire population of Colorado who can't or won't find work. But, being at the center of Eurozone banking as we mentioned last week and having some of the coolest castles anywhere will hopefully help Germany lead the way to recovery on the continent. EUR/USD will open at 1.178 today.
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US, China Like Oil8/2/2020 Image: Zbynek Burival on Unsplash
The US and China consume more than a third of the world's oil demand. Tomorrow's US jobs report is expected to produce a relatively decent employment yield. Oiling is the desktop version of birding with extensive hikes from the desk to the refrigerator.
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India Returns To Work8/2/2020 Image: Hitesh Choudhary on Unsplash
From 23.5% in April to 11% in June, India's unemployment has fallen sharply. Going into 2020, the underrated land of manufacturing, agriculture, and tech ran a 69.62% debt/GDP figure which positioned it well for recovery acts when the plague hit a few months later. The US, by comparison, entered the year of perfect vision and hindsight clichés rocking a 106.90% debt/GDP. One of these countries has a spending problem and strangely isn't embarrassed by it. The other has a phenomenal cuisine supported by tiny restaurants nowhere near the main drags and very friendly staffs throughout the world. We'll have a level 4, please. After the first seven attempts, we Americans sometimes realize what we can't handle.
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Tragedy of the Commons8/2/2020 Image: Sam Beasley on Unsplash
Back in the day, when shepherds and wranglers were frenemies, livestock would graze on politely shared common grass. But common areas, like the microwave in the break room, are left untended by design. If someone doesn't take direct ownership, the soil is overgrazed, the water becomes polluted, the land stops providing, and the spinning glass plate is forever caked in tomato sauce. The central banks in the Eurozone know that everyone will share the bad risk. Simply, Germany's Bundesbank, which holds a 26.4% stake in the Eurozone, is owed nearly a trillion EUR. If the national bank is in trouble, you can bet commercial bankers have tempered bottle service at least twice per month. Anyone in construction will tell you that operating on very thin margins, essentially buying work, is not sustainable. At the top of the funnel, commercial banks feed the promises of cash. The government is incentivized to borrow from itself and the smaller economies love that distributed risk. EUR/USD will open at 1.7754 today. |