@theMarket: Markets Feel the Heat
First, the good news: there is only one more week until the end of the month. The bad news, however, is that October may not treat investors any better than did September. As my swabbie friends would say, is it time to "batten down the hatches?"
Let me say I take no joy in being right. During the last few weeks of writing, the volatility I predicted has come home to roost. This kind of correction is especially painful because in these times of great uncertainty, we could have at least pointed to the stock market, and our investments accounts, as one piece of good news.
As I wrote last week: "Investors, therefore, should be mentally and emotionally prepared. If you witness days, or even weeks of ups and downs, don't be surprised. It would not surprise me to see several pullbacks, only to regain those losses, before selling off once again."
That quote sums up the market action throughout this week. All of the worries I have enumerated: the possibility of a winter wave of coronavirus, a slowing economy, the elections, and China trade have converged to drive most financial instruments lower.
Global stocks, commodities, interest rates, even high-yield junk bonds (the last instrument supposedly supported by the Federal Reserve Bank), fell hard. Gold, thought to be a safe haven, "go to" investment, was also clobbered, hitting a low of $1,850 an ounce late in the week. Only the U.S. dollar climbed, staging a big comeback from its multi-week lows.
After last week's declines, some investors hoped that we had seen the worst, but nothing has really changed. The president, who uses the stock market as his barometer of success or failure, added yet another worry to our growing pile of concerns. Wednesday evening, President Trump, in response to a reporter's question, refused to commit to a peaceful transfer of power, if defeated in November. It wasn't the first time the president has said that, but investors took his comments seriously this week. As for me, I chalk it up to campaign rhetoric, but it illustrates the point I have been making about volatility.
We have an entire month ahead of us in which we should expect heated comments from both sides on so many issues that I lose count. The Supreme Court vacancy after the passing of Ruth Bader Ginsberg is just the latest controversy, but there could be others. Driving further downside in the markets, for example, could be revelations dealing with the president's tax returns and/or Vice President Joe Biden's (and his son's) history with Ukraine. Further accusations of foreign interference in U.S. elections, and/or additional mail-in ballot issues could be with us up until, or even after, the actual November 3 election. All of these possibilities could add fuel to the fire throughout October's stock markets.
On the plus side, a coronavirus vaccine could be in the offing as early as next month, according to the President. While most pundits believe another stimulus deal is dead in the water until sometime after the elections, who knows? The Democrats are readying another stimulus plan with a $2.4 trillion price tag. That is down from the $3.5 trillion bill the House passed a few months ago and could be on next week's agenda for passage.
Unfortunately, the Republicans' Senate, with a few exceptions, does not seem willing to compromise, and they are sticking with their own $500 billion proposal. That could change if the markets really take a hissy fit. It might be just enough to get the two sides talking again.
Any or all of the above considerations could cause market swings of anywhere from 3-7 percent in both directions. It might be a day trader's dream, but it could also be their worst nightmare. My advice is to stay out of it.
If things fall apart from here, I could see the S&P 500 Index pull back into the 3,050-3,140 range. If the lower end of that guesstimate were to happen, we would be looking at a 15 percent decline from top to bottom. I hope not, but if so, take your lumps and wait until the smoke clears in November, or possibly December.
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The Retired Investor: Back to the Future in America's kitchens
Whether it is recipes, groceries, home gardens, grilling, pots and pans or online cooking classes, Americans have rediscovered the kitchen, thanks to COVID-19. Where once an occasional meal at home, or a single-serve dish for the kid's lunch was sufficient, times have changed. Home cooking has become a bigger business.
Americans are cooking more and throwing out less food, according to the Food Marketing Institute, an organization that tracks grocery shopping trends. They saw a 40 percent uptick in home cooked meals, and a 27 percent increase in those who were planning more meals in advance in 2020.
However, cooking at home, many Americans discovered, wasn't as easy as it looked. Those who primarily ate out in restaurants in the past, found that cooking well, and often, takes planning, practice, and repetition.
Everything from storage space to kitchen equipment proved less than adequate for many. A frying pan that was good enough for the occasional grilled cheese sandwich failed the practicality test when cooking entire meals every day for four or five. Basic items like measuring cups, baking tins, good quality kitchen knives, high-performance cookware, non-stick pans, and cast-iron pots have seen a surge in demand.
"How to" cooking and recipe searches are as popular today as videos from Netflix or Disney. Take me, the cook in the family. I love cooking and have been doing so for decades. You would think I know most recipes by heart, but in the last two weeks, I, and evidently millions of other cooks, have been looking up recipes for zucchini, swiss chard, and squash — all produce from all those new backyard gardens that we are now harvesting.
On Facebook, you are as likely to see pictures of someone's new smoker, or gas grill as you are photos of their family or pets. Telephone conversations more often revolve around instant pots and air fryers than the latest restaurant reviews because they are few and far between. I know I'm guilty of texting my daughter (cooking runs in the family) for some recipe or other based on a dish she posted on Instagram.
Online shopping and curbside deliveries for groceries have also risen as consumers found that it was more convenient and somewhat safer than going to the local supermarket. Places such as Amazon grocery sales rose by 32 percent since the outbreak, while certain brand manufacturers that sold direct-to-consumers saw increases of as much as 100 percent or more. Deliveries at home have more than doubled since pre-COVID-19 levels.
The traditional brick and mortar grocery store and supermarket have seen revenue gains above normal, running about 10 percent higher than last year. There has been a notable increase in pantry items as well — rice, soup, pasta, and sauces. Shoppers have also returned to the center aisles where pre-packaged goods are usually found. This is a big change from the recent past, where shoppers preferred to buy items on the store's perimeter like fresh fruit, meat, and seafood.
That makes a lot of sense to me, since cooking three squares a day can be exhausting at times. At first, when the country was shut down, and there was plenty of time on our hands, "project" dishes and baking from scratch were popular. Today, where working from home requires more time at the computer than in the kitchen, having more pre-packaged meals available gives cooks a break. Even I have succumbed at times to picking up a "Tagliatelle grilled white chicken and portobello mushroom sauce" dinner that is microwaveable in eight minutes.
As the seasons change, and traditional holiday celebrations such as Halloween, Thanksgiving, Hanukkah, and Christmas approachs, I would expect that America's kitchens will continue to get a work-out unless, by some miracle, the pandemic should end. In the meantime, I will start researching trick-or-treat cupcakes. What about you?
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@theMarket: Investors Face a Rollercoaster Ride
Volatility returned to the stock market this week as the level of uncertainty increased on several fronts. Unfortunately, there won't be any definitive answers to what concerns investors for at least two months.
It is September, after all, and this month is notorious for inflicting pain on investors. Historically, October is not much better, and in a presidential election year it can be worse. While the financial media will provide their thoughts on just why stocks drop or rise on any given day, it is not much use to you.
The real reason for "why" will only be known after the fact. This week, the excuse for Thursday's and Friday's decline had to do with the Fed, or so many believe. But Jerome Powell, the chairman of our central bank, did not say anything new, nor did the Federal Open Market Committee meeting notes add any insight on Fed policy. The message that rates will stay lower, for longer, was repeated again with the Fed's timeline somewhere between infinity and beyond.
I suspect the disappointment for many was that the central bankers did not indicate their willingness to provide additional quantitative easing. In fact, one could infer that the Fed would be pleased if the long end of the yield curve started to move higher at some point. What that means is that shorter-dated bonds and notes would yield less than longer-term 20- and 30-year bonds. In a perfect world, that is what should be happening, but it's not thanks to the Fed's past stimulus efforts.
It could be why technology shares sold off, or at least that is my guess. These high growth companies normally borrow money at the long end of the curve, and invest that money in their businesses to produce even higher growth years into the future. If that cost of capital were to rise, it could clip the future growth rates of these high-flyers.
However, overall, the Fed assured us that whatever comes, it "has our back." And if so, why the sell-off? The simple answer is future uncertainty. The economic data is giving the markets conflicting signals. Unemployment, while dropping, is not happening quite as fast as the markets would like. Since there is no additional fiscal stimulus as of yet, the economy may still grow, but again just not as fast as investors would like.
Then there is the conflicting information on when a coronavirus vaccine will become available. Will it be in October, as some in the political arena contend, or will it be later, at the end of the year, or sometime in 2021? Since just about everything to do with the economy depends on that vaccine, investors' expectations are all over the place. And, finally, there is the presidential election.
This week, a new worry surfaced, centered upon the outcome of what might be a contested election. The prospect of a really close race where an avalanche of mail-in ballots is recounted, and where opposing parties squabble over every single vote, could drag on for weeks, some say months. The Biden team has already hired lawyers to prepare for such an eventuality. Back in the year 2000, when the outcome of the Gore/Bush election was questioned, markets waited in limbo for five weeks into December. In the meantime, the stock market declined 10 percent, until Al Gore reluctantly accepted defeat.
On the China front, the TikTok sale (or shutdown) has basically been booted to after the election, on Nov. 12, so I will ignore that. Downloads of WeChat, the main internet line of messaging and communication between Chinese people living, working, and studying in the U.S. and the Mainland, will be shut down on Sunday, according to the U.S. Commerce Department. That may elicit a counter response from the Chinese government or it may not — more uncertainty.
Investors, therefore, should be mentally and emotionally prepared. That doesn't mean the worse will happen, but it could. If you witness days, or even weeks of ups and downs, don't be surprised. It would not surprise me to see several pullbacks, only to regain those losses, before selling off once again. However, once we are through this thicket, markets should resume their uptrend.
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The Retired Investor: Bicycles Sales Are Booming
In the age of the pandemic, some industries have thrived. Take the bicycle industry, for example; sales have more than doubled this year, and the only impediment to further growth seems to be the availability of product. Thanks to COVID-19, biking has become a global phenomenon.
The real growth is centered in the metropolitan areas where much of public transportation has been curtailed due to the infectious nature of the virus. In April alone, bicycle industry sales grew by 75 percent to $1 billion year-over-year, according to bike manufacturer, Huffy. Leisure bikes, those that sell for under $200, jumped 203 percent, while mountain bike sales increased 150 percent.
The reason for this surge is obvious. Many commuting urban workers, faced with going back to work, but fearful of catching COVID-19 in packed buses and/or subways, found the bicycle a reasonable alternative. We must wait and see if this changes during the winter months in places such as the Northeast.
At the same time, with many of the country's gyms shut down, the bicycle also provided an alternative source of exercise. And as the number of outside activities for most families dwindled to streaming videos and other computer-related activities while cooped up in their homes, the bicycle offered family outings that combined safe spacing, fun, and exercise in an outdoor environment.
The same virus-related circumstances saw a similar reaction with the populations in many foreign cities across the world. Local authorities and planners responded quickly to the curtailment of transportation by embracing the trend toward bicycling. Paris, for example, added 400 miles of bike lanes in a matter of weeks. New York City and Oakland, CA designated various streets as "car-free" avenues, while the United Kingdom pushed through a $315 million infrastructure project dedicated to bicyclists. Italy is offering a 60 percent reimbursement of any bicycle purchase up to $593.
But thanks to the disruptive nature of this pandemic, there is a supply chain problem getting bikes and parts from China, which is the global hub of bicycle manufacturing. There are also U.S. tariffs on bikes and parts (25 percent) imported from China. This not only raises costs for U.S. dealers, but also injects uncertainty, since the tariff rules keeps changing.
Here in the U.S., 90 percent of all bicycles are either imported from China, or use parts made in China in their assembly. Finding a bicycle to purchase these days could be difficult. Since many bike shops have only one supplier source (China), the waiting list for new bikes can be lengthy at best.
As for supply chains overall, it could take several years before American companies can alter their supply chains to import goods from other countries outside of China, according to McKinsey Global Institute. Bicycles are only one product caught in this supply chain transition. McKinsey estimates that as much as 26 percent of exports worth almost $5 trillion are in play.
The good news for bikes, however, is that the decades-long barriers are breaking down. Despite city planners' pleas to forsake their cars, and at least try some alternative forms of transportation, commuters are finally paying attention.
Suddenly. in just a few short months, thanks to the pandemic, commuters are not only listening, but acting on at least one of the planners' suggestions — the bike. The hope is that when (or if) the virus finally fades, at least some of those bike riders will have embraced this not-so-new form of transportation. For those of us who have long enjoyed cycling, however, the fact that the world is becoming bike-friendly can only be a plus.
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The Retired Investor: CSAs & Local Farms Make a Comeback
While much of the nation's farming industry has been decimated by the global pandemic, here in the U.S. one tiny segment of the agricultural market is booming — the CSA.
The line at my local Community Supported Agriculture (CSA) pickup station was short this week. As usual, everyone wore masks and waited in line, 6 feet apart. One by one, customers stuffed their carry bags full of lettuce, radishes, kale, cucumbers, tomatoes and whatever else nature's bounty and Kate, our farmer, had planted this season. CSAs charge a seasonal, or sometimes yearly membership fee in exchange, you receive weekly boxes, or bags of fresh veggies, fruits, and more. My membership cost more than $400 this year and I will say it was well worth it.
Evidently, I am not the only one who feels this way. Across the country, memberships in CSAs are booming, even as the bigger farms have been forced to slaughter livestock, abort piglets, crush food and destroy perfectly healthy crops for lack of distribution and pandemic-struck supply lines. Some CSAs have had to limit memberships. Others are finding it difficult to handle the demand and hire workers to plant, maintain, and harvest their crops.
A couple of months ago, when grocery stores were selling out of everything and food banks were being overwhelmed, local farmers, who normally supplied produce to restaurants, schools and other commercial businesses pivoted to a new business model by focusing on the grocery store and supermarket consumer in their local areas.
Some farmers actually had already established a "close-loop" community food system where they could offer everything from meat, pork, chicken, baked goods, eggs, and other dairy products, as well as vegetables and some fruit. And what they did not produce themselves, they established business relationships with other farmers to broaden their product lines.
In the past, CSAs have survived, but not flourished, as a kind of niche market. Most members were either organic-only advocates, or those who try and support local businesses whenever they can.
In my case, I originally started buying at my local CSA a few years ago for health reasons. I liked the fact that my produce was grown organically without chemicals, preservatives, or coloration. The produce also tasted a heck of a lot better. I also liked the ambiance of visiting the farm, trading comments on the weather with the local farmer, and seeing some of my neighbors. So, I guess I qualify in both respects.
Fast-forward to this age of coronavirus. Safety has suddenly become a big issue for me. Going to the local supermarket today feels a little like navigating an obstacle course: "have the carts been cleaned, where are the hand sanitizers, which way do the aisles run, where's his mask, is she going to crowd me, should I self-checkout, or take a chance with a live cashier?"
If I sound paranoid, it is because I am. At my CSA, things are more manageable. I feel I have more control of my environment. No one sneezes or coughs on the veggies, or handles them. That is worth a lot to me.
The question I ask is: whether this short-term demand for locally-produced CSA produce last, or will it die on the vine as soon as a COVID-19 vaccine is developed?
My hope is that once you try it, you'll like it. It might be a bit more expensive than shopping at the local supermarket, but believe me, it is worth every extra penny.
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