Monthly Archives

May 2020

A Hot Market with Record-High Unemployment and Diminished Consumption: Will it Retest the Bear?

Printing money and FOMO (Fear Of Missing Out) has really boosted the market, but high unemployment and a diminished consumption cannot just be wished away. A lot has been made of the fact the market is back to where it was in early March. More relevant to me is that the prices are where it was back in late October when we had historically low unemployment and a market, sorry, an economy, firing on all eight cylinders. The market valuations, to be at the same price, are significantly higher today. What we have is the euphoric, lighter fluid effect. We're not seeing a V-shaped recovery in the economy. We are fortunate we're avoiding the "L." It appears the predicted "Nike swoosh" is what is actually happening. And yet by Labor Day GDP, will still be two-thirds of what it was pre-Covid, and unemployment will be in double digits. It would...
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The State of Post-Covid Energy in 2020

Brent oil is finally reaching $35. A sustainable - albeit low figure - up from a low in April of just $16 a barrel. A 21 year low. What is the future for the Energy industry? How's that going to impact both the nation and, specifically, Houston, Texas? Oil demand is picking up. In fact, when you look at the numbers it's pretty remarkable. However, these numbers are up from a very low base. OPEC and Russia's squabble finally has resulted in a truce, and from May 1st they agreed to reduce supply by about 9.7 million barrels per day. No small amount. However, at these prices, the ongoing decimation of America's shale industry may at some point in the future result in us once again being somewhat - not completely - dependent on Middle Eastern oil. That dependency in itself is a little bit concerning because the Middle East...
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A Small Ray of Sunshine for the Airlines

So Boeing CEO, David Calhoun, last week really threw the airlines under the bankruptcy speculation bus with his comments. And yet recently we have had some rays of hope. There's been a lot of bleak news for United recently. Delta, back in April, tried to issue $5 billion and got it for 7%. The United bond yield fizzled, despite raising the interest rate up to as much as 11%, and securing it with 360 - albeit older - aircraft. The market - I don't know if it was a reflection on United or reflection on the markets feeling that those, the older aircraft, probably have little or no resale value after factoring in the value of the engines. Warren Buffet at his recent presentation announced that he is heading to the hills with respect to the airlines. He has sold all of his airline investments, and is pretty much running...
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Chinese Curse: “May You Live In Interesting Times”

There's a well-known Chinese curse: "May you live in interesting times." These are interesting times. Last weekend I listened in on Warren Buffet's shareholder meeting. For the first time ever there was no one there. It was a virtual meeting. And he made two very interesting points that I'd like to bring up. First, he talks about how there are no good deals out there. I think that's important because there's a bit of a mania in the markets right now. It's almost as if people aren't looking down the street. In fact, just today, someone close to me lost a high paying job. There's a lot of damage in the economy. There will be good deals. We just need to be very circumspect how we proceed in the next six months. We also are looking at debt not seen since the end of World War II - and yet...
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How Does the UAL Displacement Bid Affect You?

Over the weekend United Airlines announced a displacement bid. Probably everybody's seen this. How will that bid affect you and what, if anything, can you do about it? Over the weekend we've heard that they're planning on displacing about 4,500 pilots; as much as 41% of the workforce. Now, we all know that the airline's going through a brutal period, but it doesn't mean that the airline's going out of business. In fact, this is kind of encouraging news because usually the "M.O." of an airline is to make its worst-case position, its worst-case scenario, available in a displacement or a furlough bid. Back in 9/11, after 9/11, I was told I'd be furloughed. That fuse actually stopped six numbers below me. Quite a few people in the end weren't. That's normal, because of the 60 day wait that they have to give both certain States and the federal government...
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