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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How Do Oil Prices Go Negative? And What Does That Mean?

How does oil go negative? And what on earth does that mean for the rest of us? Well, earlier this week oil prices collapsed. Momentarily, futures hit -$40. But was that a true reflection of the market? I mean, if we look at Brent, which is another commonly traded sweet crude, their prices hit closer to 20. This does suggest that there's more going on here than just simple supply and demand. What on earth happened? Well, first there are two things. One, in Texas, just like everywhere else, it's very difficult to completely shut down an oil field. When you turn off the spigot, that pressure doesn't just dissipate It can cause damage to the field. Two, because of the collapse in demand in the United States and the fact that the rest of it must be exported, we have a scenario where no one can take the oil....
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4 Phases of the Impact of Covid-19

There are four phases to the cycle of the economic corporate and medical harm that's being done by the Coronavirus. This is a discussion of the four cycles; how we envision this playing out over the rest of the year. So the first phase was economic and corporate damage. Well, we've seen since this began, actually initiating in China, it was both supply and demand shock simultaneously, but often to different parts of the markets. For example, Apple has seen significant supply shocks from China, Taiwan - while other firms like the airlines, the travel industry, restaurants - I've seen enormous demand shock. So many parts of the economy have been damaged by this shock, and that damage is not going to end overnight. That's going to continue. Second, is we have what we call "financial contagion feedback loops." In the short term markets are emotional machines, in the long...
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UAL Voluntary Enhanced Leave Bid

At the beginning of the week, United Airlines offered the pilots voluntary extended leave. What does this mean to you? Especially if you're retiring soon. If you're not retiring, all this is saying is "Don't come to work and we'll pay you 50 hours in May, or if you want to leave for a longer period of time, 40 hours a month." Frankly, if you've got a commute, you don't like being around sick people - you just don't want to come to work -that's not a bad deal. Well, what if you're retiring? Really, the retirement decision is one about the pension; the lump sum. Let me be clear. It is our opinion at Avion Wealth that the annuity is completely safe. Not only is the pension plan relatively well-funded, but the PBGC coverage for the annuities that were frozen about a decade ago, or more now, is more...
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COVID-19 & Market Update

Today, I want to talk about the virus update, the economic stimulus package, how it's affecting markets and what to expect next. Let's talk about what we know first on the virus - you can all read, so I'll be brief. So what do we know? The COVID-19 is apparently showing all signs of being seasonal as it warms up, transmission rates slow. It doesn't mean it's going to go away. Just means we're going to hopefully get more time for the hospitals to build up their beds, their inventory of equipment, their respirators. New York City of course is getting hammered, and it's right in that critical weather temperature band of locations that are most susceptible to this. We're seeing that the fatality average rate is still less than 1% where there's good health care, and it's also age and health dependent. For growth rate the United States is...
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Market Drop & Avion’s Coronavirus Business Continuity Plan

Good morning. What a Monday! The market is down 7%. Oil prices have collapsed to $34, and Goldman's actually afraid it'll hit $20. We have Coronavirus. We're going to talk today about all these. Most important - what's our strategy to protect our clients from these fires? We have two kinds of clients who are reacting to what is essentially a real capitulation within the market. We've got the scared clients, and to them I would say we plan for this. This is why we've been so conservative. No one knew when a market correction would come, but we knew for over 18 months that the markets were rich. So we've planned for this. We're going to get through it. The hungry clients are actually the more interesting group, and for those the issue is when do we get in. When do we buy cheap. And there's no right answer....
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