Wednesday, September 2, 2020

Stock Market Overview -- Pivotal Economic Point


Pivotal Economic Point....

We are going to be discussing below the latest unemployment data, and the signs of the US is diving deeper into this economic collapse. We will also break down what's to come, from the impending stock market decline, to the crisis hitting the hotel industry.

The United States is eight months into a nightmare year that has seen the national economy decimated, tens of millions of Americans forced out of work, and a dramatic change of living standards across the country. 

Do you remember the headlines that ran earlier in 2020? They promised a recovery, as early as the third quarter of this year, and a sharp climb back to normal levels of economic activity; however, the situation actually took a turn for the worst, when the third quarter began in July 2020. 

A second wave of coronavirus cases forced most states to roll back their plans for reopening. Vulnerable businesses that had already lost months of profits had to shut their doors once more, shortly after welcoming customers back for the first time. Millions of temporary job losses became permanent, as a rising number of businesses succumbed to bankruptcy or at least significant downsizing.

Weekly jobless claims temporarily dropped below 1 million for the first time since March 2020, giving the illusion of a recovery; however, they have, once again, returned back above to 1.1 million, which was significantly higher than what economists had forecast, who estimated that the figure would remain below the seven-figure threshold at 923,000.

Clearly, American workers are still being laid off in mass, as the economy continues to crumble around us. In the meantime, the US government has failed to push a second stimulus bill through Congress that would address the needs of these tens of millions of unemployed citizens.

In total, over 57 million Americans have applied for unemployment assistance in only 22 weeks, and many of these individuals are dependent on these payments in order to keep up basic living expenses, like with rent and grocery bills.

The US economy is steadily falling apart, with indicators across the board showing no signs of improvement. 

Businesses, week after week, give into financial ruin, and close their doors as more layoffs become permanent job losses, which is leading to more Americans fallIng further behind on their debt payments and bills.

Lately, this economic collapse has made its way into a worrying new phase, with the unemployment numbers remaining so high, signaling a bleak future ahead for the US economy.

Remember, prior to this year, the most unemployment benefits claimed in a single week was only 695,000, with that all time high being exceeded for the past 22 weeks in 2020.

It is evident that we are living in unprecedented times, and the dire statistics just keep on coming. The jobless claims that we saw this past week, even though towards the lowest levels of this health crisis, still double those that were recorded, during the peak of the last recession.

These numbers prove that the labor market is a long ways from being healthy. For example, Hurricane Katrina, when compared to other economic disruptions in the US, only caused half the job losses in Louisiana, than this current economic collapse.

This is the moment that we will look back in the history books as being the worst depression of modern times. It has smashed the records of other crisis in recent years, and continues to defy expectations.

One of the few reasons the damage done to the US economy and the American public hasn't been much worse is the emergency aid offered by the federal government. The nearly 60 million jobless Americans have been able to make ends meat has been because of the $600 a week in unemployment benefits paid out by the government.

Vulnerable citizens now have to rely solely on state benefits, which are often much smaller, but that assistance is no longer available.

For example, with the loss of aid comes a much higher risk of eviction. Needy Americans are being forced from their homes left and right, even as tenants gather together to protest what they may view as landlords' unfair actions.

President Trump signed an executive order that would offer up half of the original unemployment benefits at $300 a week for any eligible jobless Americans. The memorandum, which was announced earlier this month, allowed unemployment benefits to reach $400 of weekly payouts, but only if the state governments took on 25% of the expenses.

The other choice is for the states to deny their residences the additional $100, but still implement $300 in federal aid, paid for entirely by the central government.

The Federal Emergency Management Agency (FEMA), on the bright side, has already accepted nine states into the program, listed alphabetically: Arizona, Colorado, Iowa, Louisiana, Missouri, Montana, New Mexico, Oklahoma, and Utah.

There are 14 more states that are planning to apply or are waiting for acceptance, but a number of states have opted out of the program.

Furthermore, only three states, Kentucky, Montana, and West Virginia, said they would sign on to pay the additional $100 to eligible residents. The unemployed workers in those states would receive $400 a week, instead of $300, with the rest of the country seeing their benefits slashed in half at a time, when financial assistance is a critical lifeline, during these dire circumstances.

At this time, individual Americans will be suffering for the foreseeable future, with already tens of millions of them missing bill payments every month, building up a backlog of debt that will continue to haunt them, even when the crisis finally comes to an end.

Moreover, businesses are collapsing at an unbelievable pace, with the restaurant sector, for example, having seen nearly 75,000 establishments shuttered for good in the second quarter of this year. No one has been spared, with the economic devastation touching everything from tiny, family-owned caf├ęs to Michelin star dining locations, popular among the rich and famous.

These closures will have long reaching consequences, even if we can't see them yet, because when a restaurant closes, the ripples sweep along the various supply chains.

The hotel industry, now being hit, is well documented as struggling through these lock-downs and travel bands. Room occupancy rates have plunged to record lows, and even big-named chains have had to cut a large portion of their workforce.

Lately, the industry has warned that it is going up against a serious default disaster. One of every four hotels across the US is now at risk of foreclosure, because they simply can't afford to keep making their mortgage payments.

Currently, 23.5% of hotel mortgage loans are at least 30-days delinquent, the greatest peak ever recorded -- a significant spike, when compared to the hotel delinquency rate of 1.3%, during the prior 12-month period.

In total, $20.6 billion in hotel commercial mortgage-backed security loans are delinquent by 30-days or more, as of July 2020. For comparison, the highest volume of delinquent hotel loans, during the previous financial crisis, from 2007 to 2009, was only $13.5 billion.

Many of these hotels will have to close down permanently, due to the demand for travel remaining next to nothing, and the continued concerns of the coronavirus.

This means that a number of the tens of thousands of Americans, employed by hotels across the country, are likely to join the ranks of the jobless citizens no longer receiving federal benefits.

The hotel sector is requesting federal assistance in the form of a bail out, but of course, these measures are a hot commodity, and almost every industry has similar demands.

Not everyone will come out on top, when the government decides what industries receive bail outs, and there will be ones that do not, never recovering to their prior glory days.

The global economies have also taking hit after hit this year, with world trade plunging to its lowest levels, during its 13-year record, in June 2020.

Merchandise trade plunged 18.5%, in the second quarter of 2020, according to the World Trade Organization, compared to the same time frame in 2019.

It is estimated that the US stock market, as a whole, is 78% overvalued, even as the country suffers through months of the worst economic climate, since the great depression of almost a century ago.

The stock market has been entirely severed from the underlining economy, forming a strange inverse relationship -- the worse the economy gets, the better the stock market performs.

We are watching a slow and inevitable stock market bubble inflate, with the downfall being swift and sharp.

We have gotten to this point, because of the Federal Reserves excessive meddling into US economic affairs.

The stock market has been pushed to all time highs, because of their backward policies, even as various indicators suggest a more troubled economy.

We are only at the start of this economic collapse. There is a long road ahead, and far worse situations on the way, despite how dark things seem already. Of course, the Fed will make every effort to hold asset prices high, and overly inflated, but they are fighting a losing battle.

Investors will hit a point, when they finally realize that there is no light at the end of the tunnel, with the country wracked by one crisis after another, bursting investors confidence, and the giant stock market bubble.

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