Ambastha Financial LLC

By Kuldip K. Ambastha

Jerome Powell, the Chair of the U.S. Federal Reserve, issued detailed comments this week. The American economy continues to be ravaged by the coronavirus pandemic. Additional fiscal support aid (e.g. another round of stimulus payments to Americans) will likely be needed for the American economy to recover. However, the Fed is not considering the use of negative interest rates at this time. The use of negative interest rates would be a highly unorthodox monetary policy tool in the USA.

Interest rate fluctuations, bond purchases, and forward guidance (commentary) are the standard tools of the Fed being used right now. The Fed funds rate range is 0% – 0.25% at the moment. Japan along with many countries in Europe have instituted negative interest rates and negative yields for the full duration curve range of their government bonds. Those countries were slowing before the coronavirus pandemic, and are continuing to struggle now during the coronavirus pandemic.

The capital markets reacted negatively to the comments made by Jerome Powell this week. As long as an end to the coronavirus pandemic is not in sight, the American economy will be under duress.

Keywords – U.S. Federal Reserve, Fed, Jerome Powell, American, economic, COVID-19, coronavirus, pandemic, fiscal, monetary, aid, stimulus, economy, negative interest rates, Fed funds rate, Japan, Europe.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

During this week, both J.Crew and Neiman Marcus announced their respective bankruptcy filings. The retail industry has been on fragile ground for many years now, and the coronavirus pandemic has pushed both of these companies into bankruptcy. Due to the public health issues around the coronavirus, brick-and-mortar retailers have had to administer widespread store closures.

As part of its bankruptcy process, J.Crew will be giving ownership to its lenders. J.Crew is the first prominent American retailer to file for bankruptcy due to the pandemic. The company’s debt will be restructured and permanent closures of some stores will occur eventually. Market volatility meant that an IPO for J.Crew’s Madewell business unit could not happen. Madewell will stay a part of J.Crew for now, and Madewell’s CEO (Libby Wadle) will stay in her post. J.Crew had struggled with customers shifting to online shopping over going into physical stores. Furthermore, J.Crew was sharply criticized for raising prices of its items.

In the same week and also due to the coronavirus pandemic, Neiman Marcus became the first major American department store company to file for bankruptcy. Neiman Marcus was overwhelmed by its debt load. By filing for bankruptcy, Neiman Marcus will be able to restructure its finances, invest in some strategic brick-and-mortar stores, and enhance its online platform. For many years, Neiman Marcus was well-known for its seasonal catalog of offerings (such as clothing, jewelry, and holiday gifts) which appealed to wealthy American individuals. Unfortunately, debt and retail industry pressures ended up making Neiman Marcus unable to sustain itself as a going concern.

In one week, two famous American retail companies went bankrupt. Due to the ongoing coronavirus pandemic, these two retail companies sadly may just be the first two of many retail companies to go bankrupt.

Keywords – J.Crew, Madewell, Libby Wadle, Neiman Marcus, bankruptcy, bankrupt, retail, retailer, debt, equity, finances, coronavirus, COVID-19, pandemic, public health, brick-and-mortar, stores, online, platform, fashion, wealth, wealthy, affluent, American.

Disclosure – The principals and clients of Ambastha Financial LLC have no positions in J.Crew and Neiman Marcus, since neither company has publicly traded stock.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

The Dow Jones had three down and two up days this week. The coronavirus pandemic has continued to wreak havoc all around the world, and the American capital markets were affected. During 1Q2020, the USA’s GDP (gross domestic product) annualized contraction rate was 4.8%. This figure was announced on Wednesday, April 29, 2020, and was not surprising given that millions of Americans are unemployed and thousands of businesses across the USA have been closed in full.

Many places within the USA have stay-at-home directives in place, to help stop the spread of the coronavirus. Fear, limits on mobility, and so on made for a drop in consumer spending of 7.6% annualized, a drop in durable goods spending of 16.1% annualized, a drop in services spending of 10.2% annualized, and a drop in business investment of 8.6% annualized. Another 3.8 million people filed for unemployment insurance in the past week for the first time bringing the total job loss number to 30 million, equivalent to about 18% of the American workforce. All jobs created since the Great Recession era of 2008-2009 have now been lost in about 6 weeks. While this negative data was not surprising, the full extent of the damage caused by the coronavirus is still unknown since during 1Q2020, matters started getting much worse in March. Later GDP-related quarterly announcements for 2Q2020 and onwards will likely shed more light on this front.

After the 1Q2020 GDP data was released, the U.S. Federal Reserve (Fed) has stated its commitment to extraordinary emergency steps due to the current turbulence. American interest rates have been lowered to near zero by the Fed, with a target range of 0.00% – 0.25%. The Fed will maintain interest rates at near zero until the economy starts to recover, will be taking aggressive action through emergency lending programs, and is committed to deploying all possible tools to support the American economy.

Keywords – Dow Jones Industrial Average, Dow Jones, DJIA, coronavirus, COVID-19, pandemic, public health, U.S. Federal Reserve, Fed, 1Q2020, interest rates, emergency lending, economics, economy.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

Snap Inc. (SNAP) stood out this week for positive reasons. On Wednesday, April 22, 2020, the stock had an astounding 36.7% return for the day. This return was driven by the company’s strong 1Q2020 results. Wall Street’s quarterly revenue expectations were surpassed. Snapchat has 229 million average daily active users as of the end of 1Q2020, an increase of 11 million for the quarter. Wall Street analysts like the company’s long-term prospects. Due to the strong 1Q2020 results, the company was able to roll out plans for a $750 million privately placed debt offering and also an option for investors to obtain up to $112.5 million in additional convertible securities. Because of the global coronavirus pandemic causing massive uncertainty for the future of the company, 2Q2020 guidance was not given.

Keywords – Snap Inc., Snap, SNAP, Snapchat, Evan Spiegel, Bobby Murphy, Reggie Brown, Lara Sweet, Derek Andersen, Jeremi Gorman, Jared Grusd, Rebecca Morrow, Michael O’Sullivan, 1Q2020, 2Q2020, quarter, quarterly, guidance, users, Wall Street, debt offering, convertible securities, private placement, coronavirus, COVID-19, pandemic.

Disclosure – The principals and clients of Ambastha Financial LLC have no positions in SNAP.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

The coronavirus pandemic continues to wreak havoc all around the world. In the USA, retail sales declined by 8.7%, making for a record decline. The previous record was 3.9% in November 2008, during the Great Recession / global financial crisis (GFC) era. Clothing and accessories sales declined 50.5%. Food services and drinking places declined 26.5%. Auto vehicle and parts sales declined 25.6%. Due to a need to prepare for staying at home for a potentially long period, food and beverage (including groceries) sales increased by 25.6%. Continued lockdowns all over the USA likely will mean that even worse data will be seen in the month of April plus the quarter of 2Q2020 overall.

American factory output in March fell by 6.3%, which was the largest monthly decline since 1946. Looking at underlying sectors, motor vehicle output fell the most with a decline of 28%. In recent history, these factory output figures are quite negative, especially in light of the fact that during the Great Recession / GFC period 3.5% drops in factory output were seen in September 2008 and December 2008. This is all bad news, with more bad news likely to come in the near future.

Keywords – coronavirus, COVID-19, pandemic, public health, crisis, Great Recession, global financial crisis, GFC, retail sales, lockdown, factory output, bad news.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

Carnival Corporation (CCL) is well-known as a cruise operator and as a prominent travel / leisure company. This British-American company has struggled recently due to the coronavirus pandemic seen worldwide. However, during this week, the company had strong days on Monday, April 6, 2020 and Tuesday, April 7, 2020, returning 20.3% and 10.7% on those respective days, because of an assist from the Public Investment Fund (PIF) of the Kingdom of Saudi Arabia (KSA). In the past few years, HRH Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud has been making efforts to transition the KSA away from oil and gas revenues, and the PIF was created (as a Saudi sovereign wealth fund) as part of his broader efforts to successfully execute upon the Saudi Vision 2030 during the reign of his father, HRH King Salman bin Abdulaziz Al Saud.

The PIF has purchased 43.5 million shares of Carnival Corporation, which makes for a 8.2% stake in the company. Reports of this purchase led to the 20.3% and 10.7% returns noted above. Prior to this infusion from the PIF, Carnival Corporation’s stock was suffering since the coronavirus pandemic has had a material negative impact on all parts of the company’s business. Global cruise operations have been suspended. Some ships have been quarantined.

Port closures and travel restrictions are present all over the world at this time. Due to the dire circumstances seen at this time, the Carnival Corporation had fully used up its $3 billion revolving credit facility on Friday, March 13. The company also raised $6 billion across both debt and equity instruments. The capital infusion from the PIF is a vote of confidence in an embattled company. That said, plenty of risks still abound for Carnival Corporation going forward, especially if the coronavirus pandemic continues for a long time with no potential vaccine present.

Keywords – Carnival Corporation, CCL, cruise, travel, leisure, tourism, Public Investment Fund, PIF, sovereign wealth fund, SWF, Kingdom of Saudi Arabia, KSA, Saudi Arabia, HRH King Salman bin Abdulaziz Al Saud, HRH Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud, Saudi Vision 2030, coronavirus, novel coronavirus, COVID-19, pandemic.

Disclosure – The principals and clients of Ambastha Financial LLC have no positions in CCL.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

The Dow Jones was up and down this week day by day, similar to what has been seen in the past few weeks. Due to the coronavirus pandemic and its related public health concerns around the world, massive changes have been seen in the USA and these changes have been affecting the capital markets significantly. Specifically, data related to the American jobs and unemployment landscape has been quite negative, likely with more bad news to come in the following weeks.

Weekly jobless claims are reflecting massive damage from the coronavirus. Specifically, about 10 million American individuals filed the initial paperwork for unemployment insurance in the last two full weeks of March. This is a record that has led the Congressional Budget Office to state that the unemployment rate may soon be greater than 10% during 2Q2020, a figure which is higher than what occurred at any time during the global financial crisis (GFC). Companies across the board, whether small, medium, or large, have been announcing massive layoffs and furloughs, to cut costs as more and more people have to stay at home due to the coronavirus.

Globally, one million people have been infected by the coronavirus, with a death toll of above 55,000. In the USA, over 266,000 cases of infection have been identified as of the afternoon of Friday, April 3, 2020. Cases have been reported all over the USA, with a lot of attention focused on the state of New York which has been especially hit hard with over 100,000 cases of infection.

On Friday, April 3, 2020, the Department of Labor released an official jobs report with data through March 12th (before the USA mostly went into a lockdown mode because of the coronavirus). This report showed actual job loss data which was much more than expected. March’s change in non-farm payroll jobs was a loss of 701,000 vs. an expected figure of a loss of 100,000. March’s unemployment rate was 4.4% vs. an expected figure of 3.5%.

Given that the coronavirus pandemic is still present globally everywhere, no coronavirus vaccine has been developed as of yet, and social distancing measures may be in place for a while, it is fair to expect more negative data in the near future. This negative data will make for many more up and down days in the Dow Jones before stability can be achieved at an unknown future point in time.

Keywords – Dow Jones Industrial Average, Dow Jones, DJIA, data, jobs, unemployment, unemployment insurance, jobless claims, non-farm payroll, coronavirus, COVID-19, pandemic, public health, global financial crisis, GFC, layoffs, furloughs, costs, world, globe, New York, Congressional Budget Office, Department of Labor.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

Per the table seen above, the Dow Jones Industrial Average (DJIA) took investors on a volatile ride this week. Down days were seen on Monday and Friday. Up days were seen on the Tuesday, Wednesday, and Thursday in between. This pattern in the DJIA was observed due to the federal government’s response to the coronavirus pandemic.

Even though two down days were seen, the DJIA posted its best weekly percentage gain since 1938. Initially, the U.S. Senate was expected, early in the week, to pass a $2 trillion stimulus package to deal with the coronavirus pandemic. However, the package was approved in the Senate on the night of Wednesday. Then, on Friday, the U.S. House of Representatives approved the package as well. Later in the day on Friday, President Donald J. Trump signed the coronavirus relief package. This series of events had a direct impact on the DJIA’s fluctuations.

On Monday, a down day was seen because people had hoped a package could have been finalized in the Senate on this day, but this did not happen. On Tuesday, hopes of a package coming together drove a strong gain. Tuesday’s gain was the biggest-ever one-day point and percentage gains since 1933, a day after hitting the lowest level since 2016. On Wednesday and Thursday, more modest gains were seen each day as the bill was discussed in the Senate and House. On Friday, the bill being passed and signed by the President was seen as positive, though this was also offset by a news report showing that U.S. consumer sentiment had fallen significantly. The whole world is still in uncharted territory due to the coronavirus pandemic. Week by week, a lot can change both in the USA and elsewhere.

Keywords – Dow Jones Industrial Average, Dow Jones, DJIA, government, stimulus, package, bill, coronavirus, COVID-19, pandemic, public health, trillion, Senate, House, consumer sentiment, President Donald J. Trump.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

This past week was a volatile one in the investment markets, worldwide. “May you live in interesting times” was a quote popularized during the global financial crisis (GFC) era. This same quote applies now as well, in terms of the wild roller coaster ride seen for March 16-20. On a daily basis, fluctuations were seen across all indices globally. The Dow Jones Industrial Average (DJIA) saw both losses and gains day-by-day during this week, per the table seen above. On Monday, March 16, 2020, the DJIA fell by 2,997 points, which is the biggest daily point decline ever. On the same day, the DJIA fell by 12.9%, which is the highest daily percentage decline since October 1987’s “Black Monday” crash. For the week, DJIA dropped by 17.3% which is the largest weekly percentage drop of DJIA since October 2008 during the global financial crisis.

Similarly, in the week before, West Texas Intermediate (WTI) crude oil ended the day of Friday, March 13, 2020 at $31.73 per barrel. WTI crude oil’s price dropped dramatically to $20.55/bbl for the day ending Wednesday, March 18, 2020. WTI crude oil prices were also quite volatile ending at $25.63/bbl and $22.59/bbl on March 19 and 20, 2020, respectively. The crude oil price has not been this low since 2002. This has been caused by not only severe curtailment of oil demand owing to the overall slowing world economy even before the coronavirus pandemic plus the coronavirus-related lockdown of countries and cities across the world, but also the oil oversupply issue because of market share battles between Russia and Saudi Arabia since the collapse in dialogue of an OPEC+ meeting a few weeks ago.

What drove these fluctuations? Negative coronavirus-related news has affected every human being and every investment market. No vaccine currently exists for the coronavirus, and developing one may take anywhere from 12 to 18 months per what medical experts are saying. Governments and central banks everywhere are developing interventionist emergency response plans to deal with the volatility. Until the coronavirus-linked uncertainty is gone, markets will keep reacting to daily news reports. The losses seen this week in the DJIA have eliminated all gains since when President Donald J. Trump was inaugurated. Wall Street investment banks are foreseeing a significant recession coming soon. From the perspective of psychology, one could hypothesize that the investment markets will only recover when governments and central banks worldwide manage the coronavirus crisis successfully. How long this will take is unknown.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.

By Kuldip K. Ambastha

It is always easy to assume either that things today are not as good as they were in the past or that they aren’t going to be as good in the future. The first is irrelevant, and the second is usually not a good bet. Mankind is pretty amazing at doing foolish things to create problems and then finding brilliant ways to overcome them. I am not unaware of the world’s many current problems, but I am optimistic nonetheless. Pessimistic people always sound smarter than optimists, but optimists generally live in bigger houses. (Thomas Britton [Britt] Harris IV; https://www.ai-cio.com/news/britt-harris-return-on-luck/)

In one’s life, there is space for both pessimism and optimism in general, as needed. That said, on Wall Street pessimism does not deliver as optimism does. A pessimist may hoard money under the mattress, or at most put it in a bank earning less than 1% in yearly interest. A pragmatic optimist, in contrast, may evaluate risk and return, and then invest in a reasonable mix of stocks and bonds. Over the long run (30 years, annualized returns, not adjusted for inflation), stocks will deliver strong returns, bonds will deliver moderate returns, and cash will deliver very low returns. When accounting for inflation, stocks and bonds will likely still deliver positive returns, while cash may not deliver more than the rate of inflation. When investing for the long-term, it is important to be a pragmatic optimist. Pessimism does not pay off.

Disclaimer – No recommendations are being made via this post. Past performance is not an indicator of future performance. As an investor, you should do your own research and seek professional advice from a Registered Investment Adviser (RIA). You can lose money by investing in stocks and other instruments. Ambastha Financial LLC does not assume any responsibility (legal or otherwise) for any losses that may occur as a result of actions taken based on this post. All content copyrighted © 2020 – Ambastha Financial LLC.