American Consumer Economy.

7-7 Market Highlights (September 1 – September 7, 2019)

American middle class is working and consuming. And, they may be looking around for a good and better deal, not just focused on Chinese cheap goods.  FOMC Chair says the American recession is unlikely, and global economy is slowing but the recession not eminent. Despite some signs of slowing, the U.S. unemployment rate is still only 3.7% and consumer spending remains strong. Simply put the American consumers are the solid foundation for the greatest economy of the world. 

For China, further decoupling must be a terrifying scenario and Xi maybe realizing lose-lose trade predicament. China knows that the U.S. remains the world’s number one consumer market, and America is now clearly looking to shop around. Beijing needs to come up with some kind of offer to slow this trend either at the trade negotiating table or in some kind of arrangement with the U.S. manufacturers that are still in China. Well, the optimism on trade talks boosted Asian stocks, and bolted Dow nearly 500 points Thursday. But some say Dow may jump 10,000 points if a good trade deal can come from October meeting.

Market closed on 9/06/2019:   DOW: 26,797;   S&P500: 2,978; NASDAQ: 8,103; Gold: $1,513.40; Oil: $5.57;  US 10-Year: 1.555% 

Here are the highlights of the 36th week of 2019:   

1.   American Middle Class…?   What is middle class? There are many definitions and explanations. Well, there’s no fixed definition of what makes an American middle class. However, a recent survey and asking people the traits they perceive as middle class. And, according to recently polled, 7.5% perceived having no debt as a trait of the middle class, but many Americans with mortgages may be an exception. And while 15.5% of respondents say having a car that’s less than five years old, but many successful people in big cities have no need for a car. And many unsuccessful people go into debt to buy a shiny new car. Well, it boils down to the four traits that over 50% of respondents perceived as being middle-class: 1) pay your bills on time. 2) have a secure job. 3) able to save money. 4) have the time and money for the occasional vacation. To 51.2% of respondents, being middle-class meant having both the time and money to take a vacation. "Middle class" may not mean that you can afford all the luxuries you want, but it does indicate that you’re successful enough to take a break from work every now and then. None of these items alone is a good indicator that you’re middle class. But when you combine them, they show that you’ve achieved that level of success. Are you in, or not?

2.   Dividend Income…?          In a world of disappearing income, the stable stocks paying a high dividend yield may be an income strategy you might want to consider.  In a world of falling and even negative interest rates, investors are searching the best yield. Perhaps, some stocks may give investors a higher yield than the overall market and the yield on the benchmark 10-year Treasury. So, the stocks with a dividend yield above 2%, a Standard & Poor’s credit rating of “A” or higher and 10% or more annual dividend growth over the past five years. These may be, perhaps, a dividend-yielding company you should consider: Simon Property Group, the largest shopping mall operator in the U.S., has the highest dividend yield on the list at 5.6%. Home Depot is another notable with a 2.4% dividend yield. In addition to real estate stocks, home improvement stocks also perform well in low rate environments. When yields drop, mortgage rates also go down and people will refinance their mortgages. The extra monthly savings from mortgage payments often go to home improvement projects, which boosts foot traffic at places like Home Depot. And, according to Investor’s Business Daily Target (TGT), Restaurant Brands (QSR) Kar Auction Services (KAR), McDonald’s (MCD) and Darden Restaurants (DRI) are the best dividend stocks for 2019. Take a look if these are interesting to you.

3.   US-China Trade Deal Breakthrough…?          Perhaps the greatest danger to the Chinese economy may not be the trade deal itself. The decoupling effects of manufacturing in China may have the greatest and lingering devastating effects on Chinese competitiveness. Well, reliable China insiders hint that this round of trade talks could lead to a ‘breakthrough’.  Dow jumps up nearly 500 pts Thursday on optimism on trade talk.  “There’s more possibility of a breakthrough between the two sides,” said Hu Xijin, editor-in-chief of the Global Times. The previous 18 months of trade talks between the U.S. and China have only led to more tit-for-tat tariffs, but this time it might be different, according to Chinese sources who seem to have inside knowledge on the trade war.  “New developments”, let’s hope so because “There’s no winner in a trade war,” reporter warned. China ready for a breather while Hong Kong, South China Sea, and other global ventures are weighing heavily on Xi Jinping? 

4.   Vietnam Airline Direct Flights to the USA…          A China-US trade war beneficiary. Vietnam Airlines secures first license for direct US flights. Vietnam Airlines has become the first carrier in the country to secure a coveted license to fly direct to the United States, according to the airline and a regulatory filing saw by AFP. The approval has for months been sought by Vietnamese carriers eager to exploit a fast-growing market for air travel among Vietnam's booming middle class. Vietnam Airlines has been licensed to fly from Hanoi and the southern business hub Ho Chi Minh City to Los Angeles, San Francisco, New York, Seattle and Dallas, according to a regulatory filing from the US Department of Transportation obtained by AFP.  The carrier will also be able to connect to Vancouver, Montreal and Toronto in Canada.  Vietnam's aviation sector has soared in recent years, with passenger numbers jumping from 25 million in 2012 to 62 million last year. Tourist visits from the US have also climbed, jumping nearly 60% in the past five years. 

5.   South Africa Anti-Foreigner Violence.       Marabastad, South Africa on September 2, 2019, during widespread attacks on foreign nationals and looting of their shops erupted. More than 90 people were arrested "after looting shops and damaging property in Johannesburg and surrounding areas".  South Africa is a major destination for economic migrants from the southern Africa region, with many moving from neighboring Lesotho, Mozambique and Zimbabwe in search for work. South African police patrolled central Johannesburg on Tuesday after the financial capital was hit by a new wave of anti-foreigner violence.  The township was a scene to the second night of urban rioting in Johannesburg, where hundreds of people marched through the streets on Monday in an unusually large expression of anti-foreigner sentiment. 

6.   Florida Dodges Dorian, But Bahamas Death Toll Soars.  Dorian leveled entire neighborhoods and knocked out key infrastructure, including airport landing strips and a hospital in the Bahamas. Hundreds, if not thousands, are still missing in the country of about 400,000 people, and officials say the death toll, which stands at 30, is likely to shoot up. The smell of death hung over parts of Great Abaco Island in the northern Bahamas, where relief workers on Friday sifted through the debris of shattered homes and buildings in a search expected to dramatically drive up the death toll from Hurricane Dorian. The storm made landfall on the Outer Banks of North Carolina on Friday with winds of 90 miles per hour. The U.N. World Food Programme is airlifting storage units, generators, prefab offices, and satellite equipment as well as 8 metric tons of ready-to-eat meals. A U.S. flight on Thursday brought enough aid for 31,5000 people including hygiene kits, water containers and buckets, plastic sheeting and chain saws. Total insured and uninsured losses in the Bahamas amounted to $7 billion, including buildings and business interruptions, according to a preliminary estimate by consultancy Karen Clark & Co. Prayer for the victims and may the world come forward to help these destitute people.

7.   Regrets of Self-made Billionaires.             According to six-year studies of 21 self-made billionaire by Rafael Badziag, even billionaires do have regrets. Throughout the journey, he learned something deeply insightful. Just like the rest of us, billionaires have regrets. Based on his conversations, here are some of the most common ones: 1) Not jumping on great opportunities. With great risks come great rewards. But you’ll have a hard time reaping the rewards if you don’t take action fast. 2) Not living in the present.  “I was living my life in the past, in angst about things that I’d done in the past, or I was living my life in the future,” he said, adding that he was never fully appreciative of the people he was with or the things he accomplished at that moment. 3) Not starting soon enough.  “There is never a right moment to start a business or …  But if you don’t do it, nothing will happen.” 4) Not being bolder.  However, it’s important to balance boldness with caution, he added. Otherwise, you’ll go broke.  5) Not changing fast enough.    “Every day, you’ve got to change. If you don’t change, you die. Well, on the other hand, Mistakes and Failures are necessary. In fact, almost all of them expressed that mistakes and failures are inevitable. When it comes to regrets, take them with positive attitude and learn to leverage them for your billions.

These are my researches and analysis of the highlights of the week. Perhaps you should take a closer look at them, do additional research and analysis if these are interesting to you. This “7–7 Market Highlights” is presented for general knowledge, the resource for management, and perhaps as a tool for career development, and building wealth. As always, “Think for Yourself”, you decide on your own final analysis and position. 

Mahalo. I welcome your thoughtful comments, “like” notes, and “share” of this publication. 

~ S. Vincent Shin

www.dhirubhai.net/in/vshin

References and Image credits to Bloomberg News, The Wall Street Journals, Getty image, AP Photo, Reuters, CNBC..., and special thanks to Image & Visual Consultant @U.Y.  All references, news, and images are from open source and public domain.