Hope everyone had a great Memorial Day Weekend and they’re ready for the week ahead. Time for your daily dose of the Wall Street Journal brought to you by yours truly.
Side note – I’ve also been dropping some knowledge bombs in the “Education” tab. Go check those out and let me know what you think! Have an idea for a post in the future? Let me know and I’ll probably do it!
Optimism Over Reopening Pushes Stocks Higher
Stocks moved up Tuesday on optimism about economies reopening and the potential development of a COVID-19 vaccine. This rally now pushes US indexes up more than +30% since late March.
Restaurant bookings and spending on hotels and airlines appear to be picking up in the US, coinciding with a decline in the daily number of new infections.
Despite the recent stock rally, many investors, including myself, remain concerned about how to value shares when earnings have fallen so sharply and many companies have withdrawn their future forecasts. The market rebound has pushed the S&P 500’s forward-looking price/earnings ratio to 23.36, its highest level since 2002. *insert eye’s looking to the left emoji here*
Boeing and Airbus Study How Coronavirus Behaves During Air Travel
Boeing and Airbus are researching the new COVID-19’s behavior inside jetliners, part of an industry push to curb risks that have brought air traffic to a near standstill.
The effort to better understand air-travel risks during the pandemic comes as airlines try to reassure nervous passengers that masks and filtered cabin air provide reliable protection from infection in flight. Boeing said they’re developing computer models that simulate the cabin environment and could ultimately inform decisions by airlines, health officials and regulators on how to prevent the virus’s spread.
Airbus said the plane maker is exchanging information with universities in the US and other countries – they’re also exploring other methods of reducing the spread of the virus including self-cleaning materials (a disinfectant that can last for 5 days & touchless devices in lavatories).
Despite sanitary efforts, Friday the TSA screened only 349,000 across the entire US; -88% below year-ago levels.
Tax Credit for Keeping Workers on Payrolls Draws Bipartisan Interest
The $3 trillion package passed by the House this month features an expanded wage subsidy, known as the employee retention tax credit. That proposal (which would add $194B to an already $55B tax credit created in March) is gaining bipartisan support even as lawmakers clash over other legislation to aid the economy during the pandemic.
The House’s plan would give employers enough money to cover up to 80% of their wages and benefits, up to $45,000 per worker, plus a credit for fixed expenses like rent.
For Democrats, the subsidy offers an alternative to the payroll-tax cut President Trump is seeking, which they oppose because it does little for the unemployed. Republic supports prefer the subsidy to spending programs favored by Democrats and see it as a way to link aid to work.
The nonpartisan Congressional Budget Office projects unemployement averaging 8.6% in the fourth quarter of 2021.
Either way, people are unemployed and that in itself is a hard problem to fix – especially during a pandemic.
Lumber Prices Rebound From Coronavirus Decline
About 18 months ago I spent every spare hour of time I had looking for “recession indicators” online along with a list of actions to take once we were deemed to be in a recession. You know what every online resource I used told me? The price of lumber and copper are massive indicators of economic growth and contraction. If our economy is thriving, chances are we’re building things and you need lumber and copper to do that which drives prices up. If our economy is contracting, chances are we’re not spending extra money building things therefore the demand for lumber and copper will decrease which decreases prices.
Well do I have news for you –
Lumber future for July delivery ended Tuesday at $356.80 per 1,000 board feet on the Chicago Mercantile Exchange – Austin, I have no idea what that even means? Is that historically high or low?
I got you –
Boom – perspective.
And here is how the prices of saw-mill share-prices have been impacted.
And here is a graph showing the growth (and contraction) of residential construction.
Alright Austin we get it – but what does this mean? Great question.
Considering Lowe’s and Home Depot reported double digit lumber sales growth, “home-building season” may still be a thing this year. I wonder how this will impact the price of homes over the next 12 – 24 months. As always, drop your feedback in the comments below!