Free falling  The week started with a historic plummet in oil prices – May futures for WTI crude expiring on Tuesday turned negative for the first time ever and ended the day on Monday at -$37.63 per barrel. Futures are contracts to purchase commodities (in this case oil) at the contract price at a given time in the future. Part of the price in futures contracts is the cost of physically carrying (aka storing) that product. Nobody had space to actually store the oil because demand has basically been nonexistent while production continued, so inventories were just too large. Buyers were demanding $37.63 from the seller to store the oil (or looking at it from the other side, sellers…

Jobless claims & retail sales  Job losses continue to plague the US as life as we knew it remains shuttered. Another 5.25M workers applied for unemployment benefits last week, bringing the COVID-related job losses to over 21M in just a month. To put this into perspective, this is about equivalent to the number of jobs that have been created since the financial crisis in 2008. 10+ years of job creation lost in just one month. While many companies are suffering, others like Amazon are hiring thousands to keep up with the sharp increase in demand from the quarantine life that we’ve now accepted as reality where days and time seem irrelevant, baking bread is…

What’s on their mind The Federal Reserve released meeting minutes from its March meetings when the FOMC basically cut interest rates to 0%. A few weeks ago, they were looking at two plausible scenarios for the US economy – a recovery in the second half of this year or a recovery that wouldn’t really take hold until next year. Under both scenarios, inflation falls (core inflation fell in March for the first time since Jan 2010) and unemployment rises.  Moral of the story: The Fed’s mandates include price stability (managing inflation around 2%) and full employment. Both of those pieces are getting blown up right now and the Fed is actually doing a fantastic…

The bad… Jobless claims, which have been coming in around 200k just a month ago, have been in the millions in the last two weeks in March. Jobless claims for the last week in March came in at 6.65m, after a 3.34m number for the week prior. This implies a 10% unemployment rate, up significantly from the record-low 3.5% we saw in February. Economists are predicting more than 25m Americans could lose their jobs in the next few months.  Moral of the story: 10m people have filed unemployment in just two weeks and I don’t think things are going to get much better anytime soon. Just in these two weeks,…