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An Underwhelming Start to Q2

An Underwhelming Start to Q2

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Financial markets continued to limp into Q2 overnight, with equities and energy continuing to lag as the world’s economy continues to wily under the ongoing COVID-19 pandemic. Energy was front and centre overnight with US Crude Inventories blowing out to 13.8 million barrels and Whiting Petroleum filing for Chapter 11 bankruptcy protection. The CEO used terms such as “right-sized balance sheet” and “enhanced cost structure” to put a brave face on proceedings. No amount of management-speak gobbledygook can cover the fact that US shale is in deep trouble and Whiting Petroleum won’t be the last company in the sector to call in the restructuring experts to “right-size” balance sheets.

 

One positive notes this morning came from President Trump though, who said that he expected a Saudi Arabia-Russia production deal within days. That sounds like the wild optimism from the President that we know and love. It is hard, though, to see such a deal happening without the US coming to the party in some shape or form, however that may be engineered.

 

With US and European equity markets wilting again overnight, Asia looks set for a negative day as well. Although perhaps to a lesser extent as the region pins its hopes on a re-emerging China. The Reserve Bank of New Zealand climbed on the dividend buy-back train today, ordering banks to suspend dividend payments. That follows a trend started in Europe where buybacks and dividends are rightly dirty words right now.

 

I am somewhat flabbergasted that authorities are even having to get involved in this aspect of global commerce, given that many large corporations around the world are in a weak position to weather the coronavirus storm. Much of that being precisely because of their excessive dividend and buy-back policies, whilst all holding out their hands for taxpayer bailouts. I am impressed that legions of c-suite executives are doing just that with a straight face, and I suspect that much hard love is coming their way in the months ahead. They too, will be sharing the pain that everyone else in the world is experiencing. To emphasise just how important this is, the aforementioned Whiting Petroleum CEO will still pocket a “bonus” of $6.4 million for his high-quality work. The rest of the C-suite will snuffle $8.2 million from the corporate trough for their “efforts.” You couldn’t make this up.

 

The data calendar today is mostly tier-2 with all eyes on the US Initial Jobless Claims this evening. Last week’s blowout 3.3 million increase could be beaten again tonight, with the street forecasting another jump of 3.5 million new claims. With COVID-19 biting its way into US society deeply now, further fiscal packages from the US Government will be inevitable. My biggest concern being can doctrinal differences be put aside for the greater good. Wall Street capitalism looks terrific on paper in a bull market, right up until the moment that it doesn’t.

 

Tomorrow morning will be interesting for Asia, with final PMI’s from China, Japan, Australia and Singapore. Much hope will be pinned on the continued improvement of data from Asia’s powerhouses. A disappointment on that front will see much of the tentative hope displayed in the region wiped away as quickly as it has begun.

 

There will be a passing interest in US Non-Farm Payrolls tomorrow evening with the street expecting a drop of 100,000 jobs and Unemployment to remain steady at 3.80%. I believe both may well be wishful thinks when one looks at the jobless claims. In the overall picture, though, terrible data tomorrow night should surprise nobody at all with the progress of the COVID-19 battle being the only thing that really matters.

 

Equities

 

Wall Street gave ground again overnight, with all three leading indices falling 4.40% as the new quarter got underway. Both the S&P 500 minis and NASDAQ futures have climbed 1.25% this morning as profit-taking from the previous two days has set in.

 

That has given a respite to Asian markets, which would have expected a tough day at the office after Wall Street’s price action overnight. The Nikkei 225 is down 0.75% with the Kospi slightly higher, up 0.78%. Mainland China sees the Shanghai Composite gently lower by 0.10% and the CSI 300 by 0.25%.

 

Singapore is lower by 1.40% along with Jakarta with the Hang Seng down 0.30%. Australia is the worst performer today, perhaps reflecting its outperformance over the previous sessions, the All Ordinaries has fallen 2.80% and the ASC 200 by 1.90%.

 

Overall, the picture is one of a modest attempt by Asia to hold its nerve, backed by China, as the rest of the world clearly faces more trying times ahead in the face of the COVID-19 pandemic. However, the sentiment is fragile, to say the least, and we expect the region’s markets to resolve to the downside still, particularly once Europe arrives.

 

Currencies

 

The US continues to benefit from haven flows and US treasury yields continuing to edge higher. With Europe no closer to overcoming its virus shutdown, EUR/USD fell 0.65% overnight to 1.0940 and a retest of 1.0900 looks set to occur sooner, rather than later. GBP/USD fell 0.40% to 1.2370 and appears to be consolidating in a broader 1.2300/1.2500 range following its March collapse. Further gains past 1.2500 will be challenging in the short to medium term.

 

Haven currencies fared slightly better with the USD/JPY falling 0.40% to 107.10. The street is still awaiting the much-anticipated Japanese stimulus package that is promising much, but delivering precisely zero on the details front. With the Olympic postponed until next year, the urgency of action required is increasing. The longer the Government vacillates, the more likely it is we will we see USD/JPY turn sharply higher.

 

USD/CNH turned higher overnight as the greenback strengthened in general. USD/CNH rose 0.40% to 7.1265, although Chinese authorities seem content to allow the Yuan to trade calmly in a 7.0600/7.1600 range for now.

 

USD/IDR continues to look very vulnerable. Yesterday it was announced that the Bank of Indonesia would directly buy government-issued bonds, as the Finance Ministry scrambles for cash to fight COVID-19 and insulate the economic slowdown. The direct monetisation from the 1998 playbook is unlikely to find friends amongst investors, local or international. A pseudo-lock-down of Jakarta was announced overnight as well, but the language was nebulous, much as it has been from the Government thus far. USD/IDR is hovering just under its recent highs at 16600.00, and a further test of the top side looks to be on the cards sooner rather than later. Indonesia’s most significant challenge ahead will be avoiding capital flight from the domestic population.

 

Overall the US Dollar strength looks set to continue, supported by its haven designation, yields and the ongoing demand for US funding from around the globe.

 

Oil

 

Oil has rallied impressively this morning in Asia after a lacklustre session overnight. Hope that US President Trump can get Saudi Arabia and Russia to the negotiating table has seen both Brent and WTI shrug of last night’s massive climb in US Crude Inventories.

 

Brent crude futures are 5.90% high at $26.30 a barrel this morning, with WTI futures 4.60% higher at $21.25 a barrel. Brent crude’s next resistance is at $28.00 a barrel, and WTI has resistance at $22.00 a barrel.

 

I would warn, however, that any glimmer of a production deal will need the participation fo the United States, given that is effectively Russia and Saudi Arabia’s main gripe int he first place. The free ride enjoyed by US shale as the weight of cuts to maintain prices fell upon OPEC+. From a legal point of view, how the US could participate in an effectively cartel-like action escapes me. We should also note that the world is facing a massive demand shock even without a price war to complicate things. Therefore, excessive hope on oil prices is likely to be mostly priced in at these levels. Anyone thinking of going long at these price levels should think very carefully about doing so.

 

Gold

 

Gold picked itself up of the floor overnight, finally seeing some haven-based flows into the yellow metal. Gold rose 0.90% to $1588.00 an ounce in overnight trading and is unchanged this morning in Asia.

 

Gold still needs to reclaim $1600.00 an ounce to alleviate near-term technical concerns though. And beyond that, the $1640.00 an ounce region is formidable technical resistance.

 

Gold’s next real test will be if equity markets move aggressively lower again tonight in New York. Gold weathered the storm yesterday, but we do not yet know if the rush to cash during stock selloffs has ceased to be an important driver of gold performance. With that in mind, bargain hunters at these levels should avoid loading up too heavily with a break of $1560.00 an ounce, likely to provoke stop-loss selling.

 

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Key shipping company files for Chapter 11 bankruptcy

The Illinois-based general freight trucking company filed for Chapter 11 bankruptcy to reorganize.

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The U.S. trucking industry has had a difficult beginning of the year for 2024 with several logistics companies filing for bankruptcy to seek either a Chapter 7 liquidation or Chapter 11 reorganization.

The Covid-19 pandemic caused a lot of supply chain issues for logistics companies and also created a shortage of truck drivers as many left the business for other occupations. Shipping companies, in the meantime, have had extreme difficulty recruiting new drivers for thousands of unfilled jobs.

Related: Tesla rival’s filing reveals Chapter 11 bankruptcy is possible

Freight forwarder company Boateng Logistics joined a growing list of shipping companies that permanently shuttered their businesses as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.

The Carlsbad, Calif., logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of California listing assets up to $50,000 and and $1 million to $10 million in liabilities. Court papers said it owed millions of dollars in liabilities to trucking, logistics and factoring companies. The company filed bankruptcy before any creditors could take legal action.

Lawsuits force companies to liquidate in bankruptcy

Lawsuits, however, can force companies to file bankruptcy, which was the case for J.J. & Sons Logistics of Clint, Texas, which on Jan. 22 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas. The company filed bankruptcy four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.

California-based logistics company Wise Choice Trans Corp. shut down operations and filed for Chapter 7 liquidation on Jan. 4 in the U.S. Bankruptcy Court for the Northern District of California, listing $1 million to $10 million in assets and liabilities.

The Hayward, Calif., third-party logistics company, founded in 2009, provided final mile, less-than-truckload and full truckload services, as well as warehouse and fulfillment services in the San Francisco Bay Area.

The Chapter 7 filing also implemented an automatic stay against all legal proceedings, as the company listed its involvement in four legal actions that were ongoing or concluded. Court papers reportedly did not list amounts for damages.

In some cases, debtors don't have to take a drastic action, such as a liquidation, and can instead file a Chapter 11 reorganization.

Truck shipping products.

Shutterstock

Nationwide Cargo seeks to reorganize its business

Nationwide Cargo Inc., a general freight trucking company that also hauls fresh produce and meat, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Illinois with plans to reorganize its business.

The East Dundee, Ill., shipping company listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition and said funds will not be available to pay unsecured creditors. The company operates with 183 trucks and 171 drivers, FreightWaves reported.

Nationwide Cargo's three largest secured creditors in the petition were Equify Financial LLC (owed about $3.5 million,) Commercial Credit Group (owed about $1.8 million) and Continental Bank NA (owed about $676,000.)

The shipping company reported gross revenue of about $34 million in 2022 and about $40 million in 2023.  From Jan. 1 until its petition date, the company generated $9.3 million in gross revenue.

Related: Veteran fund manager picks favorite stocks for 2024

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Key shipping company files Chapter 11 bankruptcy

The Illinois-based general freight trucking company filed for Chapter 11 bankruptcy to reorganize.

Published

on

The U.S. trucking industry has had a difficult beginning of the year for 2024 with several logistics companies filing for bankruptcy to seek either a Chapter 7 liquidation or Chapter 11 reorganization.

The Covid-19 pandemic caused a lot of supply chain issues for logistics companies and also created a shortage of truck drivers as many left the business for other occupations. Shipping companies, in the meantime, have had extreme difficulty recruiting new drivers for thousands of unfilled jobs.

Related: Tesla rival’s filing reveals Chapter 11 bankruptcy is possible

Freight forwarder company Boateng Logistics joined a growing list of shipping companies that permanently shuttered their businesses as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.

The Carlsbad, Calif., logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of California listing assets up to $50,000 and and $1 million to $10 million in liabilities. Court papers said it owed millions of dollars in liabilities to trucking, logistics and factoring companies. The company filed bankruptcy before any creditors could take legal action.

Lawsuits force companies to liquidate in bankruptcy

Lawsuits, however, can force companies to file bankruptcy, which was the case for J.J. & Sons Logistics of Clint, Texas, which on Jan. 22 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas. The company filed bankruptcy four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.

California-based logistics company Wise Choice Trans Corp. shut down operations and filed for Chapter 7 liquidation on Jan. 4 in the U.S. Bankruptcy Court for the Northern District of California, listing $1 million to $10 million in assets and liabilities.

The Hayward, Calif., third-party logistics company, founded in 2009, provided final mile, less-than-truckload and full truckload services, as well as warehouse and fulfillment services in the San Francisco Bay Area.

The Chapter 7 filing also implemented an automatic stay against all legal proceedings, as the company listed its involvement in four legal actions that were ongoing or concluded. Court papers reportedly did not list amounts for damages.

In some cases, debtors don't have to take a drastic action, such as a liquidation, and can instead file a Chapter 11 reorganization.

Truck shipping products.

Shutterstock

Nationwide Cargo seeks to reorganize its business

Nationwide Cargo Inc., a general freight trucking company that also hauls fresh produce and meat, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Illinois with plans to reorganize its business.

The East Dundee, Ill., shipping company listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition and said funds will not be available to pay unsecured creditors. The company operates with 183 trucks and 171 drivers, FreightWaves reported.

Nationwide Cargo's three largest secured creditors in the petition were Equify Financial LLC (owed about $3.5 million,) Commercial Credit Group (owed about $1.8 million) and Continental Bank NA (owed about $676,000.)

The shipping company reported gross revenue of about $34 million in 2022 and about $40 million in 2023.  From Jan. 1 until its petition date, the company generated $9.3 million in gross revenue.

Related: Veteran fund manager picks favorite stocks for 2024

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Tight inventory and frustrated buyers challenge agents in Virginia

With inventory a little more than half of what it was pre-pandemic, agents are struggling to find homes for clients in Virginia.

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No matter where you are in the state, real estate agents in Virginia are facing low inventory conditions that are creating frustrating scenarios for their buyers.

“I think people are getting used to the interest rates where they are now, but there is just a huge lack of inventory,” said Chelsea Newcomb, a RE/MAX Realty Specialists agent based in Charlottesville. “I have buyers that are looking, but to find a house that you love enough to pay a high price for — and to be at over a 6.5% interest rate — it’s just a little bit harder to find something.”

Newcomb said that interest rates and higher prices, which have risen by more than $100,000 since March 2020, according to data from Altos Research, have caused her clients to be pickier when selecting a home.

“When rates and prices were lower, people were more willing to compromise,” Newcomb said.

Out in Wise, Virginia, near the westernmost tip of the state, RE/MAX Cavaliers agent Brett Tiller and his clients are also struggling to find suitable properties.

“The thing that really stands out, especially compared to two years ago, is the lack of quality listings,” Tiller said. “The slightly more upscale single-family listings for move-up buyers with children looking for their forever home just aren’t coming on the market right now, and demand is still very high.”

Statewide, Virginia had a 90-day average of 8,068 active single-family listings as of March 8, 2024, down from 14,471 single-family listings in early March 2020 at the onset of the COVID-19 pandemic, according to Altos Research. That represents a decrease of 44%.

Virginia-Inventory-Line-Chart-Virginia-90-day-Single-Family

In Newcomb’s base metro area of Charlottesville, there were an average of only 277 active single-family listings during the same recent 90-day period, compared to 892 at the onset of the pandemic. In Wise County, there were only 56 listings.

Due to the demand from move-up buyers in Tiller’s area, the average days on market for homes with a median price of roughly $190,000 was just 17 days as of early March 2024.

“For the right home, which is rare to find right now, we are still seeing multiple offers,” Tiller said. “The demand is the same right now as it was during the heart of the pandemic.”

According to Tiller, the tight inventory has caused homebuyers to spend up to six months searching for their new property, roughly double the time it took prior to the pandemic.

For Matt Salway in the Virginia Beach metro area, the tight inventory conditions are creating a rather hot market.

“Depending on where you are in the area, your listing could have 15 offers in two days,” the agent for Iron Valley Real Estate Hampton Roads | Virginia Beach said. “It has been crazy competition for most of Virginia Beach, and Norfolk is pretty hot too, especially for anything under $400,000.”

According to Altos Research, the Virginia Beach-Norfolk-Newport News housing market had a seven-day average Market Action Index score of 52.44 as of March 14, making it the seventh hottest housing market in the country. Altos considers any Market Action Index score above 30 to be indicative of a seller’s market.

Virginia-Beach-Metro-Area-Market-Action-Index-Line-Chart-Virginia-Beach-Norfolk-Newport-News-VA-NC-90-day-Single-Family

Further up the coastline on the vacation destination of Chincoteague Island, Long & Foster agent Meghan O. Clarkson is also seeing a decent amount of competition despite higher prices and interest rates.

“People are taking their time to actually come see things now instead of buying site unseen, and occasionally we see some seller concessions, but the traffic and the demand is still there; you might just work a little longer with people because we don’t have anything for sale,” Clarkson said.

“I’m busy and constantly have appointments, but the underlying frenzy from the height of the pandemic has gone away, but I think it is because we have just gotten used to it.”

While much of the demand that Clarkson’s market faces is for vacation homes and from retirees looking for a scenic spot to retire, a large portion of the demand in Salway’s market comes from military personnel and civilians working under government contracts.

“We have over a dozen military bases here, plus a bunch of shipyards, so the closer you get to all of those bases, the easier it is to sell a home and the faster the sale happens,” Salway said.

Due to this, Salway said that existing-home inventory typically does not come on the market unless an employment contract ends or the owner is reassigned to a different base, which is currently contributing to the tight inventory situation in his market.

Things are a bit different for Tiller and Newcomb, who are seeing a decent number of buyers from other, more expensive parts of the state.

“One of the crazy things about Louisa and Goochland, which are kind of like suburbs on the western side of Richmond, is that they are growing like crazy,” Newcomb said. “A lot of people are coming in from Northern Virginia because they can work remotely now.”

With a Market Action Index score of 50, it is easy to see why people are leaving the Washington-Arlington-Alexandria market for the Charlottesville market, which has an index score of 41.

In addition, the 90-day average median list price in Charlottesville is $585,000 compared to $729,900 in the D.C. area, which Newcomb said is also luring many Virginia homebuyers to move further south.

Median-Price-D.C.-vs.-Charlottesville-Line-Chart-90-day-Single-Family

“They are very accustomed to higher prices, so they are super impressed with the prices we offer here in the central Virginia area,” Newcomb said.

For local buyers, Newcomb said this means they are frequently being outbid or outpriced.

“A couple who is local to the area and has been here their whole life, they are just now starting to get their mind wrapped around the fact that you can’t get a house for $200,000 anymore,” Newcomb said.

As the year heads closer to spring, triggering the start of the prime homebuying season, agents in Virginia feel optimistic about the market.

“We are seeing seasonal trends like we did up through 2019,” Clarkson said. “The market kind of soft launched around President’s Day and it is still building, but I expect it to pick right back up and be in full swing by Easter like it always used to.”

But while they are confident in demand, questions still remain about whether there will be enough inventory to support even more homebuyers entering the market.

“I have a lot of buyers starting to come off the sidelines, but in my office, I also have a lot of people who are going to list their house in the next two to three weeks now that the weather is starting to break,” Newcomb said. “I think we are going to have a good spring and summer.”

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