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What’s that smell? You smell that?
Smells like a 3 day weekend to me! Everyone be safe this weekend and have fun.

Companies Confront the Unforgiving Economics of Coronavirus
Rising costs, weak demand, and customer limits are challenging business owners as they begin to reopen. Companies from major retailers and package carriers to local restaurants and hair salons are awakening to a new economic reality in the age of the new coronavirus: being open for business is almost as hard as being closed.

Facing higher costs to keep workers and customers safe and an indefinite period of suppressed demand, businesses are navigating an ever-narrowing path to profitability.

To put things in perspective, Walmart, Target, and Home Depot this week said they absorbed more than $2B comined in added expenses for wages, bonuses, and other benefits for workers during the early months of the pandemic. The stakes can be higher for small businesses which tend to operate on thinner profit margins and smaller cash reserves.

Price of food and other items have risen (I have a friend that owns a restaurant and he told me last night the price he pays for his beef has tripled since COVID began), employees need protective equipment, new safety concerns, and the number of customers they’re allowed to serve is capped.

It ain’t looking good for most small businesses right now. You really want to help someone out during this? Go eat at a local restaurant or buy from a local small business.

State Jobless Rates for April Show Uneven Impact of Pandemic
Nevada’s unemployment rate was highest at 28.2%; rates were close to 8% in Minnesota and Nebraska. Unemployment rose across all 50 states is the highest its been since 1976. That’s 44 years ago.

Here’s a little graph I saw that helps illustrate things –

Why was Nevada hit so hard? The casino industry of course – which are now allowed to open at limited capacity in Mississippi and Louisiana. Hawaii faced similar challenges – employment in leisure and hospitality accounts for one in five jobs there. Those jobs declined -56% in April.

States also heavily dependent on manufacturing also saw big job losses. Auto makers like GM, Ford, and Fiat Chrysler all closed plants in Michigan mid-March. Michigan’s employment in manufacturing industries fell -28% in April.

It will be interesting to see how quickly these states can bounce back and which companies will be agile enough to continue to drive growth.

Corporate Bond Rally Picks Up Momentum
Are you a bond lover? I’m not – so most of this sounds like gibberish to me. But if you are, this paragraph is for you.

As of Thursday, the average extra yield, or spread, investors demand to hold speculative grade corporate bonds over US Treasury bonds was 6.81%. This was down -0.76% from the previous Friday – on track for the biggest weekly decline since the week ended April 17.

Average spread on investment-grade corporate bonds also was down the most since that week, tightening -0.23% to 1.85%.

BlackRock’s iShares U.S. high-yield corporate-bond exchange-traded fund ticked up 0.3%, while its investment-grade ETF was flat. AT&T’s new 2.75% 2031 notes traded in the afternoon with a spread of 2.05%, having been issued Thursday at a spread of 2.1%.

The yield on the benchmark 10-year U.S. Treasury note settled at 0.659% compared to 0.677% Thursday. Net inflows into high-yield funds totaled $1.6 billion in the week ended Wednesday, bringing the three-week total to nearly $10 billion.

Alright, enough of that.

GM’s Plans to Increase Truck Production Delayed by Parts Shortage
A shortage of parts from Mexico is hampering GM’s plans to quickly ramp up production of high-profit pickup trucks. GM has delayed plans to roughly double output at its two main US pickup-truck factories by adding additional shifts of workers next week. GM is prioritizing large pickup tricks as they restart North American operations (probably because the price of gas is so low and a big deterrent for people to not to buy a pickup truck is their fuel economy. Low gas prices might mean more pickup truck sales).

The company is scrambling to replenish thin dealership lots and also needs to jumpstart cash flow, after burning through billions of dollars over the last few months amid the industry shutdown – and GM’s truck + SUV sales generate ~$65B in annual revenue for them. Credit Suisse estimates GM’s truck business along accounted for $10.7B in pretax profit in 2019, or about 90% of the company’s total profit.

They need their truck sales ASAP. Y’all whipping around in a truck/SUV or sedan right now? I’m in a 2006 Lexus ES 330 – what a beauty. See you all Monday.

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