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The U.S. Economy Will Beat Coronavirus, Buffett Says: ‘Never Bet Against America’ – Forbes

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TOPLINE

Billionaire investor Warren Buffett, speaking at Berkshire Hathaway’s first-ever virtual shareholders meeting on Saturday, said that he is optimistic that the U.S. economy can bounce back and overcome coronavirus. 

KEY FACTS

While Buffett admitted that “we haven’t faced anything that quite resembles this problem” before, he said that the United States has “faced tougher problems” and overcome them in the past.

“I remain convinced… nothing can basically stop America,” he said. “The American miracle, the American magic has always prevailed and it will do so again.”

Buffett acknowledged that the virus is “still hard to evaluate” and “we’re learning as we go along,” though he says that he does take solace in the fact that it is “not as lethal as it may have been.”

While he is optimistic about America’s economic future, Buffett said that the fallout from coronavirus is still unclear—and hard to compare to past crises: “In 2008-2009, our economic train went off the tracks,” he described. “This time, we just pulled the train off the tracks and put it on a siding.” 

The Oracle of Omaha took a big-picture view to demonstrate his optimism about the economy: The United States today is “an incredibly more wealthy country than we were in 1789.”

He calculated that the net worth of the United States in 1789 amounted to around $1 billion, while the wealth of the country today is well over $100 trillion: “That’s mind blowing,” he said.

CRUCIAL QUOTE

“In the end, the answer is: Never bet against America,” Buffett said.

Big number: $49.75 billion

That’s how much Buffett’s investing conglomerate, Berkshire Hathaway

BRK.B
, lost in the first quarter. The company reported a massive net loss of nearly $50 billion, as the coronavirus-driven market sell-off took a significant toll on the company’s stock holdings.

Key background

U.S. economic activity plunged during the first quarter, with GDP contracting by 4.8%—the biggest downturn since the 2008 financial crisis. The benchmark S&P 500 index had fallen over 30% by late March, before recouping some of those losses in April: It’s now down 13% so far in 2020. What’s more, with corporate earnings season well underway, many companies are also disclosing the damage the virus has done; Even some of the biggest companies in the world, such as Apple

AAPL
and Amazon

AMZN
, have felt the impact.

Further reading

Berkshire Hathaway Lost $50 Billion Last Quarter As Warren Buffett’s Investments Took A Hit From Coronavirus (Forbes)

What Is Warren Buffett Up To? Berkshire Swooped In During 2008, But What’s Its Power Play For 2020? (Forbes)

Stocks Had Their Best Month In 33 Years, But Here’s Why Experts Are Skeptical (Forbes)

Here’s What Warren Buffett Says About The Coronavirus And His Outlook On Stocks (Forbes)

Full coverage and live updates on the Coronavirus

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Why the stock market is outperforming the economy: Morning Brief – Yahoo Canada Finance

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Tuesday, May 26, 2020” data-reactid=”16″>Tuesday, May 26, 2020

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET.&nbsp;” data-reactid=”17″>Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. 

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Subscribe” data-reactid=”18″>Subscribe

<h2 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Corporate profits look better than expected, the economy looks worse than expected” data-reactid=”19″>Corporate profits look better than expected, the economy looks worse than expected

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="During the early days of the coronavirus pandemic, economic and market forecasters were flying blind.” data-reactid=”20″>During the early days of the coronavirus pandemic, economic and market forecasters were flying blind.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Accelerating numbers of confirmed COVID-19 cases along with sudden lockdowns around the globe made it impossible to estimate with any accuracy the kind of impact economies and businesses would see.” data-reactid=”21″>Accelerating numbers of confirmed COVID-19 cases along with sudden lockdowns around the globe made it impossible to estimate with any accuracy the kind of impact economies and businesses would see.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="As preliminary March data — which captured the earliest impacts of these lockdowns — started to trickle in, forecasters were quick to slash their expectations. Economists predicted depression-like numbers and the financial market pros predicted earnings would crash.” data-reactid=”22″>As preliminary March data — which captured the earliest impacts of these lockdowns — started to trickle in, forecasters were quick to slash their expectations. Economists predicted depression-like numbers and the financial market pros predicted earnings would crash.

Now, after two months and many economic and earnings reports later, two narratives have emerged: the U.S. economy as a whole is in worse shape than expected, and the profits of America’s biggest corporations are doing better than expected.

<h3 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The economy looks worse” data-reactid=”24″>The economy looks worse

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Following the releases of April economic numbers, including dismal jobs numbers and disastrous retail numbers, economists revised their forecasts even lower.” data-reactid=”25″>Following the releases of April economic numbers, including dismal jobs numbers and disastrous retail numbers, economists revised their forecasts even lower.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="On May 12, Goldman Sachs cut its GDP forecasts and while warning the unemployment rate would spike to 25%. The same day Goldman cut its forecasts, Credit Suisse economists made similar cuts while warning “a longer growth slump will outlast fiscal relief.”” data-reactid=”26″>On May 12, Goldman Sachs cut its GDP forecasts and while warning the unemployment rate would spike to 25%. The same day Goldman cut its forecasts, Credit Suisse economists made similar cuts while warning “a longer growth slump will outlast fiscal relief.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="BofA economists lowered their GDP estimates last Wednesday, warning that GDP in Q2 would fall at a 40% rate while saying the recession will be “unlike anything we have seen in modern history.”” data-reactid=”27″>BofA economists lowered their GDP estimates last Wednesday, warning that GDP in Q2 would fall at a 40% rate while saying the recession will be “unlike anything we have seen in modern history.”

And just on Friday, JPMorgan economists cut their 2021 GDP forecasts while warning the unemployment rate would stay above 10% through at least the end of the year.

<h3 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Big companies are doing better” data-reactid=”29″>Big companies are doing better

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Through Friday, 97% of S&amp;P 500 (^GSPC) companies had announced their Q1 financial results, including many retailers whose quarters went through April.” data-reactid=”30″>Through Friday, 97% of S&P 500 (^GSPC) companies had announced their Q1 financial results, including many retailers whose quarters went through April.

And these numbers have mostly been better than expected.

“Although aggregate earnings are beating estimates by +2.6%, ex-Financials, earnings are surpassing expectations by +7.1%, with 65% of companies exceeding their lowered projections,” Credit Suisse’s Jonathan Golub wrote on Friday.

To be clear, it looks like earnings per share will have been down by around 14% in Q1. But the takeaway is that analysts were expecting worse.

“Expectations were -10.5% at the end of March, and -25.3% when 1Q reporting season began,” Golub added.

These better-than-expected earnings results help, in part, explain the rebound in the stock market.

The U.S. economy appears to be in worse shape than expected. (AP)
The U.S. economy appears to be in worse shape than expected. (AP)

<h3 class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Bigger companies cash in as their smaller competitors struggle” data-reactid=”47″>Bigger companies cash in as their smaller competitors struggle

We’re aware that Corporate America is a part of the U.S. economy, and so these stories aren’t mutually exclusive. Still, these diverging narratives call attention to the fact that big companies have massive advantages in the current environment as everyone else struggles to keep up.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="With many small businesses shuttered and tens of millions of Americans workers headed to the unemployment office, government stimulus checks have made their way to big retailers like Amazon and Walmart, which both reported blowout quarterly numbers.” data-reactid=”49″>With many small businesses shuttered and tens of millions of Americans workers headed to the unemployment office, government stimulus checks have made their way to big retailers like Amazon and Walmart, which both reported blowout quarterly numbers.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“The stimulus might as well be called the Amazon and Walmart shareholder act,” NYU professor Scott Galloway said to Yahoo Finance. “There are some unintended consequences here. The strong are getting stronger.”” data-reactid=”50″>“The stimulus might as well be called the Amazon and Walmart shareholder act,” NYU professor Scott Galloway said to Yahoo Finance. “There are some unintended consequences here. The strong are getting stronger.”

For Galloway, what’s happening in business now was inevitable. “The future doesn’t look any different. It’s just being accelerated faster… After 11 years of a bull economy, a lot of these small businesses quite frankly just shouldn’t be around. And they have to adapt and reshape.”

However, many would contend that it’s unreasonable for all businesses to have prepared a financial buffer for a pandemic that led to an unexpected, fragmented, government-mandated, months-long economic shutdown.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“We let big box retailers stay open because they sell essential goods, but they also sell the same nonessential goods that small stores — who were forced to close — normally do,” Gary Cohn, former director of the National Economic Council recently tweeted. “We can’t let this run small stores out of business and need to make sure we level the playing field.“” data-reactid=”57″>“We let big box retailers stay open because they sell essential goods, but they also sell the same nonessential goods that small stores — who were forced to close — normally do,” Gary Cohn, former director of the National Economic Council recently tweeted. “We can’t let this run small stores out of business and need to make sure we level the playing field.“

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="By Sam Ro, managing editor. Follow him at @SamRo” data-reactid=”58″>By Sam Ro, managing editor. Follow him at @SamRo

What to watch today

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Economy” data-reactid=”60″>Economy

  • 8:30 a.m. ET: Chicago Fed National Activity Index, April (-4.19 in March)

  • 9 a.m. ET: FHFA House Price Index month-on-month, March (+0.6% expected, +0.7% in February)

  • 9 a.m. ET: S&P CoreLogic CS 20-City home price index MoM SA, March (0.3% estimated, 0.45% in February); S&P CoreLogic CS 20-City YoY NSA, March (3.4% estimated, 3.47% in February)

  • 10 a.m. Conference Board Consumer Confidence, May (87.5 expected, 86.9 in April)

  • 10 a.m. ET: New Home Sales, April (500,000 expected, 627,000 in March); New Home Sales month-on-month, April (-20.3% expected, -15.4% in March)

  • 10:30 a.m. ET: Dallas Fed Manufacturing Index, May (-73.7 in April)

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Earnings” data-reactid=”68″>Earnings

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Pre-market” data-reactid=”69″>Pre-market

  • 6:55 a.m. ET: AutoZone (AZO) before market open

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="READ MORE” data-reactid=”72″>READ MORE

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="European stocks rise as all UK shops allowed to reopen next month [Yahoo Finance UK]” data-reactid=”74″>European stocks rise as all UK shops allowed to reopen next month [Yahoo Finance UK]

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Uber-rival Bolt raises $109 million [Reuters]” data-reactid=”76″>Uber-rival Bolt raises $109 million [Reuters]

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Joy, confusion over money allocated for niche U.S. schools amid coronavirus” data-reactid=”80″>Joy, confusion over money allocated for niche U.S. schools amid coronavirus

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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Editor’s note: Morning Brief will be observing Memorial Day. We will return Tuesday, May 26.” data-reactid=”83″>Editor’s note: Morning Brief will be observing Memorial Day. We will return Tuesday, May 26.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.” data-reactid=”85″>Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Find live stock market quotes and the latest business and finance news” data-reactid=”86″>Find live stock market quotes and the latest business and finance news

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For tutorials and information on investing and trading stocks, check out&nbsp;Cashay” data-reactid=”87″>For tutorials and information on investing and trading stocks, check out Cashay

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Include question period in Phase 2 of Manitoba's economy restart, NDP says – CBC.ca

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If restaurants, pools and gyms can reopen in the next sweeping phase of Manitoba’s reopening plan, so should a democratic institution holding the government to account, the Official Opposition says.

NDP Leader Wab Kinew wrote to Dr. Brent Roussin and the premier on Monday, arguing the restoration of regular sitting days of question period should be included in Phase 2 of the economy restart, like the many eateries and recreation centres that can soon open their doors.

No date is attached to the second phase yet. 

“The democratic functions of the Legislative Assembly are an essential part of our province,” the letter reads.

“Other provincial legislatures and Parliament are ensuring that regular sittings of their Houses will take
place in June and during the summer.”

Another edition of question period will occur on Wednesday, but no additional dates have been set. The legislature normally goes on summer recess in early June.

Sittings limited during pandemic

The legislature usually meets four days a week throughout much of spring, but sittings were indefinitely suspended by the COVID-19 pandemic in mid-March. 

There has since been one emergency meeting to pass COVID-19 legislation and three question periods in May. 

While negotiations between party house leaders for extra sitting dates have happened, no plan has been ironed out.

“It seems odd to me that when we look at Phase 2, I might be able to get a tattoo on my way to the gym after which I visited a patio, but I wouldn’t be able to hear the Premier answer accountability questions in Question Period,” Kinew said.

On Monday, the Liberals called for sittings every Monday to Thursday in June.   

House Leader Jon Gerrard says the existing sittings, conducted with a reduced number of MLAs, demonstrate the legislature can function under physical distancing and sanitation requirements.

“We have seven weeks of work to make up, and unless we go back with more sitting days, it is not going to get done,” Gerrard said in a news release.

“We should be sitting in June and September to make sure that the PCs have to justify and defend their agenda in public.” 

A number of Progressive Conservative MLAs are seen in the legislature in March 2020. (Gary Solilak/CBC )

Premier Brian Pallister was non-committal last week when asked about more question periods.

“I understand the job of opposition parties is to do what the opposition is trying to do here now,” he said in a media briefing.

“That being said, we’re focused in the middle of a pandemic on the recovery of our province and we’re also focused on being available in an appropriate manner, in a safe manner, here in the legislature and always to answer questions that the opposition and you in the media may have.”

The government said Monday that the health department is comfortable with the physical distancing measures in place for question period. Any additional sitting dates must be negotiated between the parties. 

During the pandemic, Manitoba legislators are meeting more frequently than their counterparts in other provinces. 

The Saskatchewan and Nova Scotia legislatures haven’t been recalled since mid-March. New Brunswick has only met once to consider COVID-19 legislation and Prince Edward Island will resume sitting tomorrow. 

The Manitoba NDP, however, says the provinces representing the vast majority of the population — including Ontario, Quebec, Alberta and British Columbia — have sitting dates in June. 

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Singapore cuts 2020 GDP outlook again as virus batters economy – TheChronicleHerald.ca

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By Aradhana Aravindan and John Geddie

SINGAPORE (Reuters) – Singapore downgraded its 2020 gross domestic product forecast for the third time on Tuesday, the trade ministry said, as the bellwether economy braces for its deepest ever recession.

The city-state lowered its GDP forecast to a contraction range of -7% to -4% from the prior range of -1% to -4%.

Singapore’s economy shrank 0.7% year-on-year in the first quarter and 4.7% on a quarter-on-quarter, a less severe decline than advance estimates, although officials and analysts warned of more pain ahead.

“There continues to be a significant degree of uncertainty over the length and severity of the COVID-19 outbreak, as well as the trajectory of the economic recovery,” said Gabriel Lim, permanent secretary at the ministry of trade and industry.

Following the news, the central bank chief economist Ed Robinson said monetary policy remains unchanged and will next be reviewed in October, as planned.

Singapore also downgraded its 2020 forecast for non-oil domestic exports to -4.0% to -1.0%, from -0.5% to 1.5% previously.

Exports have been a rare bright spot for the economy in recent months mainly due to a surge in demand for pharmaceuticals.

Analysts expect the trade-reliant economy to see a deeper contraction in the second quarter due to a two-month lockdown, dubbed a “circuit breaker” by authorities, in which most workplaces closed to curb the spread of the novel coronavirus.

The city-state has among the highest number of infections in Asia and has said that easing of the lockdown from next month will only be done gradually.

“The downward revision…implies a significant deterioration in the second-quarter momentum due to the circuit breaker period as well as a weak recovery trajectory,” said Selena Ling, OCBC Bank’s head of treasury research and strategy.

The government first flagged the possibility of recession in February when it cut its 2020 GDP forecast to -0.5% to 1.5%, from 0.5% to 2.5% previously.

Singapore’s finance minister is set to deliver the latest in a string of multi-billion-dollar economic packages to offset the hit to businesses and households from the pandemic later on Tuesday.

(Reporting by John Geddie, Aradhana Aravindan and Fathin Ungku; Editing by Sam Holmes)

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