Bonds used to be the main long-term vehicle through which investors would make money in the markets. But all of that has changed thanks to the COVID-19 pandemic.
Thanks to an epic buyout of bonds and significantly reduced interest rates, record lows have been seen across a wide variety of government bond products. The actions taken by central banks may have provided some temporary sense of order, yet comes at the price of bond prices being controlled by the people who write the policies.
As a result, many investors are directing their attention towards the foreign exchange (FX) market.
Yes, the same market where volatility levels are far greater than what they were one year ago. The extremely liquid market that can deliver some phenomenal returns or some equally catastrophic losses. The name of the game is short-term returns to recoup some of the losses experienced with bonds.
Naturally, dipping your toes in the foreign exchange market requires a much larger appetite for risk. But they’re rapidly moving up and down each day, and the investment opportunities are available 24/7, 5 days a week.
For those of you trading in the FX markets, you’d better watch out for some unexpected moves in the last quarter of 2020. Institutional investors with no experience in handling currencies will be making some wildly illogical bets, not understanding exactly how or why they are moving the market.
What do YOU think about this recent switch? Is there any legitimacy behind it, or are investors just in a state of total panic? Let us know your thoughts by replying to the newsletter!
CEO of United Airlines: No Vaccine, No Travel Demand
Some people are absolutely insistent on the COVID-19 vaccine being approved and distributed across the world before life can return back to normal. One of the individuals in full agreement with this opinion is United Airlines’ CEO Scott Kirby.
In a recent interview he did with CBS, he said the aviation industry won’t make a full recovery until the COVID-19 vaccine can be freely available to the United States. As for when he expects that exact moment to come around, he shot out Q4 2021 as his best guess.
It’s interesting for him to make these comments amidst United’s dire financial situation: With revenue declines of 85% and $25 million in cash burned per day, the looming possibility of laying off 16,000 workers becomes a dark reality. So my guess is that he gets nothing out of making these predictions (except getting to keep his executive job).
I would also guess that many other airline CEOs share a similar sentiment, fully realizing they will most likely fail to receive any kind of government bailout before October 1st unless President Trump swoops in with some last-minute deal.
Seems like there are a LOT of industries pinning their hopes entirely on the vaccine!
Cruise Lines Are Already Back in the Water!
Several cruise lines have vowed to take a temporary leave of absence before setting sail again, especially those in the United States. But some international lines aren’t willing to wait much longer before they dip their toes in the water again. And neither are the travelers who have booked cruise trips for Q3 and Q4 2020.
Notable lines resuming activity include MSC Cruises, SeaDream Yacht Club, Aranui Cruises, Costa Cruises, Paul Gaugin Cruises, TUI Cruises, and Croisi Europe. As for the countries being serviced, it’s mostly within the EU.
If these international lines haven’t already restarted their trips again, they have announced definite plans to do so in October or November.
It was bound to happen, honestly. Cruise lines cannot stay booked up forever in fear of what will happen with the transmission of COVID-19. Once they have fully optimized their procedures and protocols for keeping staff members and guests safe, they have to launch and adapt as they go along.
As for those of us who want to cruise along in the USA, we’ll have to wait just a little bit longer.
Travel Demand Is Up and So Are Airline Stocks!
In line with the previous story, it looks like travel demand is equally on the rise when it comes to flying.
According to the Transportation Security Administration, the highest average number of people processed through security checkpoints has been achieved. It was 97,999 in the week ending on April 19, which was the lowest since the start of the COVID-19 pandemic. Last week’s number was 715,145 as a daily average, and the week ending September 13th turned out to be 738,038.
This directly translated into the stocks of various airlines going right up. Delta Air went up by 3.2%, American Airlines rose by 2.1%, SouthWest Airlines made a 2.8% gain, and Alaska Air saw a 2.92% increase (amongst several others). This was reflected in the US Global Jets exchange-traded fund JETS going up by 2.23%.
One of the major factors leading to this sector-wide boost was news from Delta Airlines. They intend to raise $6.5 billion in collaboration with its subsidiary SkyMiles via a bond offering.
This announcement leads to the possibility that airlines may seek private means of raising capital to sustain themselves instead of relying heavily on the government to create a stimulus bailout fund by October 1st.
What do YOU think will happen? Will the airlines go the private route or fall back to government handouts once again? Reply to this newsletter with your predictions!
Smoke-Free Casinos Are Coming to the Las Vegas Strip
The casino joints in Las Vegas are one of the last few remaining places in the USA where you can freely smoke indoors without having to walk all the way outside to light up a cigarette.
But COVID-19 is going to change all that. If you remember that the virus is a respiratory infection, and that people with heavy smoking histories are more susceptible to contracting and transmitting the virus, you’ll understand what logically follows.
Two casinos in Las Vegas, NoMad Las Vegas, and Park MGM, will become the first casinos to be 100% smoke-free. This change was announced amongst limited hours of operations and limited amenities. It turns out that a significant number of guests were requesting a smoke-free experience, and that’s exactly what they’re getting.
Alongside these modifications is a brand new “Seven Point Safety Plan” being rolled out by MGM and the hotels operating under its wing.
Social distancing policies, hand-washing stations everywhere, touch-free check in, temperature checks, mandatory mask wearing, and all-new cleaning protocols are just some of the changes to be rolled out in the near future.
Azul Airlines to Receive Aid from the Brazilian Government… or Not!
If the airlines in the USA aren’t receiving government funding, there are other countries who will happily support their most vital airlines for fueling their international tourism efforts.
Azul Airlines, one of the most important airlines for Brazilians, was recently offered a financial aid package from the Brazilian government. Sitting at $376 million, 60% of the offer will be funded by the development bank, with the remaining 40% being contributed by investors and other banks.
This naturally led to the share prices rising by 6% by the end of yesterday’s trading session. However, Azul stated that they may not need the money. Due to a strong cash balance and rising travel demands, they may have the option to walk away.
One of the factors preventing them from jumping into bed with the government is a 15% stock dilution. This would be necessary in order for the deal to go through, but at the expense of each share representing a smaller piece of the company. The stock’s value would down in the short-term yet the company would solidify themselves against the possibility of bankruptcy.
It’s a tough decision to make. Whichever direction they go, let’s just hope they make the right call (for their own sake).