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CEC Entertainment Inc., the parent of Chuck E. Cheese and Peter Piper Pizza, filed for Chapter 11 bankruptcy on Thursday morning, making it the latest casualty of the virus pandemic that has crushed the restaurant industry. 

CEC, owned by private-equity firm Apollo Global Management Inc., said the public health crisis and virus-related lockdowns have been the “most challenging” in its history, as it grapples with the severe financial strain of continued store closures. 

The company listed both assets and liabilities in the range of $1 billion to $10 billion, according to court filings in the U.S. Bankruptcy Court for the Southern District of Texas. The strategic purpose of the bankruptcy is to “achieve a comprehensive balance sheet restructuring that supports its reopening and longer-term strategic plans.”

CEC said the U.S. and international franchise partners are excluded from restructuring. As of this week, 266 Chuck E. Cheese and Peter Piper Pizza restaurants have reopened – CEC operates more than 700 facilities, suggesting operating capacity is about 38%.

Readers may recall, bankruptcy fillings soared last week to 11-year highs matching the peak of the global financial crisis. The filings, led by weak consumer and energy sectors, were the most for any week since May 2009.

A period of high unemployment will be sticking around for the next several years – there’s a striking correlation between the unemployment rate and loan delinquencies – as we noted a month ago – will result in a “biblical” wave of bankruptcies.

The bad news this week is the emergence of the virus in California, Florida, and Texas. New quarantine orders were established in New York, New Jersey, and Connecticut on Wednesday for travelers from out of state. This all suggests lockdowns in certain states could be ahead – despite the Trump administration warning the economy cannot afford another round of lockdowns. 

If the economic recovery is drailed by a second coronavirus wave – expect a flood of bankruptcies from virus sensitive industries such as restaurants – which essentially means there’s no V-shaped recovery. 

Authored by Alex Nitzberg via JustTheNews.com,

BET founder Robert Johnson during a Wednesday interview with Fox News described people toppling statues as “borderline anarchists” and pushed back against the idea that black people support such behavior, suggesting instead that they “laugh” at those who knock down the statues.

“You know black people, in my opinion, black people laugh at white people who do this, the same way we laugh at white people who say we got to take off the TV shows,” he said mentioning the “Dukes of Hazard,” a decades-old television program that has come under fire for featuring a car emblazoned with a Confederate flag graphic.

He pointed out that knocking over a statue will not “close the wealth gap,” “give a kid whose parent’s can’t afford a college money to go to college,” “close the labor gap between what white workers are paid and what black workers are paid” or “take people off welfare or food stamps.”

Johnson said that whites who seek to “assuage guilt by doing things that make them feel good” would be much more reluctant to support payments for blacks.

Referring to actions such as “changing names, toppling statues, [and] firing professors because they said all lives matter,” Johnson explained that “it just shows to me that white America is continually … incapable of recognizing that black people have their own ideas and thought about what’s in their best interests.”

He suggested that black people should be consulted before people take actions like tearing down statues or firing someone for a comment they have made.

“Give us the belief that you respect our opinion. You go out and do something and destroy something, fire somebody because you think it hurts us. Why don’t you ask us first if it hurts us before you go and say ‘Oh, I gotta do something for the negroes to make them feel better.’ Well ask us if we want you to do that to make us feel better,” he said.

Johnson likened white people’s actions attempting to make black people “feel good” to “rearranging the deck chairs on a racial Titanic. It absolutely means nothing,” he said.

Johnson’s comments come as debates rage across the country in the aftermath of the death of George Floyd—in some cases protestors have defaced and toppled statues. President Trump has come out against changing the names of military installations named after Confederate leaders.

NatGas prices near a 25-year low on Thursday morning as the summer heat has yet to materialize, and oversupplied conditions persist. 

August NatGas futures slid 2% to 1.612 MMBtu on Thursday morning, weighed down by the lack of heat-driven demand and continued LNG weakness. 

The summer heat has taken hold across most of the Lower 48, leading to stronger power burns. But futures markets have looked for indications of extreme temperatures to drive lofty cooling demand and offset the shocks of the coronavirus pandemic and the global recession it induced.

Weather models have, so far this week, instead produced modestly cooler outlooks than what forecasters had projected over last weekend, leaving markets to focus on simmering LNG challenges and the effects of overall demand destruction inflicted by the pandemic despite governments lifting restrictions on businesses and consumers.

“After cooler trends the past few days for early next week, the data was back a little hotter, but still with several weather systems preventing impressive or widespread heat,” NatGasWeather said in a Wednesday afternoon forecast. Data also “trended cooler for the Fourth of July weekend” with weather systems over the eastern U.S. set to prevent upper high pressure “from getting quite as strong as previous runs.” – Reuters Commodity Desk 

US Lower 48 – 45-day cooling degree day 

A NatGas analysis of Bloomberg data showed gas production increased over 87 Bcf/d this week amid reports of production returning as oil drilling resumed. The data also showed the U.S. crude production hit 10.5 million b/d on June 12, has since rebounded to 11.0 million b/d on June 19. The all-time-high in production was reached on March 13 at 13.1 million b/d. The virus-related downturn in the economy has led to a collapse in energy product demand, resulting in a historic drop in oil rigs shuttering operations.

As for LNG exports, here’s what Reuters said: 

At the same time, LNG export levels hover near 4.0 Bcf/d, up from recent lows but still soft, as demand from formerly reliable destinations in Europe and Asia remains anemic due to slow economic recoveries and modest industrial energy needs. The threat of a virus resurgence also weighs on demand. In the United States, the rate of increases in Covid-19 cases has accelerated in June amid the reopening of local economies, with several states, including Texas and Arizona, reporting daily record highs this month, according to Johns Hopkins University data.

“While further progress on treatments and vaccines for Covid-19 could lead to added confidence on lifting of lockdowns … these are unpredictable times,” shipbroker Fearnleys AS said. As such, LNG sentiment remains “flat.”

Expectations for today’s U.S. Energy Information Administration (EIA) NatGas report will likely result in continued builds for the week ending June 19. 

The U.S. Energy Information Administration (EIA) on Thursday is set to issue its storage report for the week ended June 19. A Bloomberg poll found injection estimates ranging from 100 Bcf to 114 Bcf, with a median of 108 Bcf. A Wall Street Journal survey produced an average build expectation of 105 Bcf, while a Reuters survey of 17 analysts produced a 90 Bcf to 115 Bcf injection range and a median 106 Bcf injection. NGI estimated a 116 Bcf build. – Reuters 

To offset coronavirus demand loss – extreme heat in the US Lower 48 is needed this summer- if that doesn’t happen – NatGas prices will continue moving lower. 

Authored by Isabel van Brugen via The Epoch Tiomes,

Protesters at Seattle’s “Capitol Hill Organized Protest” (CHOP) zone are being encouraged by community leaders and an activist whose brother was fatally shot by city police in 2016 to leave the “occupied” protest zone.

A Twitter account, which claims to be the “official account” for CHOP, posted a statement on Wednesday addressed to “comrades in the struggle,” encouraging protesters to leave the area that was established earlier this month in the wake of Black American George Floyd’s death in police custody.

An important message from #CHOP #CHOPSeattle. Please amplify. Thank you for your support over the last two weeks. #ChopWasASuccess #CHOPcomms #CHOPCHAZ ☂️☂️☂️ #BlackLivesMatter pic.twitter.com/7e5ISrWvX6

— Capitol Hill Occupied Protest (Official Account) (@CHOPOfficialSEA) June 24, 2020

“The CHOP project is now concluded,” the message said.

“While we expect a very small handful of holdouts may try to remain in the CHOP, no further organizing will be occurring to support this presence and the number on-site will be too small to be more than an annoyance for pedestrians rather than a zonal blockade.”

It is unclear who runs the Twitter account, however, the statement was signed as from “the Capitol Hill Solidarity Committee.”

“Last night, Solidarity Committee received notice from some of our trusted partners that persons in the park were in danger. We immediately implemented our emergency relocation plan, successfully evacuating most of the park. Thankfully, no danger materialized. However, we are now left with the reality that very few people remain in our beloved CHOP,” the message continued.

Free food station for those in the zone: pic.twitter.com/SkfeI9SMLZ

— Bowen Xiao (@BowenXiao_) June 12, 2020

It called on protestors occupying the zone to “continue the struggle” through social media platforms such as Twitter, Facebook, Instagram, and Snapchat, adding: “We have held city officials accountable and can continue to do so in a way that is safe for everyone.”

The message then called on supporters to vote for presumptive Democratic presidential nominee Joe Biden, to reelect Washington Gov. Jay Inslee (D), and Seattle Mayor Jenny Durkan (D).

It comes after Durkan announced on Monday that officials were working to dismantle the blocks-long span of city streets that President Donald Trump asserted was run by “anarchists,” after a shooting left one person dead over the weekend. Three other shootings have been reported in the area in recent days.

I spent nearly 1 week inside #CHAZ interviewing different people and documenting what I saw.

Here’s what I found: https://t.co/TqnaXyxZbR

— Bowen Xiao (@BowenXiao_) June 17, 2020

Durkan said at a news conference that the violence was distracting from changes sought by thousands of peaceful protesters seeking to address racial inequity and police brutality.

“The cumulative impacts of the gatherings and protests and the nighttime atmosphere and violence has led to increasingly difficult circumstances for our businesses and residents,” she said. “The impacts have increased and the safety has decreased.”

Dozens of protestors, however, are reportedly refusing to budge despite increasing calls to do so. They say their demands to slash police budget by 50 percent and distribute funds to community efforts have not been met.

“Our demands aren’t met,” one man who had set up his tent outside the Seattle Police Department’s abandoned East Precinct building told The Seattle Times. “Why would we leave?”

As part of the 2020 and 2021 budget, we will be looking at @SeattlePD‘s culture and budget. Police should not always be first people on the scene to deal with every call for help. Not every 9-1-1 call requires someone with a firearm to show up.

— Mayor Jenny Durkan (@MayorJenny) June 23, 2020

Durkan on Wednesday submitted a “Budget Rebalancing” document (pdf) that seeks to cut $20 million from the city’s police department budget in a bid to address a series of challenges that include “a movement to demand anti-racist action, to divest and rethink policing, and end institutional racism.”

The mayor’s proposal for a $20 million cut amounts to a 5 percent cut, according to The Seattle Times.

The earliest scheduled vote on the rebalancing legislation and amendments is on July 1, according to an official committee meeting schedule.

“Not This Time” founder Andre Taylor, whose brother Che Taylor was shot by Seattle police four years ago, said the violence in the occupied zone distracts from key messages about racial injustice.

“If there was no violence, you should’ve stood there for as [long as] you wanted to stay there, but the violence creates a different narrative where the people in authority have to look at it differently,” he told KING-TV.

“Our community does not support the violence,” he added.

Last year, the local county prosecutor overseeing Taylor’s case said that charges against the police officers who opened fire on Taylor would not be filed after a majority of jurors said they believed the officers thought Taylor posed a “threat of death or serious bodily injury.” Andre argued that he believes the officers internalized their fear in the lead up to the confrontation as they observed Taylor from afar.

The statement from CHOP’s “official” Twitter account said they were told that the zone would be dismantled “no later than early next week.”

“[It] will be preceded by the removal of barriers and the reopening of streets to traffic,” the statement said.

As fears of a second wave of COVID (and the concommitant risk of re-lockdowns for America) soar, the last week saw 1.48 million more Americans filed for unemployment benefits for the first time (notably worse than the 1.32 mm expected).

Source: Bloomberg

That brings the fourteen-week total to 47.25 million, dramatically more than at any period in American history. However, as the chart above shows, the second derivative has turned the corner (even though the 1.48 million rise this last week is still higher than any other week in history outside of the pandemic)

California and Maryland were the worst states for jobless claims in the prior week with Oklahoma and Kentucky showing the biggest improvement…

Continuing Claims did drop modestly but hardly a signal that “re-opening” is occurring! And definitely not confirming the PMI data…

Source: Bloomberg

And as we noted previously, what is most disturbing is that in the last fourteen weeks, more than twice as many Americans have filed for unemployment than jobs gained during the last decade since the end of the Great Recession… (22.13 million gained in a decade, 47.25 million lost in 14 weeks)

Worse still, the final numbers will likely be worsened due to the bailout itself: as a reminder, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed on March 27, could contribute to new records being reached in coming weeks as it increases eligibility for jobless claims to self-employed and gig workers, extends the maximum number of weeks that one can receive benefits, and provides an additional $600 per week until July 31.

Finally, it is notable, we have lost 387 jobs for every confirmed US death from COVID-19 (121,979).Was it worth it?

The big question remains – what happens when the $600 CARES Act bonuses stop flowing? Will those who stayed home (thanks to making more money siting on their couch than working) be able to find a job?

After March and April’s collapse, US Durable Goods Orders were expected to rebound strongly in May and according to preliminary data, they did as headline data soared 15.8% MoM – the most since July 2014. However, on a year-over-year basis, duirable goods orders remain down 21.4%…

The MoM rise of 15.8% was better than the expected 10.% rise (but off a revised lower -18.8% drop in April)…

Source: Bloomberg

Is the ‘V’ you’ve been looking for?

Source: Bloomberg

Closely watched core capital goods orders, which exclude aircraft and military hardware, rebounded 2.3% in May after a 6.5% revised lower decrease a month earlier. Shipments of those goods, a proxy for equipment investment in the government’s gross domestic product report, rose just 1.8% (after a revised lower 6.2% drop in April)…

While states have begun letting business reopen, manufacturing will likely remain slow to recover as fewer people shop and businesses rein in capital spending projects. But, of course, this is all in the rear-view mirror, stocks tell you what happens next, right? V-shaped recovery any second!

While hardly even worth mentioning at a time when everyone is focusing not so much on Q2 GDP but whether Q3 will stage a V-shaped recovery, it is perhaps worth noting that today’s final Q1 GDP revision came in right on top of expectations, and unchanged from the 2nd revision of -5.0% annualized.

While the overall change in GDP was unrevised from the second estimate, an upward revision to business investment was offset by downward revisions to inventory investment, consumer spending, and exports.

The changes between the first and second estimate are as follows:

• Personal Consumption revised lower: from -4.69% to -4.73%
• Fixed Investment revised higher: from -0.41% to -0.21%
• Change in Private inventories revised higher: from -1.43% to -1.56%
• Exports revised slightly lower: from -1.02% to -1.06%
• Imports also largely unchanged: from 2.34% to 2.37%
• Government Consumption was also flat: from 0.15% to 0.20%.

Personal consumption fell 6.8% in 1Q after rising 1.8% prior quarter, and also in line with expectations.

The GDP price index rose a modest 1.4%, also in line with last quarter, and also unchanged, while core PCE posted a modest increase and beat, coming in at 1.7% vs 1.6% expected and in the 2nd revision.

Corporate profits decreased 12.3% at a quarterly rate in the first quarter after increasing 2.6% in the fourth quarter. Corporate profits decreased 6.9% in the first quarter from one year ago.

• Profits of domestic nonfinancial corporations decreased 15.4 percent after increasing 4.8 percent.
• Profits of domestic financial corporations decreased 9.2 percent after increasing 0.2 percent.
• Profits from the rest of the world decreased 8.0 percent after decreasing 0.3 percent.

While we knew that this would be the worst print since the financial crisis, the real question is what Q2 GDP will be, and more importantly whether Q3 GDP for a quarter that begins in less than a week, will show the dramatic improvement already priced into stocks.

Authored by John Rubino via DollarCollapse.com,

Wolf Richter just published some charts that, for anyone with a sense of stock market history, are pretty ominous. It seems that the major market indexes that recently soared back to record highs are being elevated by an amazingly small number of stocks – Apple, Microsoft, Amazon, Google and Facebook to be specific — which he calls the “Giant 5.”  These stocks now account for nearly one-fifth of the Wilshire 5000 stock index’s value:

That kind of dependence on just a handful of companies is intuitively scary. What’s even scarier is that we’ve been here before, and each time the result was ugly.

In the 1960s and early 1970s the US stock market was dominated by a group of large-cap stocks that took on a life of their own, elevating the market far beyond what it would have been without them. See if this Investopedia entry sounds familiar:

The Nifty 50 refers to the fifty most popular large-cap stocks that traded at high valuations in the 1960s and 1970s. They included household names such as Xerox (XRX), IBM, Polaroid and Coca-Cola (KO). Due to their proven growth records and continual increases in dividends, the Nifty Fifty were viewed as “one-decision” picks: investors were told to buy and never sell.

Many Nifty 50 stocks sported price-to-earnings (P/E) ratios as high as 100 times earnings. They propelled the bull market of the early 1970s, only to come crashing down in the 1973-74 bear market.

Then in the 1990s, a group of Big Tech stocks strikingly similar to today’s Giant 5 so dominated the market that they gained global significance:

From Bill Fleckenstein’s book Greenspan’s Bubbles:

In May 1999, former Fed Chair Paul Volcker told an audience, “The fate of the world economy is now totally dependent on the growth of the U.S. economy, which is dependent on the stock market, whose growth is dependent on about 50 stocks, half of which have never reported any earnings.”

Volcker saw the bubble. Greenspan missed it. Just a few weeks after Volcker’s speech, Greenspan testified before Congress, saying “Bubbles generally are perceptible only after the fact. To spot a bubble in advance requires a judgment that hundreds of thousands of informed investors have it all wrong. Betting against markets is usually precarious at best.” But the so-called “informed investors” were acting in response to Greenspan’s policy of lowering rates to help the financial markets.

In 2000, inevitably, the bubble popped. Minutes of FOMC meetings show that Greenspan was blind to the fact that the market had been racing up precisely because of his reckless monetary policy. The market crash ruined many naive speculators. Meanwhile, economic researchers began to take issue with Greenspan’s beloved productivity growth. One found that productivity had actually decreased during the late 1990s.

Here’s what happened to the Nasdaq index when that generation of Big Tech stocks returned to their intrinsic value in 2000:

Now back to the current variation on this theme, which Wolf Richter summarizes as follows:

This is how dependent the stock market, and broad portfolios reflecting it, have become on the “Giant 5.” It’s not that there aren’t a bunch of other companies that have gained as much or more than the “Giant 5” in percentage terms – there are – but in dollar terms, and in weight in the market, they just don’t measure up to these five giants.

Apple and Microsoft both are now worth over $1.5 trillion. Amazon is at nearly $1.4 trillion, Alphabet at $1.0 trillion. These are gigantic valuations. They also speak of an immense concentration of power in a single company.

Among the losers in that rest of the market are companies that used to be the largest in the US stock market, such as Exxon-Mobil, which since January 26, 2018, has lost 48% of its value. The entire and once vast oil-and-gas sector has gotten crushed.

The market, and broad portfolios, are immensely dependent on the Giant 5. That was great on the way up – on their way to becoming giants, when their share of the overall market doubled in three-and-a-half years, from 10% in January 2017 to nearly 20% today.

But if they sell off – there are myriad reasons why giants sell off, as all prior giants have found out – the impact of these five companies is going to be proportional to their giant size.