CPI Increase

U.S. consumer prices increased by the most in more than a year in March.  boosted by increases in the costs of food, gasoline and rents. That was the biggest advance since January 2018 and followed a 0.2% gain in February. but underlying inflation remained gentle against the backdrop of slowing domestic and global economic growth. this supports the FEDS decision to suspend its rate hikes in 2019. If you remove the volatile energy and food prices then Prices only increased 0.1%. Im curious if this trend of increasing prices, although small continues, will make the FED revisit its decision to suspend hikes and start slowly increasing rates.  

















https://www.cnbc.com/2019/04/10/consumer-price-index-march-2019.html

Job Changes in March (by industry)

The sector with the most absolute job growth was by far Education and Health Care. There were about 70,000 jobs added in the Education and Health Care sector in March, the second was professionalism and business services.

It is pretty interesting that there were only two sectors to experience a loss of jobs in March, as the economy seems to be on a slow down. Although, after reading about the different industries and reading the rest of the article it makes more sense. The 2 industries were wholesale trade and manufacturing. We are in a political area where global trade captures much of the attention of news outlets, with recent trade tariffs with China and the global economic slowdown. The United States manufacturing sector has been getting smaller and smaller over the years so this is not much of a surprise. Although, this was a priority of President Trumps administration and saw its first decline since 2017, which could be just the beginning of the downfall.

As an economy, it is good to see that the jobs created in March clearly out weigh the ones lost. I hope that in the future these industries have varying growth rates and can even out the job growth over time.



https://www.cnbc.com/2019/04/05/heres-where-the-jobs-are-in-one-chart.html

Blamed for Climate Change, Oil Companies Invest in Carbon Removal

Major oil companies including Chevron, Occidental Petroleum, and BHP have all invested into a small Canadian company called Carbon Engineering. This comes after years of oil companies taking the main blame for carbon emissions, negatively affecting the environment. Carbon Engineering claims that they are on the verge of developing a fan that will remove already existing carbon out of the atmosphere. This could keep bringing oil companies profits for years as we've seen a rise in affordable alternatives such as electric cars.

Carbon Engineering is also researching ways to process carbon to create synthetic fuel. This fuel would be more costly to consumers, but would be a lot less harsh on the environment. However, the rise in price in this fuel could make it difficult for a new market to develop. There are negative externalities affecting the environment with regards to driving motor vehicles.
However, the additional cost of environmentally friendly fuel would not be worth it to many consumers.

It will be interesting to see the development and implementation of environmentally friendly alternatives by these oil companies. Addressing carbon emissions could be a turning point for the oil industry as a whole. Climate change has been a global concern for decades and it is interesting to see oil companies finally take action against it.

https://www.nytimes.com/2019/04/07/business/energy-environment/climate-change-carbon-engineering.html

Target raises hourly minimum wage to $13

An interesting development this week has been America's eighth largest retailer (by sales), Target Corp, announcing that they will increase their minimum wage to $13 per hour. This is especially important considering that the US unemployment rate has been at its lowest in half a century and retailers are having difficulty in attracting workers. There has been increased political pressure in the nation to raise the minimum wage to at least $15 per hour, and massive companies such as Amazon Inc and Costco Wholesale Corp have followed that exact route in the past year. In the midst of all this, Target has decided to go from an hourly minimum wage of $12 to $13, after just raising it from $11 to $12 early last year.

In contrast, the world's largest retailer, Walmart, has stuck to paying entry-level workers an hourly wage of $11. While their spokespeople have said that workers end up making over $15 when their wages and benefits are combined, this announcement from Target will undoubtedly have at least a minor effect on Walmart's labor activity. A possible issue that has been raised about this news is whether the Target workers already earning $13/hour will see an equal rise in their wages or not. This could be problematic since $13/hour earning experienced workers would be motivated to earn more than new hires and not receiving an increase would lower their motivation. Moreover, there have been reports in the past about similar companies raising minimum wages but then cutting the hours of their workers to keep the average payroll cost the same relatively. However Target decides to proceed, this could be a crucial moment for America's labor market in realizing their values and possibly standing up to corporations such as Walmart.

Article link: https://www.reuters.com/article/us-target-wages/target-raises-minimum-wage-to-13-an-hour-in-tight-labor-market-idUSKCN1RG1F9

Hundreds of millions of Facebook user records exposed on Amazon cloud servers

Hundreds of millions of Facebook user records exposed on Amazon cloud servers

Researchers at UpGaurd, a cyber security firm, found massive amounts of user data hiding in plain sight. This data was inadvertently posted publicly to Amazon's cloud computing servers. The discovery shows that a year after the Cambridge Analytica scandal exposed how unsecure and widely disseminated Facebook users’ information is online, companies that control that information at every step still haven’t done enough to seal up private data. In one instance, Mexico City-based digital platform Cultura Colectiva, openly stored 540 million records on Facebook users, including identification numbers, comments, reactions and account names. The records were accessible and downloadable for anyone who could find them online. That database was closed Wednesday after Bloomberg alerted Facebook to the problem and Facebook contacted Amazon. As a result of these findings Facebook shares fell on the news and they closed down 0.4% at $173.54.

I think of this from two sides. First it is interesting to hear people complain that Facebook is using user data by pretty much selling it to big firms like Amazon through advertisements. Facebook tracks peoples preferences and through technology both Amazon and Facebook can pick up on these preferences and send targeted advertisements to individuals. Facebook is a for profit company so when people complain that their privacy is being violated its a little silly. People post about their entire lives for the whole world to see but get uptight when they get a few extra advertisements thrown their way. If people have a problem with the way Facebook does things then they shouldn't use the sight. It is interesting to note how sloppy Facebook has become at hiding what they are doing. There is obviously a microscope on their user data policies and it seems that they just do not care about either fixing the problem or becoming better at hiding it. I am all for companies doing whatever it takes to make money. But in this day and age if a company is blatantly irresponsible people will take notice and boycott.


https://www.latimes.com/business/la-fi-tn-facebook-user-data-amazon-web-services-privacy-20190403-story.html

Mixed data offer glimmers of hope for slowing U.S. economy

U.S. retail sales unexpectedly fell in February, but a rebound in factory activity in March and strong increase in construction spending offered hope the economy was not slowing as sharply as previously feared. Retail sales dropped 0.2 percent as households cut back on purchases of furniture, clothing, food and electronics and appliances, as well as building materials and gardening equipment. Cold and snowy weather could also have hurt sales. The dollar was little changed against a basket of currencies, while U.S. Treasury prices fell. Stocks on Wall Street were trading higher.While demand is softening, the supply side of the economy is stabilizing.16 industries, including machinery, computer and electronic products, furniture, and electrical equipment, appliances and components, reported growth last month. Apparel and paper products industries reported a contraction.A measure of export orders fell, likely reflecting softening global economic growth. Factories reported hiring more workers last month.

https://www.reuters.com/article/us-usa-economy/mixed-data-offer-glimmers-of-hope-for-slowing-us-economy-idUSKCN1RD2CK

The price of Brexit has been £66 billion so far, plus an impending recession — and it hasn't even started yet

Estimates put the price of Brexit up to this point at $86 billion.  Analysis found that the depreation of the pound, increased inflation, and weak exports has led to a reduction of GDP by 3%, which translates into about $86 billion.

The model consist of creating a basket of counties that when combined with proper weightings matched the UK's growth up till the 2016 referendum.  For Example the US makes up 28.4% of the model, Hungary 24.1%, and Canada is 21.3%. This model creates a statistical doppelganger for the UK. After the referendum the UK slowed down while the doppelganger continued on trend.

The £66 billion implies that the country is £1,000 poorer per person. The decline can be seen in in the recent PMI data as well, with a PMI of 50 that implies no to very little growth.

The economic weakness is caused by firms delaying investment spending. Firms are delaying spending due to the high amount of uncertainty around Brexit. Even as deadlines have came and passed the economy is not sure what Brexit will mean for the UK.

It is clear that the cost of Brexit has been high up to this point and it hasn't even happened yet. It is possible that the UK will enter a recession due to the low investment spending created by the uncertainty. Maybe with some clarity around what Brexit means firms will feel comfortable to begin investment spending again and the UK's economy will strengthen regardless of the terms of Brexit. 


https://www.businessinsider.com/price-of-brexit-66-billion-recession-2019-4

Blamed for Climate Change, Oil Companies Invest in Carbon Removal

As fear of climate change continues to grow, large oil companies are receiving more and more flak for their role in the runaway problem. In the wake of the growing issue, some of these companies have actually begun investing in carbon removal technology. Chevron, Occidental Petroleum, and BHP have all invested in a start-up Candian firm "Carbon Engineering". This firm is in the process of developing technology to remove carbon currently in our atmosphere. The firm is testing enormous fans that suck air into scrubbing vessels that remove carbon dioxide. The CO2 would then either be buried or converted into synthetic fuel.

BHP's VP for sustainability and climate change states “This is about recognizing that climate change poses significant risks to all economic sectors. Climate change is no longer seen as a fringe issue. It’s a business risk that requires a business response.” While these large companies are confirming the threat of climate change they are not necessarily accepting responsibility for their involvement and contribution towards the problem. These same companies continue to extract fossil fuels and lobby for deregulation and further exploration rights. While it is a good sign that more investments are being made into clean environmental technology it is interesting to think about the oil firms' motives. Are they making the investments to save face and satisfy public pressure or are they actually interested in the developing and incorporating the technology into their own business to prepare for a changing world? Most likely it is somewhere in between.

https://www.nytimes.com/2019/04/07/business/energy-environment/climate-change-carbon-engineering.html

US Companies Raised $30B in Q1 2019

Nationally, startups pulled in $30.8 billion in the first quarter of 2019, up 22 percent year-on-year, according to Crunchbase’s latest deal round-up. These investments represented a large chunk (29%) of all US dollars invested in US startups in Q1. 

I'm curious as to how the behavior of a sophisticated investor varies based on the time of the business cycle. So for example, a lot of people have money in traditional equity markets and the stock market is doing quite well. As we reach the top of the business cycle, the performance of the S&P may fall, and this is when we see investors put money into other asset classes, like fixed income or gold. Do these sophisticated investors (VCs, Family Offices, Ultra High Net Worth Individuals, Institutional Firms, etc) allocate money more into private companies and private equity when the stock market has a correction?

To invest in private companies, you usually have to be an "accredited investor", so you either make at least $200,000/year or have $1M in assets. So obviously the average retail investor is not participating in these private deals, but I'm curious as to how the investment deals and deal sizes vary during a recession. Is there more money allocated into startups in such, or do you think there are much smaller deal sizes?
Let me know what your thoughts on how you think these investors act during times of corrections and recessions and how they behave with their money. 






https://techcrunch.com/2019/04/06/startups-weekly-us-companies-raised-30-1b-in-q1-2019/

Ohio Lawmakes Attempt to Rescue Nuclear Plants

Currently in the Ohio statehouse legislators are preparing a bill that would raise electric bills to rescue nuclear power plants. The highly controversial bill is an attempt to essentially bail out the Davis-Bessie nuclear plant just east of Toledo and the Perry plant northeast of Cleveland. If the bill is passed, a large amount of the revenue created would go to subsidize the plants through Ohio's newly created "Ohio Clean Air Program". Supporters of the legislation say, "they [subsidies] are needed because nuclear plants can’t generate power as cheaply as power plants that run on cheap natural gas. They argue that it’s worth keeping the plants going because they’re reliable sources of power and don’t generate a lot of carbon emissions." Opponents including consumer and business groups say, "that the state shouldn't force Ohioans to pay higher electric bill to bail out a utility company." What do you think about this government involvement which may protect a less efficient firm under the argument that it will help clean Ohio's air?

 https://www.cleveland.com/politics/2019/04/tim-ryan-tells-mahoning-valley-crowd-he-is-running-for-president-to-bring-this-country-back-together.html

Cautious Earnings Could Threaten Stock Market Confidence

In the WSJ article "Corporate Profit Squeeze Looms, Threatening Stocks' Climb," author Michael Wursthorn details how less than stunning corporate earning could lead to a shaky stock market. The stock market run this year has had its best returns since '98 and is up 15% from January. The article notes that the Federal Reserve's decision to pause the rate hikes for the rest of 2019 has fueled a lot of the bounce back. Alternatively, however, many large corporations like Walgreens, Apple, FedEx, and 3M have "slashed their profit forecasts for this quarter" which is not a positive signal to markets and could threaten performance. The article mentions that this is the first pullback in earnings in nearly 3 years, with "margin degradation" or the inability to produce meaningful margins as the center of the problem. A Morgan Stanley equity strategist cites that the margins have succumb to the rising costs that companies face from a "strong dollar" and hiring workers. This bit reminded me that business investment is a main driver in the economy, and without it, usually an economic slowdown is on the horizon. If workers are becoming too costly, and companies cannot afford to keep investing in human capital and paying competitive wages, then this could be a signal to the market and an upset to this year's positive returns. Moreover, this also reminded me of the market socialist ideas we have discussed in class. In our flexible labor market, where workers are laid off in downturns or less workers are hired if they are too costly, this allows companies to cut their losses and try to move forward. Alternatively, in the Yugoslavian example that we discussed in class where downsizing was not a real option, these margin concerns and expensive workers would threaten the health of the company and cause many more issues.

I am definitely curious about how the market will react to these earnings pullbacks from such large and successful corporations as well as the ways in which these companies will try to bounce back this next quarter.