Saudi Arabia's sports take over 

This article presented very interesting information on how Saudi Arabia has collected a large amount of sporting industries. The article explains that the main reason that they are attempting to do this is because they are trying to prepare for a world where oil (their main source of income) is less important. Some of the fields that they have expanded to include but are not limited to soccer, formula, golf, horse racing, and boxing. These are all huge sporting fields with tons of money, and now they have some control of all of these markets. This does not come without controversy though, as many people see the human rights issues that are going on and are not in support of these new leagues because of it. It goes as far as the athletes themselves being criticized because of these issues. I believe this is fair to do, but I also see the athletes' side as the Saudi Arabian leagues can throw more money at these athletes than they will see anywhere else. It will be very interesting to see where this country goes in the future and if they will be able to figure out the civil issues in their country. 

https://theathletic.com/5237849/2024/02/02/saudi-arabia-sport-investments/

Meta Shares Jump More Than 16% After Quarterly Report

 Meta posted much better than expected earning on February 2nd. It lead to a massive stock jump of over 16% to start the day. In their earnings statement they reported an EPS of $5.33 and revenue of $40.11 billion. Both were significantly higher than analysts projected. This was an 8 billion dollar jump in revenue from this time last year witch was at $32.2 billion. Meta also paid out a quarterly dividend of $0.50 and were authorized to buy back $50 billion in stock. However it is not all good at Meta as the "Meta Reality Labs" division continues to lose money for the company. This quarter the division lost $4.65 billion. With Apple also releasing their Vision Pro headset, Meta could face some competition but also we could see an increase in consumer interest in AR/VR headsets. It will be interesting to see how Meta stock continues to react to this report in the coming future. 

https://finance.yahoo.com/news/meta-shares-jump-more-than-16-on-solid-earnings-stock-buyback-and-dividend-plan-143622709.html

Fed's Primary Inflation Gauge Rose in December

The core personal consumption expenditures price index, one of the feds favorites indexes to track inflation, has seen a increase from the previous month and an overall increase from year-to-date. The PCE is a metric that tracks how much earned income of households in the US spend on current consumption of various goods and services. There are two measurements of the PCE, one including volatile food and energy cost and one the does not include those prices. When you include the volatile prices of food and energy, the PCE rose 0.2% from the previous month and saw a 2.9% increase from year-to-date. Without the volatile prices, PCE still rose by 0.2% on the month but saw an increase of 2.6% from year-to-date. This grew in tandem with consumer spending increasing 0.7%, which is more than the estimated 0.5%. With the release of these numbers, the futures market is still expecting the Fed to make the first rate cuts in March, with future traders saying there is about a 53% chance it will happen.  

Link: https://www.cnbc.com/2024/01/26/pce-inflation-december-2023-.html

Powell Navigates 'Toxic' Politics of Rate Cuts as Election Nears

    Federal Reserve Chair Jerome Powell finds himself in a challenging position. The Fed is due to cut interest rates in 2024, but given that it's an election year there are many in Washington concerned about the timeline of these cuts.  When asked on the subject of election-year politics, Powell stated, "The minute we start thinking about those things - we just can't do that."

    Allies of former President Trump have accused that the Fed is seeking to help President Biden by signaling that cuts are soon coming. On the other side, the Democrats are concerned that Biden's election chances could be hurt if the central bank waits too long to lower rates.

    Generally, administrations have avoided publicly calling out the Fed. President Trump broke this precedent when he criticized Powell and called for lower rates during his trade war. The Biden administration has mostly avoided speaking on Fed policy.

    Historically, the Fed has changed interest rates during election years. In 2004 during George W. Bush's re-election campaign, the Fed started to raise rates from historical lows. In 2012, the bank executed a bond-buying campaign during President Obama's re-election. Whatever the Fed decides "They'd have to be very clear about why that's the right thing to do in order to be very clear that this is not a political judgement", as stated by former Fed economist William English. 

https://www.wsj.com/economy/central-banking/fed-interest-rate-cuts-election-2024-843cc25a?mod=hp_lead_pos1

The inevitable food system change

     It's no secret that the way we grow food and raise livestock around the world isn't sustainable. There are 3 main categories that this breaks into. The effect on climate change, the lack of food to support everyone on Earth, and the economic opportunity.

    In regards to climate change, food systems alone contribute to 1/3 of global greenhouse emissions and are expected to contribute 2.7 degrees of temperature change by the end of the century. Not to mention as climate conditions grow worse over the years, the overall food yield from farmers will decrease. Switching to better food systems is estimated to turn a net carbon loss by 2040 and a decrease in global temperature by 1.5 degrees. In addition, 1.4 billion hectares will be saved from nitrogen surplus.

    Moving on to starvation, the current path we're on will leave 640 million people underweight by 2050 while global obesity will increase by 70%. Experts are estimating that by 2050 switching to better food systems will save 174 million people from dying a premature death. 

    Economically speaking, making the switch to better food systems is a no-brainer. To start, the estimated cost to switch to a new system across the globe would be 0.2 - 0.4% of global GDP per year. This is nothing compared to the expected gain of $5-10 trillion per year. This would allow farm workers across the world to earn a sufficient income. 

https://phys.org/news/2024-01-food-trillions-dollars-economic-benefits.html

Venezuela Considers Rejecting Deportees from U.S.

    In response to the Maduro regime's decision to ban Maria Corina Machado from participating in presidential elections, the Biden administration has threatened to reimpose sanctions on Venezuela's oil-and-gas industry. According to the U.S. State Department, unless there is progress in allowing opposition candidates to participate in the elections, the license removing sanctions on Venezuela's oil and gas industry will not be renewed.

    The Biden administration had tried to get a deal with Maduro to accept Venezuelans deported from the United States, in order to mitigate the flow of Venezuelans seeking political asylum in the U.S. southern border. Over 200,000 Venezuelans were detained by the U.S. Border Patrol until September, making them the third biggest group of migrants. With the establishment of the deportations agreement in October, Venezuelan oil and gold mining were no longer subject to economic sanctions. And for his part, Maduro had committed to restoring democratic order, freeing political prisoners, and holding free and fair elections in the coming year.

    However, Venezuelan opposition leaders and human rights groups have criticized the regime for becoming more repressive rather than democratic. Maria Corina Machado, the opposition candidate, was barred from holding office for 15 years by the Supreme Court, and the government continues to hold over 250 political prisoners. The Biden administration's response, including threats of sanctions and refusal to acknowledge Maduro's actions as inconsistent with the agreements, signals a potential breakdown in the agreement established in October.  

    Such sanctions, especially against the energy sector, present a substantial challenge to Venezuela's government, heavily dependent on oil revenue. The country, which claims to have the world's largest oil reserves, expects billions in extra income in 2024, the majority of which is intended to be used for election expenses.

Global Trade

    Global trade had a solid entry coming into 2024, and it has shown signs of increasing strength. However, it faces so challenges with political risks all over the world. Bloomberg's trade tracker has finally shown marked improvement in January led by the U.S., which is due to a surge in Los Angeles. Which is the busiest container port in North America. Improving indicators have been adding optimism that the global economy has put the worst of it behind us. Trade in South Korea and Taiwan has been able to sustain export gains as energy demand is up. Especially with the expected drop in interest rates allowing firms and factories to bring down working capital costs. 

    However, politics may interrupt this growth in the global economy. The recent attacks in the Red Sea have shown us how vulnerable supply chains can be. There is also an upcoming vote on Taiwan could lead to another potential conflict that could upend the global economy. If TSMC has trouble getting out their microchips to the market it would create a major shortage for tech companies and they supply chips to most of the top tech companies. It is also an election year in the U.S., Mexico, India, and Indonesia which could lead to new policies that could disrupt economies as well. We will have to see how it all plays out in the coming months. 

https://www.bloomberg.com/graphics/global-trade-indicators/?srnd=economics-v2

Turkey’s Aggressive Approach to Combat Inflation

    Over the past few years, Turkey has battled with an economic challenge as it faces rising inflation, due to the loose monetary policy of the Ankara government. To counteract inflation, the central bank recently implemented a bold move by increasing interest rates again by 250 basis points, bringing rates to 45% as inflation reaches 65%. Since the May 2023 elections, interest rates have witnessed eight consecutive hikes. This is the result of a new economic team added to the central bank which has increased interest rates from 8.5% to 45% to try and curve inflation pressures. Furthermore, the Turkish Lira has experienced a substantial drop as it is down 38% against the American dollar. The Central Bank of the Republic of Turkey has signaled that this might be the end of the tightening cycle. Analysts speculate that this decision may be influenced by the upcoming local elections in March, as a potential turning point for the country’s economic stance. 

    Despite the aggressive tightening cycle, skepticism remains strong amongst many analysts. Bartosz Sawicki a market analyst at Conotoxia Fintech believes that the 3650 basis point increase is not enough to curb the effect of inflation due to the combination of a loose monetary policy, negative real interest rates, and the depreciation of the Lira. Bartosz Sawicki and his colleagues at Contoxia Fintech believe that inflation will rise to 75% by May and new measures will be needed to combat Turkey’s inflation crisis. 

https://www.cnbc.com/2024/01/25/turkey-hikes-interest-rate-again-to-45percent-as-inflation-remains-stubbornly-high.html

Oil prices fall as China property crisis overshadows Middle East violence

 Oil prices fall as China property crisis overshadows Middle East violence

After militants supported by Iran fired rockets that killed American soldiers in Jordan, oil prices initially increased by more than 1%. But later on, worries about China's economy contributed to a decline in prices, which was made worse by the bankruptcy of China Evergrande, a significant real estate developer. Concerns about China's declining demand for crude oil were aroused by the court judgment requiring Evergrande to dissolve. The Middle East issue is also being watched by the market, as tensions have increased following the drone strike on American soldiers in Jordan. The incident was attributed to the Islamic Resistance in Iraq. The Middle East's unpredictability, China's economic woes, and the backdrop of global events all had an impact on the price of oil.

source:

https://www.cnbc.com/2024/01/29/oil-prices-higher-after-iran-linked-drone-strikes-kill-us-troops.html

China is tightening the screws on short selling to prop up its ailing stock market

     China has had rampant issues with its economy, since the large toll covid had in early 2020, and it is still teetering heavily as of now. China's newest ploy to fix its economic situation is to limit big investors' abilities to lend different stocks for short-selling. Which has been adding to its ever-increasing issues with its stock stock market. 

    This measure will ban strategic investors from lending out shares during times been it was agreed to avoid doing so. With this, they hope to promote fairness. Curb advantages in the market, and allow market information time to travel fairly. 

    This has lifted Chinese stocks from a five-year low, and they're attempting to do more. But according to experts the move won't be enough to bring investors back to the country's financial markets. Other factors helped with their current economic situation including a distressed real estate market, mounting debt, unprecedented youth unemployment, and the flight of foreign capital.

https://markets.businessinsider.com/news/stocks/china-stock-market-economic-outlook-short-selling-economy-2024-1

Guyana’s 2015 Oil Discovery Brings Economic Prosperity, and Armed Conflict.

 Article Summary:

Guyana is a small country in South America with a population of 800,000. A 2015 oil discovery helped launch economic activity, with the country claiming the world's highest GDP growth rate in consecutive years (2022-2023). However, the fast economic growth has shaken the country's government. Its weak democratic institutions, sharp political divides, and deep ethnic issues have been the cause for alarm among international energy investors. Many speculate Guyana will have to fix these problems, or its economy will fail despite the large oil supply. South Africa is used as an example of a country rich in resources plagued by internal problems, coining the phrase "Energy Curse". 

However, energy curses aren't the only thing on Guyana's public official's minds. As the discovery of oil brought prosperity, it also brought attention from jealous neighbors. Venezuela shares a border with Guyana, declared in 2023 with the support of its people that they plan to annex Essequibo, a region making up nearly 2/3rds of Guyana's region. And most importantly, the region that conveniently holds the oil deposits was discovered in 2015. This is unlikely to actually occur, as national boundaries were set by a world tribunal in 1899, and Venezuela has no backing on the world stage, not to mention the United States is allied with Guyana; giving it protection from one of the world's largest militaries. 

My Thoughts:

Why Venezuela thinks they need more oil, when they have the world's largest oilfield within its own borders, is beyond me. Their economy has been collapsing since 2013, maybe the issue is not the oil capacity or the physical land of the nation. But instead economic policy and sector efficiency. Fortunately for Guyana, its borders have been rigorously defined for over 100 years, and they have the backing of the entire global community; I don't expect Venezuela to press its claims. However, it will be interesting to see how their political landscape develops, and if they will be looked at as another South African and fall victim to the "energy curse", or if it will take advantage of its natural resources and bring economic prosperity to it's people.

The article: https://www.cnbc.com/2024/01/27/how-guyanas-big-oil-boom-turned-it-into-the-worlds-fastest-growing-economy.html

When will the Bank of England start to cut interest rates?

When will the Bank of England start to cut interest rates?

The Bank of England is facing the decision of when to start cutting interest rates amid a backdrop of economic complexities. While savers were pleased with increased interest rates, the central bank is now considering potential rate cuts. The primary concern lies in the rapid decline of headline inflation, projected to go below the 2% target, contrasting with the slower expected decrease in interest rates.

The Bank is cautious, particularly about underlying inflation indicators, and the sustainability of wage and price increases. Despite external pressures for rate cuts, the Bank will likely resist if inflation falls significantly below 2%. Challenges and political influences, especially in an election year, add further complexity. 

The Bank's upcoming quarterly assessment will shed light on its economic outlook, and the decision-makers must carefully navigate the situation. While a rate cut is not expected in the imminent decision, a shift in expectations regarding future rate movements may occur.

https://www.bbc.com/news/business-68106731

Sports Illustrated Thrown Into Chaos With Mass Layoffs

 

    Sports Illustrated considered to be the "bible" of sports journalism has been in steady decline for years, but this past Friday the magazine received its toughest blow yet. The magazine laid off many employees, which was a effect of the publisher Arena Group had their license to operate the publication revoked.

    Sports Illustrated has been a titan for a while, but has been on a steady downward spiral for years. In 2017 Meredith purchased Time inc, which included Sports Illustrated, for $3 billion. Two years later, Sports Illustrated alone was sold to Authentic Brands Group for $110 million, the reasoning of the buy was because of the name and image, not so much the magazine. Almost right after the purchase, Arena group struck a 10 year deal with Authentic Brands to run the magazine, paying at least $45 million for the right.

    The first round of layoffs came in 2015, when many of the staff members contributing to the illustrated part of Sports Illustrated were let go. The reasoning behind it was the magazine trying to have a stronger digital presence, and trying to attract new users online. 

    The magazine finally hit rock bottom in August when Manoh Bhargava, the creator behind 5 hour energy, took a massive stake in the group in hopes of rising. Unfortunately this did not happen and the final push came earlier this month when Arena Group failed to make a payment of $3.75 million to Authentic brands, breaching their contract.  This led to Authentic Brands sending a terminating letter to Arena Group terminating the license of Sports Illustrated, killing a titan of sports magazines. Arena group were able to immediately pay $45 million to Authentic group, with a third of the workforce being laid off.

    

Remote Works Harmful Impact on Commercial Real Estate

The rise in hybrid / remote work is negatively affecting the office sector of commercial real estate. Since the pandemic and the rise of hybrid work, office occupancy rates have reached all time lows while interest rates have soared to all time highs. In addition to the high interest rates, $1.5 trillion in commercial real estate loans are set to expire in the next 2 years. 

It is evident that our society is not going to change our working style of a hybrid / remote system. The post covid higher interest rates are changing how companies operate, with some reporting up to 18% office vacancy rates. In todays society there is no motive to go in to the office with Friday's and Mondays having an immense production slowdown. 

More than 95 million square feet of office space is currently unoccupied - the equivalent to 30 empire state buildings. Tenants already have and will continue to shrink their office footprint and landlords are coming to the realization that their buildings are plummeting in value. 

The price of office buildings has decreased by up to 40% in some conditions and a lot of commercial real estate (CRE) professionals fear that this only marks the start of the trend. I will be looking forward to how the apartment sector will perform because most of these office spaces will most likely be converted in the near future. 

Source: https://www.cbsnews.com/news/real-estate-owners-saddled-with-half-empty-offices-as-hybrid-work-continues-60-minutes-transcript/