Something unusual is happening to America's trucking industry, and it's bad news for anyone who depends on it

The article concluded three facts which are happening in the trucking industry: 

• Truck drivers are still in short supply even though wages, on average, are rising.
• According to UBS economists, there's a lag between higher pay and employment growth in the industry.
• The shortage could increase transport costs even more — bad news for many retailers that depend on the trucking industry.

"We expect labor shortages to persist in trucking for at least the next two years, as the economy remains strong, and as even in the best case scenario, truck driver employment tends to lag rising wages," Seth Carpenter, the chief US economist at UBS.

Trucking is relatively an unattractive job since it requires to work longer than most day jobs and drivers even have to work during the night. It requires a special commercial driver's license, and in many cases, passing a drug test. And even with wage growth, truck drivers are still earning less than people in comparable industries like construction and mining.

Overall, because of the high requirements, low wages, long working hours, people are less likely to apply trucking drivers. This would cause the rise in transportation cost and those retailers would suffer the most because they need road transport for deliveries to brick and mortar stores and to customers that order online.

http://www.businessinsider.com/truck-driver-shortage-persists-amid-salary-rise-2018-2

SEC blocks Chinese investors buying Chicago Stock Exchange

Last month, the SEC blocked the sale of the Chicago Stock Exchange to a group of Chinese investors. The SEC said the group had not met it's burden to show that Chinese government interference would not be a problem.

The deal was first announced in February 2016. Then-candidate Trump spoke out very strongly against the deal on the campaign trail, saying the Chinese were "taking our opportunities and our jobs".

This is relevant to the class because it shows how the markets deal with anti-trust legislation and prevent interference from not only domestic, but international governments.

https://www.politico.com/story/2018/02/16/china-chicago-stock-exchange-352343

Gun stocks reverse early gains after the Florida school shooting

I found this article interesting because events like the shootings in Florida this week have implications in the financial world. I first learned about this in my Modern Portfolio Theory class following the Las Vegas shootings last semester. Usually after a tragic event like this, the stock prices of gun manufacturing companies tend to rise initially. A large reason for this price increase is that people would be more willing to buy guns sooner out of fear of more regulation on guns. The increase in gun laws would lead to a rise in future gun prices.

A few other interesting facts from this article are that the stock prices of many of these companies have since dropped since the early increase on Thursday morning. In addition, gun manufacturing companies have not been performing as well under the Trump administration. It will be interesting to see if new gun laws will be implemented by the government, and if so, the effects they will have on the market for guns.




http://www.businessinsider.com/gun-stocks-after-florida-school-shooting-2018-2

America should get rid of oppressive job licensing

This article speaks to a lot of what we discussed in the last chapter about the lack of economic mobility in the United States. The main argument of this article is that many jobs require certain licenses that often have fees tied to them. This additional cost in the labor market crowds out lower income individuals from finding employment in certain fields and makes it harder for people to climb out of the poverty cycle. Obviously certain standards are in place to protect consumers but that is not always the case. Most of the time it isn't actually the consumer that benefits from licensing but rather the individuals that lobbied for that licensing. The article points out that in some states there is even licensing required to be a florist which was pretty surprising to me.

https://www.economist.com/news/leaders/21737032-too-many-states-have-let-rent-seekers-run-amok-america-should-get-rid-oppressive-job-licensing

EU joins global growth bandwagon

http://www.bbc.com/news/business-43055890

In light of all that has happened in the 2017 year, Europe is actually on the rise. It predates back to the crisis that took the world by storm in 2007 and although the European Union has been slowly bouncing back, “today's Eurostat figures show that the fourth quarter of 2017, compared with the same period in 2016, was particularly strong across most EU members as global growth momentum starts kicking in,” (BBC, Ahmed, 2.14.18). This past year, countries in the EU seem to have had a higher demand in products leading to greater business profits, shocking the global economy with sudden demand for exports as well. Of course it does also help to know the structural reforms have helped out the nations, same as low interest rates, and unions gaining in size. The entire EU seems to be growing, though not as greatly but nonetheless - even Britain after Brexit is maturing number wise, to ‘the good old days,’ from before their leave.

What Happened to China's Baby Bump?

https://www.bloomberg.com/news/articles/2018-02-13/what-happened-to-china-s-baby-bump

China got rid of the one child policy in 2015, and saw an expected hike in newborns in 2016, but now there has been a large decrease in new borns.  Families have indicated that they are no longer having a second child because of the financial burden. Now there is concern about a baby crisis in China, which could in turn effect future policies.  The article explains that the implication of this baby crisis could lead future underemployment due to a demographic time bomb. Consequences of this demographic time bomb could lead to less innovation and entrepreneurism. Policymakers have considered lowering taxes for larger families.  However, I am not sure that solution will fix the problem.  I am curious to see what other strategies China might implement to increase reproduction and I also wonder what other consequences might come from this demographic time bomb. 

As Trump gambles with more economic stimulus, the Fed is poised to counter inflation

This article assesses the actuality that the proposed budget by the Trump administration will result in long-term growth before inflation and higher interest rates unfold.  With all that being said, the Federal Reserve stated they are poised to counter inflation if any signs of it taking off become present.

Trump's budget includes $200 billion for infrastructure over the next 10 years, $18 billion for his wall along the Mexican border, $13 billion to fight the opioid crisis, and $716 billion for military programs and maintaining a nuclear arsenal.

Douglas Holtz-Eakin, a former chief economist under George W. Bush, stated that he believes the best chance at long-term growth is cutting taxes for American businesses, but the household tax cuts were not necessary due to a rather strong labor market that continues to hit record-low unemployments.

If higher interest rates were to occur, then all of the stimulus created by the Trump administration will become irrelevant.  Knowing the Federal Reserve has such a keen eye on signs of inflation and expected interest rates is assuring to citizens in that, if anything unexpected were to happen, the Federal Reserve will have implemented a policy before the estimated price hikes and interest rate increases were to occur.


https://www.reuters.com/article/us-usa-budget-economy-analysis/as-trump-gambles-with-more-economic-stimulus-the-fed-is-poised-to-counter-inflation-idUSKBN1FW2C8

President Trump's Budget Cuts Amtrak Funding in Half Despite a String of Deadly Crashes

President Trump has recently revealed his budget for the fiscal year 2019, which includes a very extensive infrastructure plan. One notable aspect of this infrastructural reform is his plan to cut federal grants to Amtrak by over half. However, he has also stated he intends to increase railroad safety. His infrastructure plan is completely detrimental, as slashing the budget of the passenger railroad service will only decrease the level of safety. This comes in the wake of three fatal crashes since December. Experts agree that one of these crashes could have been prevented had a positive train control system been instituted, which shows how President Trump's plan is completely unhelpful.

Source:
http://time.com/5144561/trump-budget-cuts-amtrak-half/

The Era of Fiscal Austerity Is Over. Here’s What Big Deficits Mean for the Economy.

With the recent tax cuts and the infrastructure initiative proposed by the Trump administration, many economists worry about the economic effects heading into the future. In the immediate short run, these initiatives are bound to increase economic activity and raise growth by an additional 0.7%. This comes at the cost of adding $500 billion dollars to the budget deficit bringing it from about $700 billion to $1.2 Trillion. As the article states somewhat facetiously, "it would be very hard for the government to pump an extra half-trillion dollars into the economy in a single year without getting some extra economic activity out of it." 

The questions come into the picture when trying to forecast into the future. In the short run, it is hard to estimate this impact because of the uncertainty of the current job market in the US. We still do not know what the impacts of the tax cuts will be. If the effect is that employers will begin to invest more heavily into their capital structures that will increase productivity per worker and draw some eligible workers back into the job market, these initiatives will have a substantial positive effect on the economy. However, if the fed increases interest rates more than it currently plans to the affect of the tax cuts will be short lived and the job market may stay at a relatively low level of unemployment as we have now. This would result not in economic growth but rather in a spike in inflation.

When investigating the long term impacts of these spending plans and tax cuts, the main issue for US taxpayers will be the astronomical debt-service cost the US government will have incurred. The CBO estimates that our proportion of debt to GDP will increase by 14% over the next ten years, leaving us with a ratio of 91% in 2027. Even before the tax cuts announced this year, US taxpayers are forecasted to pay roughly $800 Billion in debt service costs in 2027. With this increased need for debt by the US government, there will also be a crowding out of the private market for debt increasing the price of money for consumers in the economy. 

The picture is certainly hazy moving into the future. What do you think will happen?

Link to Article

Insider trading has been rife on Wall Street, academics conclude (The Economist- February 10th, 2018)

Paramount pictures initially released the film "The Wolf of Wall Street" on December 17, 2013. At that time, a lot of the seniors in this class were making the choice on what college to attend and what kind of academic programs to consider. The controversially, sexy, and dangerous allure of the finance/brokerage industry portrayed through the protagonist (Jordan Belfort) might say something  about the status quo of "the real" industry at play.  This article in the Saturday edition of The Economist cites three different academic studies that attempt to describe the potential pervasiveness of insider trading. The article references one study that studied nearly 500 financial institutions activity from 2005-2011. The other two studies at play were from 1999 to 2014 and followed the trades of 300 brokers. Through the dissection of these studies, it is clear some level of sleaziness still persists across market.

If you clicked on this post and are bored by now, read this final excerpt from the article:

"Large institutions can be both beneficiaries and victims of this sort of information leakage. But in general they are net gainers. The real losers, the papers conclude, are retail customers and smaller asset managers. Common to all the papers is the recognition that the public markets are, as conspiracy theorists have long argued, not truly public at all. Changing the law to fix that may not even be feasible. But at least, in large-scale data-crunching, a new type of corporate sleuth is on the case."

Interesting insight... If you are entering the financial world, how will YOU behave?

https://www.economist.com/news/finance-and-economics/21736561-one-study-suggests-insiders-profited-even-global-financial-crisis-another?fsrc=scn/tw/te/bl/ed/insidertradinghasbeenrifeonwallstreetacademicsconcludeintheknow