Nike to lay off 2% of employees, cutting more than 1,500 jobs during broad restructuring

 This article explains how Nike is going through a major restructuring where they are trying to simplify their business and go back to the basics in a way. In doing this, they will be cutting 2% of their workforce. Whilst doing this, they plan to be able to save about 3 billion over the next three years. This comes after Nike has seen slowing growth, and they are hoping that this plan will reignite their growth as a company. This being said Nike is not happy with having to do this as their CEO said, This is a painful reality and not one that I take lightly,” he added. “We are not currently performing at our best, and I ultimately hold myself and my leadership team accountable.” It will be interesting to see how this will affect their stock price shortly, but also in the long run.

https://www.cnbc.com/2024/02/16/nike-to-lay-off-2percent-of-employees-cutting-more-than-1500-jobs.html

Touchdown! Super Bowl brings big economic victory to Las Vegas

    The Superbowl was held at Allegiant Stadium in Las Vegas, Nevada. The Superbowl brought in an estimated $500 million in revenue. The Las Vegas Convention and Visitors Authority said that number could be lower than what future economic impact reports state. Analysts predicted around 330,000 people would visit Las Vegas for the game and its festivities. But it's now reported that the number could reach as high as 450,000. Spending over the weekend could reach as high as $1.1 billion. Steve Hill, president and CEO of the LVCVA stated, “Anecdotally, it looks like the estimates that we’ve been putting out are gonna be a little conservative,” also, “Just talking to the properties about how the week went for them — better than expected, which expectations were pretty high. So, we’re pretty happy about that.”

    There were 300 events in the days leading up to and on Sunday. Chief marketing officer Kate Wik during a presentation said that more than 100 national and international broadcast stations were on Radio Row — a media area in the Super Bowl run-up. The event generated an estimated 14,000 news stories with more than 5 billion domestic impressions. Nevada sportsbooks took in a historic amount wagered, $185.6 million in bets. TV viewership was 123.4 million viewers, according to CBS Sports. More than 202 million viewers watched at least some of the game. 

Link: Touchdown! Super Bowl brings big economic victory to Las Vegas (msn.com)

British Retail Rebound Provides Some Hope for Recession-hit Economy

Sales recovered 3.4% in Britain from December according to the Office for National Statistics which is the best monthly gain they have seen since April of 2021. This has provided hope for economists that the nation's recession will be shorter than they had originally expected. This increase in sale was fairly uniform across all sectors with food shops specifically seeing the largest jump at 3.9%. 

The latest figures also show the British economy has officially entered a recession after a 0.3% decline in GDP in the fourth quarter, following a 0.1% decline in the third. In December Britain saw their biggest monthly decline in sales since January of 2021 at 3.3%, meaning even after the large recovery in sales seen this month they are still 1.3% below their pre-pandemic levels. Economist Joe Maher believes the uptick in sales indicates the worst could be behind them and the combination of falling inflation and rising wages will allow for a good chance of recovery.

The outlook this month is only semi-positive as growth figures are down, however inflation seems steady and December saw a healthy job report in December. Economists also note that monthly data are very volatile and the sales jump lat month really only worked to offset the decline that was seen in December and restore the level seen in November. This is consistent with the stagnation seen through the last 18 months in Britain, however economists believe this could be the start of a momentum shift that leads to a real increase in activity in the retail sector. 

Source - https://www.cnbc.com/2024/02/16/uk-retail-rebound-provides-glimmer-of-light-for-recession-hit-nation.html

Japan slips into recession

 After contracting for two straight quarters, Japan's economy unexpectedly entered a recession, primarily as a result of low domestic demand. This has delayed expectations for when the Bank of Japan might end its negative interest rate policy and surprised economists who were expecting growth.

In the final quarter of 2023, the GDP shrank at an annual rate of 0.4%, after declining 3.3% in the previous quarter. Spending reductions by both companies and households caused Japan to fall out of third place in the world economy.

The Bank of Japan's intentions to raise interest rates for the first time since 2007 are complicated by this less successful than anticipated performance. The recession throws a wrench in the central bank's plans to end its negative rate policy, which it has been discussing.

Private consumption fell by 0.2% as households tightened their budgets in response to growing living expenses. For the tenth consecutive month, household spending decreased in December compared to the same month last year, with wage increases falling short of inflation. The previous quarter's business spending was likewise weak, declining by 0.1%.

In the upcoming months, there is a risk that the yen's reversal to levels not seen since November will increase cost-push inflationary pressure. Japan's yen saw minimal movement in relation to the US dollar following Thursday's data, trading at 150.40.

Growth was boosted by net exports by 0.2 percentage points. December saw a spike in exports, driven mostly by cars going to the US and equipment for making chips going to China. As a subset of service exports, inbound tourism also continued to grow, with December seeing a record number of visitors.

Looking ahead, given that growth is predicted to slow down in some of Japan's major trading partners in 2024, external demand may become a less dependable source of support for growth.


Source: https://www.bloomberg.com/news/articles/2024-02-14/japan-s-economy-slips-into-recession-clouding-boj-s-policy-path

 

Brazil: Tackling Corruption

According to the Organization for Economic Co-operation and Development (OECD), despite foreign bribery schemes being on the rise in Brazil, the country has made some progress. According to the report, Brazil has implemented legislation against corporate bribery and taken enforcement actions against large-scale foreign bribery cases, including utilizing leniency agreements.

The report, however, raises a concern about Brazil's ability to effectively charge individuals, noting that only 28 of 60 foreign bribery allegations have been investigated, and that only three companies have received leniency agreements since 2014. OECD suggests Brazil should increase its efforts to prevent foreign bribery, especially in the private sector, by prosecuting more individuals. Brazilian policymakers should enhance efforts to deter foreign bribery, including bringing more individuals to justice and improving whistleblower protections.

The report also highlights challenges in enforcing anti-bribery laws, such as the lack of convictions of people in foreign bribery cases. It highlights the first criminal anti-bribery proceeding to last nearly a decade in which eight of nine defendants were found not guilty due to the country's statute of limitations. It is recommended by the OECD that Brazil amend the statute of limitations through legislative action or other means to address these issues.

 

Even as inflation wanes, voters still worry about getting by.

An AP news article titled It’s a mismatch on the economy. Even as inflation wanes, voters still worry about getting by, covering economic worries despite a relatively strong economy. The article covers the economic woes of the people of the city of Grand Rapids, MI. During the poll, the city of 200,000, responded rather negatively to the US economy, despite recent inflation, production, and employment numbers coming out rather strong compared to the rest of the world. The article highlighted several reviews from the inhabitants of Grand Rapids, varying from political affiliation, job, and family size. However, all interviews reported a negative outlook on the economy, mainly around housing and food costs. I think this article is a good example of how the average American is impacted by the economy, while regulators only run off of indicators and macro concerns. While regulators, investors, and the wealthy are celebrating the state of the economy, price levels have kept the rest of America from feeling the same about the economy. The article gives a good parallel on how theory and real-life interact with each other.

Link to the Article: https://apnews.com/article/economy-voters-stress-biden-michigan-2024-election-92071eacbbb7a39f12e838ec9daaa51c

ESPN, College Football Playoff reach new TV contract extension

 

The CFP has decided to stay with ESPN for the coming years. The Athletic reported that the sports division of the Walt Disney Company and the power brokers behind the playoffs reached a massive extension on their current broadcast agreement. Starting in 2026, ESPN will pay $7.8 billion over 6 seasons for the rights of the playoff.

While there are two years left on the current deal, many questions circulated wether ESPN would want to or be able to commit towards keeping the most important games in college football. What makes next season different is it will be the first year of the expanded 12 team playoff, changing from the original 4 team playoff.  ESPN who already has deals with UFC, Top Rank Boxing, major tennis, hockey, etc.. decided that the CFP will be worth the buy.

Another note that was made is that ESPN has the choice to sublicense games, which would most likely be first round, to another network or digital player. This is perhaps what the future of streaming looks like, with Warner Bros. Discovery and Fox comes into play. As this is all happening, nothing T.V related will be set in stone until the Pac-12 is settled, which right now is a conference shrinking to two members and is in danger of losing its seat at the Power 5 table.

Russia’s economy ‘in for very tough times’ despite improved growth outlook, IMF managing director says

Russia’s economy ‘in for very tough times’ despite improved growth outlook, IMF managing director says

link- https://www.cnbc.com/2024/02/12/russias-economy-in-for-very-tough-times-despite-improved-outlook-imf.html

The head of the International Monetary Fund, Kristalina Georgieva, has warned that the Russian economy, despite receiving a growth upgrade, is still facing significant challenges. The IMF recently raised its forecast for Russia's economic growth from 1.1% to 2.6% for this year, attributing it to the country's investments in its war economy since the invasion of Ukraine. However, Georgieva emphasized that this growth comes at a cost, with a significant outflow of skilled workers and reduced access to technology due to sanctions. She believes that the Russian economy is in for tough times ahead, despite the seemingly positive growth forecast.

Global military spending hits record $2.2 trillion

 The latest report of the International Institute for Strategic Studies (IISS) paints a worrying picture of instability and an era of contested power. According to the IISS, global military spending reached a new high of $2.2 trillion, a 9% increase since 2022. The reason for this is because of recent events such as Russia invading Ukraine, China’s military modernization, conflict in the Middle East, and military coups in Africa. 

The war on Ukraine pressures other nations to increase defense budgets. The member nations of NATO increased spending by 32%, making this the second consecutive year of growth and contributing to over 50% of the world's military spending. Because of the war, Russia has increased military spending by 30%, which accounted for 7.5% of the country's GDP. China has increased its military spending for the 29th consecutive year, due to its ambition of creating a “world-class” military by the middle of the century. 

The United States continues to be the world's top military spender. In 2023, the United States had a military budget of $900 billion, which is greater than the top 15 countries combined. Compared to previous years, from a GDP standpoint, the United States military spending is 3.36% less than in previous eras such as the Cold War. 

The global arms race raises a serious concern about the political state of the world. Increased military spending and an increase in tension between nations increase the risk of international conflict. Increasing spending on defense systems also means cutting back on other areas such as healthcare, education, and public services. 

https://apple.news/AHMy7wdLnT--W8cEf-acVJQ

China's market crash could be the last straw for many foreign investors who leave permanently, think tank says

     China has been taking hits recently and now China's stock market decline could spell disaster for the country. With the decline of the stock markets, foreign investors have been pulling out en masse and they are likely not to come back. China's firms collectively have also suffered a 7 trillion dollar loss since early 2021 which has and will continue to greatly affect offshore traders. 

    China, which was originally a staple for stable growth for investors, will now change course because of these issues and become a beacon for fast profits. This will continue to contribute to the volatile funds swing that permeates through modern Chinese markets. There has been a response to these issues as Beijing has responded to the financial stress by including state-backed purchases as well as restricted access to offshore markets and curbs on short-selling.

    One of the leading concerns for China is its property market which accounts for most of the country's GDP. It has recently sustained a mass of default waves with real estate giants forced to liquidate. There was also a crackdown on the tech sector in 2020 which led to more investors pulling out. Net foreign inflows last year reached only $6.1 billion, the lowest level since 2017.

    And even without all the underlying issues China continues to impose worry by its intentions for stock investors. They have made various announcements directed at financial markets that suggest less tolerance for business as usual.

https://markets.businessinsider.com/news/stocks/china-economy-crash-real-estate-property-stock-market-foreign-investors-2024-2

Markets everywhere

I listened to a very timely podcast on market efficiency.

 

What do you think? Can you come up with an example where markets would be an efficient way to arrange allocation of a particular good or a service but not necessarily fair, or equitable, or acceptable in some way? Would like to get some examples in the comments. 

YOLO spenders have created a huge credit bubble in the US economy

 Consumers today have taken on a massive amount of debt but are spending like crazy and it's creating a bubble in the US economy. Today, consumers drive 70% of the US economy and in the fourth quarter of 2023, their spending jumped up by $208 billion. At the same time, household saving rates currently sit at a mere 3.7% which is way down from the historical rate of 9%. What’s worrisome is that along with this, households have added a shocking $212 billion to their debt during that period, resulting in over a 100% increase in consumer spending that was financed by debt. 

While consumers show no signs of slowing down, credit card delinquency rates with 30-day default rates have risen from 5.9% a year ago to 8.5% today and one in every twelve holders of credit cards is missing their payments. The last time this happened was in 2011 when unemployment was at 9%, but today it sits at a near all time low of 3.7%. Delinquency rates for auto loans and mortgage loans have also increased lately, but none of this seems to worry consumers.

https://apple.news/A1h3Sb45HQc2--f93MI3OkA

Cooper Meek

Fast Passes.....yes or no? The wealthy are cutting the line at the airport, Disney World and ski resorts

An interesting article on the topic of efficiency and fairness. What is your take on the ability to pay to skip lines? Is waiting in line to get a service and using a fast pass the same product? What happens when more people use these passes? Are there negative externalities to the people who do not pay? The wealthy are cutting the line at the airport, Disney World and ski resorts

  Attacks in the Red Sea are disrupting Global Trade. Here's how it could affect what you buy.

    Car factories have stopped production in Belgium and Germany, spring fashion lines are delayed all over Britain, and a Maryland company that makes hospital supplies doesn't know when they are going to get parts from Asia. Attacks in the Red Sea are delivering an unexpected shock to global trade, along with pandemic related port jams and Ukraine's Invasion of Russia. The attacks are coming from Houthi Rebels in Yemen that are seeking to stop Israel's offensive against Hamas in Gaza. They attack cargo ships by forcing them away from the Suez Canal and causing them to have to go around the tip of Africa.

    Ryan Petersen, CEO of global supply chain managment company Flexport, described what is happening right now in the Red Sea as short-term chaos that will lead to increased costs. This problem will continue to grow the longer the war in Gaza drags on. Petersen explained that the disruption in the Red Sea lasting a full year could inflate prices of goods by 2%. This will lead to even higher interest rates and weaken the economy. 

Attack in the Red Sea

Clouds over global economy ‘beginning to part’ but Red Sea crisis could spell trouble, says IMF

Japanese Yen

 The Japanese Yen has hit a new YTD low against the dollar during the Asian session. The US jobs data released on Friday is also shows that the US economy is doing well, which allows the Fed to keep interest rates high. This is keeping the dollar at a higher value, which makes the difference greater. 

Fears of continued tensions in the Middle East and the China's slowed growth may also be affecting the Japanese Yen. Also, a recent survey found that the Japanese services sector, which accounts for 70% of the country's GDP, has expanded at the highest rate since September. This may cause further inflation due to the Bank of Japan needing wage increases in the service sector and the need for higher prices.

https://www.fxstreet.com/news/japanese-yen-drops-to-fresh-ytd-low-against-usd-bears-seem-non-committed-202402050159

Market Failures and Public Goods

 This is a lecture by an Austrian economist Peter G Klein at the Mises Institute. If the two economist in the podcast we went over in class are pro-market bordering on the extreme, then this is the extreme. The lecturer gives a radically pro-market take on market failures and public goods, arguing heavily against any sort of government involvement in the market and attempts to make the case that well-defined property rights are the best way to solve problems like negative externalities, and also makes a case that private firms do have reasons to provide public goods absent the market. He goes over examples like the Pigouvian tax and Coase Theorem and argues against them on theoretical grounds, trying to show how externalities aren't as easily quantifiable as they may appear, and again that most seriously negative externalities could better be solved through well-defined property rights rather than any government interference in the market. He goes over public goods like the famous lighthouse example and firework shows and argues that private firms can and have managed to provide them in the past. He uses radio as an example of a good that was at one point considered impossible to profit off of, until entrepreneurs learned to advertise on the radio to make profit. Overall, its an extremely pro-market take, as is to be expected from an Austrian economist, but I found the lecturers arguments on externalities in particular were interesting to consider, and as a whole the lecture is a nice comparison to the podcast we listened to, with this economist somehow going one step further. 

Externalities, Public Goods, and the Role of Government | Peter G. Klein:

https://youtu.be/y95f3n_-nMY?si=FkIQHxeHa-qRldfJ

      

India's Paytm, the online payment company, faces regulatory crisis

This article discusses challenges faced by Vijay Sharma who is the founder and CEO of Paytm, which is one of the leading online payment companies in India. Recently the central bank ordered Paytm to shut down its banking arm to stop most of their operations by March 1 due to "persistent non-compliances" and "supervisory concerns." This decision has led to a substantial drop in Paytm's valuation, causing concerns among investors.

Paytm's valuation plummeted to $3.7 billion from its IPO valuation of around $20 billion in 2021. The stock also experienced a 75% decline since its IPO. Analysts, including those at JP Morgan, suggest that the company needs to "restore credibility" to regain investor confidence.

Majority of Indians now use digital services to makes payments as small as buying a candy or buying groceries and even medication. As of right now, Paytm is trading at 487.2 rupees, which is a significant decrease from its market listing price of 1,950 rupees in 2021. Over the recent months, SoftBank, one of the major supporter of the company, has reduced their ownership stakes. And other huge investors like Alibaba and Berkshire Hathaway have divested their holdings. Despite all these challenges Vijay Sharma remains optimistic, even referring to the regulatory crisis as a "speed bump". 

https://www.reuters.com/business/finance/indias-startup-rockstar-paytm-ceo-sharma-battles-regulatory-crisis-2024-02-03/

U.S. economy added 353,000 jobs in January

In January, the U.S. job market added 353,000 nonfarm payrolls, exceeding expectations while the unemployment rate remained stable at 3.7% when projections expected it would be 3.8%. The average earnings rose by 0.6%, which is double the estimate, and the wages also increased by 4.5% on a yearly basis. Job growth was common among sectors, which gives a strong start for the labor market in 2024.

The report shows a strong U.S. economy. This could delay Federal Reserve interest rate cuts. The market reactions were mixed with futures showing an over 80% chance of no rate cut in march.  Even though there are positive job figures, a broader unemployment measure rose to 7.2%. There are still concerns about the division between hourly earnings and hours worked. 

https://www.cnbc.com/2024/02/02/us-economy-added-353000-jobs-in-january-much-better-than-expected.html?&qsearchterm=economy

India budget 2024: What does it say about the economy, elections?

Just before national elections, the Indian government recently released an interim budget that included both anticipated policies and surprises targeted at investors and rural voters. India hopes to raise its sovereign credit rating through this consolidation, more capital spending, and welfare programs. For the next fiscal year, the government of Prime Minister Narendra Modi (BJP) plans to target a lower fiscal deficit than what the market had anticipated—5.1 percent. Capital expenditure on infrastructure projects is expected to rise, though at a slower rate than in previous years. Budget cuts were implemented, mainly in the areas of food subsidies and fertilizer bills, which may have been influenced by worldwide patterns. Especially, the budget gives special attention to the rural economy, keeping in account problems such as low consumption and providing support for programs like affordable housing and fisheries. 

All things considered, the budget conveys the government's optimism about its chances of reelection, and some analysts even suggest that it is part of the ruling party's plan to win another term in office.

https://www.aljazeera.com/economy/2024/2/1/indias-2024-budget-what-does-it-say-about-the-economy-elections 

Turkey's High Interest Rate

 Turkey's high inflation has led to to raise interest rates to 45%. Inflation in Turkey is up to nearly 65% and their currency, the lira, has hit a record low compared to the U.S. dollar. Analysts say that this will be the last interest hike for a while with local elections coming up in March. Their Central Bank referred to this as the end of their monetary tightening cycle. The Anarka government had a very loose monetary policy which led to this loss in value of the lira. Through the more recent finance team, interest has been raised from 8.5 to 45% since last year. Some still believe this is not enough to combat the rate of inflation.

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

Denmark's National Debt Lowest in 25 Years

     The recent figures from Denmark's central bank, Nationalbanken, reveal a notable decrease in the national debt, standing at 294 billion kroner. This is a reduction of 28.6 billion kroner compared to the beginning of 2023 and is equivalent to approximately 10.5 percent of Denmark's GDP. The recorded debt level is the lowest since the Nationalbank began tracking it, showcasing a positive outlook for the country's public finances. Senior economist Kristian Skriver from the Danish Chamber of Commerce attributes this achievement to recent surpluses in public finances, propelled by factors such as high employment, low unemployment, and robust consumer spending. 

    Additionally, Denmark's disciplined budget practices, where politicians adhere to allocated spending, contribute to the low debt. The low state debt not only fosters economic confidence but also allows for keeping interest rates relatively low. This economic resilience, coupled with the ability to borrow more money if needed, positions Denmark favorably, especially in times of crisis. The country now ranks among the few with the lowest national debt globally, outperforming many European counterparts.

https://www.thelocal.dk/20240123/denmarks-national-debt-at-lowest-level-for-25-years 

U.S. economy added 353,000 jobs in January, much better than expected

 Job growth within the United States greatly exceeded expectations in the month of January. The estimate for the month was 185,000 which was only about half of the actual 353,000 nonfarm payroll additions that were seen over the course of the month. The unemployment rate also stayed at 3.7% which was lower than the 3.8% estimate. Other metrics such as average hourly earnings and year-over-year wage also increased more than expected. 

The report also showed the job increase in December was 333,000 which is higher than originally reported. The combination of increased job growth and increased rate of wage gains is now expected to delay the Fed’s interest rate cuts, the latest estimate is that there is an 80% chance the Fed will not lower interest rates in March.

Across the economy, GDP growth was seen that went against the predictions of a recession. All of these factors create a very complex situation for the Fed when it comes to monetary policy decisions in the near future. The Fed does plan to cut interest rates soon, however not without further indications of cooling inflation, Chair Jerome Powell acknowledged the Fed’s concerns about the impact inflation has on consumers, particularly those of lower incomes. Recent data on inflations shows that core inflation is at 2.9%, close to the Fed’s goal of 2%, however the Atlanta Fed’s measure of “sticky” inflation still remains up at 4.6%.

Source - https://www.cnbc.com/2024/02/02/us-economy-added-353000-jobs-in-january-much-better-than-expected.html

Germany's Economy Shrinks 0.3%

Germany is typically considered an economic powerhouse in Europe. The country was once an exemplary model of growth at a time when many other major developed economies were struggling. Unfortunately, the International Monetary Fund predicted Germany to be "the worst-performing major developed economy" in 2023. In recent years the country has suffered from a variety of economic blows.  

In support of Ukraine, Germany no longer sources their energy from Russia. Due to this, there have been times when energy prices have more than doubled. Inflation influenced consumers to decrease their spending. To combat this, the Central Bank raised interest rates harming the development of new infrastructure.

Many of the main forms of transportation and new housing/work spaces were negatively affected by the decrease in spending on infrastructure. However, this is not all attributed to rising interest rates. Covid relief funds were meant to be allocated to modernizing the country for economic and environmental benefit. Unfortunately, these funds were unable to be reallocated and a budget crisis ensued.

Germany must now rework their budgets while struggling with other economic stressors. 

https://apnews.com/article/german-economy-contraction-high-energy-prices-13be4304370fa0449538c68c3fdd60c0

 

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/

How America’s economy keeps defying expectations when the rest of the world is struggling

     Analysts have been predicting a bleak economic outlook in the US for the past few months or so now but Americans shouldn’t fret. After a prediction of about 1.5% growth for the last quarter of 2023 and a forecast of recession for the first quarter of 2024 with 0.2% growth, they couldn’t have been more wrong. The economy boasted a staggering 4.9% annualized growth rate in the final quarter of 2023. This occurred in large part thanks to massive consumer spending even in the face of the biggest interest rates in 23 years. Singapore is the only other industrialized country that spent more on Covid stimulus from 2020 to 2021 and it’s showing in consumer habits. People didn’t have the opportunity to spend and now that they’re back out with more money, they’re sending it every which way. 

The annualized GDP actually slowed to a growth rate of 3.3% for the final quarter of 2023, but this proves us abreast of the rest when realizing that the combined GDP of the 20 countries that use the euro grew at just an annualized rate of 0.1% in the third quarter last year. Just as well, the UK is growing at an annualized rate of just 0.2% while Japan’s economy shrank by 2.1% from the year prior. Whenever there’s a boom like this, there’s an impending leveling out. However, as always with the US economy, who really knows?

https://apple.news/A81qMyYeqTtGniK_y5WsTsQ

Cooper Meek

Ravens playoff success brings economic boom to Baltimore

    With the recent success of the Baltimore Ravens, the city is gearing up to host the AFC Championship game this weekend, with all the tickets, hotel reservations, and memorabilia that are being bought, the economy is seeing quite the boost right now. Hotel Revival at Mount Vernon is seeing an unusual and rare sellout in January. Ramond Sneed, General Manager of Hotel Revival, had this to say, "Business has been booming, the Ravens have been a huge impact for us," he also went on to say, "There's something about the NFL and your team being successful, it's a talking point with the staff - it's a talking point with the customers - it's a conversation, with good banter that gets everyone excited."

    Apparel stores are also getting the love, with all the fans crowding in from all over the country, it is customary for them to go into these stores and get the freshest and newest Ravens gear ahead of the big game. Michael Tyson, Owner of Poor Boys Sports, met the economic boost with a lot of joy, ""It's been crazy, I mean packed - the parking lot is packed - having trouble getting cars in the lot, to be honest with you." Whether it is expected MVP Lamar Jackson or the Superbowl being within arm's reach for the Ravens, these fans have a lot to be happy about, and so does the economy.

Ravens playoff success brings economic boom to Baltimore - CBS Baltimore (cbsnews.com)