The electric vehicle industry has been on the rise as consumers look to shift to a more sustainable and environmentally friendly mode of transportation. Tesla was the industry leader in terms of their design, pricing and distribution as we all saw its cars popping up all over the place in the last year or two. Companies have been following their lead and creating their lines of electric vehicles. Whether this is due to the creation of vehicle lines or an extension of already existing models, they are becoming a far more popular option than they were in the past. The problem with the industry is that it is still new, so product design, safety and pricing are still metrics that are being played around with from the manufacturer. Ford is one of the companies doing this today. They released a product called the Mach-E which was created to be one of the top competitors for Tesla’s Model Y. Last week, Ford announced that it would be cutting the price of their car after Tesla announced a price reduction for the Model Y in early January. For Ford, the price reduction fluctuates between $600 up to $5,900. This is not as much as Tesla’s $13,000 price cut, but at the same time, the price of Ford’s model is not as expensive as Tesla’s. Most of the time, when we hear about the price reduction of a product, it is usually associated with a negative impact. This may not hold true in this case. Wall Street investors are applauding these cuts as they can be used to drive up demand and sales of the product. As we inch closer and closer to a recession, consumers are tightening their wallets and a high-priced electric car may not be what people want to be spending money on right now. Tesla is acting as a regulator in the current market. If the industry leader cuts their prices, other companies will follow. Not many people would pay for another brand when Tesla is the lowest in terms of cost. When you pair this with the brand image Tesla has generated up to this point, other companies need to cut prices to stay competitive. The expected increase in sales will reflect Ford’s vehicle output. The quantity produced of the Ford Mach-E is expected to jump from 78,000 to 130,000 units annually produced. The Mach-E is the second-best selling EV in the US behind Tesla. Ford’s model comes in between the prices of $46,000 and goes all the way up to $64,000 while Tesla averages between $53,500 to $57,000. Tesla however outsold Ford with more than 522,000 units sold just in the US alone in 2022. To increase production, Ford has moved outside the US for the mass construction of their vehicles. They have a plant in Mexico that is currently under construction for upgrades but will be operational in the coming months. It will be interesting to see how these price cuts benefit those in the industry. Will they see an increase in revenue? Drop in sales still? Time will tell, but as more consumers shift to EV, this will surely increase their appetite to buy in the current trending economic conditions.
Streaming services have grown immensely since the start of the pandemic and even in the years leading up to COVID-19. As a result of this, it has left companies such as Netflix, Disney+, Hulu, and many more fighting over viewers and precious market share in order to get their share of the pie. As we are slowly coming out of the other side of the pandemic and seem to be entering an economic recession in the coming months, this war may turn into a partnership to keep their companies afloat. Last year marked the first time ever that Netflix’s number of subscribers dropped, with their share price falling by over 60%. They were not the only ones either. As the world turns more to streaming services companies did what they do and adapted to this new method of entertainment. Most companies that did so saw a decrease in their stock price over the past year. With this happening, we may see something that is uncommon in the modern business world. We may see competitors team up to slow and reverse the current trend. According to their most recent quarterly reports, Netflix added 7.7 million new subscribers in the fourth quarter of 2022 with the stock price rising 6%. In the past, news like this would be deadly for competing companies, however, not this time. Netflix competitors also saw a slight increase in their share price after the reports were published. It will be interesting to see what happens in the coming months as Netflix will soon implement a fee for password sharing. According to Netflix, they expect first quarter numbers to be lower than the fourth of 2022 as a result. On the other hand they expect numbers to increase again going into the second quarter as more customers sign up for the service. As we recently flipped the page into 2023, it will all be about banding together in order to fight subscriber fatigue. As the world goes more and more digital by the day companies will be in a constant fight to keep up with the times, and streaming services will be at the forefront of that fight. The number of services has increased drastically over the past couple of years and has saturated the market giving the consumer the option to choose who they want. I myself am interested to see what the services working together will look like. If they can work together in order to keep the market in good standing, then it will be of great benefit to the consumer over time. They can’t get into a pricing war because at the end of the day the consumer will go with what may be cheaper, especially with a recession looming.
In a follow-up to my recent article regarding railroad union strikes, I bring you the news that the US Senate has approved an agreement that will pass on to President Joe Biden. This agreement is major as it prevents the rail unions from going on strike. At the final act there was an effort to include seven days of paid sick leave that didn’t end up making the final draft. This was an important bill for the US economy as any strike would hinder the transportation of goods raising their market prices, and the importance of this was reflected in the Senate’s voting. The bill passed through with 80 in favor and a mere 15 against. President Biden has already stated that he will sign the bill if it were to make it across his desk. Now, as for what the final bill looks like, it is similar to what was discussed in my previous article. Railroad workers will see a pay increase of 24% over the next five years with the dates of this arrangement going from 2020 to 2024, payouts will average $11,000, and an extra paid day off. The passing of this bill was accepted by the union. They even went as far as to release a statement saying, “our members are forced to work more hours, have less stability, suffer more stress, and receive less rest… No American worker should ever have to face the decision of going to work sick, fatigued or mentally unwell versus getting fired by their employer.” While no worker should go to work sick in any way, I get what they are saying. Hopefully, the terms of the agreement will be sufficient for long term stability in terms of pay and worker treatment on the railroads. Now how does this benefit the average consumer? It will mean that we won’t have to pay higher prices as the Christmas and New Year’s holidays roll around the corner. Products will be imported and exported easily and without delay which won’t create a shortage of the products on the market. While this is big for the current time of year the more important figure is that gas and the chemicals used in making it will be easily transported. This means gas prices will hover around the same prices that they sit at currently instead of potentially jumping up. This will save the consumer money on gas from traveling all over the place for their shopping. Overall, the union coming to an agreement is good for both parties. Workers get a pay structure and work environment they feel safe and happy in, and the consumer’s wallet doesn’t have to suffer because of the shortage that would have come from the strike.
This past week in Omaha, Nebraska, a major deal was offered that could determine consumer spending for the foreseeable future. This deal was offered to railroad engineers that saw an offer of a 24% raise to conductor salaries that was ultimately rejected. The rejection of the offer has raised many concerns regarding whether the dispute will be settled before next month’s deadline. Before Monday three of the smaller unions had already rejected the offer with a split vote on Monday between the two largest unions which led to the result of the offer. However, seven smaller unions were able to accept and approve a deal with the terms of a 24% raise with an additional $5,000 in bonuses. The unions will go back to the drawing board and will renegotiate the terms of the agreement. This time they will look at adding paid sick time to their contracts. Much to the disliking of the railroads resulting in the negotiations going into deadlock between the two parties. All 12 of the unions need to approve of the offer to prevent a strike. This is where this issue would really hurt the general economy and the American consumer. It would further tighten the supply chains and as I mentioned before, increase stress in a post pandemic economy both in the US and globally. If this were to continue it is likely that Congress would step in at some point in order to impose a contract between the railroads and the unions assuming they cannot come to an agreement. The main problem that workers have with the railroads is the lack of consideration for quality-of-life. Many feel as if the demanding schedules hinder their ability to live life away from the rails, something that is supposed to be improved in the negotiations. So, why does this matter to the typical consumer? Because we will experience supply chain issues like those seen during the pandemic due to 30% of the nation’s freight being moved via the railroad. Gas prices could again increase as a result of oil refineries having trouble producing the current gas volumes they are. Recently harvested crops took longer to move and fertilizers for upcoming plants will not reach their destination in time. Finally, consumer goods will be impacted due to the inability to import goods. This comes at the worst time of the year with the holiday season upon us. Consumers may see a severe shortage in their favorite goods resulting in the prices to increase. As the Thanksgiving and Christmas holidays come closer, it will be interesting to see how this dispute ends. Hopefully for consumers both in the US and globally they settle, and people can move forward without having to worry about higher costs during the biggest spending period of the year.
Stocks on the Asian market have declined as of Mon., November 14, 2022, while European and American stocks open higher due to the optimistic views on inflation in the US and virus cases spanning over China. Last week, US inflation reported at a lower rate than in the prior weeks which caught the attention of investors all over the world. They hope that this hints that the FED will rethink its plan to continue to raise interest rates to help fight rising inflation. However, industry workers such as Venkateswaran Lavanya of the Mizuho Bank believe this is not an accurate measure as to what is coming. In an article published by US News, Lavanya said, “It is far too hasty to declare a decisive conclusion to inflation risks.” Meaning, that reports can come in on a daily, but we cannot assess these as true indicators as to what the FED will do with interest rates in the future. This still did not stop the various markets from around the world from responding to this news. Exchanges such as the FTSE in London saw a 0.8% gain, the DAX in Frankfurt just behind them at a positive 0.7% gain, and Paris’s CAC 40 jumping 0.5%. However, not all markets responded in a way that would reflect this optimism. In the US, the S&P 500 dropped 0.2%, with the Dow Jones dropping 0.1%. These numbers still should not be looked at as a representative value for the entire US stock market. While the markets did see a slight drop, the S&P jumped 5.5% on Friday alone. This ends a great week for the US markets, which saw all three exchanges ending in the green. Last week was also a big week for the US political economy with the congressional elections being held, which found Republicans likely to take control of the House of Representatives, and the Democrats taking the Senate. In Asia, concerns of COVID are still high. The Nikkei 225 out of Tokyo dropped by 1.1% while the Hang Seng in Hong Kong went up 1.7%. With the news of the Chinese government making the decision to reduce the economic cost of their Zero COVID policy are primarily the reason behind the major shift of the markets. Finally, in Seoul, the Kospi dropped 0.3% with the S&P-ASX 200 following with a 0.2% drop. The FED will meet again in December once again to discuss interest rates. Investors expect another rate hike however this time only by half a percent in comparison to three fourths of a percent that was seen with the last four hikes. It will be interesting to see what the markets continue to do in the coming weeks leading up to the meeting. As talks of recession creep into the conversations in America more often, it may get worse before it gets better, but we will not know until more plays out in the coming weeks.
China has been a global superpower for many years now, and they are wanting to increase their global standing in a war of technology with the US. On Oct. 7t, President Biden released a new set of regulations on China hindering their ability to purchase advanced microchips and the equipment necessary to make those chips without the proper licensing. The new set of regulations also restricts the US civilian from helping certain chip manufacturing facilities located in China in order to develop the chip. This has created a tech war between the United States and China, a war that Chinese leader Xi Jinping is eager and wanting to win. He believes that by doing so China will have officially arrived as a tech superpower on the global scale, and he believes that the new regulations are unfair and prevent China from taking the necessary steps in propelling their country to the next level. The United States has become a hub for chip manufacturing, and the rest of the world is almost dependent on the US and other countries in order to design, make, and fabricate the chips. The new regulations are hitting China in both the short- and long-term. While it restricts their ability to produce and gain access to chips as of now, the country will also be affected in the long run. Mark Williams and Zichun Huang, both analysts at Capital Economics, stated, “Chinese firms will lose access not only to advanced chips, but to technology and inputs that might over time have allowed domestic chipmakers to climb the ladder and compete at the cutting edge.” This goes to show how much the regulations placed by the Biden Administration will hurt the Chinese economy and tech industry in the future. There is little chance for true tech advancement, and they believe it will extremely hurt China’s chance at becoming the leading tech superpower in the world. The chips in question are an important component in the making of smartphones, self-driving cars and arms manufacturing. With this in mind, the US has made it public that the reasoning behind the regulations was to protect national security interests. As of 2025, Beijing has targeted for China to become a, if not the, global leader in a multitude of different industries, and the tech sector was not one left off the list. Pair this with leader Xi Jinping coming back for an unprecedented third term, and China may be on their way to achieving that benchmark. With the shipping industry struggling to get shipments across the oceans it will be interesting to see how this plays out for China. China will focus on achieving this domestically by creating a talent pool large enough that all their technological goals will be completed by their set deadlines. China has been a country threatening the US in terms of global supremacy for years now, and with the world shifting to a more technologically based world by the day, it will be interesting to see where the scales shift in the coming months and years.
On Oct. 7th, 2022, Electric truck and SUV company Rivian Automotive announced that they would be recalling all their vehicle lines as a result of a loose fastener. The recall will tighten said fastener in order for drivers to steer the vehicle without issue. Rivian, founded in 2009, will be recalling over 13,000 of their vehicles. The cause of the problem is a result of the front upper-control arm and steering knuckle not having enough torque. The company based out of Irvine, California, believes that it would only take a few minutes to make the fix and that all repairs should be completed within 30 days, assuming customers collaborate willingly. Rivian is trying to jump on the EV buzz and fix their problems now with the hopes the emerging consumers within the EV market will start to purchase their vehicles and grab a hold of the overall market share currently dominated by Tesla. The company has been public for little over a year and has already surpassed Ford and GM in market value making it the second most valuable automaker from the US behind Tesla. However, with the current economic conditions, the stock price does not reflect their prosperous first year being publicly traded as it has dropped 67% on the year thus far. Big news for the company came last month as they announced a partnership with Mercedes-Benz. The two companies will be building a factory in Europe that will produce electric vans for both companies to sell to the public. Even though Rivian has experienced success as of late, it has not come without its hardships. It started in March when the company announced price hikes on all vehicles which resulted in huge backlash from angry customers. Then in April, the company laid off over 800 workers after reporting a $1.6 billion net loss in the first quarter of 2022 alone. Followed up by another poor second quarter where they posted a $1.7 billion net loss. Then as the old saying goes, “when it rains it pours.” Rivian has not been able to escape the global supply chain issues that have plagued the global economic environment. As a result, their factory stationed in Illinois can produce 150,000 vehicles per year on average. This year, the factory will be happy to produce 25,000.
This upcoming Wednesday Sept. 21, The Federal Reserve will meet to discuss the topic of raising interest rates once again. The past two meetings have resulted in two interest rate hikes which is significant since they haven’t raised rates since 2018. However, since March alone, the Fed’s benchmark policy rate has risen 2.25% and it stands to go up again after Wednesday’s meeting. After the meeting concludes interest rates once again will receive a bump of three quarters of a point which would bring rates to 3%. In addition, they also could raise rates by as much as an entire percentage point which would bring rates to 3.25%. All around Wall Street it is a back-and-forth discussion between whether or not people think the Fed will continue raising interest rates until November or if inflation will slow down so the central banks can relax for a little.
Forecasts for the last quarter show that interest rates could rise to as high as 3.5-4% by November and jump up to 3.75-4.5% in December. When it comes to answering the question “do you think this will slow down anytime soon?” economists believe that there is still more to come in the future. Inflation is still rather high in comparison but has gone down over the past year. Before August, the national inflation rate sat at 8.52% with it now sitting at 8.26%. This is certainly moving in the right direction, but still up from last year’s closing rate of 5.25%.
Even though interest rates are still high, this still doesn’t mean the economy is struggling all around. The job market is sitting in an amazing position right now with an unemployment rate of 3.7% equaling 6 million people across the US without work. To put it into perspective, it is generally accepted that an unemployment rate between 4-5% is full employment. Full employment refers to the economic system where anyone who wants to and is able to work is employed. In addition, consumer spending is also still going strong. We are seeing consumer spending numbers at a higher level than it was during the COVID-19 pandemic period, it is still strong with consumers spending $1.392 trillion (USD) in the second quarter of 2022. This is up slightly from the $1.388 trillion that was spent in the first quarter of 2022.
Finally, the housing market is still high even with the spike in interest rates in the past months. These rate hikes could prove to be costly in the long run though, as too many hikes could result in sending the US economy into a mild recession according to Chief Investment Officer at Girard Timothy Chubb. These hikes could also shift the stock market substantially in terms of market volatility. With interest rates still rather unpredictable, investors have no idea what forecasts for later in the year could look like. July 2023 forecasts have rates anywhere between 3.25-5% which would result in other central banks, such as the European Central Bank, to increase rates as well to keep the market in some sense of balance. If this were to happen it would make the markets that much more volatile making it harder to predict whether a stock price will go up or down based on other market occurrences.
While it is unknown what will happen this week and in the coming months, it will be interesting to see what happens and how it continues to impact the global economic environment.
On Thursday Sept. 14, La Salle’s National Society of Leadership and Success had their Orientation night for new members. For those who haven’t heard of NSLS, it is a national chapter playing host to 1,675,341 members across 771 chapters. La Salle’s chapter was created in June of 2021 by Azaria Soto, Dr. Elizabeth Schroeder, and Dr. Patrick Coyle. The chapter vision is simple but one that shows what is to gain from becoming a member. “Our vision is to help members achieve personal growth, cultivate lasting relationships, and obtain career success”. At their orientation the organization was able to welcome 13 new members to add to their 493 total.
NSLS helps provide students with the opportunity to gain excellent experience from a career and personal development standpoint. Not only do students get to network and meet new people at the beginning of their professional careers, but they can also get involved to develop habits that will transfer over into the real world. There are many executive board positions that allow students to run meetings, plan events, and create a plan for growing the organization throughout the year. This is not limited to just one major either. It is open to anyone who wants to join and grow and develop transferable leadership skills. There will be one more orientation night for any students that either missed the first or are interested in joining. The date for the make-up session is Monday Sept. 19. Anyone who may be interested in this should attend this session to learn more about NSLS and begin the process of joining the organization.
On Sunday Sept.4th, Bed Bath and Beyond Chief Financial Officer Gustavo Arnal was found dead by New York City Police Officials. The former 52-year-old CFO was identified as deceased after it was found he threw himself off the balcony of his 18th floor high-rise apartment. Arnal had joined the company at the peak of the COVID-19 pandemic in May 2020 after a successful career at companies such as Avon, Walgreens and Procter and Gamble. Arnal was instrumental in guiding triple B through the pandemic through his financial knowledge and his ability to create a strong collaborative culture around him. This news however comes at a terrible time for triple B as they creep closer to declaring bankruptcy. As of now, they are fighting this problem by downsizing.
As of Wednesday Sept. 7, the company will be laying off 20% of their corporate employees, closing 150 stores, and reducing several in-house home good brands. In addition to this, $500 million has been saved up to help the company fight through the financial hardships they are facing at this time. Shifting the focus back on Gustavo Arnal, on Aug. 23, a lawsuit filed in the US District Court in DC naming Arnal as a defendant in a class action lawsuit. This case pinned him against Ryan Cohen, who accused the company and Arnal of pump and dump schemes to hyperinflate the company’s stock price. The contents of the lawsuit stated that Arnal and other company officials made misleading comments regarding the company’s current financial situation. Bed Bath and Beyond failed to communicate financial plans with investors, delayed stockholders from seeing their holdings and stock positions, and shared fake revenue numbers.
The company also introduced their “Buy Buy Baby” promotion for the purpose of increasing stock price. This promotion saw triple B acquire a privately held baby merchandising company for $67 million. This comes at a time of financial hardship for companies worldwide. It is worth noting that Ryan Cohen, the other side of the lawsuit against Arnal, sold his $178 million stake in the company. As a result of this sale, Bed Bath & Beyond stock (BBBY) dropped by a whopping 19.63%. On Aug. 18, the day Cohen sold his shares, Bed Bath and Beyond stock price dropped from $23.08 per share to $8.63 per share as of today. This was the beginning of the downfall for the company, and they have been fighting to stay afloat since. It will be interesting to see how Bed Bath and Beyond fights through this time and the financial standing of the company moving forward.