Posts

tesla

Tesla Vehicles Are Becoming Cheaper, What This Means For The Company 

Tesla has recently cut their prices on some of their top-selling models, including the Model Y SUV and Model 3, by up to 20% across the US and Europe. The changes were revealed on Tesla’s website last Thursday. 

While the vehicles are still relatively expensive, the drop is significant when compared to its previous premium pricing. Many are speculating that these decreases are a sign of Tesla backing away from the months they spend gradually raising the prices of the electric vehicles. 

Embed from Getty Images

Tesla has also experienced the impact of the economy in recent months, missing market estimates for sales last year, shifting its market capitalization from $1 trillion to less than $400 billion, according to reports from Business Insider.

Company owner Elon Musk has recently bought and taken over the popular social media platform Twitter, where he’s made it clear that rising interest rates in general have been taking a toll on the electric vehicle company. 

“Fed needs to cut interest rates immediately, they are massively maplifting the probability of a severe recession,” Musk tweeted in November. 

Interest rate increases have had a major impact on the costs of financing Tesla vehicles, making it even more difficult for consumers to become a Tesla owner. 

Dan Ives, senior equity research analyst at Wedbush Securities, said “it’s no secret that demand for Tesla is starting to see some cracks as a global slowdown of the economy that started in 2022 continues into 2023.”

Embed from Getty Images

“A softening demand for the global EV market is a bigger driver of price cuts than interest rate hikes. When it comes to demand, backlog orders have come down significantly for Tesla, making price cuts is a good way to increase the immediate- and medium-term sales pipeline,” said Simon Moores, CEO of Benchmark Mineral Intelligence, a price reporting agency for the EV supply chain, to Insider. 

Traditional automakers have also entered the electric vehicle market, providing cheaper alternatives to Tesla, which has dominated the EV market since its launch. 

According to data from an Experian report, from January to September 2022, Tesla accounted for 65.4% of new electric vehicle registrations in the US. This percentage marks a significant decrease from the two previous years: 68.2% in 2021 and 79.4% in 2020. 

The cuts to Tesla pricing will likely welcome more consumers to purchase the vehicles. Ives stated that he estimated the price cuts could definitely increase demand by around 12-15% globally in 2023. 

“This is a clear shot across the bow at European automakers and US stalwarts (GM and Ford) that Tesla is not going to play nice in the sandbox with an EV price war now underway,” he said.

wealth

The Top 1% Gained Twice As Much New Wealth As The Rest Of The World Within Two Years

Over the past two years, the world’s wealthiest individuals have acquired twice as much new wealth as the rest of the world, according to Oxfam’s annual inequality report.

goldman sachs

Goldman Sachs Gearing Up To Lay Off Up To 3,200 Employees This Week 

According to reports from an individual involved in Goldman Sachs, the company will be laying off up to 3,200 employees this week as a means of saving on costs. 

The source who spoke with CNN stated that more than a third of the projected layoffs will come from the firm’s trading and banking units. These cuts are a result of uncertain economic and market conditions, as Goldman Sachs has recently been feeling the impacts of a decrease in global dealmaking. Many companies are leaning away from mergers and raised capital with the firm. 

Embed from Getty Images

As reported by Bloomberg, hiring for roles in other departments will continue into the new year, and a new class of analysts are also expected to start working for the firm later this year. 

At the end of the third quarter Goldman Sachs reported having around 49,100 employees after adding thousands of positions during their recovery from the pandemic; which many financial markets have also done. 

Overall, the Federal Reserve and other major banking firms have begun to raise their borrowing costs as a means of combating inflation rates throughout the nation. 

Many companies are working on saving money by any means necessary to prepare for a possible recession that would occur as a result of rising interest rates. The rate of mergers and acquisitions have overall been on the decline as well. 

Embed from Getty Images

Goldman Sachs is one of the most well known firms that’s involved in these mergers and acquisitions as well. So with the recent decline in transactional activity, the firm experienced a 12% drop in revenue in the third quarter of 2022 when compared to one year ago. 

Investment banking revenue overall has decreased by 57% yearly, according to reports

This past October Goldman Sachs announced part of its plan to streamline operations by combining their trading and investment banking divisions, as well as combining its digital consumer bank, known as Marcus, with its wealth management sector. 

Reports indicate that shares of Goldman Sachs were up less than 1% in premarket trading as of this week. 

Goldman Sachs isn’t the only massive company planning on implementing layoffs in their 2023 plans. Amazon stated earlier this month that they plan on laying off more than 18,000 employees while Morgan Stanely have already begun layoffs in the new year.

home sold

Real Estate Experts And Data Show Market Is Gradually Slowing Down

According to recent housing reports, the current real estate market in the US is slowing down gradually due to inflated home prices and high interest rates.

interest

Mortgage Rates Hit a 20-Year High of 6.92%

According to Freddie Mac, mortgage rates reached a 20-year high last week due to rising interest rates, now at a whopping 6.92%. The Federal Reserve is continuing its aggressive monetary policy to squash surging inflation, sending shockwaves throughout the housing market.

The federal funds rate is projected to reach 4.4% by the end of 2022. Russia’s invasion of Ukraine, supply chain issues and record low interest rates during the pandemic led to unprecedented inflation, prompting the Fed’s policy initiative.

While the Fed continues to wrangle with inflation, the housing market is especially feeling the pinch of higher interest rates. The S&P 500 and the New York Stock Exchange also fell 20% from this time last year as a result of these rate hikes. The declines have continued for several weeks.

Despite the Fed’s efforts, the consumer price index has not significantly budged. The index rose to 8.2% in September, far from the Fed’s eventual target of 2%.

For the last 15 years, mortgage rates in the U.S. have been relatively low. Thirty-year fixed mortgage rates were notably low during the previous two years, hovering between 2.5% and 3.5% between 2020 and early 2022.

However, mortgage rates spiked in recent weeks. As of Oct. 13, the thirty-year mortgage rate is at a two-decade high of 6.92%. The fifteen-year rate is at 6.09%.

Embed from Getty Images

Freddie Mac’s chief economist Sam Khater released a statement regarding the rates.

“Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April 2002. We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously. The next several months will undoubtedly be important for the economy and the housing market.”

The Fed has been clear about its plan to continue increasing the federal funds rate until prices begin to level out. Mortgage rates tend to rise alongside the federal funds rate.

In September, the chairman of the Fed, Jerome Powell, said there is no way to avoid the rising unemployment and slowing growth that will follow the Fed’s current monetary policy. The consequences of out-of-control interest rates may be even more disastrous for the economy than necessary rising interest rates. The Fed estimates unemployment will climb to 4.4% in 2023 and 2024, up from the current rate of 3.5%.

“We have to get inflation behind us. I wish there were a painless way to do that. There isn’t.”

Some experts are taken aback by how quickly mortgage rates are rising. Economist Matthew Speakman from Zillow told ABC News that “few could have predicted exactly how far and how fast they have risen.”

“There’s not a lot of incentive for rates to come down dramatically in the near-term, but that doesn’t necessarily mean they’re going to keep running away at this pace.”

The relationship between homebuyer behavior and rising mortgage rates is complicated. In general, higher mortgage rates reduce demand, which drives down the prices of homes. Real estate prices are falling, but not as rapidly as expected, in the face of the skyrocketing mortgage rates.

Embed from Getty Images

Daryl Fairweather, an economist at Redfin, spoke on the complexity of the current housing market.

“It’s like a standoff between buyers and sellers. Buyers can’t afford higher prices, and sellers don’t want to sell for lower prices.”

Recession worries, rising inflation and high-interest rates have made things appear bleak, but many experts believe mortgage rates will not continue to skyrocket. Lawrence Yun, the chief economist at the National Association of Realtors, predicts that rates will hover around the resistance point of 7%.

“We don’t want to see a bursting out of that second resistance and going up, because you’re talking about 8.5% mortgage rates, something that we clearly do not want to see. The 7% interest rate could be the new normal.”

In July, Yun released a statement predicting that higher mortgage rates will persist as long as the high inflation rate persists.

“If consumer price inflation continues to rise, then mortgage rates will move higher. Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”

house

US Home Prices Decline at Fastest Pace Since 2008 Financial Crisis

We are in the middle of the most significant two-month drop in home prices since shortly after the collapse of the Lehman Brothers in September 2008. Prices have been declining at the fastest pace since the Great Recession, prompting some experts to believe we are entering a housing market correction.

dollar

Surging US Dollar Wreaks Havoc on Global Economy

The U.S. dollar is the strongest it has been in the last 20 years. The rising value of a dollar has worldwide ramifications, with international currencies plummeting in comparative value and foreign central banks hiking up interest rates to protect price stability.

The dollar continues to strengthen as the U.S. Federal Reserve continues its aggressive monetary policy, raising interest rates to bring down inflation in the U.S. economy. The Dollar Index, which measures the U.S. dollar against an average of six major global currencies, including the euro, Swiss franc, Japanese yen, Canadian dollar, British pound and Swedish krona, has risen 15% in 2022.

A stronger dollar can purchase more foreign currency. The British pound plummeted to a record low on Sept. 26, reaching $1.03 against the dollar in a near historic dollar-to-pound parity. Historically, the pound has always been valued higher than a dollar, usually upward of $1.20 against the dollar.

Embed from Getty Images

The effects of a strengthening dollar reverberate throughout the global financial system since the dollar is the currency used in most international transactions. Recent shocks to the global economy, such as the war in Ukraine, supply chain disruptions and the pandemic, push up the dollar’s value even higher since companies and other countries stow their reserves in dollars during economic volatility.

The dollar is traditionally seen as a symbol of “stability and security” in terms of crisis. Moreover, despite ongoing inflation, the U.S. economy is still more stable than other nations’ economies. Consumer spending is still strong, and unemployment is still low.

George Saravelos, Deutsche Bank’s head of foreign exchange research, noted the building tension in the global economy.

“The dollar is experiencing its largest valuation overshoot since the 1980s. Amid extreme volatility, a global chorus of discomfort is slowly building.”

American tourists and U.S. consumers benefit from a stronger dollar since goods and services produced in other countries and sold in the U.S. become less expensive to purchase. A stronger dollar also helps U.S. companies import goods at lower prices. Tourists traveling abroad can also buy goods at lower prices since the dollar has stronger buying power.

Embed from Getty Images

However, American businesses that export goods struggle under a strengthening dollar since goods made in the U.S. become more costly and less attractive to buyers in other countries. Multinational businesses that operate in other countries also make less profit when they convert revenue in foreign currency to U.S. dollars.

Smaller emerging economies worldwide especially struggle with the rising cost of the dollar since international companies borrow and trade money in dollars. The world’s commodities, like oil, industrial metals, wheat and soybeans, are priced in dollars and increasingly more expensive to import. Petrol now costs more in several countries worldwide. Countries with debt denominated in dollars will also see higher interest payments, no matter the initial exchange rate.

As reported by the NYTimes, Mr.Obstfeld, a U.C. Berkeley economist, spoke on the far-reaching impact of the Fed’s monetary policy.

“Central banks have purely domestic mandates, but financial and trade globalization have made economies more interdependent than they have ever been and so closer cooperation is needed. I don’t think central banks can have the luxury of not thinking about what’s happening abroad.”

At the same time, the consequences may be even worse for the global economy if the Fed does not bring down historical inflation rates in the U.S.

Central banks around the world are trying to raise the value of their currencies by increasing interest rates, similar to what the Fed is doing in the U.S. The U.K. increased its rate by 2%, and analysts predict they may raise it to as high as 6%. The European central bank has increased its interest rate by 1.25 percentage points. These rising rates may push many countries into a recession if raised too high by decreasing borrowing and spending and reducing economic activity.

dow

Dow Tumbles More Than 1200 Points After Inflation Data

US stocks plummeted Tuesday after the latest Consumer Price Index report showed inflation rates are still at a 40-year high. The Dow fell more than 1200 points on its worst day since June 2020.

The report revealed that monthly consumer prices rose more than expected in August. History shows that low unemployment and rising inflation often precede a recession. High inflation rates erode consumer purchasing power. They also decrease companies’ profits due to rising material costs, causing stocks to fall and economic activity to slow down.

Embed from Getty Images

Matt Peron, director of research at Janus Henderson Investors, agreed with most analysts that the Federal Reserve will likely increase the federal funds rate higher to cool off the market.

 “The CPI report was an unequivocal negative for equity markets. The hotter than expected report means we will get continued pressure from Fed policy via rate hikes.”

The Fed responds to rising inflation by increasing the federal funds rate. In the wake of the pandemic, the rate sat at near zero in an attempt to stimulate the economy. The Fed then hiked rates from a range of 0.25% to 0.50% in March 2022 to a range of 2.25% to 2.5% in July 2022. The rate of increase in borrowing costs was the fastest since the 1980s.

When the Fed raises the federal funds rate, the cost of credit throughout the economy increases and loans become more expensive for businesses and consumers, since interest payments are higher. At the same time, people with savings in banks earn more interest on their deposits. Together, this drops the amount of money in circulation, bringing down the inflation rate. However, if the Fed increases the federal funds rate too high, it may also trigger a recession by slowing economic activity too much.

Embed from Getty Images

The Fed is expected to keep hiking the federal funds rate until a sustained drop in consumer price inflation. Investors hoped that the Fed would keep its interest rate increases at a slower speed, with analysts predicting a federal funds rate of 3.4% at the end of the year. Brian Jacobsen, a senior investment strategist at Allspring Global Investments, told Reuters his concerns.

“The big risk is that next week, the Fed tries to convince the markets that they’re not going to just try to go for 4% with the Fed funds rate, but that they could push it to something closer to four and a half percent.”

All three major US stock indexes — S&P 500, the Dow, and Nasdaq had their most significant one-day percentage drops in over two years. The CBOE volatility index, which measures the market’s expectations for volatility over the next 30 days, rose to 25.74 points.

The next Federal Reserve meeting is scheduled for Sept. 20.

 

UK

One Third Of Households In The United Kingdom Facing Poverty Due To Rising Energy Costs 

According to campaigners from the United Kingdom, nearly one third of households in the nation will face poverty by the winter due to increasing energy costs and paying bills that are expected to rise in price even further with the new year. 

According to estimates from the End Fuel Poverty Coalition (EFPC), about 10.5 million households will be in “fuel poverty” for the first three months of 2023. In other words, based on their incomes after they’re done paying their energy bills their household income will fall below the poverty line. 

Embed from Getty Images

The definition of poverty in the UK is any household with an income of less than 60% of the UK median, which stands at £31,000 ($37,500), according to official statistics.

Cornwall Insight is the research firm that provided the data leading to the prediction that one third of households will be impoverished in the winter. The average energy bill is expected to hit £3,582 ($4,335) a year from October, and £4,266 ($5,163) from January; about £355 ($430) a month.

The forecast for 2023 represents a 116% increase in energy bills from their current levels. Fuel prices have been surging worldwide, and in the UK prices are projected to continue to rise by 83% in January. 

Embed from Getty Images

Cornwall Insight, however, also is expecting energy bills will start decreasing in the second half of 2023. The average household bill in the UK has risen by 54% this year due to inflation rates regarding fuel and energy consumption.

The UK government announced a bill in May which introduced a  £15 billion ($18 billion) package of support — including a “£400 ($484) payment to 29 million households from October — to ease the burden of energy bills.”

But Simon Francis, coordinator for the EFPC, said “the latest price estimates meant the current level of government support amounted to a drop in the ocean.”

Craig Lowrey, a principal consultant at Cornwall Insight, said in a Tuesday press release that “if £400 was not enough to make a dent in the impact of [the company’s] previous forecast, it most certainly is not enough now.”

Liz Truss, the UK’s foreign minister and as prime minister, has proposed “cutting taxes to help people struggling with their bills, rather than direct help.”

best places to live

The Best Places To Live In America This Year 

Real Estate company Niche has released their fifth annual report of the Best Places to Live in America, which includes a number of different categories including the most affordable places in the nation to live. 

“The pandemic triggered a new set of possibilities—suddenly, many individuals and families found themselves more mobile than ever before, and in the past two years they have continued to think hard about where they really want to live,” says Luke Skurman, CEO and founder of Niche.

Niche creates their reports using data from reliable sources such as the US Census and other government agencies, in addition to citizen reviews and reports. When it comes time to put there report together, they look at factors such as affordability, diversity, local housing economies, and other integral factors that buyers would look at when it comes time to buy a home. 

Embed from Getty Images

For the second year in a row, Niche reported that The Woodlands is the top place in America to live. Ryan Bell, the principal strategist at Niche, discussed why it’s been able to top the list two years in a row. 

“When you look at all the factors we chose for our best cities ranking, The Woodlands is extremely well-rounded. It had high scores in each category, including weather, overall affordability and the quality of its public schools.”

Niche’s best cities rankings also incorporate real ratings from people who live there, so the residents’ love and appreciation for their home certainly helped The Woodlands hang on to the number one spot for two years running,” says Bell.

Gil Staley, CEO of The Woodlands Area Economic Development Project, also spoke to the perks that The Woodlands has to offer leading to its top ranking on the list. 

“Our county, as a whole, is one of the fastest growing counties in the nation and our community has turned into a regional center for jobs,” Bell explained, adding that the highly ranked school districts in the county also make the Woodlands a desirable place to live. 

Niche listed Fort Wayne, Indiana as the most affordable place to live in the US, a title which it also earned in 2018, 2019, and 2021. 

Embed from Getty Images

“To take the number one spot, Fort Wayne had to have strong performance in several factors we take into account for the lowest cost of living rankings. In particular, housing and rental affordability in comparison to incomes in the area, are Fort Wayne’s strongest factors for affordability this year,” says Bell. 

Forbes Magazine reported on why citizens in Fort Wayne also believe it’s such an amazing place to live: “Fort Wayne is a lovely place to visit and live. I’ve lived here for six years now and still haven’t seen everything. It’s family friendly and just friendly in general. It’s a small city compared to most, but there’s much to do. It’s full of history and rivers.”

The Top 10 Best Places to live in America according to Niche are ranked as follows: 

  1. The Woodlands, Texas
  2. Cambridge, Massachusetts
  3. Naperville, Illinois
  4. Arlington, Virginia
  5. Overland Park, Kansas
  6. Ann Arbor, Michigan
  7. Columbia, Maryland
  8. Berkeley, California
  9. Plano, Texas
  10. Irvine, California

For the rest of the rankings from Niche, check out their full report here.