CONSUMER TRENDS

TikTok Shop: The New Amazon?

In the recent months following the release of TikTok’s newest update, TikTok Shop has grown into a viral sensation, becoming a major game changer in the e-commerce world. TikTok, which used to be a platform for posting viral videos and creating new trends, has now taken a step further with TikTok shop. With the growing popularity of TikTok shop, it now poses as a competitor to e-commerce sites like Amazon.  

TikTok shop allows its users to browse, promote, and purchase products without leaving the app to find them elsewhere. TikTok has also made use of a powerful tool: influencer marketing. Influencers promote products through the videos they post, influencing viewers to buy such products as their favorite influencers are raving about them. TikTok utilizes the consumer mindset, allowing influencers to give coupons to consumers, and also link the product directly in the video, saving buyers their time. TikTok further encourages influencers to make videos about products by offering a locked commission rate if buyers use their links to buy products.  

Furthermore, TikTok uses an algorithm with its “For You” page. As you know, the “For You” page recommends videos tailored to a user’s preferences. With the new Shop feature, the For You page now displays products that are trending or suit your preferences based on previous searches in the app. This boosts sales and product visibility for smaller brands, allowing them to compete in the TikTok market, where it might be harder to compete on a larger platform like Amazon.  

Even though Amazon stands as the dominating marketplace in the global e-commerce market, TikTok's strategic marketing plan is capturing the attention of the younger generation. TikTok combines entertainment with retail, aligning with many of the consumer trends right now. With the projected growth, TikTok shop could challenge Amazon’s status of being the go-to shopping site. 

GLOBAL OUTLOOK

Elon Musk vs. Brazil

Over the past month Elon Musk has been in a bitter feud for the last few months with the government of Brazil. The social media platform X, has been banned in Brazil leaving over 20 million users without access to the platform. The ban came as a response to the attack on the Brazilian congress in 2022, the Brazilian Supreme court ordered Musk to censor accounts which they deemed seditious for having allegedly orchestrated the attack on the Brazilian congress, Musk however refused to take down those accounts on grounds that it would undermine freedom of speech. The ban was enacted in August by a ruling made by Justice Alexandre de Moraes, which Musk has given the epithet of Darth Vader. The Supreme Court has even issued a fine for up to nine thousand dollars for anyone caught using X through a VPN. However, on Friday the Brazilian Supreme Court ordered Musk to pay $5 million USD in fines, which Musk could probably find in his couch cushions, and X has appointed new legal representatives in the country. On Tuesday Musk agreed to pay the fines and it is up to Moraes to rule on whether or not X would come back to Brazil, it is still unclear whether or not Musk would ban the accounts that the Supreme Court originally ordered to censor.

Le Pen faces Trial: End of the Road?

In yet another chapter of French government scandals, Marie Le Pen, the leader of the right-wing National Rally party in France, has been put on trial in regards to embezzlement charges that she and other leaders of her party used EU funds to pay local lawmakers to work on projects unrelated to the EU. 

If convicted, the party would likely not feel any impacts with voters since their base consists of EU skeptics according to experts. Yet, if Le Pen were to be convicted, she would be barred from public office for 10 years which would essentially eliminate any hope for the three-time presidential candidate. Ouch. Notably, other parties in France and the rest of Europe have been accused of the same crime of utilizing EU funds to pay for national issues, but the actions of the National Rally party are said to be “systemic” and taken to extreme lengths. The party recently gained a significant number of seats in the French parliament due to the popular criticism of current-President Macron’s policies on immigration and the economy. However, it does not have a majority and is branded by the French mainstream media as far-right. Therefore, it is likely that this trial will only serve to make the party more unpopular and unviable.

This represents a global theme of rising corruption levels as indicated by a recent study done by the NGO “Transparency International”. Following this study, thirty-four countries saw significant declines in their corruption perception index representing failing anti-corruption efforts around the world. Researchers point out weakening checks on power, increased trends of bribery, and the rise of authoritarianism as major contributors to the issue. Notably, issues of corruption tend to disincentivize small businesses and replace them with established, multinational companies which ultimately leads to a more corrupt government. While bringing charges to address the issue of National Rally corruption in France is a good step for the country, more work will need to be done to reduce corruption across the globe.

Japan’s Yen Whirlwind: Is the Carry Trade Back?

For those who’d rather watch paint dry than think about the world’s fourth-largest economy, here’s a reason to tune in: Japan has been riding on an inflation rollercoaster lately. 

• Because of Japan’s ultra-low interest rates and the U.S.’s soaring ones, investors run to grab returns elsewhere, leaving the yen weak. 

• For consumers, the decline of the yen exacerbates already high prices. Alternatively, for exporters, it inflates earnings and makes Japanese products more competitively priced abroad. 

The newly elected prime minister of Japan, Shigeru Ishiba, has been a long-time critic of Japan’s ‘easy money’ policy, which they’ve been using since the 1990s, basically the government saying “Let's flood the market with yen and make borrowing a breeze.” 

• BOJ governor Kazuo Ueda has been trying to change things up and raise the interest rates over the years. 

• In July 2024, interest rates rose. 

  • Cue the stock market panic. The stronger yen hurt sales overseas, and the fear of lower profits spread like the flu during the final season. Investors also reacted negatively to higher interest rates and economic slowdown in Japan and globally leading to a sell-off in stocks. 

Impact on global markets: On Wednesday, Ishiba said that he did not believe the environment requires them to raise the interest rates further. This being said, both the Prime Minister and the BOJ have hawkish viewpoints. It is expected that interest rates in Japan will get a lift-off at the beginning of next year.   

• On Wednesday, the yen took a nosedive, the biggest in over two years. Investors saw this and thought, “Carry trade?”- a popular investment strategy where investors borrow money in a low-interest-rate currency (like the yen) and invest it in higher-yielding assets abroad. 

• Will the yen's fall in value be a quick blip, or is it here to stay? Opinions are divided.  Some say the yen carry trade will come back into boom because of where the currency is heading. Others argue that it is only a temporary setback. 

• Chris Weston, head of research at Pepperstone, says that volatility is still heightened and risk is prevalent. “It takes a brave soul to go hard on getting stuck into carry here.” 

So, whether you’re ready to dive into carry trade or just stay back and watch which way the yen will go, Japan’s financial scene is anything but dull. Stay tuned- it is bound to be a fun ride!

MACRO

Port Strike Finally Struck

On Tuesday, October 1st at midnight EST, approximately 47,000 members of the International Longshoremen’s Association (ILA) went on strike demanding: 

• substantial compensation increase ($5 per hour raise per year for the next six years)

• protection from automation

A one-week strike could cost the U.S. economy $3.78 billion and lead to supply chain slowdowns lasting until mid-November. “A port strike would paralyze US trade and raise prices at a time when consumers and businesses are starting to feel relief from inflation,” said Erin McLaughlin, Senior Economist at The Conference Board. This is especially true with the recent Federal Reserve cut rate.

Why strike now? The ILA explains in a Monday statement: 

“The Ocean Carriers represented by USMX want to enjoy rich billion-dollar profits that they are making in 2024 while they offer ILA Longshore Workers an unacceptable wage package that we reject.”

It’s true. The shipping companies that have employed these fighting workers have made record profits since the pandemic, with some growing by 800% compared to earnings before the pandemic. It is necessary to note despite what seems like high compensation, many workers face long hours and dangerous conditions, many without sick leave. Fatal injuries among maritime workers occurred at a rate of 18.4 per 100,000 workers (a rate of 6 times the rate of all U.S. workers).

What does this mean for the upcoming election?

The Biden Administration has intentionally chosen not to intervene due to the upcoming elections and is one of the few presidents who have supported collective bargaining. Biden’s vowed not to undercut the power of labor unions by invoking the Taft-Harley Act, which would force workers on strike back to work or face being replaced.

What does this mean for you:
If the strike continues, some imported items could experience shortages and higher prices including:

• Bananas

• Alcohol imported from Europe, South America, or the Carribean

• Machinery Parts

• Electronics

• Seafood

• Coffee Beans

Zoom Out

The port strike is another big win for labor unions following a summer that was full of strikes by the UAW, Teamsters and Screen Actors Guild-American Federation of Television and Radio Artists.

Visa’s Debit Dominance: Monopoly or Mastery?

The U.S. Department of Justice has accused the financial giant Visa of unfairly imposing fees on merchants and deterring rivals in an antitrust lawsuit filed on Tuesday, September 24, 2024. 

For over a decade, the Justice Department claims that Visa has entered into de facto exclusive agreements with other merchants and banks, pushing them to route the bulk of their transactions solely through Visa’s payment network. In doing so, they have maintained a monopoly by threatening merchants with higher fees when they use other payment networks to process debit transactions. 

This lawsuit originated from investigations by enforcers under the Biden Administration, which have targeted corporate middlemen and aimed at companies wielding power in technology and agriculture. In 2021, President Biden issued an executive order that made aggressive antitrust enforcement a pillar of his economic policy. 

Visa is one of the biggest middlemen in the payments industry: 

• Visa has processed $3.8 million in U.S. debit transactions this year through June, and

• Generated $7 billion in processing fees per year. 

Visa’s actions negatively impact younger and lower-income Americans the most. In a statement accompanying the complaint filed in the Southern District of New York, Attorney General Merrick B. Garland stated, “Visa’s unlawful conduct affects not just the price of one thing, but the price of nearly everything.” 

This is not the first time the Justice Department has tried to prevent Visa from exploiting its monopoly: 

• In 2020, the Justice Department sued to block Visa’s deal of $5.3 billion to acquire the firm Plaid, a financial services company. The Justice Department stated that Visa already has a “decisive market position through its online debit monopoly and would unlawfully extend that advantage by acquiring Plaid.” Two months later, Visa and Plaid abandoned their deal. 

• Federal antitrust regulators have scrutinized Mastercard for allegations regarding Visa illegally suppressing competing debit payment networks with Visa and Mastercard. They have called out Visa and Mastercard on possibly maintaining a duopoly. 

Visa’s abuse of its monopoly power impacted the costs borne by consumers, merchants, banks, and the competitive process of being a payment industry corporation. The Justice Department has yet to decide what it will require from Visa to resolve the lawsuit. Analysts at Wells Fargo stated that they believe the review will “play out over a long time.”

Deutschland’s Deluge of Difficulties

September 27th: The German economy is sick with stagnation – it isn’t expected to rebound anytime soon. 

As of 2024, GDP is expected to stagnate. Between July and September 2024, the ZEW Economic Sentiment Indicator, Germany’s primary barometer for economic confidence, plummeted by 38.2 points (41.8 → 3.6). Firms and consumers alike have a grim outlook for Germany’s economic rebound in Q4. Germany has experienced a vicious back-and-forth of sharp GDP contraction, marginal growth, and lengthy stagnations between 2022 and 2023 (Figure 1). These movements were largely attributed to global inflationary pressures, which accelerated the decline in firms’ domestic investment. This lack of investment has hindered innovation, which in turn has reduced productivity. 

For years, the German economy has faced major challenges. A strained education system, high corporate taxes, and restrictive laws have hindered competitiveness. Low wage growth has fostered a strong culture of saving, which leveled consumption. An aging population drove expectations of smaller future returns, lowering firms’ domestic investment. This flood of structural issues was dammed by Germany’s world-class manufacturing sector. Fueled by cheap Russian Gas, and strong global demand, manufacturers fostered over a decade of strong GDP growth following the 2008 financial crisis. (Figure 2). By 2019, the German economy was locked into this manufacturing-heavy, Russian gas-dependent, export-oriented model. 

TECH

Airpods Go Pro in Healthcare

Apple is turning your earbuds into a healthcare device.

The Juice:

          In a major flex, Apple’s latest update for AirPods Pro allows them to function as hearing aids for people with mild to moderate hearing loss. Recently approved by the FDA on Wednesday, the update will arrive sometime in the fall and will only work with AirPods Pro 2 and iOS 18-compatible devices. While AirPods already face little competition in the earbud world, this new feature turns them into a multi-use audio tool, taking a swing at the traditional (and expensive) hearing aid market.

Why It Matters:

          Let’s face it—hearing aids are notoriously expensive, often costing thousands of dollars. By entering the space, Apple could make assistive devices more affordable and accessible. The global hearing aid market, projected to hit $10 billion by 2030, might be in for disruption. And if there’s one thing Apple loves, it’s shaking up industries. 

          With AirPods’ new health feature, Apple is lowering the barrier to entry for those needing hearing support but balking at the high costs of traditional devices. This could lead to a wave of new users, boosting consumer spending on health tech while improving the quality of life for millions—a win-win.

The Economic Effects:

          When consumer tech gets healthcare-savvy, it increases competition in both industries, leading to lower costs and more innovation. In the long term, affordable assistive technology like this leads to better health outcomes, which translates to more productivity, fewer sick days, and higher labor participation. Apple stock will likely see healthy gains come this fall. 

          Apple’s AirPods are no longer just earbuds. They’re becoming tools for healthier, more productive workers, all good news for the tech industry and consumer prices! Learn more here. 

Nvidia’s New Strides in AI

Nvidia: Founded in 1993, the company first focused on gaming hardware, but today is a leader in AI, data centers, and automotive technology. Their GPUs (graphics processing units) are critical for rendering high-quality graphics in video games and powering complex computations.

In recent news…Nvidia has just released the NVLM-D-72B model, one of the most powerful AI tools publicly available today!

Nvidia is no stranger to this new technology:

• Its CUDA platform is the go-to choice for developers to harness the power of GPUs for general-purpose computing and real-time data analytics.

• Its Drive platform explores automotive tech to help manufacturers build smarter cars.

The company collaborates with major firms across various industries, from gaming to healthcare, to enhance its offerings. With a strong focus on innovation and a diverse portfolio, Nvidia continues to take charge of the future of computing and beyond! If you want to explore this powerful new tool, click here.

Drones and Decisions: The Ethics of AI in Combat

Eric Schmidt, former Google CEO and now chair of the U.S. Department of Defense’s Defense Innovation Advisory Board(DIB), argued in a highly suspect September 21, 2024, Financial Times opinion piece that “AI-driven warfare” demands new approaches to military technology and more importantly, (taxpayer) spending. While Schmidt's ‘proximity’ to tech lends some weight to his vision, his perspective requires careful examination, considering historical arms control efforts and the complex ethical implications of AI in warfare, if the DoD expects taxpayers to front the bill.

Schmidt advocates for a shift towards affordable, attritable, and abundant AI-driven weapons systems. He argues: "As increased defense budgets meet the AI revolution, procurement decision-makers should favor weapons systems that are affordable, attainable, and abundant."

Schmidt also calls for increased defense spending and innovation, stating: "We cannot waste this opportunity simply buying the same weapons we fought with in our past wars. The age of AI demands that we invent, adapt, and adopt the weapons of AI." Note that AI weapons aren’t science fiction; they’re currently being used and will likely continue to be used whether you like them or not. Schmidt's and other more ‘hawkish’ voices in the tech space call to further the "adoption of the weapons of AI"  often overlook crucial ethical and practical concerns. The integration of AI into warfare raises profound moral questions that philosophers like Peter Singer (Professor of Bioethics at Princeton University) have grappled with: can machines make ethical decisions in combat scenarios? The potential for AI to make life-or-death choices without human intervention is deeply troubling when it’s humans at the other end of the spear. Using AI weapons could further dehumanize warfare, treating human beings as mere means rather than ends in themselves.

From a practical standpoint, AI weapons could exacerbate the security dilemma, potentially triggering a new arms race, particularly with our most important trading partner China, who Eric Schmidt and the DIB seem to have top of mind. History, particularly the Cold War nuclear arms build-up, shows how such escalations can increase global instability and drain our nation's pockets even without a single warhead being fired. The dual-use nature of AI technology complicates traditional arms control approaches, just like nuclear energy versus weapons, presenting a clear and present danger in tying AI development to weapons manufacturing. There’s no use in conceding to luddites; AI has and will continue to bring significant use-cases from medicine to translation to dataset ease of access, but the dual-use nature of AI technology complicates traditional arms control approaches, just like with the dichotomy between nuclear energy weapons, there is a clear and present danger in tying the development of AI to weapons manufacturing, that Schmidt, the DIB, and the rest of the arms industry seems to either be ignoring or ambivalent to.

While Schmidt's vision emphasizes the importance of advancement in tech (which is true), it underestimates the ethical complexities and potential destabilizing effects of the proliferation of AI weaponry. Rather than rushing to "adopt the weapons of AI," we must engage in thorough, inclusive dialogue about the responsible development of military AI, prioritizing human control, ethical considerations, and global stability over technological opportunism.

“Once weapons were manufactured to fight wars. Now wars are manufactured to sell weapons.” -Arundhati Roy