Dow futures fall 97 points as stocks look to pull back from record highs

After the record high of 23,000 where it closed at Wednesday, the Dow dropped significantly Thursday seemingly in response to the record high.  The record high could have scared some people as they possibly anticipated a drop off from the record high.  This thought process is shown that people decided to sell and get out while it is good.

The attitude of buyers and sellers of stock affects the stock market.  If people think the stock market is going crash it will not continue to grow, it will shrink.  That is one of the characteristics of an open market economy, that confidence of the consumer directly affects the economy.

What else do you think caused the drop in the Dow?

https://www.cnbc.com/2017/10/19/us-stock-futures-earnings-catalonia-concerns-dow-on-the-agenda-for-wall-street.html

Nobel in Economics Is Awarded to Richard Thaler

Richard H. Thaler won the 2017 Nobel Memorial Prize in Economic Sciences. "The Nobel committee, announcing the award in Stockholm, said that it was honoring Professor Thaler for his pioneering work in establishing that people are predictably irrational — that they consistently behave in ways that defy economic theory. People will refuse to pay more for an umbrella during a rainstorm; they will use the savings from lower gas prices to buy premium gasoline; they will offer to buy a coffee mug for $3 and refuse to sell it for $6." This defies what current economic models are based off of. "Mainstream economics was built on the simplifying assumption that people behave rationally. Economists understood that this was not literally true, but they argued that it was close enough. Professor Thaler has played a central role in pushing economists away from that assumption. He did not simply argue that humans are irrational, which has always been obvious but is not particularly helpful. Rather, he showed that people depart from rationality in consistent ways,  so their behavior can still be anticipated and modeled." I think that this a very modern way of thinking about economics. I actually feel like what Thaler is saying almost seems like common sense. It will be interesting to see how this way of thinking changes the current economic models and their assumptions! 

Bitcoin Prices Fluctuate Due to New Jurisdiction

Bitcoin saw a severe drop in value of over 8.5 percent on Wednesday. This was followed by a slight bounce back and is now valued at 5,410 USD. These fluctuations were caused by statements made by the US Commodity Futures Trading Commission in a report called "CFTC Primer on Virtual Currencies." The report stated that they have jurisdiction over virtual currencies including Bitcoin. This is causing fear amongst owners that regulation will make Bitcoin more difficult to use and may loose value. That being said, it is still valued extremely high and reached a record point last Friday.

Bitcoin allows for fast transactions without the use of a broker or bank. This could save people a significant amount of time and money and could benefit the economy greatly. This would allow for increased national saving and allow for increased large transactions and business investment. If Bitcoin can avoid serious issues it could play a huge role in the future of U.S currency. It will be interesting to see what kind of regulations the U.S government will place on this currency and to see just how popular it becomes.

https://www.cnbc.com/2017/10/18/bitcoin-plunges-nearly-9-percent-on-fears-of-greater-oversight-from-us-regulators.html

More debt keeps China's economy humming

An article from CNN highlights the recent third quarter growth results for China and evaluates its ability to keep up their goals for growth. China’s economy expanded 6.8% in the third quarter which is the number economic forecasters expected for the world’s second largest economy. China’s annual target growth for 2017 is 6.5% or higher and looks to be on track to reaching that goal. However, many experts have had doubts about the accuracy of the country’s data. The stable growth numbers seem to be masking the heavy debt burden that Chinese companies carry. The Chinese president has stressed the importance of cutting levels of debt, but there are many skeptics on ability for China to get this done. Many experts expect that Chinese growth to slow in the coming years. As we learned in class, this is a natural thing for economies to do as they begin to reach the steady-state.

http://money.cnn.com/2017/10/18/news/economy/china-economy-third-quarter-growth-gdp/index.html 

Nike Aims for New Market

Nike’s new “Pro Hijab” ad released earlier this week was an attempt to reach new female consumers in the Middle East, despite the popular view that it was brought out as a political statement.  Nike’s efforts were to introduce a lightweight, highly wearable hijab that doesn’t come untucked when working out or during competitions has little to do with timing or the political climate.  Many wouldn’t be surprised if Nike hopes to expand its reach to a growing market of Muslim shoppers buying apparel and footwear, which is estimated to reach $484 billion annually by 2019.

In recent years, there has been discussion around the world about the role of women in the Middle East, including in traditional societies such as Saudi Arabia.  Nike looks as if it going to be capitalizing on that conversation with a new Nike Middle East ad that features a Muslim woman running in a hijab and other Middle Eastern women participating in sports.  For any company, making a connection with consumers requires a great deal of cultural experience to understand the habits and norms of a particular region.  A company makes an emotional connection that can be established or strengthened brand loyalty when they strike a note with the thoughts and feelings of a consumer group.

If Nike’s Pro Hijab campaign is successful, executives could also position the company to introduce Muslim women to athleisure wear, an already growing market that is projected to top $350 billion by 2020 for brands that cater to every style and choice from yoga to basketball.  In my opinion, I think Nike is smart to aim for a new market that there is not much competition in.  Nike’s new reach could also help the company find a cushion against growing global competition.  Tapping the Middle East could be important to offset any decline it might experience in the slow growing economy of China, while also introducing its products to a new group of consumers.

http://fortune.com/2017/03/11/nike-sports-hijab/

Will Tesla soon have direct competition?

Volvo, a Swedish car manufacturer, has recently announced that they will be coming out with an all electric high performance sedan. The car is not a Volvo though, it will be made by a manufacturer called Polestar which will be based out of China and owned by Volvo. This car will be manufactured in China which will give them an advantage in taking a lead in the Asian markets.  I believe Polestar's new car could be direct competition to Tesla, requiring them to possibly innovate more or lower prices to stay competitive. This is huge for the high-end electric car market because Tesla has not been faced with competitors such as Polestar and it will be interesting to see how Tesla handles this kind of competition

https://www.wsj.com/articles/volvo-unveils-a-direct-challenge-to-tesla-1508252078

United States is Now Worlds Second Most Competitive Economy

According the the Washington Post, the United States has climbed to an eight year high to second in the worlds most competitive economies just behind Switzerland. The question is, what does this mean to the United States? Is this a positive or negative?

Breaking this down into more details shows that this can be a positive for the United States as a whole. The United States in one of the world leaders when it comes to higher education, job training, quality of companies and technological capabilities. Which shows that the United States is indeed being very competitive when it comes to the economy, and pushing more industries to increase their value and production. That being said, there is still much more that the United States needs to improve on. For example, the US is 29th in the world when it comes to health and primary education, which is not a very good spot to be on. Also, we land at 83rd when it comes to our macroeconomic environment. Which has decreased from 71st the previous year. This reflects that slow growth of the United States since the Great Recession.

With President Trump planning to unveil his tax plan soon, it will be interesting to see how it will affect the economy as a whole. Obviously, the United States are going to have continue to improve on our technological resources in order to keep up with the rest of the world with the rate that technology is moving at. It will also be interesting to see where the U.S lands next year, especially with some of the changes that President Trump plans on doing to the economy this coming year.

https://www.washingtonpost.com/news/wonk/wp/2017/09/26/the-united-states-is-now-the-worlds-second-most-competitive-economy/?utm_term=.b0c4ef477476

Nearly Half of Republican Voters Support Stricter Gun Control Laws

A recent study done showed that about half of Republican voters support stricter gun control laws in the US.  About four months ago the same survey was conducted and there was a five percent increase since then.

About 49 percent either "strongly support" or "somewhat support" stricter gun laws in the US.  Out of the 49 percent, 25 percent said they strongly support and 24 percent somewhat support. The other 45% was either "strongly opposed" or "somewhat opposed" to stricter laws.

This survey was taken after the recent shooting in Las Vegas.  The gunman had shot and killed 59 and injured 500.

Gun control has been a controversial topic for ages.  If more shootings occur I think the number of people wanting stricter gun control laws will continue to rise. 

http://time.com/4978719/republicans-gun-control-las-vegas-poll/

IMF and World Bank looked into crystal ball for world’s economies this week

At meetings held this time of year every year, the IMF and World Bank discussed with policy makers from around the world how they see the future for the world’s economies –and what they think the main risks and opportunities are.  The Eurozone economies and the US economy, among others, are growing more quickly than any time since before the global financial crisis hit nearly ten years ago.  This is good news. But while these international institutions generally predict that the largest economies of the world will continue to grow at a good rate, they see some risks.  

These potential risks include the negative effects that further increases in interest rates by the Federal Reserve in the US would have on emerging economies—by causing some of the finance from international investors flowing to these economies looking for higher returns to return back to the US when the US Federal Reserve raises rates again. There are also political risks from the possibility of conflict in Korea and the risk of more protectionist trade policies in the US slowing trade flows and therefore hurting global economic growth. And the head of the IMF called on more economies to do structural reforms to their fiscal policies—for example to raise more money from taxes—while their economies are strong and people won’t feel the burden as much.

There were also remarks from the leaders of the World Bank and IMF that, even though the global economy has been growing at a healthy rate, there is a need for more inclusive growth—that helps more poor people enjoy the growth benefits also. And in some of the large advanced economies including the US, wages and inflation are growing slowly.

My own view is that it must be hard in reality for two international institutions to be able to predict the future accurately for more than one hundred economies. They may have some idea of the risks and possible opportunities. But they can’t possibly know in advance about every possible political crisis that could brew in countries around the world and affect economies. It’s also difficult to predict the next big innovation and how that could affect growth of economies.

https://www.bloomberg.com/news/articles/2017-10-12/global-economy-still-has-room-to-grow-provided-reforms-are-made

https://www.reuters.com/article/us-global-economy-outlook/growth-gathering-momentum-but-wheres-the-inflation-idUSKBN1CI1KL

https://www.reuters.com/article/us-imf-g20/global-policymakers-grapple-with-half-baked-recovery-short-of-wage-growth-idUSKBN1CJ0QX

Yellen is Upbeat About Economic Growth

On Sunday, Yellen spoke about the impact of the recent hurricanes and devastation to our country. She thinks the disasters will continue to give us slow economic growth, but expects a full rebound by the end of the year. She also spoke at an international banking firm and said that she was incredibly surprised about the persistently low inflation but expects it to rise again with consumer service industries having prices decreases.

According to the article, this will lead to the third interest rate hike this year. This is said to be a direct reflection of the strengthening economy. The following are quotes from Yellen regarding the current economic state and comments regarding the hurricanes.

"Economic activity in the United States has been growing moderately so far this year, and the labor market has continued to strengthen," Yellen said in a speech to a panel that included central bank officials from China, Japan and the European Central Bank.

"While the effects of the hurricanes on the U.S. economy are quite noticeable in the short term, history suggests that the longer-term effects will be modest and that aggregate economic activity will recover quickly."

As we have recently covered in class, the economy naturally bounces back from devastations, therefore Yellen's comment on historical data coincides with that we've learned.

According to this article, what we've learned in class, and where we are in history, the rising of interest rates makes sense. Our interest rates are extremely low, relative to past years. If the economy is growing, inflation is reasonable and controlled, the interest rate hike will reflect where we are. Excited to see where this will take the economy and how another interest rate hike will affect us.








https://www.cnbc.com/2017/10/15/fed-chair-janet-yellen-sounds-upbeat-note-on-economy-and-inflation.html