On The Agenda

1. Progress on inflation

2. The housing market is unusual

3. Taylor Swift’s GDP is bigger than 50 countries

4. Starbucks is secretly a bank

5. Will Gen Z work a 60-year career?

6. The benefits of equality (for stocks)

Progress on Inflation  ^TIMELY

From Bennett Fees, Economic Research Associate

CPI data was released yesterday showing a monthly increase of .4% in September, down from a .6% increase in August. This was primarily driven by housing and food costs, the former comprising more than half of the increase.

The yearly, breakdown of CPI and core-CPI which excludes the more volatile food and energy categories are shown in the graph below.

Even if progress is not a victory, the continued deceleration in Core CPI (the red line) is promising.

So what’s next?

The Fed will be looking for movement in two areas: nonhousing core services, commonly referenced as supercore inflation, which is still above its pre-pandemic level, as well as job growth which remains at a level not consistent with the Fed’s 2% inflation target. While these keep the Fed far from comfortable, the fact that inflation has fallen thus far without anything breaking has left many hopeful for a soft landing.

The Housing Market is Unusual ^LUMINARY

I want to point out two interesting things about the housing market. The first is simply their current prices. The graph below shows the growth rate of housing prices (blue line), a measure of rent from the CPI (green line) as well as a measure of weekly earnings (orange line) since 2000.

Noticeably, the rapid rise in housing prices post-COVID has outpaced increases in earnings resulting in a difficult situation for home buyers.

Second, and from a macroeconomic perspective, the yearly change in permits is also behaving unusually. The following graph shows the year-over-year change in new private housing permits.

Historically, as indicated by the sharp decreases during the shaded regions that visualize recessions, housing permits have been a pretty decent gauge for a recession. Yet, when one looks at the past two years, we see a similar dramatic drop in permits even though we’ve since escaped a recession.

What does this mean?

Most simply, the housing market is unusual because we are in an unusual time. There just aren’t many clean historical comparisons to make right now - unemployment remains low despite the federal funds rate (the primary interest rate of the Federal Reserve) being at a twenty-two-year high and most of the projections for a mild recession in 2023 have been left in the rearview mirror. The idea is to stay as flexible as the period you’re in and to make informed adjustments to you’re outlook depending on the context. Stick around for updates!

If Taylor Swift were an economy, she’d be bigger than 50 countries ^TIMELY

From Nate Hoskin, Founder & Lead Advisor

With the Eras Tour projected to generate close to $5 BILLION (with a B) in the United States alone, Taylor Swift’s GDP is larger than countries like Belize, Fiji, and the Maldives.

She’s also showing corporate executives how to treat employees to win their loyalty and admiration.

Gallup reports that “quiet quitting” is costing the global work economy $5.88 trillion a year.

To translate this data point for Gen Z and Millenials: “People acting their wage and only doing the work they are paid for is costing companies trillions because they can’t steal productivity for free as easily”.

Taylor has been lauded for giving 6-figure bonuses to her team, including life-changing $100,000 bonuses to truck drivers. And yet those bonuses totaled $55 million, about 1.1% of the revenue from the tour so far.

Swift seems to be earning her saint-like reputation both as an artist and as a business person, and making a pretty penny while she’s at it.

Starbucks is an undercover bank. ^LUMINARY

Starbucks runs an undercover banking operation and they make millions off of your money every single day.

Thanks to the Starbucks Card, Starbucks had $1.8 billion of cash on its balance sheet last year, which was technically yours. But don’t worry, Starbucks will keep it safe for you, and earn between 3-5% interest for their trouble. That’s about $54 million in free money for Starbucks.

It only gets more crazy when you add in gift cards that were purchased but never redeemed. This is called “breakage revenue” and Starbucks made $196 million last year from services they never provided.

All of this accounts for a trifling 0.67% of Starbucks’ gross revenue for the year, so until further notice they are just a coffee shop with a 9-figure side hustle of holding onto your money.

I tell you this as a reminder that if your money isn’t working hard for you, it’s working hard for someone else. 

Rather than keeping a big balance on the 0% interest Starbucks Card, one might consider keeping it in a High Yield Savings Account and adding it to the Starbucks Card while waiting in that insufferable line.

Rather than buying a gift card and giving it away without a second thought, keep the number and periodically check the balance of the card. After a few months, if the card is still unused, use it for yourself.

Are we working backward? ^TIMELY

From Jon Scott, Lead Author 

The Wall Street Journal has been running an ongoing series about the future of work, including the fact that today’s youth and young adults will likely face a 60-year career. Doesn’t seem fun, right? With all the commotion about a future career lasting 150% longer than the current career length, the question posed is how workers should go about managing their careers.

Clearly, burnout has become an important factor to consider for worker’s health. Many high-powered careers in fields such as law, finance, and consulting require employees to grind away their youth working with the hope that later in life they can enjoy more free time. But maybe we are doing it all wrong? Maybe the better solution is for workers to enjoy their twenties and early thirties, and then focus on their careers in the latter half of their thirties and early forties.

Knowing that retirement at a young age is becoming seemingly impossible, how should young adults and future workers handle their careers?

See the results next week!

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