Assessing the Impact of the Department of Governmental Efficieny’s Cost Cutting Agenda

By: Sabib Hossain

After President Donald Trump was elected, he quickly took the initiative of cutting federal spending through the Department of Government Efficiency (DOGE). Led initially by Vivek Ramaswamy and Elon Musk, DOGE aims to cut $2 trillion from US government spending. Ramaswamy has since dropped out of the role to embark on his campaign for Senator of Ohio. The organization plans to do this through slashing regulations and cutting federal jobs.

Among the federal agencies Ramaswamy called for eliminating or reorganizing were the Internal Revenue Service, the Education Department, the Center for Disease Control and Prevention, and the Federal Bureau of Investigation. In effect, federal employee unions are fighting back as they see their jobs are in jeopardy. The National Federation of Federal Employees, which represents 110,000 workers, has been consulting their legal team and plans to lobby members of Congress.

Most recently, as a way to monitor federal employees’ productivity and identify “fake government employees”, Musk instructed federal employees to email a list of five things they did in the work week. A second email was also sent and failure to comply will result in termination. Seemingly it is a serious matter, but the American Federation of Government Employees (AFGE) argued the US Office of Personnel Management (OPM) does not have the authority to send these emails. Further, the Department of Defense, US Armed Forces, FBI, State Department, NASA, and the Department of Health and Human Services instructed employees to not participate, due to the fact of exposing sensitive information.

Though the DOGE has set zealous goals, let us dive deeper into the tangible nature of these ambitions. The department has existed for only a few weeks, so they are still far from the goal. According to AP News, nearly 40% of the contracts President Trump’s Administration have canceled as part of the cost-cutting initiative are not expected to save the government any money. That is because the total value of those contracts has already been spent. An administration official argued it made sense to cancel potential deadweight contracts even if it did not yield any savings. Some of the canceled contracts were for research studies that have been awarded and already paid subscriptions to media services.

For now, the DOGE says it has saved $65 billion so far, 3% of its goal, but this figure has not been independently verified. While the department has made strides towards its ambitious goals, its effectiveness and long-term impact remain uncertain as it navigates the complexities and legalities of federal spending.

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Bitcoin’s November Surge: Institutional Demand Drives Record Gains

By: Reina Huang

Bitcoin has been experiencing a significant surge in November 2024, tracking for a 38% gain by the end of the month, making it the best performance since February. The price of Bitcoin approached the long-desired $100,000 milestone, reaching highs of $98,722 before decreasing slightly. Analysts attributed the significant growth to the re-election of former President Donald Trump, whose victory has led many investors to price in a more favorable regulatory environment for cryptocurrencies.

Trump’s campaign focused on the need for clearer digital asset regulations, differing with the Securities and Exchange Commission’s (SEC) approach, which many in the industry viewed as overly aggressive. His victory, seen as a signal for a more crypto-friendly policy environment, has restored investor confidence, driving Bitcoin’s impressive rally throughout the month.

It is anticipated that Trump's second term will have wider economic ramifications that could increase the price of Bitcoin. The main cause is the expected rise in government deficits and possible inflation, which may raise demand for Bitcoin as a gold-like store of value. Bitcoin's appeal as an alternative currency is further supported by the possibility that a second Trump administration may affect the U.S. dollar's global position. Strong institutional interest, particularly in Bitcoin exchange-traded funds (ETFs), has contributed to the recent surge in the price of bitcoin. Following the election, there were significant inflows into Bitcoin ETFs, including BlackRock's IBIT, which at one point witnessed their biggest day of inflows ever. Several long-time Bitcoin owners have taken profits after selling, but this institutional demand has helped counteract their pressure.

While institutional investors have been expanding their exposure to Bitcoin ETFs, long-term Bitcoin holders have been decreasing their holdings. This change has further supported the cryptocurrency's upward trajectory by generating a net positive demand for it. Many investors are growing more hopeful about Bitcoin's future as the year goes on.

According to analysts, Bitcoin might hit $100,000 by the end of 2024, and others even speculate that its value might double by the end of 2025. The increasing use of Bitcoin by organizations and governments are major factors contributing to this confidence. Bitcoin's long-term value proposition is further enhanced by the fact that governments and major institutions are increasingly considering it as a treasury reserve asset.

Despite its surge and positive outlook, Bitcoin remains volatile. It has recently dropped approaching $90,000 after temporarily trading near $100,000, showcasing the ups and downs of the cryptocurrency market. However, many believe that Bitcoin is well-positioned for future growth because of its core characteristics, which include increased institutional use, less regulatory ambiguity, and its reputation as digital gold.

Citations:

Macheel, Tanya.

“https://www.cnbc.com/2024/11/29/bitcoin-heads-for-nearly-40percent-november-gain-a s-it-edges-closer-toward-100000.html.” CNBC, CNBC, 29 November 2024, https://www.cnbc.com/2024/11/29/bitcoin-heads-for-nearly-40percent-november-gain-as it-edges-closer-toward-100000.html. Accessed 30 November 2024.

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Mobile Shopping Dominates Black Friday Sales

By: Mark Aronov

Black Friday marked a significant shift in consumer behavior, as mobile devices dominated the shopping frenzy like never before. U.S. shoppers spent a record $10.8 billion online, with over half of those sales (around 55%) completed on smartphones. Think about that: people aren't just browsing deals on their phones—they're completing purchases more than ever before.

Why is this happening? It boils down to convenience. Shopping from your phone eliminates the need to battle crowds, wait in long lines, or even leave the comfort of your couch. Retailers have adapted by making mobile apps more intuitive and offering perks like app-only discounts and streamlined checkout options. These enhancements make it easy for consumers to shop wherever and whenever they choose.

This trend underscores the evolving preferences of younger consumers, who increasingly value speed and simplicity over the traditional in-store shopping experience. For these shoppers, waiting in line or dealing with crowded stores feels outdated. Features like app-exclusive discounts, one-click checkout, and real-time price comparisons are particularly appealing, allowing them to grab deals quickly and efficiently. As this demographic continues to grow in spending power, their shopping habits are reshaping the retail landscape.

From a business perspective, the dominance of mobile shopping signals a clear directive: companies must prioritize mobile-first strategies or risk being left behind. Businesses that invest in mobile technology, user-friendly apps, and seamless digital experiences are emerging as winners in this competitive space. Mobile shopping is no longer just an additional channel; it’s becoming the primary one. Companies that lag in their mobile offerings may struggle to keep up, losing both sales and customer loyalty.

The financial implications are equally compelling. E-commerce innovation is driving significant growth, making it a focal point for investors. Companies that excel in mobile commerce are seeing a direct impact on their bottom lines, and their stock performance reflects this. For example, retailers with robust mobile platforms often outperform their competitors during peak shopping seasons. Investors are now more inclined to back businesses that lead in digital transformation, seeing them as better equipped to thrive in the future.

Looking ahead, mobile shopping is poised to play an even larger role in the retail sector. It’s not just a convenience for consumers—it’s a strategic imperative for businesses. The companies that innovate and adapt quickly to meet the demands of mobile-first consumers will shape the future of retail. For those of us in the business world, this evolution is both a challenge and an opportunity, offering valuable lessons in how to stay agile in a rapidly changing market.

This Black Friday wasn’t just about breaking sales records—it marked a turning point in the retail industry and provided a glimpse into the future of shopping. With mobile commerce leading the way, the holiday shopping season will continue to redefine consumer habits and business strategies alike.

Citations:

Yahoo Finance, "Black Friday Data Shows US Shoppers Spent Record $10.8 Billion Online," November 26, 2023

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How Starbucks is Planning to Reinvent Itself

By: Aviva Laskin

On August 13, Starbucks revealed some exciting news: Brian Niccol, the former CEO of Chipotle Mexican Grill, has become the new CEO of Starbucks. While this may seem like unimportant news to many, the new change in management will likely have a major effect on those who are regular Starbucks customers. In an open letter to all partners, customers, and stockholders, Brian Niccol stated that he had “spent time in our stores, speaking with partners and customers, and talking with teams across operations, store design, marketing and product development”. From these experiences, he noticed that visiting a Starbucks, especially in the US, can “feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic”. He realized that people believe that “we have drifted away from our core”, and plans to go back to Starbucks’s original roots of being a “welcoming coffeehouse where people gather, and where we serve the finest coffee, handcrafted by our skilled baristas” by implementing changes in four key areas. The first key area that Niccol plans to improve in is

making sure that baristas have all of the necessary tools and ample time to ensure that customers are getting the perfect order every time. The second key area is ensuring that customers receive their correct order every time without waiting too long for it. The third and fourth key areas touch upon what Niccol wrote about earlier, with his goal being to “elevate the in-store experience” and “tell our story”.

These new changes have come amidst a difficult fiscal year for Starbucks, whose financials have been affected by sales dropping in their second-largest market, China, and boycotts caused by the ongoing war between Israel and terrorist group Hamas. In reports released by Starbucks, global store sales and consolidated net revenues in Q4 of FY 2024 have declined 7% and 3%, respectively. GAAP earnings per share have decreased by 8% to $3.31, and non-GAAP earnings per share have also decreased by 6% on a constant currency basis to a current price of $3.31. In its home market, the US, sales haven’t fared any better, with a 6% decline in same-store sales and a 10% decline in traffic. These drops in revenue are a shock to a global chain such as Starbucks, who hasn’t seen such low numbers since the 2008 recession and financial crisis. However, there is a sense of renewed optimism between Starbucks’s board of directors, who recently approved a quarterly cash dividend increase from $0.57 per share of outstanding stock to $0.61 per share of outstanding stock. This means that a higher number of investors are willing to buy the stock rather than selling it, which causes both demand and stock price to rise. This is usually seen as a good sign for a company’s financials, as it shows that investors have high expectations for the future of the company.

Citations

Starbucks. “Message from Brian: Back to Starbucks.” About Starbucks, 10 Sept. 2024, about.starbucks.com/press/2024/back-to-starbucks/.

Lucas, Amelia. “Starbucks Shares Slide after Coffee Chain Says Sales Fell Again, Suspends Outlook.” CNBC, 22 Oct. 2024,

www.cnbc.com/2024/10/22/starbucks-shares-slide-after-preliminary-results-show-sales-f ell-again.html.

Starbucks. “Starbucks Reports Preliminary Q4 and Full Fiscal Year 2024 Results.” Starbucks.com, 2024,

investor.starbucks.com/news/financial-releases/news-details/2024/Starbucks-Reports-Prel iminary-Q4-and-Full-Fiscal-Year-2024-Results/default.aspx.

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Fed’s Dilemma:

Interest Rate Cuts in Question Amid 2024 Presidential Election Results

By: Adrian Rosales

On January 20, 2025, Donald Trump will re-enter the White House as the United States’ 47th President. When it comes to economics, it is widely known that Trump’s policies include a robust high tariffs-low taxes program. The 2024 President Election results have many analysts across Wall Street debating its impact on the Federal Reserve’s plans for cutting interest rates through next year.

At the most recent Federal Reserve meeting on November 7th, the Fed cut interest rates by 25 basis points to 4.50%-4.75%. The Federal Open Market Committee (FOMC) made sure to add that it has “made progress” towards achieving its inflation goal of 2%. It had been rumored before the election results came out that the Fed may continue to cut interest rates at a consistent rate of 25bps all through the latter part of 2025. Amidst the election results, Fed Chair Jerome Powell stated that “We don’t guess, we don’t speculate, we don’t assume” what policies get put into place and added that “… the election will have no effects on our policy decisions” in the near term.

As of most recently, Trump has stated that he would impose tariffs at a level of 25% on foreign goods entering the country from Canada and Mexico, and an additional 10% tariff on goods from China. Trump argues that this would pay back the tax cuts he’d impose on corporations that produce their goods in the US, from 21% to 15%. This is part of Trump’s “America First” campaign to incentivize companies to produce their goods domestically and not outsource their production overseas.

Many Wall Street analysts view this agenda as one that will result in a stronger dollar value, which could continue the growth in consumer spending, which currently sits at a 3.5% annualized rate. This could, as a result, spark inflation again in the US economy. This may impact on what the Fed decides to do in terms of cutting interest rates. There has been a lot of speculation over whether it may be better to hold off on cutting rates for a bit going into next year once Trump takes office. Keeping rates where they currently lie could pour water over the flame of consumer spending to combat the possible inflationary headwinds with the strong levels of spending across the US.

All in all, the Fed has made sure to state that their decisions are data-driven and takes into consideration many factors outside of what potential policies may occur once Trump arrives in office next year. There is an argument to be made over whether the Fed should continue cutting rates in the next year or so, but a lot must be seen as time goes by and policy is changed. The Fed has done a lot recently to help reach their inflation goals, but there are still a lot of decisions to be made to achieve that goal fully. Only time will tell what impacts economic policy will have on the broader US economy from all parties involved.

Articles Referenced:

The Guardian: https://www.theguardian.com/business/2024/nov/08/will-donald-trump-plan-pay off-higher-tariffs-lower-taxes

Fortune: https://fortune.com/2024/11/27/jerome-powell-rate-cut-2025-deutsche-bank-trump tariffs/

New York Post: https://nypost.com/2024/11/26/business/fed-minutes-show-volatility-was reason-to-go-slow-on-rate-cuts/

PBS: https://www.pbs.org/newshour/politics/what-does-trumps-latest-tariff-plan-mean-for-the-u s

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The Federal Reserve cut key interest rates twice this year, so why are mortgage rates still so high?

By: Sabib Hossain

In September 2024, the Federal Reserve cut the key interest rate by 50 basis points, the first since March 2020. In November 2024, the institution cut the key interest rate once more by 25 basis points. Some ponder: if the key interest rate is being cut, then why are 30-year fixed mortgage rates still well above 6%?

To start, a cut in the key interest rate does not directly lead to a decrease in mortgage rates, but they are correlated. Theoretically, a Fed rate cut typically brings down mortgage rates. First, we should identify the most important factors impacting mortgage rates: inflation, the rate of economic growth, Federal Reserve monetary policy, and the bond market.

Now, let us delve deeper into each factor. Inflation refers to the rise in prices of goods and services. To ensure lenders receive a real net profit, they must maintain interest rates at a level that is sufficient to overcome a waning purchasing power through inflation. Further, other economic indicators such as GDP and employment rates influence mortgage rates. As economic growth increases, consumer spending also does, including seeking loans for home purchases. This increase in demand results in an uptick in mortgage rates. The opposite is true when the economy slows down. Moving on, the Federal Reserve has been mandated by Congress to pursue “maximum employment” and “price stability” through implementing monetary policy, which refers to the actions made by the central bank to manage the money supply and the interest rate. A well-known maxim of bond investing is an inverse relationship between interest rates and bond prices. As aforementioned, the Fed does not directly set rates for the mortgage market, but its actions in establishing the federal funds rate have an impact on the interest rates available to the public. Lastly, mortgage lenders tend to tie their interest rates closely to Treasury bond rates as it can competitively account for risk and profitability over the long term. In other words, as bond prices increase, bond yields decrease, which in turn decreases mortgage rates.

That said, why are mortgage rates still stubbornly high? The October Bureau of Labor Statistics Jobs Report, another indicator of economic growth, showed that 254,000 jobs (double the estimated number) were added in September 2024, possibly shifting the market’s outlook on economic growth. Further, the US economy grew at a strong rate of 2.8% in Q3: consumer spending accelerated to a 3.7% annual pace, exports increased at an 8.9% rate Q/Q, and core inflation was down from 2.8% to 2.2% Q/Q.

Looking forward, investors are concerned about President-elect Donald Trump’s economic plans. Trump’s proposal to cut corporate tax rates to 15% from 21% would increase earnings by S&P 500 companies by 4%, according to estimates from Goldman Sachs. These cuts could lead to a wider budget deficit and balloon the U.S debt by $7.75 trillion over the next decade. Moreover, Trump’s plan to impose tariffs on $3 billion in goods to reinforce his “America First” economic attitude could reignite inflation. The tariffs work like this: when a company imports something from another country that has tariffs imposed on it, the company has to pay a tax to the US government: it is the company importing the goods that pays the tariffs, not the country sending the goods. On his first day in office, Trump has already vowed to implement a 25% tariff on goods imported from Mexico and Canada. These tariffs on imported goods will likely be borne by US families, importers, and domestic/foreign companies in the form of higher prices or lower profits.

These proposed tariffs may contribute to inflationary pressures on the U.S. economy. In response to rising inflation, bond investors may demand higher yields in exchange for a decrease in purchasing power for future payments, causing Treasury bond yields to increase. This upward pressure on bond yields will likely lead to higher mortgage rates as well.

However, if tariffs slow economic growth significantly, they could reduce overall demand and investor confidence, potentially driving investors to seek safer assets like Treasury bonds. This increased demand could lower yields and, subsequently, mortgage rates. The net effect on mortgage rates depends on whether inflationary pressures or growth concerns dominate.

In short, while the Federal Reserve's rate cuts can influence mortgage rates indirectly, the current combination of robust economic growth, inflationary pressures from proposed tariffs, and investor reactions to fiscal policy uncertainties suggests that mortgage rates are likely to remain elevated until inflation subsides or economic growth slows significantly.

References:

● Boak, Josh. “Trump’s Tariffs in His First Term Did Little to Alter the Economy, but This Time Could Be Different.” AP News, 28 Nov. 2024,

apnews.com/article/trump-tariffs-china-mexico-canada-fentanyl-inflation-cf905e75e8635 11baef959a80ee2eea2. Accessed 30 Nov. 2024.

● Eisen, Ben. If the Fed Is Cutting Rates, Why Aren’t Mortgage Rates Falling?, Wall Street Journal, 7 Nov. 2024,

www.wsj.com/economy/housing/mortgages-fed-interest-rate-cuts-7e5345b8. Accessed 30 Nov. 2024.

● Ganguly, Sarupya. U.S. Housing Affordability to Worsen Even as Price Rises Slow: Reuters Poll | Reuters, Reuters, 27 Nov. 2024,

www.reuters.com/markets/us/us-housing-affordability-worsen-even-price-rises-slow-202 4-11-27/. Accessed 30 Nov. 2024.

● “Meeting Calendars and Information.” The Fed - Meeting Calendars and Information, www.federalreserve.gov/monetarypolicy/fomccalendars.htm. Accessed 30 Nov. 2024. ● Mortgage Rates, Freddie Mac, 27 Nov. 2024, www.freddiemac.com/pmms. Accessed 30 Nov. 2024.

● Picchi, Aimee. “How Trump’s Economic Agenda Could Affect Mortgage Rates in 2025.” Edited by Alain Shorter, CBS News, CBS Interactive, 27 Nov. 2024,

www.cbsnews.com/news/trump-tariffs-inflation-impact-mortgage-rates/. Accessed 30 Nov. 2024.

● Wile, Rob. “Why Mortgage Rates Are Still High after a Fed Cut - and Likely Won’t Go down Anytime Soon.” NBCNews.Com, NBCUniversal News Group, 9 Nov. 2024, www.nbcnews.com/business/consumer/mortgage-rates-still-high-why-federal-reserve-rat e-cut-trump-rcna179356#. Accessed 30 Nov. 2024.

● Wiseman, Paul. “US Economy Grew at a Solid 2.8% Pace Last Quarter on Strength of Consumer Spending.” AP News, 30 Oct. 2024,

apnews.com/article/economy-growth-inflation-gdp-consumers-federal-reserve-6a3fbfb57 90b07434d656a95865b7435. Accessed 30 Nov. 2024.

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Future in Consulting

By: Daniel Rabinovich

Consulting season is upon us, and it’s one of the most sought-after career paths for recent graduates. Consulting involves professionals from specialized firms providing strategic advice to help companies tackle various business challenges. There are numerous types of consulting, such as risk, technology, and strategy consulting, each offering unique insights and solutions for specific issues. Consulting firms generally fall into several key categories. At the top, we have the MBB firms—McKinsey, Bain, and BCG—renowned as the leading strategy consulting firms. Next, there’s the Big Four: EY, Deloitte, KPMG, and PwC. While primarily known as accounting firms, they also boast impressive advisory and consulting divisions. Finally, there are elite boutique consulting firms, such as Oliver Wyman and Alvarez & Marsal, known for their specialized expertise. The recruiting process for consulting involves two main interview types. The first is the behavioral interview, where you’ll be asked about your resume, leadership experiences, and general character. This helps interviewers understand who you are and how you might fit within their team. The second type, the case interview, is more hands-on. Here, the interviewer presents a real-world business problem, and you’re asked how you’d approach solving it. This exercise is designed to showcase your analytical and problem-solving skills, along with your ability to structure a coherent approach to complex challenges. Preparing for these interviews is crucial, and practice makes perfect. Mock behavioral interviews and case studies—whether with friends, classmates, or even family members—can help you become more comfortable with the format and expectations. Many candidates find that regular practice sharpens their skills, especially when it comes to articulating solutions under pressure. It’s also worth noting that consulting recruitment starts early. For summer internships aimed at sophomores and juniors, as well as full-time positions for graduating juniors, applications typically open in early August and run through the beginning of December. Starting your preparation early can give you a significant edge in what is a highly competitive process. In sum, consulting is a dynamic and rewarding field for those willing to put in the effort. Early preparation, targeted practice, and a clear understanding of the industry’s demands can make all the difference in securing a coveted position.

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Addressing the Accountant Shortage:

New CPA Pathways and AI Solutions

By: Aviva Laskin

As 2024 is coming to a close, one major problem is still plaguing the accounting field: the lack of new accountants joining the workforce. According to an analysis done by Bloomberg, numbers from the U.S. Bureau of Labor Statistics show that since 2019, the number of accountants in the US has dropped by 340,000 , with there now being around 1.6 million accountants and auditors employed (Fortune). This crisis has only been exacerbated over the last decade, with the former 120-credit CPA requirement now replaced with the 150-credit CPA requirement, a requirement that current accounting students say has made them second guess this career path. To help alleviate this shortage, some companies are turning to artificial intelligence to complete the monotonous, mundane work that entry-level accountants must do during their first few years in the workforce. Jenn Ryu, the CEO of a global consulting firm called RGP, shared data with Fortune Magazine that “finds 43% of financial decision-makers said their organization is investing more in end-to-end automated accounting processes and AI tools to counter the accounting shortage” (Fortune). However, she also doesn’t believe that accountants are at risk of their jobs being completely taken over by artificial intelligence, as she claims that highly skilled accountants are still needed to make complex judgmental decisions that artificial intelligence does not have the power to accurately make.

Yet, these highly skilled accountants are being dissuaded from the profession by the low starting salary compared to other financial careers, the high-stress environment, and the multiple steps required to become a CPA. Firms have begun feeling the effects, and a new proposal proposed by both the American Institute of CPAs and the National Association of State Boards of Accountancy has attempted to offer an alternative. Currently, to earn a CPA, candidates must obtain 150 credits, pass the CPA exam, and have one year of work experience under their belt. Under this new proposal, which must be given public feedback by December, prospective CPAs can use an additional year of work in place of earning 150 credits, which often entails earning a Master’s degree on top of an undergraduate degree. In this additional year, various skills in critical thinking, audit, and other related areas would be tested on, and supervisors at the candidate’s workplace would sign off to ensure that these areas and skills were tested on. This dramatic change to the CPA pathway is much more cost-effective, which could potentially open up the profession to those who previously avoided it due to financial burdens of obtaining the extra Master’s degree often necessary. States such as California have already begun moving forward with this plan, but we have yet to see New York make any such advances.

References:

Maurer, Mark. “New CPA Paths Emerge as States Try to Stem Accountant Shortage.” WSJ, The Wall Street Journal, 2 Oct. 2024,

www.wsj.com/articles/new-cpa-paths-emerge-as-states-try-to-stem-accountant-shortage-769 e78e6.

Estrada, Sheryl. “CFOs Turn to AI amid Accountant Shortage—but Experienced Talent Is Still Needed.” Fortune, 10 July 2024,

fortune.com/2024/07/10/cfos-ai-accountant-shortage-experienced-talent-needed/. Accessed 31 Oct. 2024.

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TSMC's October 2024 Surge:

How AI is Powering New Growth and Innovation

By: Reina Huang

Taiwan Semiconductor Manufacturing Company (TSMC) marked a significant surge in October 2024, driven by heightened demand for advanced chips. Chips built by TSMC fuel the vast majority of electronic devices from the world, ranging from smartphones, laptops, servers, to complex devices such as cars, consumer goods, and the growing field of artificial intelligence (AI). In contrast to competitors such as Samsung and Intel, TSMC does not market their processors but primarily focuses on manufacturing, serving as a major supplier for companies such as Apple, Amazon, and Google which rely on TSMC to produce the chips in their cloud servers. Not only do major tech companies rely on TSMC, but chip designers like Qualcomm and Nvidia are key clients.

On Thursday, October 17, 2024, TSMC shares soared to 12% to reach an all time high of 205.84 stock closing price surpassing consensus analyst forecasts for Q3 profit and sales of $300.78 New Taiwanese (NT) dollars, ultimately boosting its market value to $1.08 trillion USD. TSMCreported an approximate 54% year-over-year increase in net profit of NT$325.26 billion ($10.12 billion USD) from NT$211 billion. After the release of the results, TSMC Chief Financial Officer Wendell Huang stated in an earnings call transcript produced by Factset, “Based on the current business outlook, we expect for our fourth-quarter revenue to be between $26.1 billion and $26.9 billion, which represents a 13% sequential increase or a 35% year-over-year increase at the midpoint.”

TSMC forecasts the positions of the company to be leaders in the semiconductor industry,especially with the effects of the global chip shortage and the rising demand for advanced technologies, particularly AI.

With the increased drive in AI and machine learning, TSMC plays a significant role in the industry as they center their product design on GPUs and TPUs with advanced semiconductor

manufacturing processes, such as 5nm and 3nm technology nodes. TSMC expressed that “our business was supported by strong smartphone and AI-related demand for our industry leading 3nm and 5nm technologies”in the third quarter, referring to semiconductor nodes. “We have talked to our customers all the time, including our hyperscale customers who arebuilding their own chips. And almost every AI innovator is working with TSMC,” Huang said.

To maintain the growth in demand for AI, TSMC is currently investing $64 billion into building three major fabrication plants in Arizona. It is expected to open next year with the second facility to begin volume production in 2028, and lastly, the third plant scheduled to start production by the end of the decade, respectively.

References:

Anselmo, J., & Magill, K. (2024, October 24). TSMC revenue jumps 36% YOY on AI demand.

Manufacturing Dive. Retrieved October 28, 2024, from https://www.manufacturingdive.com/news/tsmc-q3-2024-revenue-up-36-yoy-ai-demand-semiconductor/730791/

Gopalan, N. (2024, October 17). TSMC Stock Jumps on AI-Fueled Earnings Surge. Investopedia.

Retrieved October 28, 2024, from https://www.investopedia.com/tsmc-stock-jumps-on-ai-fueled-earnings-surge-8729504

Iordache, R. (2024, October 17). Tech Nvidia and Apple supplier TSMC shares pop afterquarterly profit soars on AI demand.

Pelligrino, S. (2023, January 2). What is TSMC? Apple, Amazon and even Google all use TSMC chips, but what makes this particular manufacturer so popular?

https://www.techmonitor.ai/what-is/what-is-tsmc/?cf-view

Saul, D. (2024, October 17). Just the Beginning For AI Demand Surge as Big Chip Stocks Gain $250 billion.

https://www.forbes.com/sites/dereksaul/2024/10/17/just-the-beginning-for-ai-demand-surge-as-big-chip-stocks-gain-250-billion/

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Elon Musk's Robotaxis and Robo-Assistants:

How Tesla's Bold New Tech Could Change the Game

By: Mark Aronov

Tesla’s recent announcements are bringing us closer to a world that once only seemed possible in science fiction. At Tesla’s “We, Robot” event, CEO Elon Musk unveiled two projects that could impact how we live and move in the future: the fully autonomous “Cybercab” robotaxi and a humanoid robot named Optimus designed to serve as a personal assistant. But how realistic are these plans, and what do they mean for the future of Tesla and the tech world?

The Robotaxi: What’s the Deal?

The Cybercab robotaxi is Tesla’s vision for a fully autonomous electric car that could drive itself without a steering wheel or pedals. Essentially, it’s a self-driving car meant to be a part of a shared, automated rideshare service. Instead of using traditional sensors like LiDAR, which create detailed 3D maps, Tesla has doubled down on using only cameras and advanced AI software to navigate the roads. If this approach works out, Tesla’s Cybercab could offer ridesharing services that are cheaper and more efficient than competitors like Uber or Lyft, which still rely on human drivers or hybrid approaches​.

But can Tesla deliver? Musk claims Cybercab will hit the streets by 2026, but it depends on regulatory approval and technological breakthroughs. Autonomous driving tech is tricky and has faced safety scrutiny from regulators due to accidents involving Tesla’s Full Self-Driving (FSD) software. However, if Tesla can resolve these challenges, the robotaxi could be a big player in the emerging $1 trillion autonomous vehicle market, allowing Tesla owners to make money by adding their own cars to a robo taxi fleet.

Meet Optimus: Tesla’s Answer to Household Helpers

Alongside the Cybercab, Musk also introduced Optimus, a humanoid robot designed to act as a personal or industrial assistant. Think of Optimus as a futuristic household helper that could do anything from vacuuming to basic repairs. Musk describes Optimus as a mix between an R2-D2 and a highly adaptable assistant, hoping it will one day be a fixture in both homes and workplaces. This would open up a new line of revenue for Tesla, pushing it beyond just an electric vehicle company into the realms of robotics and AI.

The key to Optimus’ success will be its ability to perform a wide variety of tasks safely and reliably. Though Optimus is still a prototype, Tesla’s ambition is clear: a robot that could change how we think about physical labor in everyday life. However, like with the robotaxi, there’s still a long road ahead in terms of perfecting the tech and securing regulatory approval​.

Tesla’s recent advancements with the Cybercab robotaxi and Optimus robo-assistant hint at a future where automation meets everyday convenience, positioning Tesla at the forefront of AI-driven industries and potentially reshaping markets in both transportation and robotics.

References:

"Live Coverage: Elon Musk Unveils the Tesla Cybercab and Robovan." New Atlas, October 11, 2024.

"Tesla Says 'Future is Autonomous' at 'We, Robot' Event with Optimus, Robotaxi Demonstrations." Robotics247, October 2024.

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The “Arms” Race in the Chip Industry:

A Dispute Between Arm and Qualcomm

By: Adrian Rosales

To address these claims, Visa General Counsel Julie Rottenberg stated that the lawsuit, “ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving.”

On October 23, 2024, the semiconductor company Arm Holdings took legal action to cancel its architecture license against Qualcomm. This ongoing legal dispute dates back to 2022 when Arm sued Qualcomm in a licensing dispute. This case has created waves in the semiconductor industry, with repercussions for both companies, their share prices, and their customers.

The dispute between Arm and Qualcomm can be traced back to 2021 when Qualcomm acquired Nuvia, a chip startup company that developed its own processor cores based on Arm’s technology. This acquisition turned Qualcomm’s relationship with Arm sour, as Arm supplied its architecture for Qualcomm’s chips. Qualcomm has been looking to extend its reach beyond the smartphone market and is relying on Nuvia’s technology to boost these efforts. Qualcomm revealed its first smartphone chip based on Nuvia’s technology this week and was met with a positive reception, especially due to the ability for that technology to be used in cars as well.

After hearing this news, Arm was quick to act. A day after Qualcomm’s announcement, Arm escalated the dispute by issuing a 60-day notice to terminate Qualcomm’s architectural license, threatening Qualcomm's ability to use Arm’s architecture for designing chips. Arm argues that Qualcomm’s use of Nuvia’s technology without renegotiating its license violates their agreement. If enforced, this termination could significantly disrupt Qualcomm’s future product development and shipments, specifically for new devices like Microsoft’s laptops that use Qualcomm’s chips. Additionally, Qualcomm’s partners, such as device manufacturers, could be forced to halt their production, which can potentially impact the broader tech ecosystem.

Following the legal action taken, Qualcomm has responded by accusing Arm of making baseless threats to extract higher royalty fees. Qualcomm claims it has upheld its rights under the current license agreement and believes Arm is attempting to manipulate the legal process ahead of the scheduled December 2024 trial date. A Qualcomm spokesperson described Arm’s move as a “desperate ploy” and maintained that the court would rule in Qualcomm’s favor, allowing it to continue using Arm’s intellectual property.

For Arm, this lawsuit reflects a broader strategy to increase its royalty income and exert greater control over its technology as it becomes a more prominent player in various markets. However, while it seeks to secure higher royalties, it also risks deteriorating relationships with key partners like Qualcomm, which accounted for about 10% of its revenue in the past year.

This conflict has also had a great impact on investor sentiment. Both companies saw their stock prices drop after Arm announced its intention to cancel Qualcomm’s license, with Arm’s shares falling by over 6% and Qualcomm’s by 4%. Despite the tension, some market analysts believe that the two companies may settle before the December trial with the idea that furthering a legal battle could hurt both companies.

If Qualcomm loses access to Arm’s technology, it could jeopardize its ability to compete in fast-growing areas like data centers and autonomous vehicles, where custom chips are critical for growth and innovation in these areas. It is yet to be seen what develops as the trial date approaches. However, you best believe that the industry is closely watching how this legal battle unfolds and how its outcome will impact the semiconductor industry.

References:

Financial Times: https://www.ft.com/content/015ddc85-09ac-447d-bdb9-6db5ced01889

https://www.justice.gov/opa/media/1370421/dl.

Reuters: https://www.reuters.com/technology/arm-holdings-cancel-qualcomm-chip-design-license-bloomberg-news-reports-2024-10-23/

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Microsoft’s Activision Deal:

Pioneering a New Era in Global Cloud Gaming

By: Sabib Hossain

On October 13, 2023, Microsoft acquired Activision Blizzard for a total cost of $75.4 billion, marking a definitive milestone in the gaming industry. Now, Microsoft faces its biggest challenge amidst this decision: the release of “Call of Duty: Black Ops 6” on October 25th to its Game Pass subscription service.

The investment is the biggest in the tech company’s history. As a result, gaming is now Microsoft’s fourth largest sector, on par with their Windows division and larger than its Linkedin unit. But why? To start, Microsoft wants to advance their position in the cloud gaming (streaming) market. The company’s mission is to bring more games to more players across more devices, promoting versatility and flexibility. They do this through a subscription based service, costing $15 a month for the Game Pass Standard or $20 a month for Game Pass Ultimate, on any device without the need of a console. “The big picture vision is a Netflix for video gaming,” said Joe Tigay, a portfolio manager at Equity Armor Investments.

The video game industry is facing structural obstacles similar to the ones Netflix faced before streaming movies and TV was popular. Players are concerned that the quality of cloud based gaming is not on par to that of their PC. To that end, Erik Webster, a technology consultant,states, “When you look at a game being streamed, you see how over-compressed those images look.” Further, some established games like “Fortnite” are free to play. Zealous gamers also tend to prefer keeping a small collection of games, anticipating developers to update them with unique features. In effect, analysts are dubious that their streaming service will take off.

With the new edition of “Call of Duty,” gamers can stream or download through the Game Pass,paying the monthly fee. Microsoft sees this streaming service going in the right path with this purchase, closing the gap between them and Sony Group and Nintendo’s console sales.

It will also be sold separately for a flat fee of $69.99. On that note, the tech giant has found it arduous convincing avid gamers to opt out of separate pricing and downloads for monthly fees.

Microsoft launched Game Pass in 2017: PC games were added shortly in 2019: the option to stream games, including mobile ones, was introduced in 2020. As of January 2022, Game Pass has amassed 34 million subscribers, which Microsoft disclosed in February 2023 and has not yet updated. This represents a small percentage of 3.1 billion gamers worldwide.

Michael Pachter, an analyst at Wedbush Securities, suspects the subscriber count is about the same today, and he expects the new “Call of Duty” game to increase the count by 2 or 3 million people.

Evidently, it will take time for Microsoft’s bet on video games to pay out, but Microsoft’s dedication towards diversification is a calculated risk.

References:

Chan, Kelvin, and Matt O’brien. “Microsoft Closes Deal to Buy Call of Duty Maker Activision Blizzard After Antitrust Fights.” AP News, October 13, 2023.

https://apnews.com/article/microsoft-activision-video-game-britain-ed7f6123dd114098fe64c03a88f84327.

Needleman, Sarah E. New ‘Call of Duty’ Tests Microsoft’s $75 Billion Bet on Future of Video Games, October 24, 2024.

https://www.wsj.com/tech/call-of-duty-microsoft-video-game-pass-streaming-service-fa115141.

Scarcella, Mike. Microsoft settles video gamers’ lawsuit over $69 billion activision deal |Reuters, October 15, 2024.

https://www.reuters.com/legal/litigation/microsoft-settles-video-gamers-lawsuit-over-69-billion-activision-deal-2024-10-15/.

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A clash over market share and competition:

The DOJ strikes Visa with antitrust claim

By: Sabib Hossain

On September 24th, 2024, the United States Department of Justice sued Visa on accounts of illegally monopolizing the market for consumers’ payments amounting to trillions of dollars annually in an attempt to open the debit card market for competition. On this news, the stock price fell 5% on Tuesday.

To address these claims, Visa General Counsel Julie Rottenberg stated that the lawsuit, “ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving.”

According to the DOJ, Visa controls 60% market share in debit payment, generating $7 billion annually in debit swipe fees. This underscores the other notable players in the market, such as American Express, Discovery, and Mastercard. Visa has been at the center of criticism from lawmakers and regulators for their overwhelming control of the payments industry.

Visa has taken several measures to ensure competitors would not dilute their market share. The company has signed a number of contracts with large merchants and acquirers, controlling the merchant routing decisions. These contracts entail Visa paying for the merchant’s loyalty; if this is not followed, severe consequences follow. When a company routes away from Visa, they are met with high rack rates. According to the Department of Justice, dozens of merchants representing “hundreds of billions of dollars of 2023 debit payment volume have signed contracts to route 100% of their eligible debit volume to Visa.” These agreements are structured as cliff pricing, which grants the merchant or acquirer a lower price for every transaction routed of Visa as long as its volume of transactions meets the agreed threshold.

Additionally, Visa uses its leverage over its potential debit customers, such as Apple. Viewing Apple Pay as a threat, Visa paid Apple to limit innovation: this is applicable for other potential competitors. To dissuade competitors, Visa provides them monetary incentives to promote their products, in some cases worth hundreds of millions of dollars annually.

Suing companies for benefiting from a lack of competition and profitable contract clauses is not an anomaly. The DOJ sued Live Nation Entertainment in an antitrust lawsuit in May. They claimed that the Ticketmaster owner decreased the number of competitors, who could have reduced ticket price fees.

The debit card market is lucrative. On average, Americans use a debit card twice as much as a credit card. To conceptualize this dominance, Visa has a market capitalization of $530 billion, just under Walmart and JPMorgan Chase. There are legitimate claims against Visa, but as for any antitrust lawsuit, it will take years to fully develop. The lawsuit will likely be inherited by a new administration next year.

For now, it is the consumer who pays the price. As fees increase, merchants compensate by raising prices for goods and services.

References:

Case 1:24-cv-07214 document 1 filed 09/24/24, September 24, 2024.

https://www.justice.gov/opa/media/1370421/dl.

“Largest American Companies by Market Capitalization.” CompaniesMarketCap.com - companies ranked by market capitalization. Accessed September 26, 2024.

https://companiesmarketcap.com/usa/largest-companies-in-the-usa-by-market-cap/.

Michael, Dave, and Angel Au-Y eung. Justice Department sues Visa, Alleges Illegal Monopoly in Debit-Card Payment, September 24, 2024.

https://www.wsj.com/finance/regulation/justice-department-sues-visa-alleges-illegal-monopoly-in-debit-card-payments-a9ecd39c.

Scarcella, Mike. Visa taps hardened D.C. duo to battle US Monopoly Lawsuit, September 25, 2024.

https://www.reuters.com/legal/government/visa-taps-hardened-dc-duo-battle-us-monopoly-lawsuit-2024-09-25/.

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Is it Time for Paytm to Go Home?

By: Tonima Hossain

Paytm, one of India's largest digital payments and financial services platforms, hasn't done well on the first day of their IPO. Paytm is used by more than 333 million consumers, backed by SoftBank Group, Berkshire Hathaway Inc., and other influential companies. While other startups have done extremely well after going public, Paytm didn't seem to share this trend, even though this is India's largest IPO to date.

After selling $2.5 billion of stock, the shares declined rapidly. Starting off at the price of 2,150 rupees per share, equivalent to $28.95, it declined to 1,564 rupees, equivalent to $21.07. Using a circuit breaker, the prices were halted from falling further, since they had already fallen 20% from their opening price. This disaster started due to a few separate factors. Primarily, individual investors were excited about the IPO, due to the benefits they may achieve from gains on the first day of trading, otherwise known as listing day. But once the shares started falling, everybody began to give up on the IPO. A serious concern of investors was that Paytm is competing against PhonePe which is backed by giants like Google and Walmart; no one wanted to be stuck with the losing stock that was priced aggressively. In addition, a recent report written by analysts at Macquarie stated that Paytm's IPO should be listed as 1,200 rupees, and that Paytm was a "cash-burning machine" due to their no visible direction of profit. Radhakishan Damani, an Indian billionaire, aired his concerns claiming that e-commerce and fintech aren't destined to succeed in India as they have in countries like America. While the internet market in India has not fully been tapped into yet, the market makes it evident that potential alone cannot validate the price of a stock. While Paytm fell 37% in the first two days of trading, as of November 25th it has rebounded 20%. Paytm's opening day may indicate the stock is destined to fail, but a short period of time does not indicate how successful a stock will be in the future. There are few investors who are holding out hope and are using Paytm as a value investment, including Blackrock and Canada Pension Plan, who have increased their stake in Paytm by purchasing more stock. Looks like there are varying opinions on what the right move is, and only time will tell if the stock hit its peak or if it will keep on climbing.

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How the Retail Experience Has Changed in a Post-Pandemic World

By: Juliya Marchuk

Retail shopping - Buying loved one's gifts or updating our wardrobes, all of us have found ourselves in a mall or large shopping centers at one point or another. After the pandemic hit in early March of 2020, the entire world of retail shopping had completely changed. Many retail businesses like Century 21, JCPenney, and some locations of DSW had closed because they did not have the financial means to keep many of their store locations open. Many nationwide chains were forced to close and restructure their companies through bankruptcy and close their money-losing locations to keep their numbers profitable. Macy's chief executive officer stated, "We were carrying too much inventory for years," and "Through the pandemic, our opportunity to work through our stock and get in line with demand is a benefit we'll hold on to going forward."(1) One of the many factors that retail businesses targeted after reopening to the public was the improvement of their customer services. Knowing that customers can shop online and not have to face in-person communication with the staff made the company's emphasis on improving in-person shopping much higher. Whether it be implementing call centers, or having the staff go through additional training, the main takeaway is that customer service is only going to improve from this point on.

Another improvement that retail businesses will be implementing is improvements in technology. Not only do we see this in retail, but also in the world around us. As everything is moving to an online world, it is only appropriate for retail businesses to move forward in technological advancements as well. Paper records are being replaced with online devices . The "chat now" feature when online shopping is something which many companies are implementing called "real-time communication with facility professionals". The pandemic has forced these retail businesses to figure out what exactly needed to be done and ways that they could all improve. The temporary close gave them the time to figure out what improvements needed to be done and how they could do this efficiently. As everything is slowly returning to "normal" we can only expect better experiences and improvements while retail shopping in the future.

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The Pandemic's Lasting Effects on the Supply Chain Issue, and its Impacts on Small Businesses

By: Lamya Serhir

As 2021 comes to a close, the U.S. continues facing supply chain problems as materials such as microchips for automobiles, and lumber for housing are low in supply but high in demand. The country has yet to recover from the 'Great Resignation' over the pandemic, which is when many workers quit their jobs due to the influx of stimulus checks and availability of alternative jobs such as freelance work. One such industry that is experiencing both a shortage of supplies and workers is Pharmaceutical. According to a November study by the National Community Pharmacists Association, 60% of independent pharmacy owners and managers stated that they are "dealing with supply chain disruptions in which nearly 70% reported struggling to fill staff positions" (Musto, Fox Business). Only 31% described the overall financial health of their business as "very good or somewhat good." Patients are advised not to panic buy, but instead call the pharmacies to check their supply during these times of uncertainty. But pharmacies are not alone, as recent reports show 90% of small business owners are enduring supply chain disruptions with "25% experiencing slower delivery times in their customers" in addition to increased costs (Yahoo News). To combat this, some small businesses have been buying inventory in bulk, which is risky since extra inventory could greatly decrease cash flow, but many business owners state "having empty shelves during the holiday season would be even more costly" (Qin, Morning Brew). Although these conditions have made it more difficult for small businesses to endure, it has also led to local companies leaning on each other a lot more as a result. Since there have been a lot of delays in delivery, especially during the holiday season, local manufacturers are given a competitive edge (Krueger, New York Times). For example, supplier bargaining power has increased for companies like Coronet LED, a lighting company based in Totowa, NJ with a showroom in Manhattan. Companies are beginning to see the benefit of having part of their supply chain in New York, so they always have some stock that is easily available. All in all however, the shortage of essential products has given more bargaining power to manufacturing companies and suppliers at the expense of small or independently owned businesses as the holidays arrive. The effects of the pandemic have yet to subside, and President Biden is only facing increasing pressure to fully stabilize the economy. Alleviating the delays and shortages of materials in the supply chain is one hurdle he has yet to overcome, and its solution doesn't seem to be in sight any time soon.

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The Buzz Around NFTs, and the Financial Structure Behind Them

By: Koorosh Nabatian

In March 2021, a piece of digital art sold for nearly $70 million. This marked the record for the largest NFT sale in history, making creator Beeple the third most valuable living artist in the world. Outside of this massive sale, people continue to spend on NFTs as trading volume reached $10.67 billion in the third quarter of 2021 (Kay, 2021). Many investors are looking to digital collectibles and NFT art in hopes of long-term price appreciation. However, not everyone buys an NFT to speculate on its price; some within the crypto community buy NFTs to earn social capital. According to widely-known NFT investor Cooper Turley, successful crypto investors set their Twitter or Discord avatars to NFTs in order to "flex" and provide an "investor access and acceptance in the crypto community" (Locke 2021). While many are either looking to earn profit or earn status through NFTs, some buy digital art simply because they like it. But why spend money on an NFT when digital copies are free on Google Images?

An NFT is a cryptographic asset stored on a blockchain with "unique identification codes and metadata that distinguish them from each other" (Sharma, 2021a). NFTs are often rare digital collectibles or artwork, but can also be found in the forms of audio or music. The fungibility aspect of NFTs is best understood through the following example; If Albert owes Bob one bitcoin for a transaction, Bob will not care which bitcoin he receives since they are all alike. Conversely, each NFT is unique, so if Bob is owed one zombie cryptopunk token (type of NFT collectible), Albert cannot pay him with an alien cryptopunk token instead. Digital art collectibles such as cryptopunks are scarce in addition to being non fungible. There are only 10,000 pixelated digital characters in circulation, and only one person can own each cryptopunk on the Ethereum blockchain. One may wonder why anyone would pay hundreds of thousands of dollars for a cryptopunk when exact copies are available online. The difference is that an NFT is an asset "with true ownership and provenance" (Dickey, 2021). Since an NFT owner can prove and trace the purchase of the original asset, he or she can then resell the asset for profit if the demand for the original NFT has increased. Not all NFTs must be purchased with ethereum, either. NBA Topshots is the best example of a digital collectible, in this case a player card, that can be purchased using a credit card. While collecting digital rarities is very popular, investors should confirm to themselves why they are buying in, and what risks are present.

Investors should understand that purchasing an NFT is more speculation than investment. Many people are attracted to the tremendous upside for price appreciation in the digital asset space, and many will buy NFTs due to F.O.M.O. Unlike a stock with cash flows that can be discounted and projected several years into the future, NFTs have no such cash flows. The value of an NFT is based solely on the perceived value of the market. There is nothing wrong with the speculative nature of NFTs, for many other "investments" such as gold or Bitcoin are also just valuable in the eye of the beholder. However, the issue is that many people buy NFTs hoping to get rich quick. It is essential to understand the speculative nature of such a gamble. Although one day the market for NFTs could go to zero, there is also tremendous upside for capital appreciation. One should understand this dynamic, and only purchase an NFT if seeking a speculative asset or if he or she actually assigns value to owning a cool digital asset.

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