The Economy’s Weekly Recap

7/7/23 - 7/14/23

_{Raymond Lin}

_{This Week’s Prominent Events}

_{Microsoft’s Sisyphean Struggle}

• _{Microsoft’s $69 billion acquisition of Activision Blizzard, creator of games like Call of Duty, Overwatch, and Diablo, has been ongoing since January 2022. The deal has been ongoing for so long because it has met several regulatory challenges. However, it seems Microsoft is finally moving closer to acquiring activision.}

• The Federal Trade Commission(FTC)’s injunction, which would have stopped paused the deal and delayed it even longer, has been blocked by a judge. This means that the acquisition is now much more likely to go through. Microsoft still faces the UK’s CMA, the equivalent of the US’ FTC, but the CMA seems to be open to negotiations. This means the arduous journey Microsoft has endured to acquire Activision may finally end soon and Microsoft may be able to expand their business.

• Microsoft’s success may lead to a greater number of tech mergers or acquisitions as Jefferies senior analyst Brent Thill said “it opens the floodgates for more M&A” and “If we can get these deals closed, we think, ultimately, it's going to open up confidence to make the move forward”

Dangerous Lead Cabling

• Lead is quite dangerous and is not safe to be inhaled or ingested in any quantity. It can attack nervous systems, cause comas, cause convulsions, and linger in the body for decades.

• Despite the removal of lead in things like paint, lead can still be found in a number of areas due to old toxic lead cables. According to the Wall Street Journal, there are over 2000 lead-covered cables that are not being addressed. Some of these cables are in water sources, near schools, and next to bus stops. More than 1,000 schools are within a half mile of an underwater lead cable. In one spot, the New Iberia fishing spot, lead was 14.5 times the EPA threshold for areas where children play.

• Unfortunately, it is difficult to remove these lead cables because they release lead and expose the workers who remove them to danger. But given they are likely contaminating soil and groundwater, something needs to be done.

• While the US has done a lot to combat lead exposure, such as by removing it from paint, gasoline, and piping bringing drinking water, lead exposure appears to remain an issue.

Massive Hollywood Strikes

• With the emergence of generative AI and streaming platforms, actors and writers have been increasingly threatened. Their work has become less valued and their importance may continue to diminish.

• In response, the Writers Guild of America (WGA) began to strike about two months ago and brought much of US film and TV production to a halt. However, companies have seemingly decided not to compromise and to outlast the strikes.

• But, for the first time since Ronald Reagen was its president in the 1960s, the Hollywood’s actors’ union will join the WGA in its strikes. According to the New York Times, they want residual payments, a form of royalties, from streaming services and guardrails against AI replacing jobs.

• The strike could go on for months with it being reported that studios plan to wait until October to start talking, but hopefully it resolves soon with a compromise that ensures the betterment and protection of the writers and actors.

Decreasing Inflation

• Inflation, the blight that has plagued the world for some time now, appears to be cooling even more in the US. While it has been on the decline for some time, the recent news that it rose just 0.2% in June, appreciably less than the 0.4% rise in May, is likely music to many an economist or investor.

• Despite this good news regarding inflation though, it is likely there will be further interest rate hikes. A strong labor market and wage growth means that there is still room for concern in the Federal Reserve’s eyes.

• At least two more rate hikes are expected before the end of the year, meaning the Fed’s battle against inflation is still ongoing.

Threads: A Success or Coming Failure?

• Although Threads has gone from 0 to 100 million users in less than a week and is seemingly developing a more user driven experience, it appears Threads may face a difficult future.

• Firstly, it still faces a lack of features and functionality with the Threads experience still being fairly barebones. Additionally, there is a genuine question of whether Threads can maintain the hype and activity on it in the future with one analyst saying “I'd rather eat broccoli for the full day than be on Threads”.

• Childish insults aside though, engagement and, more importantly, revenue appears to be a challenge for Threads. No plans have been announced yet for monetization and, even if Threads did monetize, it would add a meager amount of revenue to Meta. Miraculously, if Threads somehow instantly matched Twitter’s peak of 4.51 billion in ad revenue, it would be a mere 4% growth for Meta.

• But it may be too early to discount Threads. It is still new and the message of a nice and peaceful platform may prove alluring and enduring. One should limit their expectations though as Threads clearly faces a number of challenges.

Upcoming Events

Chinese AI regulation

• With the rise of generative AI and the enormous changes and dangers it may bring, many governments have begun to concern themselves with its regulation. China has already begun to introduce rules to limit and control AI while allowing it to develop.

• Some rules include…

  • Reporting illegal content and forcing Generative AI services to change their algorithm to prevent illegal content.

  • Conducting security assessments

  • Adhering to the “core values of socialism”

• In many ways, China’s new AI regulation is a microcosm of how the Chinese government operates. It seeks to enforce its authority with speed and effectiveness to secure growth and maintain its power.

• While China may be fast, others are also beginning to concern themselves with AI. The FTC is investigating ChatGPT’s parent company OpenAI and the EU has created its own AI regulations.

Crypto’s Recent Fortune

• While those invested or fascinated in cryptocurrencies and crypto companies are sometimes laughed at, it appears that they can sometimes have wins too.

• A court has ruled that a token on a crypto exchange is not an unregistered security. Instead, the court regarded it as a commodity. This means it doesn’t have to meet the requirements of a security which means it doesn’t have to provide transparency or regular financial statements like a security does.

• This seems to have provided some optimism as Coinbase, which would likely benefit as a crypto exchange platform, was up over 20% after the announcement.

China Softening Up On Tech

• For the last few years, China has been cracking down on its tech companies to limit their power and status. China attacked these companies by disturbing business practices and punishing them to ensure consumer protection and prevent monopolistic practices. In this endeavor, it has been extremely successful. It wiped over a trillion dollars worth of value from its major tech companies and reduced certain companies greatly. Jack Ma, after criticizing an aspect of China’s government, lost half his wealth while his companies fared even worse. Ant Group, which was planned to IPO for $315 billion, is now worth only around $80 billion.

• Now though, it seems that Beijing may be changing its tune as it recently actually praised companies like Tencent and Alibaba when it had so recently persecuted them. In particular, it praised their innovations in technology and how tech companies would be more important in the future with new Chinese priorities in semiconductors and AI.

Weekly Question

What is the current d

efault font of Microsoft Word?

• A: Calibri

• B: Proxima Nova

• C: Aptos

• D: Times New Roman

Answer: C. Aptos. It was Calibri for 15 years but it has recently been changed to Aptos.2