If you’ve walked into a grocery store in the past six months, you might notice that your usual purchase seems pretty inexpensive.

According to the US Bureau of Labor Statistics, this current period is the longest period of falling food prices since the 1960s.

Experts believe that the price of food will continue to decline into early 2017 as well.

So, why are the prices on staples like milk and eggs so low? 

Many believe that this is due to the lowering cost of oil and the health of the American economy.

Because the agricultural industry is so reliant on oil for operating machinery and transporting the food, the cost of global oil can directly affect the price of food in our local grocery stores.

However, some people might not feel a different in their weekly grocery runs, as it is estimated that prices have declined 2.2% from September 2015 to September 2016.  While this seems like a relatively small amount, some commodities have changed in price dramatically.

Some major grocery companies, like Kroger, have even reduced their annual earnings predictions due to the deflation of food prices.

For example, milk prices are very low.  In early 2016, milk producers threw out 43 million gallons of milk because there was a lack of demand for the product.  Also, producers overestimated the trade potential of milk to deliver to China and Russia, as demand was high last year but has decreased dramatically.

There is a direct correlation between oil prices and agricultural product prices.  When the price of the cost of oil declines, so does the price of food products.

According to ED&F Man, an agricultural commodities firm, more than 20% of the cost of food is determined from the price of oil.

In 2014, the price of oil began to decline.  This is due to the increased production of US oil, lessening the reliance on foreign oil.

By 2015, the United States had begun to produce 9.2 million barrels of oil per day, reaching a high in production levels since 1970.

Even though the US began to increase production, OPEC countries like Saudi Arabia refused to cut production to maintain market share, increasing the global supply of oil.

By producing more oil in the US and not engaging in as much trade with OPEC countries as previously done, the reliance on other countries has declined and the supply of oil has increased, making global oil prices much cheaper than in the past few years.

Although oil prices are expected to remain low into the beginning of next year, it is estimated that they will gradually rise, as Saudi Arabia and other OPEC begin to lower production, therefore lessening the supply of oil in our world.

 

 

 

https://www.ceicdata.com/en/blog/impact-low-oil-prices-food-and-other-commodities

http://money.usnews.com/money/personal-finance/spending/articles/2016-10-28/food-prices-plummet-these-grocery-store-items-are-cheaper-than-ever

https://www.thebalance.com/what-is-opec-its-members-and-history-3305872

http://www.marketwatch.com/story/why-you-can-thank-low-oil-prices-for-cheaper-food-2016-07-26

http://fortune.com/2016/09/09/kroger-low-sales/

http://oilprice.com/Energy/Oil-Prices/How-Oil-Prices-Affect-The-Price-Of-Food.html

http://www.economist.com/news/finance-and-economics/21672342-fuel-price-shocks-have-big-influence-price-food-oily-food

 

Since it took effect in 1994, the North American Free Trade Agreement and its impacts have been discussed by everyone from laborers to political leaders. By establishing a free-trade zone in North America, it lifted tariffs on the majority of goods produced in Canada, the United States, and Mexico. This increased the fluidity of products among the three countries, and lately, there has been a focus on how detrimental this is to the US economy.

Take a look at the textile industry. Before NAFTA, the denim industry employed 500,000 American workers, but today, there are only 130,000 left. At a quick glance, NAFTA could be blamed for this because it is the reason why so many companies moved to Mexico in search of cheaper labor and lower overall costs. Free trade allowed American manufacturers to turn to other countries in order to better compete with domestic and international companies. In terms of the laborers left without jobs, older workers especially were forced to turn to lesser paying jobs like working at Wal-Mart or other low-wage, hourly positions. All of this makes NAFTA look rather bleak, but it is important to look at the gains NAFTA has also produced.

Close to 6 million jobs in America depend on trade with Mexico, and nearly 40% of US imports from Mexico are derived from US sources. Compared to only 5% previous to NAFTA, this increase signals some of the agreement’s successes. Going back to textiles, shipments in this industry have actually gone up since 1994 due to the fact that it became much cheaper. In reality, the job losses and trade deficit that is often blamed on NAFTA have other pertinent causes.

University of Pennsylvania Wharton professor Mauro Guillen believes that many of the jobs lost from 1994 through now would have been lost regardless of NAFTA to countries with cheaper labor such as China. NAFTA simply accelerated the process and redirected the manufacturing capacity to Mexico rather than Asia. In 2013, the trade deficit with Mexico was $54 billion, but the deficit with China was $318 billion. America’s deficit with China is five times its deficit with Mexico, which means that jobs were going to be lost to foreign countries either way. If anything, NAFTA allowed North America to create a cheaper and more seamless supply chain that benefitted American companies.

New technology improvements such as automation and robotics have also reduced the necessary number of workers, so even if jobs had not moved across borders, there would have been a downsizing in employees regardless. Many of the products made in foreign countries are also designed in the US, which opens up another set of American job opportunities.

Finally, it is important to look at the positive effects NAFTA had on Mexico’s economy. Free trade allowed Mexican workers job opportunities, and while Mexicans had previously been the largest source of immigrants to America since 1940s, immigration patterns are now reversing. More Mexicans are leaving America than coming in, and some of this can be accredited to the fact that Mexico is performing so well. It is easy to blame other countries for our own problems, but maybe Americans need to take a closer look at the true culprit.

With the click of a button, a classic Burberry trench coat can be delivered to your doorstep within days. As an iconic British brand, Burberry has over 498 locations around the world and countless products traveling between national borders every day. Consumer demand and international markets that make the item seasonless while it remains a symbol of British fashion and production around the world. As winter creeps closer, you get your hands on a classic Burberry trench coat and discover the larger story of how it got to you through the process of international trade.

Statista

Burberry was founded over 160 years ago in 1856 in Basingstoke, England as a high-fashion brand. Unlike other luxury brands, Burberry has prided itself on producing its clothing in England. When the brand announced that they would open a manufacturing in China in 2012, they were met with staunch negativity. Because the trench coat is a symbol of British manufacturing and England in general, Chief Executive Officer Christopher Bailey thought that the brand should stay loyal to the heritage of the textile industry that would provide the timeless quality of the coat and opened a factory in Leeds in 2015. Although China’s production would have a comparative advantage and possibly make more money for the brand, the products would lose their history and sentiment. Using the original method that includes over 100 processes, it takes three weeks to complete a single Burberry coat. The site in Castleford manufactures 5,000 trench coats a week and has a capacity of 240,000 a year. With an average price point of $1,500, that’s $360 million a year in trench coats produced at this site. When Brexit occurred, people and brands were on edge of how trade barriers would change and impact British brands and products throughout Europe and if trade agreements would also change with the United States.

The Telegraph

With consumer prices on the rise in the U.K., the pound has fallen by a fifth to the U.S. dollar since the U.K.’s vote to leave the European Union. This is caused the price raw materials to increase, causing the price of consumer products to climb as well, which means the cost of that trench coat would rise as well. Since the U.K. will be leaving the EU, borders that were once open and had few restrictions will all change. The uncertainty of the U.K.’s trade could make labor market conditions tighter and cause even higher inflation. This type of monetary affect would curtail consumer spending, which is a main driver of the British economy. In addition, it may be harder for other Europeans to get their trench coat delivered from digital, which outperformed in this half according to Burberry’s “First Half Trading Update.” In fact, digital saw growth on a global scale in Asia, EMEIA (Europe, Middle East, India and Africa) and the Americas since the redesign and launch of burberry.com this past September. Knowing this, the delivery methods of European market segment may change in the future based on trade rules, barriers and even tariffs. The price of a coat could rise based on these factors and it is uncertain if shipping will be a different

For America, Brexit gave the United States a chance to get closer as trade partners. Obama previously said that Brexit would put the U.K., “at the back of the queue” when it came to free trade deals. The United States is the U.K.’s second largest trading partner while the U.K. falls behind as the U.S.’s seventh largest trading partner. Exporting goods is a huge boost to the British economy, in fact 10% of British exports came to the United States last year, which I can only assume included numerous Burberry coats. If the U.S. and the U.K. were able to form the Trans-Atlantic Trade and Investment Partnership (TTIP), it would cover 800 million people and facilitate closer trade with two of the largest economies in the world. However, like almost every trade deal, it has been disputed by Brits because of worries that large corporations that could take over the market, movement of jobs and softening on food safety and regulation.

You may not have realized it, but before your coat arrives to you via digital or if you pick it up in-store, all these factors have impacted that single coat. Raw materials makes your trench more expensive, the fall of the British pound has created inflation in women’s clothing. The landscape of the economy for England is in a transitional period and how it will change within Europe and America is yet to be seen at its full capacity. Your trench coat’s price is always changed based on these factors and more and how it will be delivered to customers may change and further impact this price. Perhaps it is in your best interest to go to England and purchase it straight from the source because it will be at the cheapest cost. However, next time you buy a Burberry coat, pay attention to what’s happening in the world of trade and Brexit, because the story of that coat might have changed.

HighCharts

Chinese residential developers in L.A. are expecting Chinese buyers to constitute up to 40 percent of their clients. Since 2014, Chinese real estate companies have been involved in at least seven of 18 land deals in Los Angeles.  Greenland, a Shanghai-based real estate company, bought a property called “Metropolis” in downtown L.A. near the 110 freeway. This mixed-use project with three towers and 1500 residential units is now under construction. Greenland, the property owner, has the marketing skills to attract the Chinese buyers. The realtor for the Metropolis project said 75 percent of units in one tower had already been sold. Many of those units are going to buyers from China.

The Metropolis project model 

First, Greenland targets Chinese buyers through real estate agents from both China and the U.S. The L’ands Corporation is a Beijing-based company and has years of experience selling luxury houses in China. The advertisements for the Metropolis condominiums have appeared during the Beijing company’s marketing to Chinese buyers. “We are quite confident about the overseas market because more and more Chinese clients consult with us about houses in the U.S., especially California,” said Eason Wang, one of the sales agents in the L’ands Corporation. After Wang posted the Metropolis information in his Wechat account (a Chinese popular social networking account similar to Twitter), several customers were interested, and Wang planned to put the potential buyers in contact with the Los Angeles partner — Douglas Elliman. The main roles of the Chinese real estate agents are the advertiser, the promoter and the connector between the Chinese buyers and the L.A. market. Only the U.S. real estate agents are authorized to sell American houses. The L’ands Corporation will help the potential Chinese buyers arrange the property visits with Douglas Elliman’s L.A. branch in Greenland’s office near the Metropolis project. Douglas Elliman’s team for Greenland, of course, has several Chinese employees who can speak fluent Mandarin.

A screenshot of L’ands Corporation house selling advertisements in Wechat

Greenland, the company behind Metropolis, tries to make its properties more attractive to potential Chinese buyers by linking ownership to citizenship.

It’s called the EB-5 Immigrant Investor Program. According to the U.S. Citizenship and Immigration Services, foreign investors are eligible to apply for permanent residence if they invest $500,000 in a company like Greenland in a way that helps create or preserve 10 permanent full-time jobs for qualified U.S. workers. Greenland will return the money to investors once the properties they invested in are sold. The Chinese buyer gets to stay in the U.S.

 

In 2015, more than $25 billion from China flowed into residential real estate in the United States. Chinese consumers bought more U.S. properties than people from any other country. “People move with capital nowadays. If you go to a university in the U.S., you will also consume goods including investment in property. It’s the mobility of capital,” said Yasheng Huang, associate dean of the MIT Sloan School of Management.  “The houses built by Chinese real estate companies could easily own the Chinese buyers’ attention and trust.” But behind the big boom in American real estate investment are worries about the depreciation of China’s currency and an economic slowdown. “There are right reasons for capital movement such as increasing globalization, the mobility of capital and the ability of entrepreneurs,” Huang said. What he worried about were the “wrong reasons” for capital movement such as the lack of confidence in the future of China’s economy.

 

http://www.latimes.com/business/la-fi-0825-china-dtla-snap-story.html

http://www.latimes.com/business/la-fi-chinese-us-investment-20150520-story.html

I want to talk to you about Craig Bellamy and Andrew Ayew. If you’re not a big fan of English Premier League you’re probably wondering who those two guys are, and what could possibly make them interesting enough to talk about.

 

 

 

 

 

 

Photo Credit: Arfa Griffiths via Getty Images

 

Well, they are both footballers who play the same position. Bellamy is retired, and Ayew plays currently for the London-based soccer club West Ham United where Bellamy used to play. They are interesting because they represent the effect of an insane revenue boom in the EPL, and how that has changed the economic dynamics of the one of the most popular sports leagues in the world.

In 2016, the EPL penned a new £5.13 billion broadcast rights deal which rose more than £2 billion from the previous agreement. This money is then spread amongst all the teams in the league. Imagine the EPL as a nation, and their GDP just swelled in size because the G, in this scenario the league itself, just poured a bunch of money into every team.

In past years, we have seen increases in I, or individual investment, in past years when billionaire oil magnates bought teams and injected them with loads of cash i.e. Chelsea and Manchester City, but those moves didn’t affect spending trends league wide. This time, the money has been helicoptered into small teams like Watford, as well as the giants like Manchester United. And unlike in Japan, those teams sure have spent that money.

This past summer alone teams in the EPL spent over a £1.165 billion on transfers. Trumping the gross spend from the previous summer of £870 million, and continuing an astonishing upward trend from the start of the window in 2003, in which teams outlayed a “paltry” £235 million.

Chart Source: Deloitte

Why is this happening? If we look at it through the lens of economist David Ricardo’s theory of marginal rents we can glean insight into why the trend of transfer spending has spiked so fantastically. I would point to those players and clubs on the “margin”, basically those teams that are average performers in the league, to see why spending continues to rise throughout the league.

Look at the number of record transfers that happened this past window, and then notice the spike in spending by the four teams in the chart on the right. The reason why those teams must spend even more now is because what the average team will pay for the average player has skyrocketed, and driven up the cost of players for those at the top of the league.

This brings me back to our old friends Andrew Ayew and Craig Bellamy. You can see Ayew’s name on that chart next to the £20.5 million he cost this past summer. Back in the summer of 2007, Bellamy, a player of a very similar skill-level and position, came to the same club for £7.5 milion. That is a huge jump in what that team would pay for that player in a mere eight years, and if we look at Ricardo we know that if the team on the “margin” can pay £20.5 million then that drives up the what the good clubs play for good players, and then what the elite clubs must pay for elite players. Thus creating the new market value for all players and the record spending for the clubs. After all, clubs still need players to sell tickets and TV rights.

This appears to be the new reality in the Premier League, and fans will have to get used to the dizzying amount of pounds spent on footballers as the trend continues to skyrocket.

New York Fashion Week has influenced the fashion industry and consumer tastes since 1943. It occurs twice a year in February and September, and it traditionally features styles that will be released in the following season. This has given designers and editors time to publish glossy photos and build hype for what was to come; however, as the most recent round of catwalks and glamour has come to a close, a new trend is emerging, and it is not even related to the style of the clothes themselves. What is changing the fashion industry is the idea of “see now, buy now.”

Burberry rattled the industry when it was the first to make this dramatic decision in February 2016. With the idea of “runway to retail” in mind, the products shown on the catwalk were available for purchase promptly after the show. The styles were labeled “immediate and season-less,” and the motivation for this decision was clear.

Fast fashion brands such as Zara and Forever 21 can whip out new styles from sketches to the shelves within a few weeks. With the help of the Internet, this means that the items can also quickly go out of fashion because of overexposure and instant popularity, especially if online influencers feature photos of themselves wearing similar items. The brands are notorious for mimicking the styles of high-end designers, so this means that by the time Vera Wang, Marchesa, and the like release their products months after their initial catwalks, they risk their styles looking dated and having less demand than they would have six months prior.

This comes at a time when people are constantly looking for immediate gratification, so it makes complete sense that designers are having to change their business models to fit what consumers want. Since February, several brands such as Tom Ford, Michael Kors, and Proenza Schouler have adapted in order to keep up with this changing industry. This requires the brands to adjust their production and supply chain, which is difficult for companies that have been running the same timeline for decades. High fashion used to be about scarcity and standing out, but nowadays, people are able to get their hands on just about any style they so desire.

In the modern era, shopping has become an addictive pastime, and according to NYU marketing professor Tom Meyvis, it elicits the most joy when consumers are able to browse, see something they want, and have it immediately. Just look at the increasingly rapid delivery times of online retailers. Fast fashion has perfectly filled this gap by shortening the delivery time, and if high-end brands want to keep up, they have no choice but to change. This cat-and-mouse cycle might actually be benefitting consumers in the end because data from the U.S. Bureau of Labor Statistics shows that even though there has been an overall increase in the price of retail goods, there has been a decrease in the price of clothing. Increased competition usually benefits the consumer, and the vast power of media and the Internet only adds ammunition.

It seems today that every strip mall in America has a mattress store in it. In fact, according to IBISWorld, a market research website, there are at least 9,200 stores selling mattresses in the United States. To put this in perspective, Starbucks has nearly 12,700 domestic locations and people buy more coffee then mattresses.

How did we get here? In part, mattress stores are everywhere because they are incredibly profitable. Unlike most industries where margins can be as low as a few percent, most mattresses are marked up between 40 and 100 percent according to Uptal Dholakia, a professor of marketing at Rice University.

In addition to the high margins, the uptick in mattress stores is indicative of high demand after the Great Recession when many Americans put off buying mattresses.

“People were moving much less; they were staying put in their houses,” said Dholakai in an interview with Freakonomics Radio. “During the recession, for a period of five or six years, people just stopped buying mattresses, and so there was a lot of pent-up demand.”

This demand has in turn led to major consolidation in the mattress industry as Mattress Firm has incorporated Sleepy’s, Mattress Pro, and Sleep Train into itself without closing many retail locations.

So far the demand for mattresses appears to be exceeding the supply as online direct-to-consumer mattress start ups appear. Companies such as Casper, Yogabed, Leesa, and Loom & Leaf, among others, have grown to make up 6 percent of the mattress market. Their early success has prompted investment from venture capitalists who believe that the mattress market will continue to expand to accommodate consumer demand.

 

After years of discussions about issues such as climate change, air pollution and resource shortage, sustainable development has become a popular concept that many countries want to improve. Some countries really are trying hard. Germany, for example, has been working everywhere from enhancing sustainable transportation to increasing citizens’ involvement in green policy. But there are also countries which think they are doing enough, yet actions don’t come close to making up for the damage that their economy does to the environment.

It’s interesting that our countries never get tired of competing with others. Imagine a flock of children are trying to prove to their mother, that who’s the one that loves her the most. Some make a lot of money; some take good care of her. In this case, the mother (the earth) doesn’t speak, so we need judges.

The Global Green Economy Index (GGEI) by Dual Citizen LLC is designed to measure and rank countries’ performances in the green economy. In other words, this is a real indicator of how well countries are treating the environment. GGEI was first published in 2010, and has been acknowledged as one of the main indexes to rank national performances of green economy.

There are two sets of ranking: perception and actual performance.

The perception survey is conducted based on the respondents’ assessment on their own green economy performance. The actual performance is evaluated by expert practitioners. Both results were based on the same set of indicators which lie under four main categories: Leadership & Climate Change, Efficiency Sectors, Markets & Investment and Environment & Natural Capital.

The latest 2014 GGEI report evaluated 60 countries’ performance based on the above categories. Sweden, Norway and Costa Rica are winners of the first three places.

       

 

While most of the nations have similar ranking between the two, there are countries that show significant difference. For example, United States is 6^th in perception and 28^th in actual performance. China’s perception ranking is 13^th yet its actual performance ranking is 55^th.

Obviously, the fastest growing economy did not reach its expectation at all. What went wrong? If we break down the four categories, China is investing heavily on the green market, but its efficiency definitely needs to be improved. Environment & Natural Capital is China’s weakest categories, everybody in and away from China wonders when people would be able to breath in Beijing without worrying getting sick. What can the government do to bring this score up? Perhaps that’s what China will get inspired by reading this report.

 

GGEI is an important communications tool for policy makers and international organizations, because it is a good reference point. While most countries share a common goal of maintaining a healthy environment, GGEI provides criticism and reflection on different aspects. It helps countries to realize what is working out and what more needs to be done.

The 2016 GGEI report will be available in the fall, according to the Dual Citizen website.

In America, the taller the skyscraper, the more successful you are. As companies blossom, it is not unusual for CEO’s to announce moving on to bigger and better things. However, the fate of these companies is often destroyed by the terrifying curse that haunts those with lofty goals of a shiny new building.

Economic indicators are all around us. Unemployment, GDP, and CPI are the ones that grab our attention but because our economy is so massive, it is easy to miss the little signs here and there. So why would moving to new headquarters be problematic when business has never been better? In many of these cases, the company did not properly attempt to look into the future and consider what could go wrong. Nonetheless, for some of these companies, they never could have predicted bleeding money for years after the fact.

Back in 2000, The New York Times doubted the strength of the internet. Although it was clear as day that the world would never be able to turn its back from the internet, what wasn’t clear was the fact that more accessible news lead to lower print sales. By 2007 they should have figured it out but alas, they still moved into shiny new building which led to an extremely uncomfortable financial situation. Let’s just say the accountants went gray real quick trying to crunch those numbers. The only solution was to sell the building and hope for the best.

MySpace? What’s that? Oh right that social media site that got destroyed by Facebook. Thanks Zuckerberg. In 2008, MySpace naively believed they would continue to dominate. Naturally an upgrade was necessary to house the increasing amount of employees. Of course, MySpace declined quickly after moving to new HQ, and today MySpace is owned by Time Inc. It technically still exists but as an entertainment site for music and videos rather than social media.

In these cases, perhaps the outcome of losing money could have been foreseen. However, one must remember the economy is its own animal. The ebb and flow of the market cannot be controlled as much as we like. In business, risk is unavoidable and therefore moving to new HQ isn’t the worst idea. The issue is timing. The curse will remain for all those eager CEO’s trying to jump ship because it is an enormous risk to take. Only the lucky few will go on unscathed, all we can do is watch preferably with popcorn and economic outlook sheets in hand.

http://www.businessinsider.com/poorly-timed-headquarters-2009-11?op=1/#space-3