🐂 Tesla Wins

Markets

September has witnessed a consistent trend in the financial markets, marked by declining stock values, particularly in the Nasdaq and S&P, for two consecutive weeks. Simultaneously, oil prices have exhibited a remarkable upswing, surging by nearly 30% since June, reaching their peak for the year. This notable surge can be attributed to factors such as Russia and Saudi Arabia prolonging their production reductions and China's increasing demand for fuel. As a result, the possibility of oil prices reaching the significant milestone of $100 per barrel is becoming increasingly apparent.

Why a Soft Landing Could Prove Elusive

In the lead-up to the recessions of 1990, 2001, and 2007, there were instances where many Wall Street economists optimistically declared that the U.S. was on the verge of achieving a soft landing. A soft landing refers to a situation in which interest rate increases effectively control inflation without triggering a recession.

Similarly, during this summer, the combination of decreasing inflation and a cooling labor market has generated optimism among economists and Federal Reserve officials that this elusive objective might be attainable.

However, soft landings are uncommon for a reason: they are challenging to execute successfully. Antúlio Bomfim, a former adviser to Fed Chair Jerome Powell now with Northern Trust Asset Management, noted that achieving a soft landing often requires a significant amount of luck.

Federal Reserve officials are planning to maintain current interest rates this week, as they are keen not to jeopardize their chances of achieving a soft landing.

There are four key threats that could hinder this goal:

1. The Federal Reserve maintains interest rates at a level that is too high for an extended period.

2. Economic growth accelerates unexpectedly.

3. Energy prices experience a significant increase.

4. A financial crisis erupts.

These potential challenges underscore the difficulty of successfully orchestrating a soft landing.

Auto

Elon Musk watching the Auto strike

Amid the labor dispute between Detroit's car manufacturers and their unionized workers, one individual is already emerging as a beneficiary, and that's Elon Musk, the CEO of Tesla.

Before the strike, Musk's Tesla already had a significant cost advantage compared to its competitors due to its streamlined production processes and lower wages for its nonunionized workforce. With the United Auto Workers (UAW) employees currently on strike, and the likelihood of increased wages regardless of the dispute's outcome, Tesla's advantage in this area is set to expand further.

Tesla's labor costs average around $45 per hour, notably lower than the estimated $66 per hour for GM, Stellantis, and Ford. If the UAW secures the substantial pay increases it initially sought, the labor costs for Detroit's Big Three could potentially soar to $136 per hour, according to Wells Fargo.

Tesla has leveraged this cost advantage to reduce car prices this year in an effort to maintain its dominant position in the electric vehicle market. This strategy has proven successful so far, as evidenced by Tesla's 20% increase in Q2 profits despite the price cuts.

UAW President Shawn Fain has dismissed concerns that the labor strike could further solidify Tesla's dominance in the EV market, emphasizing the importance of economic justice for working-class individuals.

One potential factor that could slow Tesla's momentum is the possibility that the UAW strike, if successful in securing higher wages, might motivate Tesla workers to unionize at Musk's factories. However, it's worth noting that the UAW attempted and failed to do so in 2017 and 2018.

In other developments related to auto industry strikes:

• Fain has rejected Stellantis's offer of a 21% pay increase as negotiations continue.

• Analysts anticipate that any potential price increases for automobiles may take several weeks to materialize, assuming there is no sudden surge in vehicle panic-buying by consumers.

• Senator John Fetterman drove from Pennsylvania to Michigan to show solidarity with the striking workers, following the example of Bernie Sanders, who spoke at a UAW rally on Friday. Fetterman emphasized the need for individuals to choose sides in this labor dispute.

Politics

California sues energy giants

The State of California has initiated a lawsuit against major energy companies, including Exxon Mobil, Shell, BP, ConocoPhillips, Chevron, and the American Petroleum Institute (the largest lobbying organization for the U.S. oil industry). The lawsuit alleges that these entities have engaged in a decades-long campaign to deceive the public regarding the risks associated with fossil fuels.

Over the past year, California has experienced a series of unprecedented climate-related events, including record-breaking heatwaves, wildfires, unusual episodes of heavy rain and snow, and rising sea levels that have posed a threat to the state's coastlines. Scientific studies have indicated that these extreme weather occurrences were either exacerbated or made more likely as a result of climate change.

The lawsuit is primarily aimed at securing financial support for recovery efforts related to the weather-related disasters that have impacted California.

Criminal Justice

Illinois becomes the first state to abolish cash ball

The practice of cash bail in the United States has a history dating back to before the country's independence from England. Fast forward over two centuries, and Illinois is set to become the first state to eliminate it.

Illinois is implementing the Pretrial Fairness Act, effective today, which will replace cash bonds with a judicial hearing to determine whether an individual should be detained before trial due to flight risk or threats to public safety. Supporters of this change argue that it will lead to fewer nonviolent offenders who cannot afford cash bail being held in detention while awaiting trial. Additionally, it aims to rectify a system that disproportionately impacts Black and other minority communities.

According to the Prison Policy Initiative, there are currently 427,000 individuals in local jails across the United States awaiting trial, and 8 out of 10 of them have not been convicted of a crime.

Critics of abolishing cash bail contend that it may lead to increased crime rates and could be seen as a pretext for those advocating for the complete elimination of incarceration, as reported by the FT.

However, a study by the University of Albany found that bail reform in New York, which allowed most individuals charged with a crime to be released without bail last year, had a "negligible" impact on crime rates. It's worth noting that some aspects of New York's bail reform have been rolled back since then.

In a broader context, while cash bail is relatively uncommon in other countries, it represents a substantial industry in the United States. Reuters reported in 2021 that the for-profit bail industry generated $15 billion in annual revenue for insurers.

Sports

When you throw shade at Coach Prime

When Coach Prime, also known as Deion Sanders, faced criticism from Colorado State coach Jay Norvell for wearing sunglasses while speaking with adults in the lead-up to their game, he responded by turning the situation into a business opportunity. Sanders revealed that he sold an impressive $1.2 million worth of his custom sunglasses during that Friday. Following this, Colorado went on to secure a thrilling come-from-behind 43–35 double-overtime victory against Colorado State in the Rocky Mountain Showdown, adding to their successful season.

This incident highlights the magnetic influence that Coach Prime has, as notable celebrities such as The Rock, Offset, and Kawhi Leonard attended the game in Boulder.