Hello, welcome to “Financial Special Way”. First of all, let me ask you a question, do you know which is the third largest e-commerce market in the world? It’s the UK! By the end of this year, the e-commerce market in the UK is set to reach $160 billion.
Today’s focus: Astronaut stuck in space station, NASA abandons Boeing and chooses SpaceX! Fierce battle in the US election, $1 billion poured into swing states for advertising! Strong summer consumption in the US, will it affect the Fed’s interest rate cut? Nvidia loses $30 billion, AI investment frenzy cools down!
The largest e-commerce platform is Amazon, followed closely by Shopify and the emerging Temu under Pinduoduo.
Due to the rapid development of the e-commerce market in the UK, major e-commerce platforms have set their sights on this “fat meat,” with Amazon facing the most pressure. In order to solidify its leading position in the UK e-commerce market and resist competition threats from platforms like Temu, Amazon has recently invested heavily in logistics in the UK.
In early August, Amazon announced a £300 million investment in the UK to upgrade its logistics transport network, creating multiple mini transportation hubs in the UK to connect the “last mile” of logistics distribution with electric cargo bikes.
In mid-August, Amazon announced another £500 million investment to build a robot distribution center in Leeds, UK. With the previously built distribution centers, this is already the 31st logistics hub Amazon has built in the UK, showing Amazon’s importance to the UK market.
The US presidential election is heating up, with both candidates, Joe Biden and Donald Trump, putting all their efforts into campaigning.
According to financial tracking data provided by Open Secrets, Biden, Trump, and their direct allies have a total of about $7 billion in campaign funds in their bank accounts, combined with the approximately $3.7 billion raised in previous campaign activities, giving them a total of over $10 billion in campaign funds. Both sides are now ramping up spending to burn through this money. And remarkably, both are targeting swing state voters through their campaign advertising.
Biden’s team’s advertising plan is very specific, as they recently announced a $3.7 billion advertising plan that will start after Labor Day and continue until November.
Trump’s team’s intentions are not yet clear. However, reports suggest that Trump’s team is producing television ads worth hundreds of millions of dollars, preparing for a large-scale rollout. It is said to have reached a $4.38 billion television booking agreement with relevant parties.
Over the next two months, American citizens, especially those in swing states, will face a barrage of campaign ads.
The world’s richest man, Musk, recently commented on the current state of the US economy again. He warned that due to excessive government spending, the US is rapidly heading towards bankruptcy.
On August 30, Musk shared a post on Twitter predicting the US government’s budget for fiscal year 2025, stating that the government budget deficit could increase from the current $1.8 billion to nearly $163 billion by 2035.
In the post, Musk wrote: With the current government spending rate, the US is on the fast track to bankruptcy. He also stated: Government overspending is the cause of inflation.
In late July, the US Treasury Department announced that the US national debt had exceeded $35 trillion for the first time.
The Congressional Budget Office (CBO) predicts that by 2034, the US debt will exceed $50 trillion, accounting for over 122% of GDP. These figures continue to raise concerns among the public.
Currently, the US economy is growing slowly, with many factors exacerbating economic difficulties, including liquidity challenges, debt default risks, escalating political tensions, and most notably, concerns about whether the US dollar will lose its position as the primary reserve currency.
On Wednesday, Asian stock markets and global futures markets plummeted significantly, driven by a sharp drop in technology stocks and concerns about global economic growth prospects, leading investors to flee risk assets. At the same time, oil prices also fell to multi-month lows.
Historically, September is usually the worst month for stock market performance, but analysts point out that there are multiple factors behind this round of plunges, including weak US manufacturing data.
On Tuesday, the US stock market fell sharply on the first trading day after the Labor Day holiday, with AI darling Nvidia’s stock plummeting, evaporating a record $279 billion in market value.
The massive sell-off of AI-related companies spread to Asian tech stocks on Wednesday, with Japanese chip equipment manufacturer Advantest falling by 7%, a supplier to Nvidia. Taiwan’s TSMC fell by over 5%, and South Korea’s SK Hynix fell by 7.7%. It seems that investor enthusiasm for artificial intelligence is waning.
This summer, Americans’ enthusiasm for travel has reached unprecedented levels. With the end of the Labor Day holiday, a booming and record-breaking “summer travel season” has come to an end. Although summer is over, people’s enthusiasm for travel is not waning, as many have already begun planning their holiday trips for this winter.
Summer travel has left many Americans wanting more, with plans already in the works for winter. There’s news: the surge in summer flights has laid a good foundation for autumn and winter travel.
Experts say that as airlines add more flights, ticket prices are dropping, which means there will be many potential discounts. What’s more, the frequent flyer miles accumulated when flying in the summer can make winter travel more affordable.
Brian Kelly, founder of travel points website The Points Guy: “Whether you want to go to Christmas holiday markets or go skiing in Europe this winter, you can use these points, and you can transfer these points to foreign airlines’ frequent flyer programs, which are currently the most cost-effective.”
This is because, in recent years, most US airlines have increased the amount of points needed for free travel, leading to point devaluation.
Brian Kelly, founder of travel points website The Points Guy: “Four years ago, you only needed 100,000 miles to travel to Europe and back, but now you need 500,000 miles. So my advice is to use foreign airlines’ frequent flyer programs because they haven’t devalued too much.”
But what if you haven’t joined a foreign airline’s frequent flyer program? Experts tell you that it’s not a problem because most major US credit cards allow you to transfer your miles to foreign airlines they partner with.
Brian Kelly, founder of travel points website The Points Guy: “You can input your points, from Amex cards, Chase, or Bank of America credit cards, and it will tell you that if you transfer your points to the Canadian airline, you can book a round-trip ticket to Switzerland for 60,000 points, but if you book through United Airlines, you need 88,000 points. That is to say, if you use a foreign frequent flyer program, you only need 60,000 points, that’s the trick.”
Not only has travel spending surged, but Americans’ consumption in various aspects has also remained strong this summer, and the consumption prices representing inflation levels will directly affect the Fed’s interest rate policy. So, will strong summer consumption affect the Fed’s decision to cut interest rates next week?
Jared Bernstein, chair of the Economic Advisory Committee: “Consumer spending was strong in July, rising by 0.4% for the month, slightly lower than 3% year-on-year.”
The US Department of Commerce released the latest inflation data for July last Friday, showing that consumer spending in the US in July was higher than in June. The Personal Consumption Expenditures (PCE) price index rose by 2.5% year-on-year and by 0.2% month-on-month, slightly higher than before. Overall, inflation indicators have remained relatively stable.
Jared Bernstein, chair of the Economic Advisory Committee: “This means that inflation continues to move in the right direction.”
While prices in supermarkets are still rising, the rate of increase has slowed down. Additionally, many Americans may have noticed that gasoline prices are slowly decreasing.
Lael Brainard, chair of the National Economic Council: “We’ve actually seen gas prices at gas stations dropping, with the national average price at $3.35, down about 50 cents from last year’s Labor Day period, the lowest Labor Day gas price in three years.”
Government data indicates that inflation levels in the US are still higher than the target value, and this will undoubtedly be an important topic for the presidential election in the next two months, as prices and borrowing costs are always among the public’s major concerns.
US Vice President and Democratic presidential candidate Kamala Harris: “I am very proud of what we have achieved by lowering the inflation rate to below 3%.”
Former US President and Republican presidential candidate Donald Trump: “We will work together to achieve low taxes, low regulations, low energy costs, low interest rates, low inflation, allowing everyone to afford groceries, cars, and homes.”
Although some investors had optimistically anticipated a 50-basis-point cut by the Fed this month, the July inflation data might dampen such relatively aggressive predictions. Now, more analysts believe that the Fed will initiate a moderate rate cut.
The Fed’s decision to cut rates and the extent of the rate cut largely depend on the inflation level as the most critical factor. In addition, the direction of the labor market is also crucial. The latest labor survey results released by the government will also provide some impetus for the Fed’s interest rate cut.
The Bureau of Labor Statistics (BLS) released a “Job Openings and Labor Turnover Survey (JOLTS)” report on Wednesday, showing that US job vacancies dropped from 7.91 million in June to 7.73 million, well below economists’ expectations of 8.09 million, hitting a new low since January 2021. Meanwhile, job cuts by US companies rose to 1.76 million, hitting a high since 2023.
Economists believe that with the decrease in job vacancies and the increase in layoffs and unemployment, a change in the supply and demand balance in the labor market is underway. Signs of weakness in the job market have intensified concerns about an economic downturn, although it has eased pressure on inflation. If the August non-farm payrolls data released this Friday are also not optimistic, it will greatly strengthen the Fed’s determination to cut interest rates.
Although the Fed’s rate cut has been much anticipated but not yet implemented, the US’s neighbor and important ally, Canada, has already cut interest rates three times in a row, further loosening its monetary policy.
As expected, on September 4, the Bank of Canada announced another 25-basis-point rate cut, lowering the benchmark rate to 4.25%, the third consecutive rate cut. If inflation continues to slow down, more loose policies will be possible in the future.
Economists predict that in the next four monetary policy meetings, the Bank of Canada will cut rates by 25 basis points each time, reducing the policy rate to 3% by mid-2025 to balance inflation and economic slowdown.
Although Canada’s current inflation rate is still higher than the 2% target, economic growth has been lackluster for several months, and the unemployment rate has also slightly climbed, hence, cutting interest rates becomes a necessary measure to boost spending and lower borrowing costs.
This week, the two American astronauts, Suni Williams and Bucky Willmore, who have been stuck in the International Space Station for three months, received both bad and good news.
The bad news is that their planned Boeing “Starliner” spacecraft malfunctioned, extending their stay in space from two weeks to eight months. The good news is that NASA has finally confirmed their return date, and in February next year, they will be able to return home aboard Elon Musk’s SpaceX spacecraft, instead of Boeing’s.
Alas, Boeing’s “Starliner” spacecraft has been trying to catch up with SpaceX, but in its first manned mission, a round trip ticket turned into a one-way ticket, and in the end, they have to be rescued by the richest man. The move not only further solidifies SpaceX’s dominance in the US space industry but is also a setback for Boeing, which is already in crisis, impacting its reputation and financial statements.
The question of where the two astronauts trapped in the space station will go has been hotly debated among Earthlings in recent months. On June 5 this year, Boeing’s new spacecraft “Starliner” successfully undertook a manned flight mission, smoothly delivering two astronauts to the International Space Station. This was the first time that Boeing had sent astronauts into space, finally becoming the second company after SpaceX to provide round-trip manned services for NASA.
As planned, the two astronauts were supposed to return to Earth on June 14 after two weeks in space, landing in the remote deserts of the US West. However, trouble ensued.
In fact, the “Starliner” spacecraft was supposed to achieve this flight in 2019 but due to unresolved spacecraft defects, it had been delayed until now. The launch went smoothly, and after 25 hours of flight, it finally arrived at the space station. However, a minor ammonia leak occurred in the propulsion system, quickly brought under control. Just as the astronauts wiped their brows, the thrusters temporarily malfunctioned during the final docking with the space station, causing trouble at the docking interface.
Fortunately, the astronauts could now enter the space station. However, the problem was that they could no longer continue their return journey on the “Starliner.” Though NASA and Boeing engineers have been working hard to resolve various issues, they just couldn’t get it done, leaving the two astronauts stranded for nearly three months in the weightlessness of space.
Thankfully, the two are still in good condition, and NASA specifically sent a cargo plane to deliver a shipment of supplies, ensuring they have ample supplies and things to do to keep occupied. While it is common for astronauts to adjust missions and delay returns while in the space station, this unusual delay, particularly with many aspects surrounding the return seemingly marred by human factors, has caused intense discussions and filled with chaos and uncertainty in NASA’s history.
Finally, NASA has confirmed this week that the return date will be in February next year, and instead of their scheduled Boeing “Starliner,” they will be returning home on SpaceX’s “Crew Dragon.”
With the return date finally confirmed, the two astronauts’ anxious hearts can rest a bit more at ease. Even though they will miss Thanksgiving, Christmas, and New Year, and what was originally planned as a two-week space trip turned into an eight-month stay, they will finally return to Earth in February wearing spacesuits designed with the SpaceX logo. The Boeing “Starliner” spacecraft is expected to return to Earth in September this year, but without anyone aboard.
Now, why did the round trip ticket on the “Starliner” spacecraft turn into a one-way ticket, and even require Musk to come to the rescue? To understand this, we need to go back to the end of the NASA Space Shuttle program in 2011.
Having stopped developing its own spacecraft, NASA changed its business model to subcontract the round-trip service to the International Space Station to private companies and selected two competing companies to share the contract. One was Boeing, a long-time ally of NASA dating back to the Apollo era, while the other was Silicon Valley maverick Musk’s SpaceX. NASA paid these two companies billions of dollars to independently develop spacecraft, while they had to figure out how to keep costs within that amount, so both companies continuously innovated to reduce costs and increase profits.
Subsequently, the two companies developed reusable spacecraft, Boeing’s “Starliner” and SpaceX’s “Dragon.”
Initially, NASA favored Boeing more. Lori Garver, former NASA deputy administrator, described in her memoir that Boeing, with deep ties to NASA, was considered the preferred contractor for the mission. Some NASA officials even felt that SpaceX’s bid was too low and seemed unreliable. Since then, both companies have spent more money on development than initially estimated, but the results have been very different.
Boeing experienced setbacks at nearly every stage of development, facing frequent delays and technical failures, as well as financial struggles. Boeing has disclosed that costs for this project have incurred a $1.6 billion loss, and to date, it is uncertain whether there will be any returns from this project.
In stark contrast to Boeing’s plight, SpaceX, a startup led by Musk, has had a bright path to success.
In 2020, SpaceX successfully sent astronauts into orbit, becoming the world’s first private company to achieve this goal. Previously, only Russia, the US, and China had achieved manned spaceflight.
Before 2020, NASA could only outsource astronaut transportation operations to Russia. Afterward, the mission was solely completed by SpaceX. In recent years, SpaceX has taken on more launch missions than any other supplier, even taking the lead in the US space ecosystem.
To date, SpaceX has transported nine astronauts for NASA and three private groups for a Houston charter company. This year alone, SpaceX’s “Falcon 9” and “Falcon Heavy” rockets have completed over 80 launch missions, while its competitors United Launch Alliance only had four, and U.S. company Rocket Lab only had ten. These outstanding achievements have impressed NASA, thus enhancing its relationship with Musk.
Musk recently announced an ambitious plan, developing the latest rocket “Starship,” aiming to send NASA astronauts to the surface of the moon within a decade!
Additionally, the current International Space Station is set to be retired and deorbited by 2030, requiring a specially designed spacecraft to bring it down from orbit, a significant task that NASA has assigned to SpaceX.
Turning to Boeing, in June this year, when the “Starliner” spacecraft carrying Willmore and Williams finally launched successfully, NASA and Boeing both felt like a weight had been lifted off their shoulders, especially Boeing. Despite years of delay, they had finally found the right track and were catching up with SpaceX.
However, their jubilation lasted for only 25 hours. Another spacecraft malfunction dealt a blow to the trust NASA had painstakingly built in Boeing, and Boeing’s executives were no longer in the spotlight.
In recent weeks, heated debates over the reliability of Boeing have erupted among Boeing and NASA engineers, prompting NASA to take a more cautious approach, requiring more testing and data before making decisions. Ultimately, after weighing for weeks, NASA finally made the painful decision to replace the “Starliner” with SpaceX. For NASA, on the one hand, ensuring astronaut safety, and on the other, minimizing potential impacts on Boeing’s reputation and financial reports are crucial.
Although choosing SpaceX could embarrass Boeing, continuing to choose Boeing’s “Starliner” could lead to even more disastrous failures, dealing a fatal blow to Boeing’s reputation.
NASA Administrator Bill Nelson told the media: The Challenger and Columbia disasters in the past resulted in 14 deaths, a lesson that must be remembered.
In recent years, Boeing has been embroiled in quality and safety crises. This year, Boeing experienced another near-miss when a new 737Max jetliner’s fuselage broke in flight, leading to a complete grounding of this aircraft model. Subsequently, a series of chain reactions ensued, with the SEC investigating Boeing, upheaval among Boeing’s top executives, Chairman Larry Kellner announcing retirement, and Commercial Airplanes CEO Stan Deal immediately stepping down. At that moment, trust in this massive long-standing enterprise from government departments, suppliers, and the public plummeted to the lowest in history, with the company’s stock price falling by 30%, estimated to yield the worst performance since 2020.
Boeing’s financial situation has worsened, with the company burning through over $1 billion in cash every month in the first half of this year, leading to tight cash flow. In the last quarter, Boeing injected $10 billion in debt financing, but whether it will continue