The Corn Wars

Plus: Easing EU inflation is putting central bankers in the holiday spirit ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 1, 2022

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TOGETHER WITH

Good morning.

Some jolly old elves say things like “Ho, ho, ho!” to bring holiday cheer, while others prefer stuff like “The time for moderating the pace of rate increases may come as soon as the December meeting.”

On Wednesday afternoon, Federal Reserve chair Jay Powell gave Wall Street the news it was yearning to hear after months of inflationary pressure pushed interest rates up faster than a magical sled. At an appearance at the Brookings Institution, Powell made it clear he would keep pushing rates to fight inflation, but the stock market took its own trip north in the last two hours of trading thanks to the comments.

Morning Brief

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The Eurozone receives some welcome good news.

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Airbnb ground landlords down on subletting.

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Mexico wants no more genetically modified corn.

International

Inflation Finally Cools in the Eurozone

It may not be the World Cup Trophy (at least yet), but Europe got a big win on Wednesday.

After 17 brutal months inflation in the eurozone is starting to cool, according to data published by the EU’s statistics agency. Still, it remains at a white-hot 10%, and there’s a long way to go before hitting the union’s 2% target.

The Winter of our Relative Content

You know the story. War in Russia. Disrupted supply chains. Energy crisis. All the rest. It’s been a nightmare for Europeans, propelling the continent into a severe cost of living crisis. While food, alcohol, and tobacco prices increased again this month at a year-over-year rate of nearly 14%, energy price inflation fell from over 41% in October to just 35% in November thanks to easing pipeline pressures. Meanwhile, services inflation slowed as well to just over 4%.

That was enough to pull inflation down to the aforementioned 10%, a bigger drop than the 10.4% expected by most economists and a welcome reprieve from the record 10.6% year-over-year price increases in October. And while not every member nation of the Eurozone felt the sweet relief equally, the downshift in inflation may be enough to convince the European Central Bank to slow its rate-hike roll:

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Overall, 14 of the eurozone’s 19 constituents saw price growth fall in November, three nations saw inflation accelerate, while two saw it flatline. Latvia remains the hardest hit, with inflation at a staggering rate of nearly 22%, while France enjoyed just a 7% inflation rate.

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The good news is likely enough to cool the next ECB rate hike, due after the governing council meets on December 15, to just 0.5 percentage points — down from the historic two consecutive 0.75 point increases. Still, rate hikes are expected to continue through early next year.

Pay Up: European leaders remain wary of a self-sabotaging wage-price spiral, though the latest data shows salaries increased just under 3% in the three months through September, far below the inflation rate. Meanwhile, German unemployment rose to 5.6% in November — marking a 17-month high of its own.

Real Estate

Airbnb Targets Renters

(Photo credit: Open Grid Scheduler/Flickr)

In a “Nixon to China” development, Airbnb aims to legitimize your apartment sublet.

The vacation giant announced Wednesday it’s launching a new service to let renters in 25-plus US cities find apartments to live in and also sublet as Airbnb hosts, tapping into the ever-more-attractive rental market as mortgage rates continue their volatile streak.

(Sub)Let it Go

Airbnb, like many of its app-ified Silicon Valley compatriots, has had a rocky relationship with regulation. It’s been accused of neglecting both hosts and guests, driving up rents in places already beset by the housing crisis, and acting as a tacit vessel for illegal subletting. In recent years, Airbnb has put on its grown-up pants, cracking down on parties and upping fees for flaky hosts who cancel last minute from $100 to $1000.

As part of this drive towards legitimacy–and taking advantage of a market where homeownership is looking like an ever-more impossible dream– the company is partnering with 12 major landlords, including Equity Residential and Greystar Real Estate Partners, to create a base of 175 apartment buildings. Of course, Airbnb needed to sweeten the pot:

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Airbnb has promised partnered landlords as much as 20% of the revenue it makes off sublet bookings.

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The company will also help market apartments by building a… let’s say “Zillow-esque” listing platform where prospective renters can search for ‘Airbnb Friendly apartments. Airbnb’s selling point to these renters is they’ll be able to make some pocket money while they’re out of town.

If you can’t beat ‘em…: Greystar CEO Bob Faith told the Wall Street Journal landlords are sick of trying to hold back the tide of illegal sublets and would rather team up with Airbnb to legitimize the practice. “The reality is it was very difficult to restrict it,” Faith told the WSJ, adding: “People would meet somebody at the coffee shop down the street and give them the key.”

Waterworld: Americans aren’t the only market getting mortgage fatigue. The London housing market has become so hectic that some prospective buyers are indulging their inner Lucille Bluth by turning to houseboats, according to a new report from Bloomberg. Although canal boats can be a little cramped, and the mooring costs add a yearly expense of up to £20,000, the average sale price of a central London house is now £1.35 million, and that’s enough to send anyone a bit Wind in the Willows.

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Agriculture

US Disputes Trade as Mexico Plans to Ban Genetically Modified Corn

Mexico cracked corn and the US does care.

Mexico will ban all genetically modified corn by 2024. That’s not sweet news for the US, which is now threatening legal action over the sweeping policy change.

It’s Corn! It’s Got the Juice

Mexico and the US are already in disputes over energy, with the Biden Administration accusing President Andrés Obrador’s government of favoring Mexican state-owned utilities and oil companies at the expense of American businesses. Obrador’s response to the finger-pointing was positively Kissinger-esque in its diplomacy: “Oooh, I’m so scared,” he said this summer. With 90% of the US’ corn being genetically modified, this whole kernel quarrel is adding more salt to the mix.

The term “genetically modified organism” sounds like a creature Sigourney Weaver would battle in a mech suit, but no need to open the airlock just yet. It’s generally agreed upon that the gene-spliced foods – which grow quicker, stronger, and are mostly sprayed with Monsanto’s herbicide Roundup – don’t cause harm in normal consumption rates. Obrador has chosen to cite health concerns and the goal to protect native corn strains from genetic contamination:

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Obrador said Mexico is perfectly “self-sufficient” in white corn for humans and will stick to the upcoming ban. However, he did agree to extend GM yellow corn imports for another two years for livestock as the US provides 40% of Mexico’s animal feed.

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Mexico was the second-biggest market for US corn exports in 2021 totaling $4.7 billion, just behind China’s $5.1 billion. So now the US is looking to enforce its rights under the US-Mexico-Canada Agreement, a consensus trade pact that replaced the North American Free Trade Agreement in 2020.

Tortilla Inflation: In Mexico, Corn is king. Nearly 100% of the population eats corn tortillas daily, so the GM ban could spell bad news for consumers. One study from World Perspectives found that the proposed restrictions would cause the average cost of corn to increase 19% in Mexico and tortilla prices to rise 16% on average. Chefs might have to break tradition and start adopting the Tex-Mex alternative of flour tortillas.

Extra Upside

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Long COVID could cost the US economy trillions.

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More tech trouble: DoorDash laid off 1,250 corporate employees.

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Disclaimer

1. Per Vanguard. 2. Journal of Retirement Study Winter (2020). The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Journal of Retirement study.

Written by Isobel Hamilton, Griffin Kelly, and Brian Boyle.

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