Inflation Nation

Plus: East beats West when it comes to shipping ports ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 23, 2022

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TOGETHER WITH

Good morning.

You might be reading this stranded at an airport. Would it help to know that you’re not alone?

More than 4,300 domestic flights were canceled between Wednesday and Friday as Winter Storm Elliott wreaked absolute havoc across the US and played a snowy Grinch for airlines that were poised to reap the benefits of the busiest Christmas travel boom since the pandemic. Snowstorms and freezing temps might create more issues as Amtrak and other transportation alternatives have begun cancellations in the northeast. You might get home for Christmas, if only in your dreams.

Morning Brief

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Tesla tries to counter Twitter drag with a shiny new discount.

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Turkey has a new plan to fight sky-high inflation.

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Santa’s working down at the docks.

EVs

Tesla Offers Discounts to US Shoppers

Tesla’s yanking the wheel to try and swerve around the wreckage of Twitter.

The EV company whipped out a Christmas discount this holiday season, offering drivers $7,500 off if they take delivery of its popular Model 3 and Model Y vehicles before the end of the year. The company appears to be taking full advantage of a $7,500 per-EV credit headed its way next year as part of the Inflation Reduction Act while CEO Elon Musk keeps trying to figure out how to make his Twitter purchase stop hurting Tesla shares.

Bird-Brained

Tesla’s stock this year has suffered along with many other stocks, but this week saw its worst sell-off since its 2010 IPO. Although Musk blamed macroeconomic factors, like the Federal Reserve hiking rates to combat inflation, major investors blame his theatrics at Twitter. Investor Ross Gerber, historically a Musk acolyte, publicly called in the company’s board of directors for a “shakeup” saying the share price “now reflects the value of having no CEO.” Et tu, Gerber?

Tesla prices have been creeping up for well over a year now, and in July Musk tweeted the company could lower prices if inflation cooled off. With inflation far from cool, the new US discount signals a major change in strategy, although not a totally alien one. Tesla’s China operation has recently offered incentives and discounts, and now the mothership seems to be taking notes:

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Tesla offered Chinese buyers a 6,000 yuan ($860) subsidy in early December on Model Y and Model 3 cars. This came after the company cut prices across the board in October, brought in insurance subsidies, and reanimated its referral program.

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Around the same time the 6,000 yuan incentive was launched Tesla flew its Shanghai factory boss Tom Zhu over to Austin, Bloomberg reported. Sources told Reuters Zhu was brought over to smooth out production problems at the Austin Gigafactory, and that he was still around as of last week.

Musk’s machete: Twitter’s workforce is now 70% smaller than it was before Musk took over the company, but despite the staff decimation and the fact Twitter’s offices have been auctioning off items, three sources told Insider Musk is still looking for ways to cut costs two months after acquiring the company. He compared the company’s finances to “a plane that’s headed towards the ground at high speed” during a live Twitter Spaces interview this week. Tesla’s going to need to deliver a Cybertruck-load of cars.

– Isobel Asher Hamilton

Policy

Turkey Bumps Up its Minimum Wage by 55%

The global laboratory of fiscal policy has had quite a year, but no nation is being more experimental than inflation-ravaged Turkey.

On Thursday, long-serving President Recep Erdoğan announced the nation would be increasing its minimum wage by over 55% starting in 2023. The maneuver may be motivated by politics just as much as economics for the autocratish leader.

Wage the Dog

Erdoğan has long consolidated power and acted with hostility toward opposition and dissent, especially since a failed coup attempt in 2016. And though elections are still somewhat free in Turkey, observers with the Organization for Security and Co-operation in Europe (OSCE) reported intimidation campaigns and other misuses of state resources to aid Erdoğan in his last race in 2018 (when his chief opponent, it should be noted, campaigned from a prison cell). But this time around, voters have more reason than ever to oust the leader.

Inflation soared to nearly 85% in November, one of the highest marks in the world, and most economists believe year-end inflation will top Turkey’s central bank governor forecasts of 65%. Meanwhile, Erdoğan — who has significant influence over said central bank — is a student of a very niche school of thought that says high interest rates drive inflation. Under the president’s orders, the central bank began reducing borrowing costs to the world’s lowest levels in September, a move that was followed by a nearly 50% dropoff in value for the Turkish lira.

Now, with few moves left and public opinion polls showing historic discontent with the ruling party, Erdoğan and company are turning to a simple, if massive, wage hike to stabilize the roughly $800 billion economy:

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Starting next year, the Turkish minimum wage will pay $455 a month, Erdoğan announced in a televised speech on Thursday. That’s a 55% increase from where it’s stood since July and double the minimum wage at the start of 2022.

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Of course, business leaders are already bristling at the raise. “[W]ith this cost increase, it is impossible for us to keep prices the same as before,” Ramazan Kaya, president of the Turkish Clothing Manufacturers’ Association, told Reuters while threatening job cuts.

Snap election: According to Turkish officials, more than 30% of the Turkish workforce is currently on the minimum wage — meaning plenty of the population will feel the bump, or the potential subsequent business backlash, one way or another. And while experts say any positive effect for workers will likely dissipate within the high-inflationary environment before June’s election, Erdoğan, naturally, retains the power to move the election up a couple of months should he see fit. We’re guessing he just might.

– Brian Boyle

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Cargo

NY and NJ Become Nation’s Busiest Shipping Port

(Photo Credit – William William/Unsplash)

Santa used to prefer using Southern California as his US hub for moving presents, but it appears to have lost the Christmas spirit.

New York and New Jersey have come in clutch and laid claim to the title of the nation’s busiest port. If you ordered Christmas gifts, they’re likely coming by way of the City that Never Sleeps.

Heading East

For decades, California and its tens of thousands of shipping acres have been the US’ core for deliveries from Asia. But in recent months, every West Coast port has experienced a decline in year-to-date loaded imports while every port east of the Panama Canal saw an increase, according to MarketWatch.

Throughout August, September, and October — the busiest months for freighters because of the upcoming holidays — the Port of New York and New Jersey handled more than 1.2 million loaded containers compared to the almost 1.1 million that came through the Port of Los Angeles. This has West Coast executives worried:

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High consumer demands and broken supply chains during the height of the pandemic led to backlogs at California’s ports. For weeks at a time, dozens, sometimes a hundred, boats idled in the open water, waiting for a time they could dock and unload shipments. Companies began redirecting ships to the East.

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The means were already in place, too. In 2016, the Panamanian government finished a $5 billion expansion on its canal, allowing bigger ships carrying nearly 15,000 containers to travel across oceans and more efficiently dock in East Coast ports.

“We’ve got to get that cargo back,” Port of LA Director Gene Seroka told MarketWatch. “We’ll do everything in our power to make sure that happens because when it’s working right, the best route between Asia and the US comes straight through the Port of LA.”

Getting Crowded: With more and more containers sitting on their docks every month, some East Coast ports are losing elbow room. Houston has seen its total imports increase more than 20% year-over-year. Along with New York and New Jersey, it plans to implement dwell fees, meaning companies will have to pay extra if their shipping containers sit in a terminal for an extended period. Ports in South Carolina and Virginia plan on building out their harbors to allow for more ships.

– Griffin Kelly

Extra Upside

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Tick-Tock goes the regulation clock: TikTok is beefing up efforts to ease US officials’ security concerns.

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Shutdown Averted: The Senate passed a $1.7 trillion spending bill for 2023.

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