The Fed, PCE, GDP, Tariffs, DeepSeek, LIX and who was Iris Critchell?
The Economy This Week
The Federal Open Market Committee, colloquially known as “The Fed” or “The Federal Reserve”, left rates unchanged last Wednesday. No surprise there.
The Fed stated that the job market is solid, and employment remains at low levels.
That’s right where they want it.
There is no change from their previous statement that there might be two rate cuts in 2025.
They also said that inflation remains stubbornly higher than they would like.
Speaking of inflation, the Personal Consumption Expenditures index numbers for December came out.
The core – no fuel and no food – stayed at 2.8% year over year.
When you factor in fuel and food, the PCE went from 2.5% to 2.6%.
Keep in mind, the target is 2%; this is not going in the right direction.
Q4 GDP – the Gross Domestic Product - is out and results did not meet expectations.
Q3 numbers were 3.1%. Expectations for Q4 were 2.5%.
Reality was 2.3%.
Not bad but missed expectations.
Tariffs Revisited
Tariffs have been levied as follows: 25% on Canada, 25% on Mexico and 10% on China. What will be affected?
Cherry tomatoes: Canada is a big supplier to the U.S. as is Mexico.
Tonka Trucks: Over 1,000,000 Tonka trucks are sold in the US each year and every single one of them is made in China.
Maple Syrup: Yep, Canada. 60% of their production is exported to the US.
Tequila: The U.S. is the largest market for Mexican Tequila. Big shocker.
Avocados: We got a taste – haha, get it? – of high avocado prices a few years ago when many restaurants were surcharging for extra dollops of guacamole. More than 80% of U.S. avocados come from Mexico.
Smartphones: yep, they just became 10% more expensive as they are made in China.
Sledgehammers: what?! Believe it or not, there is already a 25% tariff on sledgehammers made in China. However, there are plenty made in the U.S.
DeepSeek
So what do you get when you wipe $1,000,000,000,000 off the value of the stock market? DeepSeek. Deep what??!!
Stock brokers thought something else was pretty deep last Monday.
Tired of trying to bypass tariffs on steel and aluminum exported to the United States via Mexico, China did the next best thing: they flooded the market with Artificial Intelligence.
Artificial intelligence at a significantly lower price than existing AI.
It also didn’t need as many high-end processing chips to perform as well as OpenAI, which impacted a certain chipmaker. And it wasn’t Frito Lay.
Nvidia set a new stock market record for the largest loss in value in a single day: $589,000,000,000.
The stock price of energy companies was also hit because if you don’t need as many chips, you don’t need as much power to operate all the AI data centers that everyone is planning on.
Here’s the deal. DeepSeek, a Chinese AI company, was able to produce a product as good as OpenAI’s ChatGPT at a significant discount, not using state of the art processing chips and consequently not using as much power.
That’s what happens when someone builds a better mousetrap for less.
Sam Altman, the chief of Open AI, welcomed the challenge.
Competition builds better products and is generally cheaper.
BTW, China is very proud of the new role DeepSeek has in the AI world, as they should be.
Super Bowl LIX – This Sunday
That’s Super Bowl 59 for you non-Romans out there.
This year, it is the Chiefs, the American football club representing Kansas City and the Eagles representing Philadelphia playing in New Orleans. I don’t recall which football team represents that city.
I’m kidding. It’s the aints.
As part of the event:
$3.5 million in grants have been awarded to 65 nonprofit organizations focusing on youth development, workforce training, education, health, and wellness in New Orleans.
$17,300,000,000 is spent by consumers watching the Super Bowl.
A 30 second ad will cost $8,000,000.
That’s because the game is watched by 60% of U.S. viewers.
The most expensive ticket so far is $56,925.
Who was Iris Critchell?
Born Iris Cummings in 1920 in Los Angeles, at the age of 8, she saw Charles Lindbergh at an airshow. When she was 12, she attended the 1932 Los Angeles Olympics with her parents.
Her father was a track and field official for the Olympics; otherwise, he was a physician. Her mother taught high school Latin and Greek.
My, how high school in L.A. has changed.
So inspired by the events, she wanted to try swimming and excelled in the U.S. swim trials for the 1936 Olympics. And qualified for the 1936 Berlin games at the age of 15.
She did not make it into the finals, but she did come back to win three national 200 meter breaststroke titles.
And she learned how to fly, earning her pilots license.
When WWII broke out, she was skilled enough to join the Women’s Air Force Service Pilots, or WASPs.
She met a man – Howard Critchell - while she stopped to refuel and ended up marrying him in 1944.
After the war, she earned her bachelor’s degree in science and mathematics from USC – the University of Southern California.
She ended up teaching aviation at USC and in 1962, she and her husband began teaching at Harvey Mudd College in Claremont, California.
Her students included two future astronauts.
Even when the program was shut down in 1990, she continued to work at the school as a lecturer and librarian.
Iris Critchell died a week ago Friday at the age of 104 in Carlsbad, California.
She was the last remaining member of the 1936 Olympic team.
I’m guessing she never paid attention when she heard the word ‘No’.
Boy, that month went fast. One month down, eleven to go. Keep the main thing the main thing.
