🎙️ Hidden Treasure

Not the OJ!

🍊 Orange juice is the latest grocery item to give way to inflation, with futures prices at about $3.69 a gallon, an all-time high.

Hurricanes and bad weather have reduced Florida’s crop to its lowest in nearly 80 years. Brazil and Mexico also have reduced yields this year amid warmer weather.

But hey, it’s National Coffee Day today. And at least it’s officially Cider Season 🍻

— Weronia, Shawn, and Matthew

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• Market impact of the impending gov’t shutdown

• $67 billion in rare minerals are buried in…rural Canada?

• States brace for U.S. healthcare strike

All this, and more, in just 5 minutes to read.

CHART OF THE DAY

IN THE NEWS

😬 Market Consequences of a Shutdown

Yesterday, we covered the looming U.S. government shutdown (which looks almost certain to happen now this weekend). Today, we’re covering it again, with more of a focus on its subtle but meaningful impact on finance markets.

The IPO market on pause: While the government is shut down, the market for companies going public and listing on stock exchanges essentially goes on pause.

See, the Securities and Exchange Commission (SEC) — the government watchdog for financial markets — expects to furlough 93% of its 4,600 employees. That includes nearly everyone who reviews companies’ applications to sell shares of stock to the public.

• For real-world consequences, look no further than the shoe brand worn by everyone who owns a Subraru — Birkenstock.
  

• The company had hoped to list on the New York Stock Exchange next month, but an extended shutdown would likely delay and put those plans on pause until they can get final approval from regulators, which may be easier said than done during a shutdown.

Why it matters:

As a backlog of IPO applications mounts, the delays will only worsen. Still, companies can survive with delayed IPO applications, but the government shutdown may affect something else important to markets (just a little bit!): The Federal Reserve.

• As any frequent reader of this newsletter knows, the Federal Reserve is preparing to land the plane in its fight against inflation.

The plane is descending: The Fed needs updated economic data to ensure a soft landing, and a government shutdown would delay many key economic reports, including the jobs report on October 6th, unemployment and retail sales data two weeks later, and aggregate changes in price indexes (released later in the month.)

• With an incomplete economic picture, the Fed would be flying blind into its October policy meeting, determining what happens next with interest rates.
  

• As one markets strategist commented, “It’s not a good time to have a lack of clarity for a data-dependent Fed.”

Read more

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💸 $67 Billion of Rare Minerals Is Buried In Canada

$67 billion of rare minerals are buried in…rural Canada?

Yep, that’s right. It’s all under one of the world’s biggest carbon sinks, according to a report this week from The Wall Street Journal, and there’s a fight brewing about how — or whether — to dig out the minerals essential for EV batteries that lie beneath wetlands.

• It’s a complex story, but here’s the gist: One of the most untapped sources of nickel, coppers, and cobalt — metals key for making EV batteries — sits beneath swampy forests and rivers in Northern Ontario, far from any roads.

Complicating the matter: The commodities are under peat bogs, essentially wetland vegetation, that hold more carbon per square foot than the Amazon rainforest. Climate advocates warn that digging them up could trigger the release of more greenhouse gases than Canada emits in a year.

• As you can imagine, there’s a debate between mining companies and climate advocates about whether to tap into the resources — more than 700 miles Northwest of Toronto — or to leave them be.

Perspective 1: “If I have to hop on a bulldozer myself, we’re going to start building roads to the Ring of Fire,” said the leader of Ontario province.

Perspective 2: “We are threatening to destroy so many forests and peat lands that eat the carbon out of the atmosphere. The impact could be catastrophic,” said a lawyer representing nearby indigenous groups.

The area, formed about three billion years ago, has attracted nearly 30,000 claims to mine. The mines would require new all-season roads that could negatively impact the ecosystem.

Why it matters:

It’s a question of tradeoffs and opportunity costs. Then again, what isn’t?

On the one hand, you could mine the ecosystem for an enormous amount of materials to drive more EV battery production and, in theory, more adoption. On the other hand, mining the ecosystem with more carbon per square foot than the Amazon rainforest could create catastrophic effects.

• The area includes “the most valuable nickel deposit, undeveloped, in the world,” noted one billionaire who owns a mining company. “We’re not going to be able to switch off fossil fuels, which will and are destroying the planet, unless we have abundant supplies of nickel.”
  

• Plus, commodities analysts believe Canada could be the world’s No. 1 supplier of critical minerals to the EV transition if they tap the resources.

But Canadian conservations point out that if the area is disturbed, “the damage could be irreparable in our lifetimes” — releasing 1.6 billion tons of carbon dioxide into the atmosphere, more than double what Canada released in 2019.

Read more

MORE HEADLINES

💸 California raises minimum wage for fast food workers

🎮 Fortnite’s creator, Epic Games, is laying off 16% of its staff

⚽️ Barcelona under investigation for allegedly bribing referees over $7 million

👟 Nike misses on revenue for first time in two years but projects rising demand

📱Jony Ive and OpenAI want to create the ‘iPhone of AI’

🪧 States Brace For What Could Be Largest Healthcare Strike

It’s not just the automakers and Hollywood writers; now, strikes are coming to the healthcare industry.

Thousands of unionized healthcare workers are poised to go on strike starting Wednesday if contract talks with Kaiser Permanente don't succeed over the weekend.

Over 75,000 healthcare workers at Kaiser Permanente facilities in California, Colorado, Oregon, Washington, Virginia, and Washington, D.C. intend to strike for three days starting Oct. 4 if a labor deal isn’t negotiated by the contract deadline on Sept. 30.

Historical strike: According to the Bureau of Labor Statistics data, the strike would be the largest healthcare strike in U.S. history.

• The unionized staff belong to the SEIU-UHW union, representing a group of hospital workers such as nurses, EMTs, lab technicians, optometrists, and other support staff. The union claims to represent about 40% of the total workforce at Kaiser Permanente.
  

• Unionized staff seek salary increases and solutions to labor shortages, stating that their wages haven’t kept pace with the rising cost of living.

In trouble: Kaiser Permanente stands as one of the largest not-for-profit health providers in the nation. It operates on a membership model, where patients pay a membership fee to avail themselves of the organization's health care services.

• According to its website, Kaiser Permanente serves 12.7 million members, running 39 hospitals and 622 medical offices.

Why it matters:

The unions state that the lowest-paid workers are struggling with rising costs of housing, gas, and food, adding that Kaiser Permanente facilities are severely understaffed, impacting the quality of patient care.

• They claim that staffing issues have led to long waits and delays for patients, some of whom have serious illnesses.
  

• The ongoing negotiations are further challenged by an industrywide labor shortage, exacerbated by the harsh conditions healthcare workers faced during the pandemic, leading to unfilled vacancies.

More consequences: If an agreement isn't reached following the initial strike, union members are ready for a potentially more extensive strike in November, aligning with the expiration of another contract in Washington state, possibly adding more workers to the picket line.

Read more

See you next time!

That's it for today on We Study Markets!

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