Slow and steady global growth

This episode delves into the current state of the global economy, focusing on its resilience and the challenges it faces, including governmental financial strategies and global market dynamics.

1. The global economy shows remarkable resilience, maintaining a growth projection of 3.2% despite geopolitical and pandemic recovery challenges.
2. Government bond sales are facing challenges due to market uncertainties and investor hesitations influenced by unpredictable inflation.
3. The strategic expansion of restaurant chains reflects adaptations to changing consumer behaviors and the importance of location in real estate.
4. Economic disparities between countries like the US and India versus the UK and Germany highlight the uneven nature of the global economic recovery.
5. The episode discusses the broader implications of governmental financial strategies on both the national and global economy.

1. Global Economic Overview

Analyzes the IMF's global economic growth forecast and the factors contributing to economic resilience. Key points include the influence of geopolitical issues and recovery from the pandemic. Kai Ryssdal: "The IMF says it expects global growth to hold steady at 3.2% this year."

2. Government Bonds and Market Response

Discusses challenges in the US bond market, highlighting investor concerns over interest rates and economic uncertainties. Marvin Low: "The lack of interest in some of these treasury auctions is reflecting that uncertainty."

3. Consumer Behavior and Real Estate Strategy

Covers how consumer shifts are influencing the real estate strategies of restaurant chains, focusing on location scouting and economic efficiency. Kristin Schwab: "Science like the number 50,000. That's how many residents a community needs for a Chipotle to succeed."

1. Review and adjust personal and business financial strategies in light of global economic trends.
2. Consider the impact of location when planning business expansions or real estate investments.
3. Stay informed about government financial policies, especially those related to taxes and investments.
4. Monitor global economic reports and forecasts to better predict market movements and opportunities.
5. Evaluate personal investment portfolios in light of current and projected economic conditions.

The International Monetary Fund reported today that the global economy has shown “remarkable resilience” and that growth is expected to hold steady at 3.2% this year. But that’s low by historical standards. Plus, why there’s weaker demand for Treasurys, how restaurant chains scout locations and why Warner Bros. is shelving “Coyote vs. Acme.” Beep beep!

People

Kai Ryssdal, Marvin Low, Samir Samana, Torsten Sløk, Stephanie Hughes, Kristin Schwab, Chris Brandt

Companies

Apollo Global Management, Wells Fargo Investment Institute, State Street Global Markets

Books

None

Guest Name(s):

None

Content Warnings:

None

Kai Ryssdal
Hey, marketplace listeners. You know, around here we like to think you're never too young to learn about the economy and financial basics. That's why we're bringing the million Bazillion live tour to schools to teach important lessons about budgeting, investing, saving and more. It's all the fun of the podcast, but now live, immersive and interactive. Special thanks to our tour partner, Greenlight, the debit card and money app for kids and teens.

Learn more about greenlight@greenlight.com. Million. That is greenlight.com million on the program today. No particular order. The global economic vibe, location, location, location scouts and coyote versus Acme.

Or, you know, not from american public media. This is Marketplace in Los Angeles. I'm Kai Rysdal. It is Tuesday today. This one is the 16 April.

Good as always to have you along, everybody. We are going to start with income and outflows today of the federal variety. It has surely not escaped your notice that the government spends more, a lot more than it takes in, which means the Treasury Department does a lot of borrowing to make up the difference. Selling bonds is how the government does that, and they are going to have to do a lot of it selling of bonds over the next year. And how do you suppose that is going to go?

And I ask because recently it hasn't been going all that great marketplaces of rebenish or gets us going. The last few times the US treasury issued bonds, investors were not impressed. Demand is not as robust as it was before. Marvin Low is senior global macro strategist at State Street Global Markets. The Treasury Department offered investors an interest rate, and investors said, I don't think so.

Sabrina Beneshore
Do better. So the treasury had to do better. If we go into an auction and the interest rate that's required is higher than where we were before the auction, then it looks like the auction is weaker. It was weaker because of uncertainty. The last thing an investor wants is to lock up their money in a ten year bond, only to find out that they could have put their money someplace else just as safe, locked it up for less time and gotten more money for it.

You've kind of lost out on some of that income. Samir Samana is senior global market strategist for the Wells Fargo Investment Institute. This fear of missing out is very possible right now. Bond investors could put their money in short term bonds whose interest rates are strongly influenced, it just so happens, by the Federal Reserve. So investors kind of want to know what the Fed's going to do.

But because inflation has been cuckoo bananas unpredictable recently, they don't marvin low again. The lack of interest in some of these treasury auctions is reflecting that uncertainty. For a given price, investors only have so much appetite. That is important because they're going to need a very big appetite very soon. The overall amount of government bonds coming to the market is more than $10 trillion over the next twelve months.

Torsten Slack is chief economist at Apollo Global Management. And yes, he said 10 trillion with at that is a third of us GDP. So to grow bond investors appetites that big, that may not come cheap. The ultimate result of that would be that interest rates would be moving up. The government would have to pay more to take out loans, which could drive up a lot of interest rates in the economy.

Torsten Sløk
It means that mortgage rates are going up. That means that the price you have to pay on your monthly lease for your car becomes more expensive. So government borrowing isn't just a problem for the government, it could be a problem for everyone in New York, I'm. Sabree Ben ashore for Marketplace Wall street on this Tuesday. No problems really.

Kai Ryssdal
The bond market. Since we're on the topic down, which means yields went up, we'll have the details when we do the numbers.

Remarkable resilience is the macroeconomic phrase of the day. It came from the International Monetary Fund. In describing the global economy this morning in its world economic outlook, the IMF says it expects global growth to hold steady at 3.2% this year, a cheerier estimate than they'd had just a couple of months ago. And it comes in the face of geopolitical challenges, shall we say, and a still uneven recovery from the pandemic. Marketplace's Stephanie Hughes has more.

Stephanie Hughes
Economists seem kind of surprised by the resilience of the global economy, almost like it's a student whom everyone expected to do poorly on a test. It sounds like the world is falling apart. But somewhat remarkably, the world economy is doing not too badly. Ishwar Prasad is a professor of economics at Cornell and used to work at the IMF. He points out some economies, like India and the US, are really zipping along, while others, like the UK and Germany.

Sabrina Beneshore
It's really much more of a meh. Story, but one driver of resilience. Even in those Meh economies, stock markets are doing pretty well. And Prasad says that, combined with a slight bump in consumer confidence, is stoking. Pretty robust consumption by households.

Stephanie Hughes
Still, the IMF's projected pace of growth this year and next is low by historical standards. Karen Matheson with the center for Global Development says this is partly to do with the ongoing wars in Ukraine and. The Middle east, it makes investors nervous, right? I mean, if you're just a global investor and you see this happening, you're going to want to pull back and be in safer assets. And a lot of those safer assets also have pretty decent returns right now, like us treasuries, Matheson says.

Those high interest rates here are limiting growth abroad. So if, for example, we were at a near zero interest rate level as we've been in the past, there'd be a real search for yield, so there would be more appetite for riskier debt. And, she says, if investors hold off on putting their money into riskier ventures in the developing world, that means there's less potential for growth overall. I'm Stephanie Hughes for marketplace.

Kai Ryssdal
Even with a bit of economic uncertainty and a bit of inflation, yes, for not a few restaurant chains, the business plan right now is all about expansion. Popular names are moving into new communities or adding a second or a third or even fourth locations in cities where they already do business. And not only are they looking for new spaces, they're looking for different kinds of spaces, because changes in consumer behavior have changed what restaurants need from a space. And that, as happens when you're talking real estate, brings us to that old phrase, location. Location.

Yes, location. How important is it really, though? And how does a growing chain go about finding the right location? Marketplacer Kristin Schwab has that one. Talia Berman is a New York City matchmaker.

Kristin Schwab
No, not the romantic kind, the kind that pairs real estate owners and restaurants. She's a hospitality advisor at a firm called Friend of a chef. It's a rainy day, and we're in Manhattan, standing outside a sit down pizza joint. One of her clients, she says there are a few reasons why this was a great location. First of all, Park Avenue has done historically amazingly well for restaurants.

There are plenty of notable spots around here, and it's always good to be in good company. It's also two blocks from the subway, one block from a university, which, honestly, college students, pizza, no brainer. And Madison Square park is a three minute walk. Proximity to the park is, is always going to be a winner for any kind of dining, especially when that park has a shake shack like this one, because apparently Shake Shack is a restaurant others want to be around. Berman says the burger chain has cracked the code on scouting new locations.

Shake Shack is famous for looking at analytics, to looking at things like traffic counts and median household incomes and building their business, their cases for sites around that. And then there are all these other brands that just follow them. Every growing restaurant has to have some kind of location strategy. Nick Setion, a restaurant analyst at Webbush securities, says some of the fastest expanding chains right now include Kava, Domino's Pizza and Chick fil A. Now's the time to grow, not shrink, you know, and especially since we didn't grow a lot during COVID and so you have a lot of, you know, pent up growth ahead of us.

Ceteon says this is especially true for fast casual chains because with inflation, people are very value sensitive right now. Fast casual is also where the money is. Take Chipotle. Ceteon says a new chipotle costs about a million dollars to build and brings in nearly $3 million a year in sales. You already have your payback, you know, essentially in less than a year and.

Kai Ryssdal
A half, he says. The payback for something that requires more space in labor, like the cheesecake factory, takes nearly five years. Chipotle is looking to open as many as 300 locations this year. Chris Brandt, who's the chain's chief brand officer, says its real estate team has more than 100 workers who hunt for potential new sites. There's a lot of science and a little bit of art.

Kristin Schwab
Science like the number 50,000. That's how many residents a community needs for a Chipotle to succeed. And art like will drivers want a chicken al pastor burrito badly enough to make a left turn? Cars play a big role in this because, Brandt says, locations with the Chipotle, yes, Chipotle for online orders get more traffic. Nearly 40% of the company's sales are digital, so adding the Chipotle lane is worth it.

Sabrina Beneshore
It increases the cost a little bit, but the return far outweighs the increased cost. Chipotle pays a premium for standalone or corner properties because you can't put a Chipotle lane in the middle of a strip mall. Where else can't Chipotle go? Anywhere. It's hard to source ingredients.

We would love to open restaurants in Hawaii, but Hawaii is a very difficult supply chain for us. These are all things a restaurant has to think about in advance. One wrong move can ruin business. So can bad luck. Back at the pizza place in New York, Talia Berman points across the street to an office building that used to house a big investment bank, and they're no longer in the building.

Kristin Schwab
There's about 100 people in that building today. That's demand for morning coffee and lunch salads and business dinners that, poof, dried up overnight. In New York, I'm Kristen Schwab for marketplace.

Kai Ryssdal
If somehow you miss something on the air, not just today, but whenever, you know, it happens, we get it. Check out our podcast. Marketplace.org is where you can find that, or obviously the platform of your choice.

We talked about thrifting on the program yesterday and how that's become trendy among younger consumers. Another fashion related hobby that's come back and in a big way, sewing, making and fixing your own clothes as a personal style thing, or simply to be a more conscious consumer. And if there is a market in sewing, which there is, there will surely be, and there surely are businesses to serve that market. And that gets us to today's installment of our series, my economy. I'm Kate Sprout, owner and technician of Alaska Sewing machine repair in Anchorage, Alaska.

Karen Matheson
People bring me their machines and I repair and service them. I also do the marketing and the accounting and the customer service. I do it all.

Before I started my business, there was a local sew and back shop, and unfortunately they had to close down. But as I was starting, I found out that all of their equipment, parts, manuals were going on auction. We were able to get a lot of the equipment for it was pretty economical. We were able to get a pretty good deal. So my startup costs were significantly brought down by that.

The average cost for a machine is about 170 for a service and adjust and repairs are a little bit more. It just depends on what's going on with the machine. On average, a week, I work on anywhere from five to eight machines. I can do up to ten.

Since I opened to now, business has picked up. My name is getting out there. It's great. I've had to slow down my sales and my marketing because I need to make sure that there's not a huge wait time for each machine. But as I get faster, as I learn, and I, I'm more confident, I'm able to take on more.

It's a very big word of mouth community, the sewing community, because they all meet in groups and they all talk to each other and hopefully they're saying nice things about me, but I think it's going well.

My life has changed significantly since I started doing this. I'm now making less than half of what I was making at my corporate job, and it's a good move for me. Now I'm able to work on my own timeline and I don't spend time commuting. I can spend time with my family when they need me, with my daughters while they're in school. I'm really learning how to be calm and not have all that stress.

And it's worth every bit of sacrifice I'm making. I don't travel as much. I don't shop as much. I just have to watch what I'm spending. And that's okay.

I just know that this is the lifestyle that I want.

Kai Ryssdal
Kate sprout fixing sewing machines and doing so much more. Honestly, up in Anchorage, Alaska, we cannot do this series without you. So please tell us what's up, would you? Marketplace.org myeconomy coming up, it would be. Sort of an embarrassing failure for, you know, unnamed exec A.

Indeed it would. One reason among many that some movies never see the light of day. First, though, let's do the numbers. Dow industrials up 63 points today, about two tenths percent, 37,798. The Nasdaq down 19 points, about a 10th percent, 15,865.

The S and P 500 gave back ten points, two tenths percent, 5051. Earnings season continues today with bank of America, which reported an 18% drop in quarterly profits. B of A shares lost 3.5%. Also reporting today, Morgan Stanley, where overall profit rose 14%. Lifted.

By Justin Ho, did this for us the other day. Yesterday, I think investment banking shares gained about two and a half percent. Bank of New York Mellon, BNY Mellon reported the highest quarterly earnings in its history. Net income soared to $953 million. Shares, however, went the other way, down 2%.

The number of single family homes being built dropped by 12.4% in March. That's according to Commerce Department's data on housing starts today. The seasonally adjusted rate was a little bit over 1 million units in home building stocks. Then toll brothers gave back 3%. Polti Group dropped one and eight tenths percent.

Lennar sank two and two tenths percent today. The bond market, I mentioned that earlier. Bond prices fell. The yield on the ten year t note rose 4.67%. You're listening to marketplace.

Bridget
Hey there. I'm Bridget, co host of million Bazillion Marketplaces podcast for kids about money. I want to tell you about our email newsletter course million Bazillion Academy. In this new and improved course, well help your kids learn about crypto, credit cards and inflation in just six weeks. Each lesson comes with a podcast episode, a fun cartoon, discussion, questions, and an activity that lets kids apply what theyre learning in the real world.

You can start at any time and work at your own pace. Sign up today@marketplace.org. Academy, this is Marketplace. I'm Kai Rizdahl. I preface this next story by pointing out to you that it is April mid April, in fact, and it has not been especially hot of late in Texas.

Kai Ryssdal
Low nineties in and around Laredo, sure, but the rest of the state, eighties, even seventies, and yet ERCOT, the Electric Reliability Council of Texas, that is, which operates the power grid there, is already worried about not being able to keep the lights on and has asked electricity suppliers not to schedule any maintenance today for fear the temperatures in the eighties are going to strain the grid marketplaces. Elizabeth Troval is on the if it's that bad now, what the heck is summer going to be like? Beat for us today? For a lot of Texans, it doesn't really feel like the kind of day you might need to worry about the grid. Most people, you know, will walk outside and say, hey, it's not 100 degrees outside.

Sabrina Beneshore
Why? Why is there an issue? Joshua Rhodes with the University of Texas at Austin says the issue is April is when power plants do annual maintenance that brings thousands of megawatts offline, making it harder for the grid to handle a burst of heat. Rhodes says climate change is shrinking those maintenance windows, and so that puts an. Additional strain on the system because these power plants, they do need to take these outages.

Elizabeth Trovall
Texas had a big outage in April of 2006, says energy consultant Doug Lewin. At least some of the major metros had 100 degrees in April. Too many power plants were under maintenance to meet demand during that temperature spike. But Lewin says one of the big differences between then and now is we. Do have a lot of wind and.

Solar, about 40,000 wind and 20,000 of solar. Daniel Cohan is with Bryce University. That extra solar supply, which, of course comes when it's sunny and when our air conditioners are running most, that provided the difference last summer. But energy demand in Texas keeps growing, thanks to crypto mining, data centers, EV's manufacturing, and more people moving to the state. Energy consultant David Blackmon worries about having the right mix of energy sources.

Since the sun doesn't always shine. We don't really have adequate battery capacity to store the wind and solar electricity when it's generated in midday, he says. Texas shouldn't transition away from using natural gas to generate electricity until there are more advanced ways to store renewable energy. I'm Elizabeth Troval for Marketplace.

Kai Ryssdal
A movie gets made, you hear about it. You hear it's supposed to be pretty good. In fact, you think, yeah, I'll go see that. And then you can't. Such seems to be the case with a film called Coyote versus Acme, made by Warner Brothers to tattoo of some $70 million.

But not again. It seems destined for the big screen or small screen or any screen anywhere. Teddy Brown wrote about it in the New York Times magazine the other day about why this film and others wind up never actually being released. Teddy, welcome to the program. Hey, great to be here, Kai.

Those of a certain age will remember the Roadrunner cartoons and all of that. And I guess my question is, why aren't we going to get to see it in the movies, man? Well, I have to make sure I use my words very deliberately here, because when we reached out to Warner Brothers for the story, the rumor going around was that they had spiked this movie, Kaiju versus Acme, over some tax implications. They were trying to save on their tax bill after quite a large merger with discovery. And that was denied to us by the studio.

Nick Setion
But that was sort of the news swirling around for quite a while. There is history, though, with Warner Bros. Through HBO, Max and all that, with the Batgirl movie, which was never released either. So it's not tough to put two and two together here. Yeah, of course.

And, you know, the qualitative arguments for movies like that is that, you know, for Batgirl, the accusation was the movie wasn't very good, so the studio decided to spike it rather than deal with a flop of theaters. Everything that's been reported from test audiences to the folks that worked in the movie say Coyote versus Acme is a pretty wonderful film. So this is sort of a case of what is apparently a very good movie being sort of a memory hold in favor of some accounting. Well, let's do the accounting here as best we can at a high level. In a four minute interview, a studio spends x ten s of millions of dollars to make a movie, decides it doesn't want to release it, and then how does that figure in their taxes?

Yeah, of course. So they can write off the total production costs of that movie. If they refuse to release it, they can claim the value of the production on their tax ledger for the year. So if it costs them about $40 million to make coyote versus Acme, then if they bid it, they sort of never release it. They never make money off of it.

They're allowed to claim, effectively, the total value of the movie as a tax loss and write down that debt on their. On their tax statement. Why not sell it to Netflix or somebody else who will pay them some, you know, percentage of. Of it and. And get it out that way and make some kind of money?

There's a couple different theories here. And Warner told us that. That they had not actually received any official bids from anyone, I'm going to take them other word there. But, you know, a theory that was floated to me by someone who worked the movie was that if this was a massive success for someone, say Amazon bought it for $70 million and it made a global gross of $200 to $300 million, that would be a black eye for Warner. So it would be sort of an embarrassing failure for unnamed exec.

Kai Ryssdal
A. Yeah. You point out in the piece that art has always been commerce, and these kinds of decisions by companies are not new, going back to what videotapes wound up on the shelves of blockbusters to what gets on streaming. It is, though, a situation now where consumers are more aware of it. Right.

We're becoming more, more clued into the machinations. Absolutely. These are the kinds of things that were really only privy people to who were reading variety, who were reading the sort of Hollywood trades. But now we're sort of seeing how this stuff works. It doesn't change what our influence is, though, which I think is a little frustrating and a little maddening for folks, is that we can see all this stuff happening but still have no way to actually change it.

Well, it is, and I suppose this is a value judgment I'm about to make here, but it is deeply, deeply cynical. No matter how much debt discovery and Warner Brothers piled on during that merger, it is a deeply cynical thing to take years of people's work and pretend it doesn't exist so that your accounting looks better. Absolutely. People are really passionate about this movie, and, you know, I think people might turn their nose up at being a cartoon, but there's still hundreds of folks who put their, you know, their time and effort and really, and their passion into making this, you know, I think that if this ends up being a tax write off for Warner, there's an argument to be made that this should just go into the public record and we should all be able to see it for free. Teddy Brown, writing in the New York Times magazine the other day about coyote versus acme, which we may or may not be able to see.

Teddy, thanks a lot. Appreciate your time. Thanks so much, guy.

This final note on the way out today, you remember that whole Amazon hq two palooza from five or six years ago, the frenzy, and I don't think that's too strong a word. Tax incentive subsidies, you name it, were offered by cities eager to get Amazon's second headquarters in the tens of thousands of jobs that would come with it. Well, about that, saw this in the Washington Post today, that instead of the 25,000 new jobs in northern Virginia that were promised by 2030. Amazon actually cut hundreds of jobs last year. Our digital and on demand team includes Carrie Barber, Jordan Mangy, Dylan Miethenin, Janet Nguyen, Olga Oxman, Ellen Rolfes, Virginia K.

Smith, and Tony Wagner. Francesca Levy is the executive director of digital and on demand. I'm Kai Rizdahl. We will see you tomorrow, everybody.

This is APM. Hey there. I'm Bridget, co host of million Bazillion marketplaces podcast for kids about money. I want to tell you about our email newsletter course, million Bazillion Academy. In this new and improved course, well help your kids learn about crypto, credit cards and inflation in just six weeks.

Bridget
Each lesson comes with a podcast episode, a fun cartoon discussion, questions and an activity that lets kids apply what theyre learning in the real world. You can start at any time and work at your own pace. Sign up today@marketplace.org. Academy.