November 21, 2023 • 20 mins
In the episode Abdul starts the discussion in the Eurozone, which has witnessed the recent dip in inflation to 2.9%, raising questions about the region's economic policy and the European Central Bank's next moves. He then shifts focus to the United States, where a staggering $1 trillion is allocated for interest payments, signalling concerns about debt, deficits, and rising interest rates. Then, he delved into the intricate dance of power and influence in Microsoft's acquisition of Activision. Uncover the legal, financial, and global regulatory complexities that shaped this blockbuster deal. Join us as we draw parallels with historical challenges, offer predictions, and navigate the multifaceted tapestry of these economic narratives, examining the quest for stability, growth, and resilience in a world of uncertainties.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Good afternoon, Welcome back to investorsof that podcast where we help you work
smarter and harder by providing market updatesand insights. First one, I'll apologize
for the late upload. I've beenfeeling quite unwell these past few days,
but feeling better now and able torecord. So today we're going to talk
about US government debt, some discussionon your zone inflation, and then some
updates by Microsoft's acquisitions of Activision.So with that, let's talk to our
(00:25):
first story, which is about governmentdebt. Now, the US government has
a big one trillion dollar light itemshere, but it's not for food stems,
it's not for medicare, it's notfor military. It's for interest payments.
Big debt, big deficits, andrising indust rates are putting pressure on
the US government's finances. And alot of people are worried about the debt,
you know, and deficis and fiscalpolicy and so forth. And I
(00:46):
think a lot of things have changedsince the last time we talked about this.
One is that the politics in theUS, I think have changed,
and I think for the worst.So once upon a time, maybe this
is a fairy tale, but Democratsused to the spending party and the Republicans
were more of the physical conservative party, and that may or may not be
true. But Donald Trump's presidency really, I think put an end to that
(01:07):
notion because he passed a big trilliondollar plus deficit increase in tax coude and
now you have the situation where bothparties are kind of a client to add
to the deficit. That's the firstissue. The second one is the interest
rates, as to talk about almoston every other episode, maybe in every
episode, have gone up a lot, and that's really being matters for debt
and deficits because you want to haveideally interest rates lower than your growth rate.
(01:32):
That means that your capacity to payback debt grows faster than the debt
itself. And if those those tworates start to become close, or even
potentially your interest rates even exceed yourgrowth rate, then you're you're in trouble
because you're in a situation where yourdebt could grow faster than your ability to
repay it. And I think thosetwo things changing have given a lot of
investors anxiety about where this is goingto end. And there's a lot of
(01:56):
conversation about the how it's unlikely thatthis will be under control in the next
year or so, because there's there'selections happening, and politicians and campaign rarely
talk about cutting spending or raising taxes. So it's fair to assume that the
deficit is going to keep growing.Not only that, but you have the
external shocks that could happen to themarket. Right There could be unexpected expenditure,
(02:20):
political problems, and there's enough ofthose that happening. That's happening right
now in Washington. Haven't forbid anotherwar, or the US needs to start
funding that the US wants fund orget involved in, or a politician gets
ill. Who knows what happens,But there will always be some shock.
The bodom market will react, Pricesof bods will fall, the years the
years will rise. And the riskis that in this in this jituary market
(02:45):
where everything everyone's pretty scared, theyrise more quickly and they become what central
bankers call huh disorderly uh. Anda market out of control frees everybody out,
especially when it's the US treasure market. And I think that that that
brings to a radical fix, whichis called the yield curve control. And
just explain this. This is acentral bank policy where essentially they make an
(03:06):
open and a commitment to buy howevermuch government debt is necessary to cap yields,
to pay yields to where they wantit to be. So for example,
the central bank says, hey,we declared the ten year the ten
year yield will raise will rise nohigher than one percent. And if market
say, well, we don't believeyou, and we're going to sell our
(03:27):
bonds, I add one point zerofive percent. Right, the central bank
jumps in the purchase whatever quantity ofbonds is necessary to force the market back
down to one percent. So it'sa pretty intense form of monitary intervention.
It's also a point where the centralbank and the government are almost acting together.
So central bank independent is an issue, but that's it. You know,
that's a different discussion. But youknow, you can look back at
(03:51):
World War Two where they kind ofuse this and there's a situation where like,
you know, growth wasn't the problem, but you needed, well,
the government spending was so high andyou need to suppress the cost of government
spending, so you use the youknow, the yield curve, and this
is what they did in World Wartwo, but they didn't actually explicitly tell
people to the bond market that's whatthey were doing, which is a different
(04:15):
scenario, but it's been used beforeand it kind of fits. It's this
whole word, and I think thatthat that that brings us to like the
yield market, the yield curve controlin a modern context, it's almost like
a monetary defibrillator. You use itwhen the economy is like flattening and you
need and like a new shock monetarypolicy the most extreme you can really get
(04:36):
almost and historically the US, inthe US, it's only ever been used
in wartime, right, and youcan kind of understand why it would be
used in wartime. You've got thesenew massive military spending commitments that are you
know, of prime importance to thegovernment, and you want the monetary authority,
the Central Bank to essentially ensure thatall the all that government borrowing needed
(04:58):
to finance the work at get digestedin an orderly way. But you know,
now today we're talking about historic peacetime physical deficits, and I think
that's probably why why yield club controlis on the margins back in discussion a
little bit in the US, right, Sorry to keep up again, but
I would like to add that it'snobody's central scenario that that we have this
(05:20):
next year and if we ever gotto yield can control, then you know,
the situation is pretty bad. Asan extreme where it's very you know,
we're in a bad situation pretty much. It's really the last resort.
But I think it's good to havethe discussion now. I guess, uh
because before it becomes likely part ofthe toolkit. And if there was a
(05:42):
big increase in long term treasure yieldsbecause markets were scared of the physical outlook,
probably one has to imagine what wouldhappen. Is well, you'd have
an increase in barbering costs for companies. First off, you'd have an increase
in mortgage rates, and it's actuallyhitting real people's finances, and that puts
pressure on politicians to either raise taxesor cut spending or some combination of both
(06:03):
to get physical trajectory back on amore sustainable course. We're talking about a
situation where the politics are so deadlocked, which you know, not impossible that
political pressure is not exerted or noconsensus can become to can come to you.
But you need a more and thatyou really need a more extreme monetary
(06:24):
intervention to prevent markets from melting down. And I think because the one thing
that none of us wants to see, nobody in the world should never want
to see, is a complete meltdownin the US treasure market. The big
thing in favor is the is thereference market for the entire world. All
other debt is normally priced in relationto treasury, So having a meltdown would
(06:44):
have global consequences. So the questionis should we be scared of they yield
curve control in the US? Shouldwe be scared? Should we be scared
of that scenario? Right? LikeI traditionally associate talking about this type of
stuff with almost like you know,financial blog or or or whatever it is.
But should we should we be reassuredby this? I mean it's like
(07:06):
it seems like a tool, anda tool could if necessary, but not
in the most basic case. Reallywe only apply this for very extreme cases.
But what we're talking about, whatwe're talking about this in a world
where you could say that monetary policyhasn't been one of the textbook style since
the global financial crisis. Since twothousand and eight, the FED has still
(07:28):
got a massively bloated battle street fromall the bonds that bought through quantitative easing
when it was keeping interested at zero, you know, buying bonds et cetera,
et cetera. So we're not ina in a in a sort of
text post situation. At the moment, we're still trying to get all that,
you know, out of all thatmess. So yes, having a
world where the Fed could step inand do something like this is better than
(07:49):
not having it. But even betterstill would be politicians realizing that they can
keep spending and the depthsit you know, comes under some sort of control,
you know, without any intervention.That would be to me, uh,
a far better solution. And buthowever very not likely, not likely,
I think. But the thing it'sworth saying that, you know, in
(08:11):
the in the in the Japanese contextof Japanese yield curve, I think there
have been uh the policy has stabilizedJapan. Japan is not melting down,
right, That's that much is veryclear. There have been costs. What
cost is to Japanese households who holdtheir wealth in bank accounts? You know,
if you pay long term interest ratesvery very low, then banks are
(08:31):
not going to pay you for leavingyour cash in a savings account. And
you know, in Japan, ahuge number of Japanese households no financial assets,
uh, no stocks, no bonds, they all they have all the
money in the bank and they're notgetting paid. And if there was a
less interventionist monetary policy, that bigchunk of Japanese households would be getting some
(08:52):
sort of interest on their savings andthat presumably could contribute to their lifestyle,
to their consumption habits. So it'snot that as if this is free.
In some ways, you can thinkof it as a transfer from household savers
to the government. And again thisis all hypothetical, and hopefully we don't
have to get into a messy tradeoffs the field curve control, and hopefully
(09:15):
the problem can be solved by somelevel headed politicians, because that is growing
and efficient is a problem, butwho knows. Hopefully they come to a
reasonable consensus on the future path ofgovernment spending. And I do look forward
to discussions in the next future.So let's hope into our next story.
Something we've covered a couple of times, but Microsoft's Activision acquisition, right,
(09:39):
so Activision is a gaming giant actuallyhas been nothing short of a blockbuster and
the behind the scenes maneuvers to makeit all happen are as intriguing as they
are complex. So let's start withthe basics, right, So Microsoft's twenty
one month in battle. This hasbeen going for twenty one months to security
the ap exclusion deal showcase the company'sformidable legal policy and influence machine costing over
(10:05):
one billion dollars annually. The journeyinvolves overcoming a US government attempt to block
the acquisition to the court, andnavigating the concerns of UK regulators who initially
rejected the deal. Microsoft's victory requiredwinning over regulators worldwide, including Brussels,
where the tech giant was once metwith skepticism. So let's dive deeper into
(10:28):
the financial and economic induracy surrounding Microsoft'striumph and acilition of activision. The completion
of this deal not only stands asa remarkable victory for Microsoft in a landscape
where big tech acquilutions face significant hurdles, but also raises several questions about the
companies evolving relationship with regulators globally,first regular regulator of landscape and corporate difficency.
(10:50):
Microsoft's success navigating the regulatory landscape isa testament to the company's investment in
what can only be described as aformidable legal policy and influence maschie exceeding one
billion dollars anneallyte Brad Smith at theHELM since two thousand and two has orchestrated
a shift in Microsoft approach from aconfrontational to conciliatory with regulators. This shift
(11:11):
reflects a broader trend in the techindustry as companies recognize the importance of difficacy
in advancing business interests. So whatI think is this diplomatic approach may become
a blueprint not only for Microsoft,but for other tech giants as they face
increasing scrutiny, prompting a paradigm shiftin how industry leaders engage with rentory bodies.
(11:31):
The next next nice complication is youknow you have global regulatary challenge,
right so, so just not alot of just you know, in your
in your region, but global,right so. Overcoming a US government effort
to block the deal and persuading regulatorsin the UK to reconsider their initial objection
(11:52):
required a strategic finets that went beyondlegal battles. Microsoft's ability to win over
regulators in various jurisdictions, including muscleswhere it was historically distrusted, showcase the
companies and adaptability and the effectiveness ofits influence influenced building initiatives. Third,
long term reputational impact. While thecompletion of the activision deals undially a win
(12:16):
for Microsoft, the aftermath may marka turning point in the company's relations with
the ragulants worldwide. Critics argue thatMicrosoft's attempt to claim the moral high ground,
particularly in areas like cybersecurity, couldn'tbe a double edged sword. The
recent twenty nine billion dollar back taxdemand in the US and criticisms criticisms from
rivals underscoring the challenges Microsoft faces inbalancing its global influence with addressing internal vulnerabilities.
(12:43):
Fourth, evolving tech industry dynamics.So Microsoft's victory comes at a time
where you know when active acquisitions bybig tech companies are scarce. The evolving
dynamics or the tech industry, especiallyin cloud competing post challenges that go beyond
legal and regulatory hurdles. The company'sone billion dollars annual operation spanning legal,
(13:05):
corporate and government affairs at digital crimethese unit cybersecurity teams reflects the commitment to
addressing multifaceted challenges, and the successat this acquisition may position Microsoft as a
model for how tech companies adapt andthrive in an environment marked by increased scrutiny,
ensuring that their operations aligned with evolvingindustry standards. In conclusion, you
(13:28):
know, Microsoft's financial and economic triumphsin the acquisition of Activision underscore the company's
adaptability, strategic difpmacy, and involvingdynamics within the tech industry. But as
we witness this landmark deal, itprompts us to consider the broader implications for
the sector, setting the stage forhow tech giants approach financial, regulatory,
(13:50):
and ethical challenge in the years tocome. And just to add, this
isn't the first time Microsoft has facedregulatory scrutiny. In the early two thousand,
the company battled the US the Departmentof Justice, narrowly avoiding a court
ordered breakup. Brad Smith. TheBrad Smith's leadership have has been very It's
been pivotal in reshaping Microsoft's image fromaggressive fighter to a company that values transparency
(14:15):
and corporation with regulators. Drawing parallelsto the past, we see Microsoft's evolution
mirroring broader changes in the tech industry, tech industry's approach to regulatory challenges,
and what might the future hold forMicrosoft. The company's recent victory may signal
a turning point, but challenges persist. Growing opposition and louder protests suggest that
(14:37):
tactics that serve Microsoft well for twodecades might be losing effectiveness. As Microsoft's
power in markets like cloud competing grows, it faces increasing pressure evident in the
recent twenty nine billion dollars back taxdemand in the US. Soup me to
our last story, which which involvesthe economic landscape of the Eurozone, where
(14:58):
the latest figures reveal a significant development. Eurs On inflation has taken a notable
dip, falling to two point ninepercent in October. This marks its lowest
point in over two years and carrysubstantial implications for the region's economic policy.
So let's break it down the twopoint nine figure. Two nine percent figure
is a substantial drop from the previousmonth of four point three percent, showcasing
(15:22):
the slowest annual growth in consumer priceisis twenty twenty one of July. The
driving forces behind this downturn or aremultifaceted, atri attributed to the contraction of
the Block's economy in the third quarter, primarily influenced by descending energy energy prices
and a decrease in food inflation,as reported by years that the U EU
(15:43):
Statistic Arm Statistics Arm. This developmentis crucial is crucial as as it significantly
reinforces expectations that the European Central Bankthe ECB will refrain from further interest rate
hikes. In it'll show the lowerinflation rate provides the ECB with leeway to
(16:03):
maintain a status quo on interest rates, a strategy echoed by major central banks
globally. So let's jump into somefinancial or economic complications because of this.
So first, the inflation landscape withinthe Aurzone itself is far from uniform,
right, not even everywhere, therates ranging from seven point eight percent in
(16:26):
Slovakia to almost minus one point sevenpercent in Belgium. The disparity raises questions
about the economic health of individual memberstates. High inflation at sea in Slovakia
can strain household budgets and a roadpurchasing power, potentially leading to decreased consumer
spending. On the flip side,negative inflation in Belgium may signal deflationary pressures.
(16:47):
A phenomenon that could hinder investment ineconomic growth zooming out. The Eurozone's
collective economic contraction of zero point onepercent in the third quarter raises concerns about
the overall health of the region.This contraction, german by contractions in Germany,
Ireland and Austria, poses challenges tobusinesses and investors. Companies may face
(17:07):
reduced demand for goods and services,potentially leading to layoffs and decrease profitability.
Investors in turn, may re evaluatetheir portfolios, seeking refuge in more stable
assets amid the economic troublence. Akey player in this scenario is the europe
Central Bank the ECB, which recentlyheld its best broad and positive rate to
steady at four percent, concluding aseries of ten consecutive increases. The lower
(17:30):
than expected inflation rate provides the ECDwith a delicate balancing act with While it
alleviates media pressure for further interest ratehikes, it also signals an economy grappling
for With a seconding of sagination,the central banks next moves will will be
pivotabal. We will be pivotal,requiring an approach to maintain economicsability without stifling
(17:53):
growth for consumers. The lower inflationcould offer temporary relief from the recent surge
in the cost of living. However, this relief may be short lived if
inflation slows too abruptly, leading toa potential economic downturn. It's a delicate
equilibrium where consumers navigate between costs optimismand the looming uncertainties of the economic landscape.
(18:14):
And if you look at the globalscale, the eurzones' economic struggles stand
in stark contrast to the robust growthreported in the US. This divergence and
economic jetgies raises questions about the globalinterconnectedness of economies and the potential slipover effects.
Investors and businesses with exposure to bothregions may need to recalibrate their strategies
to adapt to the divergent economic landsgames. As we scrutinize the intricate the
(18:38):
threads of this economy tapestry, itbecomes evident that the eurozones challenges and multifaceted
are very multifacting, and the interyplatebetween inflation, economic economic contraction, and
policy responses creates a dynamic environment withimplications for governments, businesses, invassadors,
and everyday citizens. Navigating these complexitieswill require coordinated efforts and strategic decision making
(19:03):
to steer the aur Zone towards apath that sustainable growth and resilience in the
face of global economic and certainties.If we reflect on historical parallels, the
EUR zone struggles mirrors the broader economicchallenges faced in the past year. You
know, Germany wants a powerhouse nowcontends with a shrinking GDP emphasizing a prolonged
period of economic weakness. And inthis scenario, one can't help but draw
(19:26):
parallels to the divergent paths of majoreconomies, where the US thrives well while
the eur Zone battles stagnation. Andas we potter the future, traditions emerge,
cautiously decide and inflation may slow downwith the external factors such as Israel
winning the Hamas conflict and which isexpected to elevate energy prices. Furthermore,
(19:49):
the diminishing impact of comparing energy pricesto last year's high levels could also contribute
to a potential slowdown in the declineof inflation, and in my opinion,
in the grand economic symphony, theeurzones composition is one of one of is
one of the struggle and potential stagnation. I think while the lower inflation rate
(20:11):
offers a breather for the ECB,the underlying challenges of a weak in economy
persists, and the question now lingerson how policy makers will address these challenges
and to do the Eurzone towards sustainablegrowth. And I guess as we navigate
these economic waters, the Eurozone's fateremains uncertain. It calls for a careful
(20:32):
balance act where decisive policy measures andexternal factors will play a pivotal role in
determining whether the region can break freefrom the shacks of stagnation and stride towards
a more prosperous future. When that'sa wrap of the of the Invested Die
podcast. Thank you very much fortuning in, and peace
Good afternoon, Welcome back to investorsof that podcast where we help you work
smarter and harder by providing market updatesand insights. First one, I'll apologize
for the late upload. I've beenfeeling quite unwell these past few days,
but feeling better now and able torecord. So today we're going to talk
about US government debt, some discussionon your zone inflation, and then some
updates by Microsoft's acquisitions of Activision.So with that, let's talk to our
(00:25):
first story, which is about governmentdebt. Now, the US government has
a big one trillion dollar light itemshere, but it's not for food stems,
it's not for medicare, it's notfor military. It's for interest payments.
Big debt, big deficits, andrising indust rates are putting pressure on
the US government's finances. And alot of people are worried about the debt,
you know, and deficis and fiscalpolicy and so forth. And I
(00:46):
think a lot of things have changedsince the last time we talked about this.
One is that the politics in theUS, I think have changed,
and I think for the worst.So once upon a time, maybe this
is a fairy tale, but Democratsused to the spending party and the Republicans
were more of the physical conservative party, and that may or may not be
true. But Donald Trump's presidency really, I think put an end to that
(01:07):
notion because he passed a big trilliondollar plus deficit increase in tax coude and
now you have the situation where bothparties are kind of a client to add
to the deficit. That's the firstissue. The second one is the interest
rates, as to talk about almoston every other episode, maybe in every
episode, have gone up a lot, and that's really being matters for debt
and deficits because you want to haveideally interest rates lower than your growth rate.
(01:32):
That means that your capacity to payback debt grows faster than the debt
itself. And if those those tworates start to become close, or even
potentially your interest rates even exceed yourgrowth rate, then you're you're in trouble
because you're in a situation where yourdebt could grow faster than your ability to
repay it. And I think thosetwo things changing have given a lot of
investors anxiety about where this is goingto end. And there's a lot of
(01:56):
conversation about the how it's unlikely thatthis will be under control in the next
year or so, because there's there'selections happening, and politicians and campaign rarely
talk about cutting spending or raising taxes. So it's fair to assume that the
deficit is going to keep growing.Not only that, but you have the
external shocks that could happen to themarket. Right There could be unexpected expenditure,
(02:20):
political problems, and there's enough ofthose that happening. That's happening right
now in Washington. Haven't forbid anotherwar, or the US needs to start
funding that the US wants fund orget involved in, or a politician gets
ill. Who knows what happens,But there will always be some shock.
The bodom market will react, Pricesof bods will fall, the years the
years will rise. And the riskis that in this in this jituary market
(02:45):
where everything everyone's pretty scared, theyrise more quickly and they become what central
bankers call huh disorderly uh. Anda market out of control frees everybody out,
especially when it's the US treasure market. And I think that that that
brings to a radical fix, whichis called the yield curve control. And
just explain this. This is acentral bank policy where essentially they make an
(03:06):
open and a commitment to buy howevermuch government debt is necessary to cap yields,
to pay yields to where they wantit to be. So for example,
the central bank says, hey,we declared the ten year the ten
year yield will raise will rise nohigher than one percent. And if market
say, well, we don't believeyou, and we're going to sell our
(03:27):
bonds, I add one point zerofive percent. Right, the central bank
jumps in the purchase whatever quantity ofbonds is necessary to force the market back
down to one percent. So it'sa pretty intense form of monitary intervention.
It's also a point where the centralbank and the government are almost acting together.
So central bank independent is an issue, but that's it. You know,
that's a different discussion. But youknow, you can look back at
(03:51):
World War Two where they kind ofuse this and there's a situation where like,
you know, growth wasn't the problem, but you needed, well,
the government spending was so high andyou need to suppress the cost of government
spending, so you use the youknow, the yield curve, and this
is what they did in World Wartwo, but they didn't actually explicitly tell
people to the bond market that's whatthey were doing, which is a different
(04:15):
scenario, but it's been used beforeand it kind of fits. It's this
whole word, and I think thatthat that that brings us to like the
yield market, the yield curve controlin a modern context, it's almost like
a monetary defibrillator. You use itwhen the economy is like flattening and you
need and like a new shock monetarypolicy the most extreme you can really get
(04:36):
almost and historically the US, inthe US, it's only ever been used
in wartime, right, and youcan kind of understand why it would be
used in wartime. You've got thesenew massive military spending commitments that are you
know, of prime importance to thegovernment, and you want the monetary authority,
the Central Bank to essentially ensure thatall the all that government borrowing needed
(04:58):
to finance the work at get digestedin an orderly way. But you know,
now today we're talking about historic peacetime physical deficits, and I think
that's probably why why yield club controlis on the margins back in discussion a
little bit in the US, right, Sorry to keep up again, but
I would like to add that it'snobody's central scenario that that we have this
(05:20):
next year and if we ever gotto yield can control, then you know,
the situation is pretty bad. Asan extreme where it's very you know,
we're in a bad situation pretty much. It's really the last resort.
But I think it's good to havethe discussion now. I guess, uh
because before it becomes likely part ofthe toolkit. And if there was a
(05:42):
big increase in long term treasure yieldsbecause markets were scared of the physical outlook,
probably one has to imagine what wouldhappen. Is well, you'd have
an increase in barbering costs for companies. First off, you'd have an increase
in mortgage rates, and it's actuallyhitting real people's finances, and that puts
pressure on politicians to either raise taxesor cut spending or some combination of both
(06:03):
to get physical trajectory back on amore sustainable course. We're talking about a
situation where the politics are so deadlocked, which you know, not impossible that
political pressure is not exerted or noconsensus can become to can come to you.
But you need a more and thatyou really need a more extreme monetary
(06:24):
intervention to prevent markets from melting down. And I think because the one thing
that none of us wants to see, nobody in the world should never want
to see, is a complete meltdownin the US treasure market. The big
thing in favor is the is thereference market for the entire world. All
other debt is normally priced in relationto treasury, So having a meltdown would
(06:44):
have global consequences. So the questionis should we be scared of they yield
curve control in the US? Shouldwe be scared? Should we be scared
of that scenario? Right? LikeI traditionally associate talking about this type of
stuff with almost like you know,financial blog or or or whatever it is.
But should we should we be reassuredby this? I mean it's like
(07:06):
it seems like a tool, anda tool could if necessary, but not
in the most basic case. Reallywe only apply this for very extreme cases.
But what we're talking about, whatwe're talking about this in a world
where you could say that monetary policyhasn't been one of the textbook style since
the global financial crisis. Since twothousand and eight, the FED has still
(07:28):
got a massively bloated battle street fromall the bonds that bought through quantitative easing
when it was keeping interested at zero, you know, buying bonds et cetera,
et cetera. So we're not ina in a in a sort of
text post situation. At the moment, we're still trying to get all that,
you know, out of all thatmess. So yes, having a
world where the Fed could step inand do something like this is better than
(07:49):
not having it. But even betterstill would be politicians realizing that they can
keep spending and the depthsit you know, comes under some sort of control,
you know, without any intervention.That would be to me, uh,
a far better solution. And buthowever very not likely, not likely,
I think. But the thing it'sworth saying that, you know, in
(08:11):
the in the in the Japanese contextof Japanese yield curve, I think there
have been uh the policy has stabilizedJapan. Japan is not melting down,
right, That's that much is veryclear. There have been costs. What
cost is to Japanese households who holdtheir wealth in bank accounts? You know,
if you pay long term interest ratesvery very low, then banks are
(08:31):
not going to pay you for leavingyour cash in a savings account. And
you know, in Japan, ahuge number of Japanese households no financial assets,
uh, no stocks, no bonds, they all they have all the
money in the bank and they're notgetting paid. And if there was a
less interventionist monetary policy, that bigchunk of Japanese households would be getting some
(08:52):
sort of interest on their savings andthat presumably could contribute to their lifestyle,
to their consumption habits. So it'snot that as if this is free.
In some ways, you can thinkof it as a transfer from household savers
to the government. And again thisis all hypothetical, and hopefully we don't
have to get into a messy tradeoffs the field curve control, and hopefully
(09:15):
the problem can be solved by somelevel headed politicians, because that is growing
and efficient is a problem, butwho knows. Hopefully they come to a
reasonable consensus on the future path ofgovernment spending. And I do look forward
to discussions in the next future.So let's hope into our next story.
Something we've covered a couple of times, but Microsoft's Activision acquisition, right,
(09:39):
so Activision is a gaming giant actuallyhas been nothing short of a blockbuster and
the behind the scenes maneuvers to makeit all happen are as intriguing as they
are complex. So let's start withthe basics, right, So Microsoft's twenty
one month in battle. This hasbeen going for twenty one months to security
the ap exclusion deal showcase the company'sformidable legal policy and influence machine costing over
(10:05):
one billion dollars annually. The journeyinvolves overcoming a US government attempt to block
the acquisition to the court, andnavigating the concerns of UK regulators who initially
rejected the deal. Microsoft's victory requiredwinning over regulators worldwide, including Brussels,
where the tech giant was once metwith skepticism. So let's dive deeper into
(10:28):
the financial and economic induracy surrounding Microsoft'striumph and acilition of activision. The completion
of this deal not only stands asa remarkable victory for Microsoft in a landscape
where big tech acquilutions face significant hurdles, but also raises several questions about the
companies evolving relationship with regulators globally,first regular regulator of landscape and corporate difficency.
(10:50):
Microsoft's success navigating the regulatory landscape isa testament to the company's investment in
what can only be described as aformidable legal policy and influence maschie exceeding one
billion dollars anneallyte Brad Smith at theHELM since two thousand and two has orchestrated
a shift in Microsoft approach from aconfrontational to conciliatory with regulators. This shift
(11:11):
reflects a broader trend in the techindustry as companies recognize the importance of difficacy
in advancing business interests. So whatI think is this diplomatic approach may become
a blueprint not only for Microsoft,but for other tech giants as they face
increasing scrutiny, prompting a paradigm shiftin how industry leaders engage with rentory bodies.
(11:31):
The next next nice complication is youknow you have global regulatary challenge,
right so, so just not alot of just you know, in your
in your region, but global,right so. Overcoming a US government effort
to block the deal and persuading regulatorsin the UK to reconsider their initial objection
(11:52):
required a strategic finets that went beyondlegal battles. Microsoft's ability to win over
regulators in various jurisdictions, including muscleswhere it was historically distrusted, showcase the
companies and adaptability and the effectiveness ofits influence influenced building initiatives. Third,
long term reputational impact. While thecompletion of the activision deals undially a win
(12:16):
for Microsoft, the aftermath may marka turning point in the company's relations with
the ragulants worldwide. Critics argue thatMicrosoft's attempt to claim the moral high ground,
particularly in areas like cybersecurity, couldn'tbe a double edged sword. The
recent twenty nine billion dollar back taxdemand in the US and criticisms criticisms from
rivals underscoring the challenges Microsoft faces inbalancing its global influence with addressing internal vulnerabilities.
(12:43):
Fourth, evolving tech industry dynamics.So Microsoft's victory comes at a time
where you know when active acquisitions bybig tech companies are scarce. The evolving
dynamics or the tech industry, especiallyin cloud competing post challenges that go beyond
legal and regulatory hurdles. The company'sone billion dollars annual operation spanning legal,
(13:05):
corporate and government affairs at digital crimethese unit cybersecurity teams reflects the commitment to
addressing multifaceted challenges, and the successat this acquisition may position Microsoft as a
model for how tech companies adapt andthrive in an environment marked by increased scrutiny,
ensuring that their operations aligned with evolvingindustry standards. In conclusion, you
(13:28):
know, Microsoft's financial and economic triumphsin the acquisition of Activision underscore the company's
adaptability, strategic difpmacy, and involvingdynamics within the tech industry. But as
we witness this landmark deal, itprompts us to consider the broader implications for
the sector, setting the stage forhow tech giants approach financial, regulatory,
(13:50):
and ethical challenge in the years tocome. And just to add, this
isn't the first time Microsoft has facedregulatory scrutiny. In the early two thousand,
the company battled the US the Departmentof Justice, narrowly avoiding a court
ordered breakup. Brad Smith. TheBrad Smith's leadership have has been very It's
been pivotal in reshaping Microsoft's image fromaggressive fighter to a company that values transparency
(14:15):
and corporation with regulators. Drawing parallelsto the past, we see Microsoft's evolution
mirroring broader changes in the tech industry, tech industry's approach to regulatory challenges,
and what might the future hold forMicrosoft. The company's recent victory may signal
a turning point, but challenges persist. Growing opposition and louder protests suggest that
(14:37):
tactics that serve Microsoft well for twodecades might be losing effectiveness. As Microsoft's
power in markets like cloud competing grows, it faces increasing pressure evident in the
recent twenty nine billion dollars back taxdemand in the US. Soup me to
our last story, which which involvesthe economic landscape of the Eurozone, where
(14:58):
the latest figures reveal a significant development. Eurs On inflation has taken a notable
dip, falling to two point ninepercent in October. This marks its lowest
point in over two years and carrysubstantial implications for the region's economic policy.
So let's break it down the twopoint nine figure. Two nine percent figure
is a substantial drop from the previousmonth of four point three percent, showcasing
(15:22):
the slowest annual growth in consumer priceisis twenty twenty one of July. The
driving forces behind this downturn or aremultifaceted, atri attributed to the contraction of
the Block's economy in the third quarter, primarily influenced by descending energy energy prices
and a decrease in food inflation,as reported by years that the U EU
(15:43):
Statistic Arm Statistics Arm. This developmentis crucial is crucial as as it significantly
reinforces expectations that the European Central Bankthe ECB will refrain from further interest rate
hikes. In it'll show the lowerinflation rate provides the ECB with leeway to
(16:03):
maintain a status quo on interest rates, a strategy echoed by major central banks
globally. So let's jump into somefinancial or economic complications because of this.
So first, the inflation landscape withinthe Aurzone itself is far from uniform,
right, not even everywhere, therates ranging from seven point eight percent in
(16:26):
Slovakia to almost minus one point sevenpercent in Belgium. The disparity raises questions
about the economic health of individual memberstates. High inflation at sea in Slovakia
can strain household budgets and a roadpurchasing power, potentially leading to decreased consumer
spending. On the flip side,negative inflation in Belgium may signal deflationary pressures.
(16:47):
A phenomenon that could hinder investment ineconomic growth zooming out. The Eurozone's
collective economic contraction of zero point onepercent in the third quarter raises concerns about
the overall health of the region.This contraction, german by contractions in Germany,
Ireland and Austria, poses challenges tobusinesses and investors. Companies may face
(17:07):
reduced demand for goods and services,potentially leading to layoffs and decrease profitability.
Investors in turn, may re evaluatetheir portfolios, seeking refuge in more stable
assets amid the economic troublence. Akey player in this scenario is the europe
Central Bank the ECB, which recentlyheld its best broad and positive rate to
steady at four percent, concluding aseries of ten consecutive increases. The lower
(17:30):
than expected inflation rate provides the ECDwith a delicate balancing act with While it
alleviates media pressure for further interest ratehikes, it also signals an economy grappling
for With a seconding of sagination,the central banks next moves will will be
pivotabal. We will be pivotal,requiring an approach to maintain economicsability without stifling
(17:53):
growth for consumers. The lower inflationcould offer temporary relief from the recent surge
in the cost of living. However, this relief may be short lived if
inflation slows too abruptly, leading toa potential economic downturn. It's a delicate
equilibrium where consumers navigate between costs optimismand the looming uncertainties of the economic landscape.
(18:14):
And if you look at the globalscale, the eurzones' economic struggles stand
in stark contrast to the robust growthreported in the US. This divergence and
economic jetgies raises questions about the globalinterconnectedness of economies and the potential slipover effects.
Investors and businesses with exposure to bothregions may need to recalibrate their strategies
to adapt to the divergent economic landsgames. As we scrutinize the intricate the
(18:38):
threads of this economy tapestry, itbecomes evident that the eurozones challenges and multifaceted
are very multifacting, and the interyplatebetween inflation, economic economic contraction, and
policy responses creates a dynamic environment withimplications for governments, businesses, invassadors,
and everyday citizens. Navigating these complexitieswill require coordinated efforts and strategic decision making
(19:03):
to steer the aur Zone towards apath that sustainable growth and resilience in the
face of global economic and certainties.If we reflect on historical parallels, the
EUR zone struggles mirrors the broader economicchallenges faced in the past year. You
know, Germany wants a powerhouse nowcontends with a shrinking GDP emphasizing a prolonged
period of economic weakness. And inthis scenario, one can't help but draw
(19:26):
parallels to the divergent paths of majoreconomies, where the US thrives well while
the eur Zone battles stagnation. Andas we potter the future, traditions emerge,
cautiously decide and inflation may slow downwith the external factors such as Israel
winning the Hamas conflict and which isexpected to elevate energy prices. Furthermore,
(19:49):
the diminishing impact of comparing energy pricesto last year's high levels could also contribute
to a potential slowdown in the declineof inflation, and in my opinion,
in the grand economic symphony, theeurzones composition is one of one of is
one of the struggle and potential stagnation. I think while the lower inflation rate
(20:11):
offers a breather for the ECB,the underlying challenges of a weak in economy
persists, and the question now lingerson how policy makers will address these challenges
and to do the Eurzone towards sustainablegrowth. And I guess as we navigate
these economic waters, the Eurozone's fateremains uncertain. It calls for a careful
(20:32):
balance act where decisive policy measures andexternal factors will play a pivotal role in
determining whether the region can break freefrom the shacks of stagnation and stride towards
a more prosperous future. When that'sa wrap of the of the Invested Die
podcast. Thank you very much fortuning in, and peace
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