Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o “Buy Now, Pay Later” lenders are looking to provide a means for people to finance their utility bills and even rent or mortgage payments. Popular “Buy Now, Pay Later” lender Affirm has started providing loans for tenants to stretch their rent payment throughout an entire month. Other companies are allowing consumers to take out loans to pay for internet, electricity, health insurance, phone bill, and water bill.
Last year, Americans spent $160 billion on “Buy Now, Pay Later” platforms, according to experts at the Federal Reserve. That marks nearly 50 percent growth since 2023. Many borrowers are seeing the loans as a necessity, that they wouldn’t otherwise be able to afford everyday items without. One concern about “Buy Now, Pay Later” programs is their existence outside the mainstream ecosystem. Finance technology companies are the ones approving the loans, not the banks. Experts warn that programs can become debt traps when consumers take on multiple loans at once. [The New York Times]
o Professional sports teams continue to ascend to ultra-high valuations. The latest team to sell is the NBA’s Los Angeles Lakers. Bog Iger and Joshua Kushner purchased one of the NBA’s signature franchises for $12.5 billion, marking the most for an NBA franchise and eclipsing the $10 billion that was paid for the Lakers last year. In recent years, the value of NBA franchises has taken off. Michael Jordan purchased a majority stake in the Charlotte Hornets for $300 million in 2010, sold his stake in 2023 for $3 billion. Similarly, former Dallas Mavericks owner Mark Cuban bought the Mavericks in 2000 for $285 million, sold in 2023 for $3.5 billion. In the NFL, the reigning Super Bowl champion Seattle Seahawks sold for a price tag of $9.6 billion earlier this summer.
Experts suggest that sports being one of the last major draws for live television and an increasing amount of money in media rights deals from leagues are contributing factors. In addition, billionaires have more money than ever. Critics point that new ownerships are increasingly buying teams as investments, and that teams and leagues are becoming too commercialized. [The New York Times]
o Travelers are taking on attractive deals to take them on blind vacations. Groupon is behind the new phenomenon where its mystery deal is priced ranging from $199 to $299 per person depending on the departure airport. The deal covers flights on budget airlines and hotel stay for anywhere from two-to-seven nights. Destinations are chosen at random and possibilities include places such as Singapore to London to Minneapolis to Phoenix to Orlando.
The catch is that there are no refunds handed out if someone doesn’t like the options they are given. Buyers are drawn to the deal due to the low costs compared to the rising costs to travel. From Groupon’s perspective, they divide vacation destinations into a gold tier, a silver tier and a bronze tier with few trips falling into the gold and silver tier categories. For vacationers, many who have not had the opportunity to go to many places see it as a chance to see a new destination. Meanwhile, many well-traveled vacationers have been disappointed by their destination. [The Wall Street Journal]
o Some Americans are turning to AI chatbots, such as ChatGPT, for help in managing household finances. A portion of those, according to JD Power’s survey results, have said they find the advice helpful in making sound financial decisions in comparison to the advice from a bank.
Many of those turning to chatbots are households that have some debt and spend beyond their means. Researchers are studying the implications for following the advice of a chatbot. When it comes to money-related matters, it seems that the chatbot would help them with more savings. However, two alarming instances for chatbot’s response came from more complicated matters, such as dealing with job loss or learning how to rebalance an investment portfolio. In summary, a chatbot could be helpful for basic finance questions or for those willing to give up data about their personal situation for a detailed response, but AI chatbots are still prone to mistakes. [NPR]
o Global sales of electric vehicles (EVs) have slowed due to their steep prices and developing charging infrastructure. That has consumers turning to hybrid models, as automakers struggle to keep up with demand. Hybrid sales accounted for roughly 14 percent on new car purchases last year in the United States, a sharp increase from just three percent in 2020. In foreign markets, hybrids account for an even higher percentage of sales with Japan and Spain accounting for half of sales.
Hybrids are less expensive than full EV models, and come with the convenience of being able to fill up at any gas station. In addition, they typically have a longer range than EV models do. They also provide gas savings over time, especially combined with higher oil prices stemming from the US war in Iran. Some automakers, such as Ford and Nissan, who had all but scrapped hybrid models from their lineups in favor of EV models are now scrambling to reverse course. The top selling hybrid is the Toyota RAV4. Demand in the US has consumers selling their used RAV4 models for more than they paid for the vehicle initially. [Bloomberg]
