Greetings Folks and a warm welcome to the 8th Edition of Friday Finance Weekly. I’ll try to keep this a little shorter than the 7th edition. Let’s start with a random fact. According to the Department of Homeland Security, the TSA collected $517,978.74 in loose change left by passengers going through security in the most recent year studied. This doesn’t include watches and other valuables that are often left behind. I am curious as to what happened to all that loose change.

For those of you who like baseball, the Philadelphia Phillies turned a rare (1–3–5) triple play on Monday, an MLB first since 1929. A 1–3–5 triple play involves a putout by the pitcher (1), first baseman (3), and third baseman (5). I must admit I have no idea what this means, but apparently, it’s a big deal.

A $30 billion antitrust settlement in which Visa and Mastercard agreed to lower and cap the fees they charge merchants was rejected this week in court.

• Originally announced in March, the settlement was intended to resolve a 19-year dispute that began in 2005 over interchange (or “swipe”) fees set by the credit card companies (i.e., the fee that merchants must pay to accept Visa and Mastercard).

• Swipe fees, which normally range from 1.5% to 3.5% per transaction, generated $72 billion in 2023. The settlement called for these fees to be reduced by at least 0.04 percentage points for three years and remain at least 0.07 percentage points below the current average for five years.

• Many large retailers were outraged by the outcome, claiming the estimated $30 billion in savings over the next five years wasn’t nearly enough. Just to make it clear, Visa and Mastercard were not fined $30 billion; they were going to collect $30 billion less over the course of the next five years.

• Another rule that merchants want to ditch—and that was not addressed in the settlement—is the “honor all cards” stipulation. This means that if a merchant wants to accept one type of credit card, it must accept all cards under the Visa or Mastercard umbrella, no matter what bank is behind them or if they cost more in swipe fees. Basically, retailers don’t want to take your fancy metal credit cards as they cost them too much but are being forced to.

Unless a more favorable settlement is reached, the case is likely headed for a new trial. I have started to see a new trend, especially in the US, where there is a cheaper price for ‘cash pay’ (i.e., debit). I wonder if this trend will continue. If a retailer refuses to take my TD Aeroplan Visa, I will rage! (Source: Reuters)

Many real estate developers open restaurants, and now it’s going the other way. Major Food Group (MFG), the restaurateurs behind Carbone and Dirty French, opened their first Miami restaurant in 2021 but quickly followed up with five additional locations to accommodate frenzied demand.

• Leveraging the popularity of its brand, MFG is now branching into real estate, with the announcement of a 58-story luxury tower located on Miami’s waterfront in collaboration with Terra and One Thousand Group.

• A seemingly peculiar partnership, the announcement was unsurprising to those familiar with Miami’s luxury real estate market, where it has become a rarity to build anything without a luxury brand attached. The branded residence market has been booming in Dubai and London, so it’s gaining traction in Miami as well.

• Unlike New York, where the address — Park Avenue, Fifth, Riverside Drive, Central Park West, Bleecker — is the brand, in Miami, buyers needed something more to grab onto. Numerous luxury brands have already affixed their names to condo projects, including Porsche, Aston Martin, Mercedes, Bentley, Pagani, Armani, Dolce & Gabbana, just to name a few.

• It’s a win-win-win situation, where developers leverage built-in customer bases to sell out faster, brands get licensing fees, a cut of sales, and a ton of free marketing, and buyers get the assurance that a trusted brand has signed off on interior design and finishes.

• MFG’s Villa Miami building will offer kitchens designed by Mario Carbone, a double-decker restaurant and bar, juices and healthy snacks served poolside, private-chef services, VIP status at all the other MFG restaurants, and Sadelle’s coffee and bagels every morning.

Some believe this is just the beginning, with the next phase of this evolution being a stack of brands on any given project – each with its own unique association. An affordable collaboration that might work is an Ikea branded residence; they already do kitchens and interior fixtures. Hopefully, it comes with a lifetime supply of Swedish meatballs. (Source: Curbed)

Volkswagen announced it would be investing up to $5 billion in EV-maker Rivian as part of a joint-venture agreement between the two companies.

• The partnership will focus on creating “next-generation software-defined vehicle (SDV) architectures” to be used in both companies’ future EVs. For those wondering, an SDV is any vehicle that manages its operations, adds functionality, and enables new features primarily or entirely via software. They allow for updates and upgrades, automation or autonomy, and constant digital connectivity.

  • Per GMI, the global SDV market is expected to reach $250 billion by 2032 (GMI).

• Rivian will license its existing IP rights to the JV and, in exchange, Volkswagen will supply an initial investment of $1 billion through an unsecured convertible note and up to $4 billion in additional investment staged through 2026.

• For Rivian, the equity injection helps to allay concerns over the company’s runway as it prepares for the release of its next-gen vehicles – the R2 and R3 SUVs. The company burned ~$1.88 billion in cash last quarter, leaving a cushion of ~$5.98 billion as of the end of Q1.

  • The announcement caused the company’s stock (RIVN) to surge 23.2% as of closing on Wednesday.

I’ve re-read what SDV means a few times, and I still don’t get it. I can’t imagine meaningful improvements to autonomous driving just by software upgrades alone. Toyota has been playing this well all along; it does seem like the hybrid strategy is the way to go. Now let’s get some popcorn and see what happens to the EV market when Tesla randomly drops their price. (Source: Yahoo Finance)

Ovax Inc., a new startup, has raised $10 million to develop a vaccine intended to prevent fentanyl-related deaths.

• The vaccine aims to block the drug from reaching the brain, thereby preventing a high or the possibility of an overdose.

• Fentanyl poisoning has been the leading cause of death for Americans between the ages of 18 and 45 since 2019. According to the CDC, synthetic opioids were responsible for 204 deaths per day last year on average.

• The company anticipates it will need another private round of funding and will ultimately need to raise hundreds of millions more to successfully bring a vaccine to market.

Maybe I have my drugs wrong, but if drug users are taking fentanyl to get high, then blocking the high seems counter intuitive. But hey, what do I know? I’ll stick to my double Tanq 10 and sodas. (Source: Bloomberg)

Okay, I was planning to make this post shorter, but it is the long weekend (in Canada) coming up, so hopefully you’ll have some more time.

This week's book is Doughnut Economics.

For decades, economics students have demanded curricular reforms to better address modern realities and crises. This book examines how our linear approach to measuring growth in GDP terms alone has created failures and explores how the theory of Doughnut Economics can provide modern solutions.

At its core, Doughnut Economics aims to preserve the fundamental needs of each person by encouraging equality of opportunity, dignity of labor, and the conservation of our planet (i.e., access to food, clean water, power, healthcare, housing, a source of income, social equity, justice, a political voice, a network of information, and peace).

The original economic model depicted a circular flow system comprising efficient markets, mutually beneficial trade, the infallibility of finance, and rational decision-makers. Unfortunately, this premise of a closed loop where capital flows freely between households and businesses did not account for leakages caused by external sources (i.e., banks, government, and international trade). An Embedded Economic Model goes beyond simply tracking the flow of income by expanding our understanding of other sources of wealth.

Updating our assumption that humans are purely rational decision-makers and leveraging our evolved understanding of psychology.

• Observation of human behavior indicates we punish selfish behavior and reward cooperation. Accordingly, shouldn’t our models view humans as social and reciprocating beings rather than purely self-involved?

• Realizing our fundamental values are fluid and that our motivations change over time.

• Accepting that human motivation is derived more from feeling than from thinking and considering this tendency when attempting to drive behavioral changes.

Evolving our binary outlook on the laws of supply and demand by considering other factors that affect our motivation to produce and consume. Rather than attempting to predict and control economic outcomes, we must observe natural trends and use policy to change course as needed.

Conceptualizing ourselves as part of a global community to address the growing issue of inequality. Accepting that society is interconnected and that no one can thrive in isolation will provide the motivation needed to catalyze the wealth redistribution process.

Developing new economic models that not only account for but prioritize, the health of our planet by heightening our focus on minimizing matter and energy losses.

Also, not sure if you watched the debate last night between Trump and Biden. Let’s just say that even though Trump made lots of stuff up, Biden forgot his meds. Ironically, Trump summed up the night well: “I really don’t know what he said – and I don’t think he does either,” when speaking about Biden.

Have a fantastic weekend and please don’t hesitate to forward this to friends and family.

Many thanks,

Sam