🏛️The Bulletin #36: Private Debt Surge, The Economic Impact of Taylor Swift's Eras Tour, and Copper: The New Oil?
In this week's bulletin, we're covering the rise of private debt, examining the economic impact of the Eras Tour, and considering the significance of copper as the 'new oil'.
💵 The Rise of Private Debt
Private debt differs from traditional ownership structures seen in stocks or private equity as investors, rather than becoming part-owners, take on the role of lenders 💳. This isn’t your typical lending scenario; it’s a thoughtful approach, often including floating-rate loans, and it serves as the financial backbone for private entities.
The Federal Reserve's recent commitment to maintaining high interest rates underscores the growing appeal of private debt📈. In the dynamic landscape of private market fundraising strategies, private debt has surged past venture capital, second only to private equity. The preference for floating-rate loans is a key contributor, outperforming bonds and closely rivaling stocks in terms of returns💰. This aligns with the current financial climate, where private debt's versatility and steady returns have become increasingly appealing to investors and companies.
After the 2008 global financial crisis, the private debt market grew as traditional banks shielded away from riskier loans, creating a void filled by private lenders. The landscape evolved with post-crisis banking regulations requiring higher capital adequacy, making it more difficult for banks to generate profit through lending. After the mid-2023 US banking crisis, banks once again tightened their lending standards, leading more borrowers to turn to private credit🏦. According to the latest forecast from data provider Preqin, private debt AUM is growing by 10.8% annually, from $1.2 trillion in 2021 to $2.3 trillion in 2027.
🪩 The Economic Effect of the Eras Tour
Taylor Swift’s Eras Tour is rewriting the script on the economic impact that live performances can have on local economies. The amount of spending her fans, the ‘Swifties’, did on travel, housing, food, and merchandising is on par with Super Bowl spending, except it happened on 53 nights, in 20 different locations, over the course of 5 months🕺.
A study by QuestionPro estimated that the tour would contribute a staggering $4.6 billion in consumer spending to the U.S. economy, making a profound impact on destinations across the country🏩 . Some of the standout moments included:
Chicago’s Eras Tour dates marked the highest hotel occupancy in the city’s history.
The first show in Glendale, Arizona was more profitable for local businesses than the Super Bowl.
The Las Vegas Convention and Vistors Authority credited Swift's tour with bringing tourism back to pre-COVID levels.
The Federal Reserve Bank of Philadelphia credited Swift with boosting travel and tourism in the region in the Beige Book.
The Eras Tour's staggering economic impact echoes a collective desire for meaningful encounters and shared experiences🫧. In the post-pandemic landscape, Americans are prioritizing spending on experiences over possessions. As we navigate this new normal (or era✨), it is evident that tours by iconic artists will play a pivotal role in revitalizing local economics and creating lasting memories for fans.
♻️ Is Copper the New Oil?
Copper is being dubbed the ‘new oil’ as its use in solar panels, wind turbines, and electric vehicles makes it essential for a transition to a clean energy economy🌞. A Goldman Sachs report predicts that demand for copper will increase by up to 900% to 8.7 million tons by 2030 if green technologies are adopted en masse. At first glance this figure may appear overwhelmingly large, but considering the metal’s status as the most efficient conductor of electricity and heat as well as its recyclability, copper stands out as an essential resource for the future of eco-friendly technology.
Before you invest all your money into copper though, consider that the world’s largest producers warn that there is a shortage of mines under development to meet the increasing demand for the metal and that they are struggling to find high quantities of the “metal of electrification” in the ground 🛢. If the supply shortage is not addressed, significant increases in the price of copper will result in clean energy technologies becoming more expensive to produce and deploy.
That’s it for this week, feel free to email me at lara_gamaleldin@brown.edu with any inquiries!
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