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The Threecap
Three things to recap this past week.
1. Inflation Concerns Hurt Investors
All three major indexes fell less than 1% as investors’ streak of 5 positive weeks in a row was snapped. After setting record highs last week, concerns over recent inflation trends weighed on the minds of investors. The monthly measure of U.S. consumer prices climbed to multi-decade highs, with prices climbing 6.2% to the highest level they’ve been since Michael Jordan won his first NBA title. These concerns alongside further inflation concerns have shaken many investors’ confidence and have caused a sharp decline in consumer confidence. An increase in yield rates to 1.58% on Friday didn’t help the market stay positive either.
Though inflation rising is bad news for investors, those who invested in gold were very pleased with this latest week. Inflation concerns provided a catalyst for the price of gold to rise to the highest level it’s been in nearly 5 months. Bitcoin, another proposed inflation hedge, swung to a peak of $68,000 and a closing price nearly $6,000 below that. Overall, with inflation concerns at a high, the retail sales report reported on Tuesday will likely be watched very closely by investors. Considering the holiday shopping session is quickly approaching, this report might hold significant sway over investors come Tuesday.
2. What is Inflation?
Inflation, at its core, is a very simple topic to understand. It means the purchasing power of a currency decreases over time. In other words, the price of everything goes up. Inflation, at a slow rate of around 2% is nothing to worry about. It’s a sign of a healthy economy and growth rate. However, when inflation stops being consistently small and increases to greater amounts, investors begin to bite their nails and worry. If you’ve heard about inflation on the news, it’s likely because consumer prices have skyrocketed by 6.2% percent this year.
If this rate continues, consumers will expect prices to increase and buy more goods now, increasing demand. This increased demand will increase the price and the cycle will repeat. But what is to blame for this unprecedented inflation? The answer is relatively simple: the pandemic. The pandemic first reduced spending to extremely low rates but when the economy shot up again, so did inflation. With Biden’s $1.9 trillion stimulus, Americans began spending, shopping, and buying goods again. Demand skyrocketed but supply couldn’t keep up. This led to supply bottlenecks and prices increasing all over the board. This inflation has caused the Fed to plan tightening monetary policy by dialing back stimulus and raising interest rates, essentially slowing down borrowing, which slows down the economy, which ultimately lowers inflation.
3. Meta, the Metaverse, and the Future
You’ve probably heard by now that Facebook officially changed its name to Meta. Its CEO, the controversial Mark Zuckerberg, told investors that their “brand is so tightly linked to one product it couldn’t represent what they were doing today or the future”. The name “Meta” was chosen to represent the product Zuckerberg wishes his company will be based around: the metaverse.
The metaverse is an incredibly hot topic as its fundamental concept is revolutionary. It’s essentially a virtual space that users can access through virtual reality and due to its 3D nature, allow users to attend concerts, parties, or be in the living room of their friend’s apartment. The full implementation of the product won’t happen for many years, but the concept is already capturing the minds of people around the globe.
The name change for Facebook also takes away from the negative press it’s been receiving lately. From accusations of being a monopoly to not caring about consumer privacy, the name change to Meta and what it signifies might be what Facebook needs to put its past where it belongs: in the past.
Summary
All indexes fell this week after inflation concerns weighed down upon investors. Inflation has been in the news lately due to its rapid growth. Facebook recently changed its name to Meta based around the unique Metaverse concept.
Featured Articles
Bitcoin Surges in Recent Weeks
When people think about cryptocurrency, the first thing that comes to mind is Bitcoin. That is because Bitcoin was the first-ever cryptocurrency. Satoshi created Bitcoin in 2009 when he restructured the blockchain to support such digital currencies. Bitcoin’s value, which peaked at $19,000 in December of 2017, fell significantly soon after. It re-surged past $10,000 on June 21, 2019, for the first time since February 2018. The sudden resurgence of Bitcoin’s value could be due to, in part, to two reasons.
What Exactly is a Bitcoin?
On Halloween 2008, in the midst of the financial crisis, a paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was sent to a cryptography mailing list. The paper was written by an anonymous person (or persons) named Satoshi Nakamoto. Nakamoto described Bitcoin as a digital currency that would allow transactions between two parties without a financial institution facilitating the transaction. Three months later, Nakamoto officially launched the Bitcoin network. It took a year for the first known commercial transaction to occur on the network, when two Papa John’s pizzas, worth $25, were purchased for ₿10,000 bitcoin. Today, a single bitcoin is worth around $50,000…
Recent Podcast
In this episode, hosts Rohan Gupta and Alex Patel continue their conversation with Tom Sosnoff, co-founder of ThinkOrSwim and tastytrade, about options. They delve into topics like volatility, options pricing, trading strategies, and much more!
Check out the episode to learn about options in a simplified way!
Finance Tip
“The bigger thing with bitcoin is not bitcoin itself, but what does that decentralized technology really do?” — Ashton Kutcher