🍿🍎 Netflix and Apple, You Two Play Nice Now
Happy Sunday everyone!
Hope you all had a wonderful week.
Ever since the government started printing money to provide stimulus to the economy, there have always been concerns towards inflation. However, lately, inflation has become a bigger and bigger topic as we see the largest increase in prices since 1990. The funny thing is, prices always will go up as we get older, inflation is healthy for the economy, but the one thing we need to worry about is the rate of inflation in a short period of time.
While you may feel helpless to know that record inflation is happening right beneath our noses, there are measures you can look into to help mitigate (at least in part) the effects that inflation has on your portfolio. A research paper this year was published titled “The Best Strategies for Inflationary Times” (linked here), and they include:
While stocks do get hurt by inflation, some stocks do tremendously well. They found that "traded commodities have historically performed best during high and rising inflation" so things like Copper, Gold, Silver, Iron and Oil.
The paper also interestingly points out that Collectibles do well during periods of high inflation. They found that collectibles "Real annual returns are positive during inflationary episodes for all three asset groups, with art at +7%, wine at +5%, and stamps +9%".
When it came to cryptocurrencies, the paper looked at Bitcoin and noted that Bitcoin is an unreliable hedge because its 5x more volatile than the S&P 500 and Gold. and that "The correlation of U.S. equity and bitcoin returns suggests that bitcoin may not deliver positive real returns in periods of unexpected inflation".
Lastly, with real estate - while it is a good thing to lock in a low interest rate right now, not many people have a ton of money to do that, but if you are able to get real estate - the research paper does find that it on average holds its value during inflationary times, which is a good sign.
Inflation is the force that pushes you to spend money instead of save it. According to the Fed, it should be closer to 2%. This is the rate that is needed for 2 things: maximum employment and price stability in the economy.
While Inflation is inevitable, during periods of high inflationary pressure there are some steps you can take to mitigate it. On Tuesday, I’ll drop a video on the exact topic.
Enjoy this week’s newsletter!
- Humphrey & Rickie
In the Markets
Weekly News Roundup
Netflix Games Launch on iPhone and iPad With Apple’s Payment System (BBG)
Netflix returns to using Apple’s controversial app-purchase system with its new video game offering after dropping the payment function from its main app three years ago.
RH: I imagine this won’t be the last incident concerning app developers and Apple’s notorious 30% cut in the first year and 15% cut thereafter. However, this does signal a cooling of tension between the two companies.
Inflation in U.S. Builds With Biggest Gain in Prices Since 1990 (BBG)
U.S. consumer prices rose last month at the fastest annual pace since 1990 which ultimately cements high inflation as a hallmark of the pandemic recovery. Higher prices for energy, shelter, food and vehicles fueled the increase.
HY: Oil led the charge at around +59% YoY. Meat was up 12%. The Fed set expectations to taper by end of month which should help curb expectations and hopefully nudge our inflation rate in the right direction.
Tesla Erases $199B in Worst Two-Day Rout in 14 Months (BBG)
Amid an influx of negative news, Tesla lost almost $200B in its biggest back-to-back selloff since September 2020. The catalyst was Elon Musk’s Twitter poll on whether he should sell 10% of his stock. It was later revealed that Musk’s brother quietly sold some shares just before the poll.
RH: Michael Burry was quoted in a Business Insider report saying Musk may want to sell stock to cover his personal debt. I’ve heard a couple different theories and while that reason is valid, Musk could have also used the poll to protect the stock from plummeting because he understands that the market right now is inflated across the board and he wants to take profits now. We probably won’t ever know the real reason but there is no shortage of theories.