May 26, 2022

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TOGETHER WITH

Good day. According to a recent Pew Research survey, the top concern on the minds of Americans is: a. health care affordability, b. inflation, c. violent crimes. Follow the 🌊 below for the answer.

In the spirit of taking a breather 😮‍💨 from covering stock market related topics, we'll cover some finance trends & a perspective for today:

Gas prices aren't the only thing going up
Globalization is fracturing
Consumer debt is on the rise, what do we make of this?

INFLATION & ECONOMY

Gas Prices Aren't The Only Thing Going Up

Giphy—Money Kids by ABC Network

If the last couple of years had a theme, it would be chaos, the unexpected, and everything getting expensive as heck. Inflation has dominated the financial portion of our minds for a long time now, and it’s spilling over into a lot more than just gas prices at this point.

What else has gotten expensive?

Food prices abroad: The cost of frozen chicken is up 21% in South Africa, red chili prices are up 28% in Indonesia, tomato costs are 88% more expensive in Egypt, tortilla prices have increased 17.5% in Mexico, and beer is now 3% more costly in Germany.

Food prices domestically: In the US, we have some serious cereal inflation. Cereal is 11.9% more expensive this April than last, meats are up 14.3%, chicken alone is up 15.3%, dairy products 9.1%, and citrus fruits up 18.6%.

Clothing: Women’s clothing is up 5% over the last year while men’s apparel is up a noteworthy 8% too.

Energy: In aggregate, energy was up 30% over the last year, with fuel oil leading the way at 80%, and electricity and piped gas services also clocking at 11% and 22% respectively. It’s nearly summer now which means our need for air-conditioning may replace heating, but nicer weather may also mean more car trips to enjoy time outdoors.

Everything car: New vehicle prices were up 13.2% and used car prices were up 22.7%. Parts and equipment were up 14.5%, tires 15.7%, and oil, coolant, and other necessary fluids were up 17.1% too. Basically, unless you have an EV with forever tires, your car is probably costing you a lot these days.

Can we do anything about it?

Although we won’t be able to lower prices on our own, we can make prudent decisions about our spending and what we do with our leftover money to help ease the pain being felt by consumers all around the world right now. If the alternative is debt, we’d recommend adjusting your lifestyle if you can.

Take this related lesson on this topic and earn Dibs 🪙 while you're at it:

Frugal Living

Budgeting & Saving

6 mins

PERSPECTIVE

Globalization Is Fracturing

The time period in which globalization was conceived largely depends on who you ask. Some would say it began all the way back in the 15th century when the Europeans started exploring the Americas, whereas others think it didn’t truly start until much more recently with travel and communication becoming so much easier than it once was.

Regardless of when it first took off, it’s well known that a globalized economy has been an integral part of making the modern world go round, and for the first time in a long time, it looks like there may be some cracks in the system.

How globalization moves the world

As humans have progressed, we’ve become less and less tribal in nature. In such a big place, eventually being locally biased and domestic-focused will only get you so far. So, we had to expand, and inevitably we did.

The globalized economy we have today is the result of centuries of progression, and it’s changed the world into what it is today. Globalization has given rise to international trade, business expansion, cheaper manufacturing, international finance, and ultimately global investment and development.

But now though, recent events have put globalization as we know it to the test (ahem… issues of energy independence and food security). They haven’t put globalization in question, but they may have undermined it.

But how?

Shaky food security: Raw material shortage? Not a big deal, but international conflict and war? Yeah, that’ll do it. Ukraine is a big exporter of much of the world’s iron, wheat, ore, and many essential oils for food production. This shutdown has inevitably contributed to an increase in food prices, but it’s also contributing to the fracturing, and some are even fearing a global food crisis.
Tariffs: China is obviously the world’s largest exporter, and a lot of those exports go to the US. Over the last 4 years though, our average imposed tariffs on Chinese imports have increased by 6 times what it previously was because of trade wars. That’s a significant bulwark against trade.
A pandemic: This factor almost goes without elaboration. The pandemic forced much of the world to consistently, yet also incongruently, shut down or significantly restrict business as usual, and this contributed a lot to the crack that’s developed in our global economy. The pandemic has caused, and is still causing, backlogs of shipments, delays, shortages—you name it. A gluttony of issues for the world at large.
Global conflict: Although two countries out of an entire world might not seem like much, the ripple effect of international conflicts is where the problem lies. Trying to exclude even one country like Russia from the global loop results in many levels of knock-on negative implications, and tensions between the west, east, NATO, non-NATO… you get the gist. Needless to say, the room is full of elephants. Experts are now suggesting that the world order is changing; there is no longer an uncontested leader that can keep the crowd in check.

PERSONAL FINANCE

Consumer Debt Is On The Rise, What Do We Make Of This?

Debt isn’t always evil. In fact, it kind of makes the modern economy work in a sense. We also know debt is popular and that most of us have some of it, but which kind is the worst?

Aside from mortgages and student loan debt, credit cards and personal loans are the leaders of the secondary, more discretionary debt market, and they both have a dark downside if not treated with care. We already know credit card debt has been on the rise, and apparently personal loans aren’t far behind.

Debtors took on $222 billion dollars of personal loans in 2021, which is a 31% increase from a year prior, and that seems… pretty stark.

The good, the bad, and the ugly

The good: Some accounts are filled with anecdotal stories of individuals who took out loans to fund some necessary expenses, and many of those who do so are using debt shrewdly and with enough tact to make it a net gain. For example, you can get a promotional offer for 0% APR loan in the first year and pay off all your student debt before interest compounds. You then have a consolidated debt you can pay with 0% APR.
The bad: The downside of this same democratization coin is that for each situation where debt benefits, there are likely others where it’s been harmful. With lots of debt-oriented financial products rolling off the fintech line every year, it’s become easier than ever to get into murky waters.
The ugly: Debt’s redeeming quality is usually the borrower having done their due diligence, and ultimately handling that debt responsibly, using it to better their life. So, debt on its own without that financial education to go with it is extremely dangerous, and can easily ruin lives. With a debt spike like this, coinciding with inflation and economic hardship all around, you can’t help but wonder how many will end up better off.

Take this related lesson on this topic and earn Dibs 🪙 while you're at it:

Plan Your Way Out of Debt

Debt Management

7 mins

🔥 TODAY'S MOVERS & SHAKERS

Dollar Tree (+17.6%) and Dollar General (+12.4%) both reported better-than-expected top and bottom-line results for its latest quarter; more consumers turned to discount stores amid higher inflation.
Norwegian Cruise Line (+12.9) as they recently reactivated its entire 17-ship fleet; the sentiment today is that the cruise industry is well on its way to recovering.
Kraft Heinz Company (-7%) on a stock downgrade by UBS citing concerns that high inflation will impact the company's sales and profits; UBS dropped its price target on the stock to $34 from $40.
Bitcoin (-24%) to $29,394.36 over the last 30 days
Ethereum (-35%) to $1,859.88 over the last 30 days

This commentary is as of 8:30 am PDT.

🌊 BY THE WAY

Answer: Inflation. 70% of Americans cited inflation as their top concern. Next was health care affordability at 55% and violent crimes at 54%, according to a recent Pew Research survey (CNBC)
🐻 ICYMI. Some bear market survival tips (Finny Bites)
🙏 Student loan forgiveness could be around the corner. What to do while you wait (CNBC)
B.S. or not? Fun read: Psychologist explains how you eat your food says a lot about you (NYPost)
Finny lesson of the day:

Real Estate Investing Basics

Investing Basics

5 mins

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The Gist is Finny's twice a week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. Finny does not offer investment and stock advice or endorsements. The Gist content team: Austin Payne, Othmane Zizi, Chihee Kim.

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