February 14, 2023

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Good Thursday to you. Today's release of the January CPI report showed that U.S., inflation grew at a 6.4% annual rate, slightly higher than expected and driven by housing costs.

Inflation has surged globally, hitting record-level highs in many countries in 2022. Which one of the following countries is inflation growth expected to be the highest in 2023? a. Argentina, b. Venezuela, c. Zimbabwe. Follow the wave 🌊 below for the answer.

The money topics for today are:

The AI hype
What is supercore inflation?
Be prepared for refund shock this tax season

INVESTING

The AI Hype

ChatGPT was released by OpenAI just two and a half months ago, and it's already taken the world by storm — surpassing over 96M monthly users. This impressive do-it-all conversational AI query tool has incited a media frenzy over the world of artificial intelligence, and it's taking a whole sector of the stock market with it.

Let's check on the AI sector

Overview: For 2022, the artificial intelligence industry (AI) had an approximate global market value of $120B, but it's expected to top $1.5T by 2030 — a 13x expansion from its current state and a resounding compound annual growth rate (CAGR) of 38.1%.
Recent anecdotes: ChatGPT has added some fuel to an already hot fire. Stocks like C3.ai, Versus, Baidu, and even BuzzFeed have all spiked at the notion of incorporating the new tool into their wheelhouse. For comparison's sake, it's worth noting that stocks like $AI and others did a lot of nothing over the last year and up until the ChatGPT hype caught on.
Spreading: OpenAI's release of ChatGPT seems to have sparked a frenzy across the tech world as big names all try to find a way to compete. Google just announced their own Bard AI tool, Bing (Microsoft) is beginning to demo their ChatGPT-powered search, and even the question app Quora recently rolled out a rival AI chatbot app called "Poe."
Into everything: AI is finding its way into everything from healthcare and insurance to writing and bookkeeping, and even one McDonald's in Texas. The startup world is enthralled with the concept and mesmerized by the prospects of supercharged efficiency and scale, and businesses of all pedigrees are beginning to integrate accordingly.
Getting involved, investing-wise: Whether you prefer direct exposure through individual equities, broader sampling by holding an AI-focused fund, or both, there are plenty of options for you. The number of individual AI-related stocks is endless and includes both big and small names from $MSFT and $GOOGL to $AMD and $AI. As for funds, you've got your share of flavors with ETFs like $BOTZ, $ROBO, $DIP, $KOMP, and a bunch of others.

The inevitable outlook

For better and for worse, it's an inevitable truth that artificial intelligence will continue to expand and progressively change the world in ways we can't imagine. It also represents an opportunity across varying industries too, as all of AI's subsequent and adjacent counterparts are continuously integrated into the world at large.

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

Investing in Sectors

Advanced Investing

7 mins

ECONOMY

What is Supercore Inflation?

Inflation has infiltrated the everyday vocabularies of billions across the globe as world economies were whiplashed in the wake of the pandemic. We're only now starting to see some light at the end of this long tunnel.

But who's to say what the actual number is? In the U.S., we've grown accustomed to using our mainstream Consumer Price Index (CPI) as the primary measure of inflation, but we also know it's not the perfect ruler either.

The Federal Reserve knows this too, and that's why they also look at metrics like core inflation — and now also, "supercore" inflation. It's not an official metric, but Jerome Powell has taken quite a liking to it and has even cited it several times in recent Fed meetings, but what the heck is it?

Is that even a thing?

What is it? So, supercore inflation isn't exactly an officially outlined inflation equation like core inflation is, but it's a refined version of that. While core inflation strips out the volatile components of food and energy, supercore zooms in even further and looks directly at the cost of services like those of doctors, lawyers, plumbers, gardeners, hairstylists, and others.
Why does it matter? The cost of services is usually less volatile than food and energy prices, which can better indicate the direction of prices in the U.S. economy. It also gives us a reading on how hot the labor market is, and just how much wages are playing into our overall inflation. This is important because the Fed can more easily influence wages through its rate hikes and contractionary policies.
What this means for inflation: While core inflation ended up 5.7% higher at the end of 2022, supercore was up 6.2% for the year. Core goods have begun to slow their roll, whereas core services are still on the rise. That means labor is becoming increasingly expensive, and the trickle-down implications of this are weighing on inflation, maybe more so than anything else.

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

What is Inflation?

Investing Basics

6 mins

MONEY TIP

Be Prepared For Refund Shock This Tax Season

The average U.S. tax refund in 2019 was $2,476, and by 2021 it had reached $3,039 — a 22% jump. Tax refunds increased during the pandemic, thanks to increased tax credits that were a part of stimulus efforts.

That's all set to change this year as several of the pandemic-era tax credits are set to return to their former selves for the 2022 tax year, likely resulting in a much lower average refund for 2022.

Changes coming

Child tax credit: For 2021, the CTC was increased from $2,000 per child regardless of age to $3,600 per child under age 6 and $3,000 for children ages 6 to 17. Now though, that amount has dropped back to its normal level of $2,000 and will end up adding thousands of dollars in income to the filings of millions.
Dependent care: Under the American Rescue Plan, the child and dependent care tax credit had its ceiling elevated to $8,000 for 2021, but no longer. For 2022, parents will be able to deduct "up to 35% of up to $6,000 in qualifying care expenses" for two or more children.
The EITC: In 2021, the earned income tax credit was increased for a group of often overlooked taxpayers, adults without kids. If your income was low enough, you'd have qualified for a $1,500 tax break here last year, but not for 2022. Now, the credit has been reset to $560.

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

Tax Deductible or Not?

Taxes

8 mins

🌊 BY THE WAY

🌎 Answer: Zimbabwe's inflation is projected to increase by 204.6% in 2023; 195% for Venezuela and 76.1% for Argentina. Following the 8.8% global inflation rate in 2022, the IMF forecasts a 6.6% rate for 2023 and a 4.3% rate for 2024 based on their most recent January 2023 update. See the complete list (Visual Capitalist)
🏷️ U.S. inflation update: Prices increased by 0.5% in January compared with a slower gain of 0.1% in December (USA Today)
📌 ICYMI. Tax tips to help you prepare for April 18th (Finny)
⛽ Why are gas prices so high? (FinMasters)
🤖 What it's like to use Microsoft's AI-powered Bing (Yahoo Finance)
📈 Finny lesson of the day. AI ETFs are rallying this year as ChatGPT hysteria heats up. But, what are ETFs again?

What Are ETFs?

Investing Basics

6 mins

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Finny is a financial wellness platform. The Gist is Finny's twice-a-week (Tues & Thurs) newsletter covering personal finance, market trends and investing insights. The content team: Austin Payne, Carla Olson. Finny does not offer investment and stock advice.

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