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Virtual Capitalist

Located in United States. 22 years old.
by on November 19, 2021
The Briefing The inflation rate in the U.S. has seen its fastest annual increase in over 30 years Fuel, transportation, and meat products are seeing some of the steepest increases Prices have been going up in a number of segments of the economy in recent months, and the public is taking notice. One indicator of this is that search interest for the term “inflation” is higher than at any point in the past decade. Recent data from the Bureau of Labor Statistics highlights rising costs across the board, and shows that specific sectors are experiencing rapid price increases this year. Where is Inflation Hitting the Hardest? Since 1996, the Federal Reserve has oriented its monetary policy around maintaining 2% inflation annually. For the most part, U.S. inflation over the past couple of decades has typically hovered within a percentage point or two of that target. Right now, most price categories are exceeding that, some quite dramatically. Here’s how various categories of consumer spending have fared over the past 12 months: CPI Category One-Year Change Energy commodities 49.5% Used cars and trucks 26.4% Energy services 11.2% New vehicles 9.8% Tobacco and smoking products 8.5% Food at home 5.4% Food away from home 5.3% Transportation services 4.5% Apparel 4.3% Shelter 3.5% Alcoholic beverages 2.2% Medical care services 1.7% Medical care commodities -0.4% Of these top-level categories, fuel and transportation have clearly been the hardest hit. Drilling further into the data reveals more nuanced stories as well. Below, we zoom in on five areas of consumer spending that are particularly hard-hit, how much prices have increased over the past year, and why prices are rising so fast: 1. Gasoline (+50%) Consumers are reeling as prices at the gas pump are up more than a dollar per gallon over the previous year. Simply put, rising demand and constrained global supply are resulting in higher prices. Even as prices have risen, U.S. oil production has seen a slow rebound from the pandemic, as American oil companies are wary of oversupplying the market. Meanwhile, President Biden has identified inflation as a “top priority”, but there are limited tools at the government’s disposal to curb rising prices. For now, Biden has urged the Federal Trade Commission to examine what role energy companies are playing in rising gas prices. 2. Natural Gas (+28%) Natural gas prices have risen for similar reasons as gasoline. Supply is slow to come back online, and oil and natural gas production in the Gulf of Mexico was adversely affected by Hurricane Ida in September. Compared to the previous winter, households could see their heating bills jump as much as 54%. An estimated 60% of U.S. households heat their homes with fossil fuels, so rising prices will almost certainly have an effect on consumer spending during the holiday season. 3. Used Vehicles (+26%) The global semiconductor crunch is causing chaos in a number of industries, but the automotive industry is uniquely impacted. Modern vehicles can contain well over a thousand chips, so constrained supply has hobbled production of nearly a million vehicles in the U.S. alone. This chip shortage is having a knock-on effect on the used vehicle market, which jumped by 26% in a single year. The rental car sector is also up by nearly 40% over the same period. 4. Meats (+15%) Meat producers are facing a few headwinds, and the result is higher prices at the cash register for consumers. Transportation and fuel costs are factoring into rising prices. Constrained labor availability is also an issue for the industry, which was exacerbated by COVID-19 measures. As a top-level category, inflation is high, but in specific animal product categories, such as uncooked beef and bacon, inflation rates have reached double digits over the past 12 months. 5. Furniture and Bedding (+12%) This category is being influenced by a few factors. The spike in lumber prices along with other raw materials earlier in the year has had obvious impacts. Materials aside, actually shipping these cumbersome goods has been a challenge due to global supply chain issues such a port back-ups. How Inflation Could Influence Consumer Spending Rising prices inevitably impact the economy as consumers adjust their buying habits. According to a recent survey, 88% of Americans say they are concerned about U.S. inflation. Here are the top five areas where consumers plan to cut back on their spending: Money saving action % of respondents Cut back on restaurant / take-out meals 48% Keep my current technology (e.g. phone, tablet) instead of upgrading 30% Budget food and cut back on grocery buying 29% Purchase less clothing / accessories 29% Put off home repairs, renovations, or home upgrades 23% Will Inflation Continue to Rise in 2022? Many experts believe that U.S. inflation will decelerate going into 2022, though there’s no consensus on the matter. Improved semiconductor supply and an easing of port congestion around the world could help slow inflation down if nothing goes seriously wrong. That said, if the last few years are any indication, unexpected events could shift the situation at any time. For the near term, consumers will need to adjust to the sticker shock. Where does this data come from? Source: U.S. Bureau of Labor Statistics – Consumer Price Index (November 10, 2021) Data Note: The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers, which represent about 93% of the total U.S. population. CPIs are based on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living.   Source For more postings by Virtual Capitalist, click Here Website
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by on October 20, 2021
Is $1 Million Enough for Retirement in America? The average American needs their retirement savings to last them 14 to 17 years. With this in mind, is $1 million in savings enough for the average retiree? Ultimately, it depends on where you live, since the average cost of living varies across the country. This graphic, using data compiled by GOBankingRates.com shows how many years $1 million in retirement savings lasts in the top 50 most populated U.S. cities. Editor’s note: As one user rightly pointed out, this analysis doesn’t take into account interest earned on the $1 million. With that in consideration, the above calculations could be seen as very conservative figures. How Long $1 Million Would Last in 50 Cities To compile this data, GOBankingRates calculated the average expenditures of people aged 65 or older in each city, using data from the Bureau of Labor Statistics and cost-of-living indices from Sperling’s Best Places. That figure was then reduced to account for average Social Security income. Then, GOBankingRates divided the one million by each city’s final figure to calculate how many years $1 million would last in each place. Perhaps unsurprisingly, San Francisco, California came in as the most expensive city on the list. $1 million in retirement savings lasts approximately eight years in San Francisco, which is about half the time that the typical American needs their retirement funds to last. Search: City How long $1 would last (years) Cost-of-living Index Annual expenditures (after using annual Social Security) Memphis, TN 45.3 76 $22,043 El Paso, TX 40.3 81.4 $24,789 Wichita, KS 39.7 82.1 $25,145 Tulsa, OK 38.8 83.2 $25,705 Indianapolis, IN 38.6 83.5 $25,857 Milwaukee, WI 37.6 84.9 $26,569 Oklahoma City, OK 37.3 85.4 $26,824 Columbus, OH 37.2 85.5 $26,875 Kansas City, MO 36.7 86.2 $27,231 Detroit, MI 35.8 87.6 $27,943 PreviousNext A big factor in San Francisco’s high cost of living is its housing costs. According to Sperlings Best Places, housing in San Francisco is almost 6x more expensive than the national average and 3.6x more expensive than in the overall state of California. Four of the top five most expensive cities on the list are in California, with New York City being the only outlier. NYC is the third most expensive city on the ranking, with $1 million expected to last a retiree about 12.7 years. On the other end of the spectrum, $1 million in retirement would last 45.3 years in Memphis, Tennessee. That’s about 37 years longer than it would last in San Francisco. In Memphis, housing costs are about 2.7x lower than the national average, with other expenses like groceries, health, and utilities well below the national average as well. Retirement, Who? Regardless of where you live, it’s helpful to start planning for retirement sooner rather than later. But according to a recent survey, only 41% of women and 58% of men are actively saving for retirement. However, for some, COVID-19 has been the financial wake-up call they needed to start planning for the future. In fact, in the same survey, 70% of respondents claimed the pandemic has “caused them to pay more attention to their long-term finances.” This is good news, considering that people are living longer than they used to, meaning their funds need to last longer in general (or people need to retire later in life). Although, as the data in this graphic suggests, where you live will greatly influence how much you actually need. Source For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/ Get your mind blown on a daily basis:
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by on October 15, 2021
The Briefing Four industries saw massive growth in the proportion of remote-friendly job postings Nearly one-third of new software and IT service jobs are listed as remote / work-from-home Charting the Continued Rise of Remote Jobs When the pandemic first took hold in 2020, and many workplaces around the world closed their doors, a grand experiment in work-from-home began. Today, well over a year after the first lockdown measures were put in place, there are still lingering questions about whether remote work would now become a commonplace option, or whether things would generally return to the status quo in offices around the world. New data from LinkedIn’s Workforce Report shows that remote work may be here to stay, and could even become the norm in a few key industries. Broadly speaking, 12% of all Canadian paid job postings on LinkedIn offered remote work in September 2021. Prior to the pandemic, that number sat at just 1.3%. While this data was specific to Canada, the country’s similarity to the U.S. means that these trends are likely being seen across the border as well. Which Industries are Embracing Remote Work? The nature of work can vary broadly by job type—for example, mining is tough to do from one’s living room sofa—so remote jobs were not distributed equally across industries. Here are the numbers on job postings that were geared towards remote work: Industry % Remote (Sept 2020) % Remote (Sept 2021) Change (p.p.) Software & IT Services 12.5% 30.0% 17.5 Media & Communications 12.5% 21.3% 8.8 Wellness & Fitness 3.3% 21.2% 17.9 Healthcare 3.2% 14.4% 11.2 Nonprofit 4.6% 14.1% 9.5 Hardware & Networking 2.2% 12.9% 10.7 Corporate Services 5.2% 9.5% 4.3 Education 9.4% 8.8% -0.6 Entertainment 3.0% 7.7% 4.7 Finance 1.8% 6.5% 4.7 Consumer Goods 2.2% 6.0% 3.8 Recreation & Travel 0.2% 3.7% 3.5 Manufacturing 1.4% 3.0% 1.6 Energy & Mining 1.0% 2.7% 1.7 Retail 0.5% 0.7% 0.2 Tech and healthcare industries are showing big shifts towards remote work, with the latter being influenced by a number of tech-driven changes, including telemedicine. Physical distancing measures forced some industries to pivot quickly. Whether virtual fitness and wellness options (e.g. Peloton and Headspace) would remain popular beyond the pandemic was a big question mark, but this jobs data seems to indicate continued digital growth in these industries. What the Future Holds Since COVID-19 outbreaks are still underway, the true test for this trend will be whether these numbers hold up a year or two from now. When offices and gyms are reliably open again, will companies dial back the work-from-home options? Today, hybrid solutions are proving popular amidst worries that fully distributed teams suffer from lower levels of collaboration and communication between colleagues, and that innovation could be stifled by lack of in-person collaboration. Of course, employees themselves are reporting being more productive and happy at home, with 98% of people wanting the option to work remotely for the rest of their careers. It’s clear that the culture of work is undergoing an evolution today, and companies and employees will continue to seek the perfect balance of productivity and happiness. Where does this data come from? Source: LinkedIn’s Workforce Report for September 2021 (Canada) Data Note: LinkedIn analyzed hundreds of thousands of paid remote job postings in Canada posted on LinkedIn between February 2020 and September 21, 2021. A “remote job” is defined as one where either the job poster explicitly labeled it as “remote” or if the job contained keywords like “work from home” in the listing. By Nick Routley Source For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on October 14, 2021
How Does Your Personality Type Affect Your Income? You’ve just finished giving a presentation at work, and an outspoken coworker challenges your ideas. Do you: a) Engage in a friendly debate about the merits of each argument, or b) Avoid a conflict by agreeing or changing the subject? The way you approach this type of situation may influence how much money you earn. Today’s infographic comes to us from Truity, and it outlines the potential relationship between personality type and income. Through the Myers-Briggs Lens The Myers-Briggs personality test serves as a robust framework for analyzing the connection between personality and income, in a way that is easily understood and familiar to many people. The theory outlines four personality dimensions that are described using opposing traits. Extraversion vs. Introversion: Extroverts gain energy by interacting with others, while introverts draw energy from spending time alone. Sensing vs. Intuition: Sensors prefer concrete and factual information, while intuitive types use their imagination or wider patterns to interpret information. Thinking vs. Feeling: Thinkers make rational decisions based on logic, while feelers make empathetic decisions considering the needs of others. Judging vs. Perceiving: Judging types organize their life in a structured manner, while perceiving types are more flexible and spontaneous. For example, someone who aligns with extraversion, sensing, thinking, and judging would be described as an ESTJ type. The researchers surveyed over 72,000 people to measure these four personality preferences, as well as 23 unique facets of personality, income levels, and career-related data. Traits With the Highest Earning Potential Based on the above four dimensions, extroverts, sensors, thinkers, and judgers tend to be the most financially successful. Diving into specific personality characteristics, certain traits are more closely correlated with higher income. Personality Type Average Income Advantage (Annual) Trait(s) Most Correlated With Income Advantage Extroverts $9,347 Expressive, Energetic, Prominent Sensors $1,910 Conceptual Thinkers $8,411 Challenging, Objective, Rational Judgers $6,903 Ambitious   For instance, extroverts are much more likely to have higher incomes if they are quick to share thoughts, have high energy, and like being in the public eye. Thinkers also score high on income potential, especially if they enjoy debates, make rational decisions, and moderate their emotions. The Top Earners Which personality types earn the highest incomes of all? Extroverted thinking types dominate the ranks again. Source: Truity The one exception is INTJs, with 10% earning an annual salary of $150K or more in their peak earning years. Personality and the Gender Pay Gap With all these factors in mind, the researchers analyzed whether personality differences would affect the gender pay gap. When the average salaries were separated for men and women, the results were clear: men of almost all personality types earn more than the average income for the sample overall, while all but two personality types of women earned less than the average. Source: Truity In fact, women with high-earning personality types still earn less than men who do not possess those traits. For example, extroverted women earn about $55,000 annually, while introverted men earn an average of over $64,000. Maximizing Your Potential Are the introverted personalities of the world doomed to lower salaries? Not necessarily—while personality does play a role, many other factors contribute to income levels: Level of education Years of experience Local job market Type of industry The particular career Not only that, anyone can work on the two specific personality traits most aligned with higher incomes: set ambitious goals, and face conflict head-on to ensure your voice is heard. By Jenna Ross Source Get your mind blown on a daily basis:
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by on October 7, 2021
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by on October 7, 2021
In 2020, the stock market and the economy had a very public break up. The Wall Street vs Main Street divide—the gap between America’s financial markets and the economy—was growing. By the end of the year, the S&P 500 Index closed at a record high. In contrast, 20 million Americans remained unemployed, up from 2 million at the start of the year. Was 2020 an outlier, or does the performance of the stock market typically diverge from the economy? In this Markets in a Minute chart from New York Life Investments, we show U.S. economic growth and stock market performance over the last four decades, to see how closely the two relate. GDP Growth and S&P 500 Returns Here’s how annual GDP growth and S&P 500 Index returns stack up from 1980 to the second quarter of 2021. Both metrics are net of inflation. Year Real GDP Growth Real S&P 500 Returns 1980 -0.3% 13.9% 1981 2.5% -18.3% 1982 -1.8% 10.8% 1983 4.6% 13.4% 1984 7.2% -2.5% 1985 4.2% 23.0% 1986 3.5% 12.9% 1987 3.5% -2.2% 1988 4.2% 7.9% 1989 3.7% 22.4% Showing 1 to 10 of 43 entries PreviousNext Note: For Q1 and Q2 2021, real GDP growth and inflation rates are quarterly rates and are seasonally adjusted.   More often than not, GDP growth and S&P 500 Index returns have both been positive. The late ‘90s saw particularly strong economic activity and stock performance. According to the White House, economic growth was bolstered by cutting the deficit, modernizing job training, and increasing exports. Meanwhile, increasing investor confidence and the growing tech bubble led to annual stock market returns that exceeded 20%. In the selected timeframe, only 2008 saw a decline in both the stock market and the economy. This was, of course, caused by the Global Financial Crisis. Banks lent out subprime mortgages, or mortgages to people with impaired credit ratings. These mortgages were then pooled together and repackaged into investments such as mortgage-backed securities (MBS). When interest rates rose and home prices collapsed, this led to mortgage defaults and financial institution bankruptcies as many MBS investments became worthless. Moving in Opposite Directions What about when the Wall Street vs Main Street divide grows? Historically, it has been more common to see positive GDP growth and negative stock performance. For example, real GDP grew by a whopping 7% in 1984 due to “Reaganomics”, such as tax cuts and anti-inflation monetary policy. However, the stock market declined as rising treasury yields of up to 14% made fixed income investments more attractive than equities. On the other hand, in five of the six years with negative GDP growth, there have been positive stock returns. The most recent example of this is 2020. Real GDP declined by 3.5%, while the S&P 500 returned almost 15% net of inflation. The Stock Market is not the Economy There are a number of reasons why the stock market may not necessarily reflect what is happening in the economy. The stock market reflects long-term views. A stock’s price factors in what investors think a company will earn in the future. If investors are confident in the likelihood of an economic recovery, stock prices will likely rise. In contrast, GDP growth is a hard measure of current activity. Sector weightings in the stock market do not reflect their contributions to GDP. The stock market remained resilient in 2020 largely because technology, media, and telecom (TMT) stocks performed well. Despite making up 35% of the market cap of the largest 1,000 U.S. stocks, these companies only account for 8% of U.S. GDP. In contrast, hard-hit companies such as restaurants and gyms generate lots of jobs and contribute materially to GDP. However, many of these businesses accounted for a small portion of the stock market or are not even publicly listed. Fiscal policy lags behind monetary policy. The U.S. Federal Reserve (Fed) can act quickly. For instance, the Fed bought $1.7 trillion of Treasury securities between mid-March and June 2020 to stabilize financial markets. On the other hand, fiscal support requires legislative approvals. The U.S. government initially provided large-scale economic stimulus through the CARES Act in March 2020, but further relief packages were stalled due to political disagreements. While many factors are at play, the above can help explain the Wall Street vs Main Street divide. Wall Street vs Main Street: Together and Apart Over the last 41 years, the economy and the stock market have moved in opposite directions almost as often as they have moved in the same direction. Here’s a summary of their movements from 1980-2020.   # of Years Stock Growth, GDP Growth 22 Stock Decline, GDP Growth 13 Stock Growth, GDP Decline 5 Stock Decline, GDP Decline 1 Since 1980, these time periods of differing performance have never lasted more than three consecutive years. In fact, one economist described the stock market and the unemployment rate as two people walking down the street, tethered by a rope. ”When the rope is slack, they move apart. But they can never get too far away from each other.” —Roger Farmer, University of Warwick economist After their public breakup in 2020, the Wall Street vs Main Street divide appears to have healed. In the first two quarters of 2021, both the stock market and the economy saw growth. Perhaps it’s easiest to sum up their relationship in two words: it’s complicated. By Jenna Ross Source For more postings by Virtual Capitalist, click Here
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by on September 13, 2021
How is the Job Market Shifting Over the Next Decade? The employment landscape is constantly shifting. While agricultural jobs played a big role in the 19th century, a large portion of U.S. jobs today are in administration, sales, or transportation. So how can job seekers identify the fastest-growing jobs of the future? The U.S. Bureau of Labor Statistics (BLS) projects there will be 11.9 million new jobs created from 2020 to 2030, an overall growth rate of 7.7%. However, some jobs have a growth rate that far exceeds this level. In this graphic, we use BLS data to show the fastest-growing jobs—and fastest declining jobs—and how much they each pay. The Top 20 Fastest-Growing Jobs We used the dataset that excludes occupations with above-average cyclical recovery from the COVID-19 pandemic. For example, jobs such as motion picture projectionists, ticket takers, and restaurant cooks were removed. Once these exclusions were made, the resulting list reflects long-term structural growth. Here are the fastest-growing jobs from 2020 to 2030, along with the number of jobs that will be created and the median pay for the position. Occupation Percent employment change, 2020–2030P Numeric employment change, 2020-2030P Median annual wage, 2020 Wind turbine service technicians 68.2% 4,700 $56,230 Nurse practitioners 52.2% 114,900 $111,680 Solar photovoltaic installers 52.1% 6,100 $46,470 Statisticians 35.4% 14,900 $92,270 Physical therapist assistants 35.4% 33,200 $59,770 Information security analysts 33.3% 47,100 $103,590 Home health and personal care aides 32.6% 1,129,900 $27,080 Medical and health services managers 32.5% 139,600 $104,280 Data scientists and mathematical science occupations, all other 31.4% 19,800 $98,230 Physician assistants 31.0% 40,100 $115,390 Showing 1 to 10 of 20 entries PreviousNext Wind turbine service technicians have the fastest growth rate, with solar photovoltaic (solar panel) installers taking the third slot. The rapid growth is driven by demand for renewable energy. However, because these are relatively small occupations, the two roles will account for about 11,000 new jobs collectively. Nine of the top 20 fastest-growing jobs are in healthcare or related fields, as the baby boomer population ages and chronic conditions are on the rise. Home health and personal care aides, who assist with routine healthcare tasks such as bathing and feeding, will account for over one million new jobs in the next decade. This will be almost 10% of all new jobs created between 2020 and 2030. Unfortunately, these workers are the lowest paid on the list. Computer and math-related jobs are also expected to see high growth. The BLS expects strong demand for IT security and software development, partly because of the increase in people that are working from home. The Top 20 Fastest Declining Jobs Structural changes in the economy will cause some jobs to decline quite quickly. Here are the top 20 jobs where employment is expected to decline the fastest over the next decade. Occupation Percent employment change, 2020–2030P Numeric employment change, 2020-2030P Median annual wage, 2020 Word processors and typists -36.0% -16,300 $41,050 Parking enforcement workers -35.0% -2,800 $42,070 Nuclear power reactor operators -32.9% -1,800 $104,040 Cutters and trimmers, hand -29.7% -2,400 $31,630 Telephone operators -25.4% -1,200 $37,710 Watch and clock repairers -24.9% -700 $45,290 Door-to-door sales workers, news and street vendors, and related workers -24.1% -13,000 $29,730 Switchboard operators, including answering service -22.7% -13,600 $31,430 Data entry keyers -22.5% -35,600 $34,440 Shoe machine operators and tenders -21.6% -1,100 $30,630 Showing 1 to 10 of 20 entries PreviousNext Eight of the top 20 declining jobs are in office and administrative support. This could be cause for concern, given this category currently makes up almost 13% of employment in the U.S.—the largest of any major category. Jobs involved in the production of goods and services, as well as sales jobs, are also seeing declines. In all cases, automation is likely the biggest culprit. For example, software that automatically converts audio to text will reduce the need for typists. While the fastest declining jobs typically fall within the lower salary range, there is one outlier. Nuclear power reactor operators, who earn a salary of over $100,000, will see employment decline at a steep rate of -33%. No new nuclear plants have opened since the 1990s, and nuclear power faces steep competition from renewable energy sources. Warning: Education Required As the composition of employment shifts, it eliminates some jobs and creates others. For instance, while production jobs are declining, new opportunities exist for “computer numerically controlled tool programmers.” These workers develop programs to control the automated equipment that processes materials. However, while many of the fastest-growing jobs are higher-paying, they typically also require advanced education.   Top 20 Fastest-Growing Jobs Top 20 Fastest Declining Jobs # with median salary > $41,950 17 5 # with post-secondary education required  16 0 Seventeen of the top 20 fastest-growing jobs have a median salary higher than $41,950, which is the median salary for all jobs in total. Most also require post-secondary schooling. These opportunities are replacing jobs that only required a high school diploma. With tuition costs soaring relative to inflation, this could create challenges for displaced workers or young people entering the workforce. By Jenna Ross Source For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on July 20, 2021
When it comes to breaking down the top 100 companies of the world, the United States still commands the largest slice of the pie. Throughout the 20th century and before globalization reached its current peaks, American companies made the country an economic powerhouse and the source of a majority of global market value. But even as countries like China have made headway with multi-billion dollar companies of their own, and the market’s most important sectors have shifted, the U.S. has managed to stay on top. How do the top 100 companies of the world stack up? This visualization pulls from PwC’s annual ranking of the world’s largest companies, using market capitalization data from May 2021. Where are the World’s Largest Companies Located? The world’s top 100 companies account for a massive $31.7 trillion in market cap, but that wealth is not distributed evenly. Between companies, there’s a wide range of market caps. For example, the difference between the world’s largest company (Apple) and the 100th largest (Anheuser-Busch) is $1.9 trillion. And between countries, that divide becomes even more stark. Of the 16 countries with companies making the top 100 ranking, the U.S. accounts for 65% of the total market cap value. Search: Location # of Companies Market Capitalization (May 2021) United States 59 $20.55T China 14 $4.19T Saudi Arabia 1 $1.92T Switzerland 3 $0.82T Netherlands 3 $0.58T Japan 3 $0.56T PreviousNext Compared to the U.S., other once-prominent markets like Japan, France, and the UK have seen their share of the world’s top 100 companies falter over the years. In fact, all of Europe accounts for just $3.46 trillion or 11% of the total market cap value of the list. A major reason for the U.S. dominance in market values is a shift in important industries and contributors. Of the world’s top 100 companies, 52% were based in either technology or consumer discretionary, and the current largest players like Apple, Alphabet, Tesla, and Walmart are all American-based. The Top 100 Companies of the World: Competition From China The biggest and most impressive competitor to the U.S. is China. With 14 companies of its own in the world’s top 100, China accounted for $4.19 trillion or 13% of the top 100’s total market cap value. That includes two of the top 10 firms by market cap, Tencent and Alibaba. Search:   Company Country Sector Market Cap (May 2021) #1 Apple United States Technology $2,051B #2 Saudi Aramco Saudi Arabia Energy $1,920B #3 Microsoft United States Technology $1,778B #4 Amazon United States Consumer Discretionary $1,558B #5 Alphabet United States Technology $1,393B #6 Facebook United States Technology $839B #7 Tencent China Technology $753B #8 Tesla United States Consumer Discretionary $641B #9 Alibaba China Consumer Discretionary $615B #10 Berkshire Hathway United States Financials $588B PreviousNext Impressively, China’s rise in market value isn’t limited to well-known tech and consumer companies. The country’s second biggest contributing industry to the top 100 firms was finance, once also the most valuable sector in the U.S. (currently 4th behind tech, consumer discretionary, and health care). Other notable countries on the list include Saudi Arabia and its state-owned oil and gas giant Saudi Aramco, which is the third largest company in the world. Despite only having one company in the top 100, Saudi Arabia had the third-largest share of the top 100’s total market cap value. As Europe continues to lose ground year-over-year and the rest of Asia struggles to keep up, the top 100 companies might become increasingly concentrated in just the U.S. and China. The question is, will the imbalance of global market value start to even out, or become even bigger? By Omri Wallach Graphics/Design: Joyce Ma Source:  https://www.visualcapitalist.com/the-top-100-companies-of-the-world-the-u-s-vs-everyone-else/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on July 16, 2021
The Briefing Generation X is the most indebted generation on average, with $140,643 of household debt Younger generations are witnessing their debts growing at a greater pace relative to older Americans Visualizing U.S. Household Debt, by Generation The year 2020 could be categorized as one where debt grew across the board. In the U.S., every generation except the Silent Generation saw their debts rise in the last year. But how much debt does each generational household owe? Generation 2019 2020 Growth (%) Generation Z (18-24) $9,593 $16,043 67.2% Millennials (25-40) $78,396 $87,448 11.5% Generation X (41-56) $135,841 $140,643 3.5% Baby Boomers (57-75) $96,984 $97,290 0.3% Silent Generation (76+) $43,255 $41,281 -4.6% Gen X are the most indebted Americans followed by the Baby Boomers. The breakdown of debt by age group suggests the typical American’s debts grow with adulthood to a certain age, at which point it begins to taper off. Download the Generational Power Report (.pdf) Digging Deeper The types of debt vary in significance for each generation. For instance, the leading source of debt for Gen Z and Millennials are student loans (20%) and credit card bills (25%), respectively. Mortgages on the other hand, are the leading source of debt for Gen X (30%) and Baby Boomers (28%). Collectively, American households have a debt pile of $14.5 trillion, with mortgages representing the majority, at 70%. Here’s how home mortgages by generation breaks down. Generation Portion of Mortgage Debt Silent Generation 4.8% Baby Boomers 29.0% Generation X 42.0% Millennials 24.2% Generation Z -   Given mortgages represent the largest slice and that Gen X is the most indebted household, it stands to reason that at 42%, Gen X carries the most mortgage debt out of any generation. Editor’s note: It should be mentioned that the Federal Reserve is yet to include Gen Z in some of their data. Zooming Out Though debts are rising for most U.S. households, they still pale in comparison to other countries. Here’s how household U.S. debt ranks on the international stage. Country / Territory Household Debt to GDP (September 2020) Switzerland 131% Australia 122% Norway 112% Denmark 112% Canada 110% Netherlands 104% South Korea 101% New Zealand 95% Sweden 93% United Kingdom 89% Hong Kong SAR 88% U.S. 78% The U.S. ranks 12th in global household debt to GDP rankings. In addition to being the largest economy by GDP, America’s GDP per capita remains one of the highest out of major countries, suggesting these high debts by generation are in part offset by high incomes. Looking Ahead Increasing debts have been manageable due to a low interest rate environment. This has persisted for well over a decade, and is expected to remain the case for the near future. Whether this can hold steady in the long run is still largely unknown. Where does this data come from? Source: Federal Reserve, Experian Notes: Household debt to GDP data is as of September 2020 By Aran Ali Source:  https://www.visualcapitalist.com/visualizing-u-s-household-debt-by-generation/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on July 8, 2021
This infographic is available as a poster. Can Foreign Currencies Act as an Inflation Hedge? Inflation is like corrosion. Initially, it can make investment returns less attractive. Over time, it can significantly eat away at an investment’s value. For U.S. investors looking for an inflation hedge, holding foreign currencies may be one option. But just how effective are they at managing inflation risk? In this Markets in a Minute chart from New York Life Investments, we look at how the performance of foreign currencies compared to U.S. inflation rates over the last four decades. How to Hedge Against Inflation Inflation reduces the value of a dollar over time. To manage this risk, investors look for returns that are higher than the inflation rate. For example, a currency that appreciates 6% during 2% inflation may be considered a relatively good inflation hedge. What makes a currency appreciate? A currency will perform well against the U.S. dollar if investors consider the issuing economy to be strong. This is because foreign investors will look to purchase investments in the applicable currency, driving up its demand. Foreign Currency Appreciation vs. U.S. Inflation Here is how the four largest non-U.S. reserve currencies have performed from 1981-2020. We measured a foreign currency’s appreciation against the U.S. dollar using annual exchange rates. U.S. inflation was measured by the percentage change in the average consumer price index for all urban consumers. Neither metric was seasonally adjusted. Year Average U.S. Inflation European euro Chinese yuan Japanese yen British pound 2020 1.2% 1.9% 0.1% 2.1% 0.5% 2019 1.8% -5.6% -4.5% 1.3% -4.7% 2018 2.4% 4.4% 2.2% 1.5% 3.5% 2017 2.1% 2.0% -1.8% -3.2% -5.2% 2016 1.3% -0.2% -5.7% 10.2% -12.8% 2015 0.1% -19.8% -2.0% -14.5% -7.9% 2014 1.6% 0.1% -0.2% -8.3% 5.1% 2013 1.5% 3.2% 2.6% -22.3% -1.4% 2012 2.1% -8.3% 2.4% -0.2% -1.2% 2011 3.1% 4.8% 4.5% 9.2% 3.7% 2010 1.6% -5.1% 0.9% 6.3% -1.4% PreviousNext   Note: The euro was created in 1999, which is why annual appreciation data against the U.S. dollar is not applicable prior to 2000. The Chinese yuan / U.S. dollar foreign exchange rate was not available for 1980, which is why annual appreciation for 1981 is unavailable.   The Best and Worst Inflation Hedges, Historically Based on available data, here is the percentage of time each currency’s annual appreciation was greater than the U.S. inflation rate. European euro Chinese yuan Japanese yen British pound 43% 18% 48% 33%   The Japanese yen acted as the best inflation hedge, with its annual appreciation beating U.S. inflation 48% of the time. Demand for the safe haven currency has historically been strong for three main reasons: After the Japanese banking crisis of the late 1990s, the government introduced a number of policy measures. This helped Japan enter the global financial crisis with a relatively stable banking system. Japan is the largest creditor nation, meaning the value of foreign assets held by Japanese investors is higher than the value of Japanese assets owned by foreign investors. In times of market uncertainty, the money of Japanese investors tends to return home—driving up demand for the yen. To take advantage of near-zero interest rates in Japan, investors conduct “carry trades” where they borrow funds in Japan and lend or invest in countries where returns are higher. During turbulent markets, investors may unwind these trades, furthering demand for the yen. The Chinese yuan has been the worst inflation hedge, with the yuan’s appreciation beating U.S. inflation only 18% of the time since 1982. This is perhaps not surprising, given that the yuan was pegged against the U.S. dollar in 1994 to keep the yuan low and make China’s exports competitive. In 2005, China moved to a “managed float” system where the price of the yuan is allowed to fluctuate in a narrow band relative to a basket of foreign currencies. This shift led to the yuan appreciating against the U.S. dollar in some years. The Risks of Currency as an Inflation Hedge As the chart makes clear, investing in foreign currencies can be very volatile. Not only can currency depreciation lead to losses, there are additional factors for investors to consider such as geopolitical risks. Of course, the effectiveness of foreign currencies as an inflation hedge depends on their attractiveness relative to the U.S. dollar. If a country is also affected by the factors causing U.S. inflation—such as an increase in the money supply—its currency could be negatively affected. Given the uncertainties associated with this strategy, investors may want to consider foreign currencies alongside other asset classes to help manage inflation risk. Published By Jenna Ross Source:  https://advisor.visualcapitalist.com/can-foreign-currencies-act-as-an-inflation-hedge/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on June 25, 2021
U.S. inflation has climbed 5% over the last year, the largest 12-month increase since August 2008. With this in mind, many investors may be wondering how to position their portfolio to hedge against inflation. In this Markets in a Minute chart from New York Life Investments, we show which asset classes have beat inflation in recent years. Real Returns by Asset Class To see which asset classes have helped hedge against short-term inflation, we calculated annual real returns—returns net of inflation—for various types of investments. A return above zero means that the asset class beat inflation, while a return below zero means that the asset class did not keep up with inflation. Here are minimum, median, and maximum annual real returns for various asset classes from 2012-2020.   Minimum Median Maximum Global equities -11.6 15.4 24.5 U.S. large cap equities -6.3 14.3 30.9 Listed infrastructure equities -8.8 12.3 23.8 Real estate investment trusts (REITs) -7.3 7.2 26.4 Gold -28.8 6.0 23.2 U.S. treasury inflation protected securities (TIPS) -10.1 2.6 9.6 Foreign bonds -9.6 1.8 14.1 Floating rate bonds -0.4 0.0 2.2 Global commodities -33.9 -2.7 15.3 Energy equities -38.0 -11.5 36.7   Global equities had the highest median real return in recent years, followed by U.S. large cap equities and listed infrastructure equities. Gold beat inflation about half the time, though in its worst year (2013) it was almost 30% below inflation. At that time, the U.S. Federal Reserve announced it would end quantitative easing measures, which decreased the perceived need for gold as a hedge. Global commodities and energy equities had the only negative median real returns of the group. However, energy equities also had the highest maximum return over the last decade, and proved to be the most volatile asset class of the group. Hedging During High Inflation Of course, there are some limitations to this data. U.S. annual inflation has been relatively low in recent years, averaging under the Federal Reserve’s 2% target. Asset classes may respond differently during periods of high inflation. For example, equities have shown their highest real returns when inflation is between 2% to 3%. However, returns may become more volatile when inflation is high, because it can increase costs and reduce earnings. On the flip side, some asset classes perform better during periods of high inflation. While commodities had a negative median real return in recent years, they performed well during three historical periods of high inflation. When annual inflation averaged about 4.6% from 1988-1991, commodities had a total annualized return of over 20%. Total annualized returns show what an investor would have earned over a given time period if returns were compounded. Gold has had a more mixed track record during high inflation, though it had a whopping annualized return of 35% from 1973-1979. The ability for an asset class to hedge against inflation can also depend on the timeframe. For example, over the long-term, gold has seen strong inflation-adjusted returns. Time to Take Action? U.S. Federal Reserve chair Jerome Powell believes rising U.S. inflation is temporary. Prices decreased sharply at the onset of the pandemic, making year-over-year inflation figures look much larger. He also believes supply bottlenecks are temporary as industries have been caught with soaring demand amid a quick reopening. However, some Fed officials say the economy is in unprecedented territory, and it’s hard to know where inflation will go next. What can investors do? There is no one asset class that has proven to be a silver bullet against inflation historically. Instead, investors may consider diversifying their portfolio with asset classes such as equities, REITs, commodities, and gold. This may help hedge against inflation, whether it stabilizes around 2% or rises to levels not seen for decades. By Jenna Ross Source:  https://advisor.visualcapitalist.com/which-asset-classes-hedge-against-inflation/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on June 11, 2021
Is inflation rising? The consumer price index (CPI), an index used as a proxy for inflation in consumer prices, offers some answers. In 2020, inflation dropped to 1.4%, the lowest rate since 2015. By comparison, inflation sits around 2.5% as of June 2021. For context, recent numbers are just above rates seen in 2019, which were 2.3%. Given how the economic shock of COVID-19 depressed prices, rising price levels make sense. However, other variables, such as a growing money supply and rising raw materials costs, could factor into rising inflation. To show current price levels in context, this Markets in a Minute chart from New York Life Investments shows the history of inflation over 100 years. U.S. Inflation: Early History Between the founding of the U.S. in 1776 to the year 1914, one thing was for sure—wartime periods were met with high inflation. At the time, the U.S. operated under a classical Gold Standard regime, with the dollar’s value tied to gold. During the Civil War and World War I, the U.S. went off the Gold Standard in order to print money and finance the war. When this occurred, it triggered inflationary episodes, with prices rising upwards of 20% in 1918. Show entries Search: Year Inflation Rate* 1914 1.0% 1915 2.0% 1916 12.6% 1917 18.1% 1918 20.4% 1919 14.6% 1920 2.7% 1921 -10.8% 1922 -2.3% 1923 2.4% Showing 1 to 10 of 108 entries PreviousNext   Source: Macrotrends (June, 2021) *As measured by the Consumer Price Index (CPI) However, when the government returned to a modified Gold Standard, deflationary periods followed, leading prices to effectively stabilize, on average, leading up to World War II. The Move to Bretton Woods Like post-World War I, the Great Depression of the 1930s coincided with deflationary pressures on prices. Due to the rigidity of the monetary system at the time, countries had difficulty increasing money supply to help boost their economy. Many countries exited the Gold Standard during this time, and by 1933 the U.S. abandoned it completely. A decade later, with the Bretton Woods Agreement in 1944, global currency exchange values pegged to the dollar, while the dollar was pegged to gold. The U.S. held the majority of gold reserves, and the global reserve currency transitioned from the sterling pound to the dollar. 1970’s Regime Change By 1971, the ability for gold to cover the supply of U.S. dollars in circulation became an increasing concern. Leading up to this point, a surplus of money supply was created due to military expenses, foreign aid, and others. In response, President Richard Nixon abandoned the Bretton Woods Agreement in 1971 for a floating exchange, known as the “Nixon shock”. Under a floating exchange regime, rates fluctuate based on supply and demand relative to other currencies. A few years later, oil shocks of 1973 and 1974 led inflation to soar past 12%. By 1979, inflation surged in excess of 13%. The Volcker Era In 1979, Federal Reserve Chair Paul Volcker was sworn in, and he introduced stark changes to combat inflation that differed from previous regimes. Instead of managing inflation through interest rates, which the Federal Reserve had done previously, inflation would be managed through controlling the money supply. If the money supply was limited, this would cause interest rates to increase. While interest rates jumped to 20% in 1980, by 1983 inflation dropped below 4% as the economy recovered from the recession of 1982, and oil prices rose more moderately. Over the last four decades, inflation levels have remained relatively stable since the measures of the Volcker era were put in place. Fluctuating Prices Over History Throughout U.S. history. there have been periods of high inflation. As the chart below illustrates, at least four distinct periods of high inflation have emerged between 1800 and 2010. The GDP deflator measurement shown accounts for the price change of all of an economy’s goods and services, as opposed to the CPI index which is a fixed basket of goods. It is measured as GDP Price Deflator = (Nominal GDP ÷ Real GDP) × 100. According to this measure, inflation hit its highest levels in the 1910s, averaging nearly 8% annually over the decade. Between 1914 and 1918 money supply doubled to finance war efforts, compared to a 25% increase in GDP during this period. U.S. Inflation: Present Day As the U.S. economy reopens, consumer demand has strengthened. Meanwhile, supply bottlenecks, from semiconductor chips to lumber, are causing strains on automotive and tech industries. While this points towards increasing inflation, some suggest that it may be temporary, as prices were depressed in 2020. At the same time, the Federal Reserve is following an “average inflation targeting” regime, which means that if a previous inflation shortfall occurred in the previous year, it would allow for higher inflationary periods to make up for them. As the last decade has been characterized by low inflation and low interest rates, any prolonged period of inflation will likely have pronounced effects on investors and financial markets. By Dorothy Neufeld Source:  https://advisor.visualcapitalist.com/inflation-over-last-100-years/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on June 1, 2021
How Rising Treasury Yields Impact Your Portfolio Since the start of 2021, the yield on the U.S. 10-year Treasury note has climbed to pre-pandemic levels. But what exactly does this mean, and how could it impact your portfolio? In this Markets in a Minute from New York Life Investments, we explain why Treasury yields are important and which investments may go up or down when yields are rising. What are Treasury Yields? Treasury yields are the total amount of money you earn from U.S. debt securities, such as bonds and T-bills. Yields depend on both the security’s price, relative to its face value, and its “coupon” or interest payment. The 10-year yield is important because it is closely-watched indication of market sentiment. Here’s what leads to changing Treasury yields: When investors expect the market to drop, they look for safer investments. Due to higher bond demand, prices rise. This lowers their yield, as bonds become more expensive than they were before. The opposite occurs when the market is bullish. When investors expect the market to rise, they look for riskier investments. Due to less bond demand, prices drop. This raises their yield, as bonds become more cost effective. Currently, Treasury yields are in the latter scenario because investors are confident in a sustained recovery as vaccines are rolled out and the economy reopens. Investments That May Go Up During Rising Yields Rising yields can have a number of knock-on effects in the market. Here are the investments that could increase in value when yields are going up. Investment Why could returns potentially increase? U.S. dollar Rising yields attract income-seeking investors, who must purchase U.S. debt in U.S. dollars Savings accounts If the economy is growing at a rate that may lead to hyperinflation, the central bank may raise interest rates  REITs While rising rates pose challenges, economic growth typically translates into a higher level of real estate demand Cyclical stocks Stocks that move with the economy, like banks, tend to do well during economic recoveries   Cyclical stocks, such as banks, travel, and energy, may all benefit from an economic recovery. This is particularly true for banks if the economy is growing at a rate that exceeds inflation targets, as the central bank may raise interest rates. In turn, this allows banks to earn a higher profit margin because they can charge a higher rate on their loans. While it is commonly said that real estate investment trusts (REITs) underperform during rising interest rates, the data tells a different story. In four of six periods of sustained rising yields, REITs earned positive returns—and they outperformed stocks in half of them. Source: S&P Dow Jones Indices Rising rates do pose challenges, including higher borrowing costs and lower property values. However, it’s evident that rising rates also have a positive influence on REITs. For instance, rising rates are typically associated with economic growth, which translates to higher real estate demand and higher occupancy rates. This means REITs can see increased earnings and dividends. Investments That May Go Down During Rising Yields On the flip side, there are some investments that could decrease in value when yields climb. Investment Why could returns potentially decrease? Bonds To remain competitive, newly issued bonds offer higher interest rates—making existing bonds less attractive Dividend-paying stocks Rising rates give an edge to newly issued bonds, creating a historically safer alternative for income-seeking investors Gold As a safe haven asset, gold is less desirable during market optimism Some growth stocks Rising interest rates make borrowing more expensive, which may slow company growth   Existing bonds will likely see declining performance, with higher volatility among long-term government and corporate bonds. Short-term bonds typically see smaller drops. This is because they have less interest rate risk: there’s a smaller probability that interest rates will rise before a short-term bond’s maturity, and they have fewer interest payments that could be affected by rising rates. Growth stocks, such as those in the technology sector, may also see weaker performance. In fact, value stocks have been outperforming growth stocks since the fourth quarter of 2020, a significant shift from growth’s strong historical performance in recent years. U.S. Treasury Yields: One Part of the Picture In addition to being a barometer for investor confidence, Treasury yields can have an important impact on your portfolio. However, investment performance can vary depending on a number of other economic factors such as inflation and interest rate levels. For example, climbing inflation could lead to higher gold prices, since gold is seen as an inflationary hedge. You may want to consider the full economic picture when you are reviewing your portfolio. By Jenna Ross Source:  https://advisor.visualcapitalist.com/how-rising-treasury-yields-impact-your-portfolio/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/  
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by on May 28, 2021
The Briefing Amazon plans to acquire Metro-Goldwyn-Mayer (MGM) for $8.45 billion This move would add 4,000 films and 17,000 TV shows to Amazon Studios’ content library Amazon’s Most Notable Acquisitions To Date Big Tech just keeps getting bigger. On May 26, 2021, Amazon announced its plan to acquire Metro-Goldwyn-Mayer (MGM) studios for $8.45 billion, making it the company’s second largest acquisition to date. Amazon has acquired multiple companies across a variety of sectors from healthcare to entertainment, helping diversify its core revenue. In total, the tech giant has acquired or invested in over 128 different companies over the last 20 years. Top 10 Amazon Acquisitions by Value In 2017, Amazon paid $13.7 billion to purchase Whole Foods Market—this remains the company’s largest acquisition to date. The Whole Foods acquisition provided brick-and-mortar space for Amazon to sell some of its flagship devices, like the Echo Dot. It also allowed Amazon to gather valuable shopping data on its customers, to better understand their offline shopping preferences. Here’s how Amazon’s top 10 acquisitions by value stack up in comparison: Rank Company Acquired Announced Date Acquisition Value #1 Whole Foods Market Jun 16, 2017 $13.7 billion #2 Metro-Goldwyn-Mayer May 26, 2021 $8.5 billion #3 Zoox Jun 26, 2020 $1.2 billion #4 Zappos Jul 22, 2009 $1.2 billion #5 Ring Feb 27, 2018 $970 million #6 PillPack Jun 28, 2018 $839 million #7 Twitch Aug 25, 2014 $775 million #8 Kiva Systems Mar 19, 2012 $753 million #9 Souq Mar 27, 2017 $580 million #10 Quidsi Nov 8, 2010 $545 million Prior to Wednesday’s announcement, the purchase of robotaxi company Zoox was Amazon’s second largest acquisition. According to their reported agreement, Amazon has the rights to use Zoox’s transport technology for ride-hailing or logistics (delivery) services. The acquisition of MGM will add 21,000 films and TV shows to Amazon’s content library, helping Amazon keep up with the fierce competition in the content streaming industry. MGM owns the rights to “The Handmaid’s Tale” series and “Shark Tank,” as well as the James Bond and Rocky franchises. Full List: Amazon’s Most Notable Acquisitions While far from exhaustive, here’s a look at some of Amazon’s most notable acquisitions since 1998, as shown in the graphic: Search: Year Company Acquired Acquisition Value Post-Acquisition Status 1998 IMDb $55,000,000 Active under own name 1999 LiveBid.com $300,000,000 Incorporated/defunct 1999 PlanetAll $280,000,000 Incorporated/defunct 1999 Alexa Internet $250,000,000 Active under own name 1999 Junglee $250,000,000 Incorporated/defunct 2008 Audible $300,000,000 Active under own name 2009 Zappos $1,200,000,000 Active under own name 2010 Quidsi $545,000,000 Incorporated/defunct 2011 LoveFilm $312,000,000 Incorporated/defunct 2012 Kiva Systems $775,000,000 Incorporated/defunct 2014 Twitch Interactive $970,000,000 Active under own name 2015 Elemental Technologies $500,000,000 Incorporated/defunct 2015 Annapurna Labs $350,000,000 Incorporated/defunct 2017 Whole Foods Market $13,700,000,000 Active under own name 2017 Souq.com $580,000,000 Incorporated/defunct 2018 Ring $839,000,000 Active under own name 2018 PillPack $753,000,000 Active under own name 2019 CloudEndure $250,000,000 Incorporated/defunct 2019 Eero $97,000,000 Incorporated/defunct 2020 Zoox $1,200,000,000 Active under own name 2021 Metro-Goldwyn-Mayer $8,450,000,000 Active under own name Showing 1 to 21 of 21 entries   »Like this? Then you might enjoy this full length article on the Biggest Tech Mergers and Acquisitions of 2020 Source:  https://www.visualcapitalist.com/most-notable-amazon-acquisitions/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on May 21, 2021
The Briefing Bitcoin had its latest price correction, pulling back more than 50% from its all-time highs Elon Musk’s tweet announcing Tesla’s suspension of bitcoin purchases accelerated the price drop Bitcoin’s Latest Crash: Not the First, Not the Last While bitcoin has been one of the world’s best performing assets over the past 10 years, the cryptocurrency has had its fair share of volatility and price corrections. Using data from CoinMarketCap, this graphic looks at bitcoin’s historical price corrections from all-time highs. With bitcoin already down ~15% from its all-time high, Elon Musk’s tweet announcing Tesla would stop accepting bitcoin for purchases helped send the cryptocurrency down more than 50% from the top, dipping into the $30,000 price area. “Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” – @Elonmusk Crypto Cycle Top or Bull Run Pullback? It’s far too early to draw any conclusions from bitcoin’s latest drop despite 30-40% pullbacks being common pit stops across bitcoin’s various bull runs. While this drop fell a bit more from high to low than the usual bull run pullback, bitcoin’s price has since recovered and is hovering around $39,000, about a 40% drop from the top. Whether or not this is the beginning of a new downtrend or the ultimate dip-buying opportunity, there has been a clear change in sentiment (and price) after Elon Musk tweeted about bitcoin’s sustainability concerns. The Decoupling: Blockchain, not Bitcoin Bitcoin and its energy intensive consensus protocol “proof-of-work” has come under scrutiny for the 129 terawatt-hours it consumes annually for its network functions. Some other cryptocurrencies already use less energy-intensive consensus protocols, like Cardano’s proof-of-stake, Solana’s proof-of-history, or Nyzo’s proof-of-diversity. With the second largest cryptocurrency, Ethereum, also preparing to shift away from proof-of-work to proof-of-stake, this latest bitcoin drop could mark a potential decoupling in the cryptocurrency market. In just the past two months, bitcoin’s dominance in the crypto ecosystem has fallen from over 70% to 43%. Date Bitcoin Dominance Ethereum Dominance Other Cryptocurrency End of 2020 70.98% 11.09% 17.93% January 63.09% 15.39% 21.52% February 61.73% 11.96% 26.31% March 60.19% 12.14% 27.67% April 50.18% 14.92% 34.90% May 43.25% 18.59% 38.16% Source: TradingView While the decoupling narrative has grown alongside Ethereum’s popularity as it powers NFTs and decentralized finance applications, it’s worth noting that the last time bitcoin suffered such a steep drop in dominance was the crypto market’s last cycle top in early 2018. For now, the entire crypto market has pulled back, with the total cryptocurrency space’s market cap going from a high of $2.56T to today’s $1.76T (a 30% decline). While the panic selling seems to have finished, the next few weeks will define whether this was just another dip to buy, or the beginning of a steeper decline. »Like this? Here’s another article you might enjoy: Why the Market is Thinking about Bitcoin Differently Source:  https://www.visualcapitalist.com/bitcoin-historical-corrections-from-all-time-highs/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/  
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by on May 19, 2021
The Briefing U.S. household debt stands at $14.56 trillion, and has doubled since 2003 Student loan debt has expanded a colossal 550% in the same time frame The State of Household Debt in America American households are becoming increasingly indebted. In 2003, total household debt was $7.23 trillion, but that figure has recently doubled to $14.56 trillion in 2020. With just under 130 million households in the country, this equates to an average of $118,000 of debt per household. Here’s how the various forms of U.S. household debt compare. Type of Debt 2003 (in trillions) 2020 (in trillions) % Growth Mortgage $4.94 $10.04 +103% Home Equity Revolving $0.24 $0.35 +45% Auto Loan $0.64 $1.37 +137% Credit Card $0.69 $0.82 +18% Student Loan $0.24 $1.56 +550% Other $0.48 $0.42 -12% Total $7.23 $14.46 100% Mortgages: Steep Price to Pay for Home Ownership Making up roughly 70% of all household debt, and growing $5.1 trillion since 2003, mortgage debt now stands at $10.04 trillion. A fundamental driver of mortgage activity is interest rates. Given the two variables tend to have an inverse relationship with one another, interest rates have a big impact on the affordability of housing. As long as U.S. interest rates remain near 200-year lows, its likely mortgages will maintain at elevated levels. Students Continue Struggling with Student Debt The second-largest form of debt is student loans. Although not quite the size of mortgages in raw dollars, student debt is the fastest growing as a percentage, having shot up 550% from 2003 to 2020. The topic of debt is highly discussed in today’s political and economic climate. That’s largely because debt has risen on all fronts to unprecedented levels. For example, the U.S. national debt has recently passed $27 trillion while corporate debt stands at $10.5 trillion. Throw the aforementioned household debt into the mix and you have a $52 trillion debt pile. That’s a big bill to pay. Source:  https://www.visualcapitalist.com/the-state-of-household-debt-in-america/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on May 13, 2021
Visualizing Interest Rates by Country in 2021 Going as far back as the 14th century, pandemics have been found to have a negative effect on interest rates. History shows that this effect is even greater than that of financial crises. Across a study of 19 pandemics since the mid-1300s, real interest rates fell an average of 1.5 percentage points lower in the following two decades than they would have otherwise. And yet, even before COVID-19, structural forces, such as rising debt, were causing interest rates to fall. The above Markets in a Minute chart from New York Life Investments shows interest rates by country in 2021. How Have Interest Rates Changed? Broadly speaking, the majority of countries’ short-term interest rates have declined since COVID-19 began. Using data from CEIC as of April 2021, short-term interest rates are measured by three-month money market rates where available. Interest rate change Apr 2020 – Mar 2021 Interest rates fell: 69 countries Interest rates increased: 10 countries Interest rates stayed the same: 3 countries Across nearly every continent, interest rates have decreased as central banks enacted measures to combat the economic fallout of COVID-19. Show entries Search: Country/ Region Short-Term Interest Rate Mar 2021 (%)* Short-Term Interest Rate Apr 2020 (%)** Interest Rate Change 2020-2021 (%) Argentina 31 12.4 18.6 Australia 0.0 0.1 -0.1 Austria -0.5 -0.3 -0.2 Bangladesh 0.7 7.1 -6.4 Belarus 13.9 10.6 3.3 Belgium -0.5 -0.3 -0.2 Bolivia 11.5 8.6 2.9 Botswana 3.5 4.4 -0.9 Cambodia 1.8 1.6 0.2 Canada 0.1 0.3 -0.2 Showing 1 to 10 of 82 entries PreviousNext   Source: CEIC (Apr, 2021) *Bolivia, Botswana, Costa Rica, Japan, Mauritius, Nepal, Qatar, Russia, Slovakia, Zambia have most recent data as of Feb ’21 **Costa Rica, Denmark, Mauritius, Norway & Russia have 2020 data as of Mar 2020 In the U.S., interest rates fell to record lows, dropping by 0.1 percentage points between April 2020 and March 2021. As vaccine rollouts accelerated in 2021, real GDP grew by an annual rate of 6.4% in the first quarter. Unemployment slightly improved to 6.1%, but still remains well above pre-pandemic levels of 3.5%. Given these variables, the question of whether interest rates will rise is an open one. Like the U.S., interest rates in the European Union declined, although at a greater rate—from -0.3% to -0.5%. To help improve economic conditions, the European Central Bank promises to purchase $2.2 trillion in government bonds until March 2022. Together, the euro area, the U.S., Japan, and Britain have produced at least $3.8 trillion in new money supply since early 2020. Interest Rates: The Steepest Gains and Declines As money creation and low interest rates have become increasingly common phenomena, the focus has shifted to inflation. With interest rates reaching 343% in 2020, Venezuela has been a poster child for hyperinflationary forces. Energy shortages only compounded the effect which was well underway before the pandemic. Between April 2020 and March 2021, interest rates jumped over 50 percentage points. In addition, Turkey and Brazil raised interest rates in March 2021 to dampen inflation. Interest rates in Turkey have increased 11.6 percentage points over the time frame, one of the highest absolute changes globally. In 2020, the lira faced historic declines, causing the price of imports to climb significantly. On the other hand, Bangladesh has seen its interest rates decline 6.4 percentage points, the steepest drop across the dataset. To help offset the effects of COVID-19, the Bangladesh Bank lowered interest rates from 7.1% to 0.7%. With rates falling 3.2 percentage points, Nigeria has also seen one of the greatest interest rate drops. In March, Fitch Ratings gave the country a B rating with a stable outlook, supported by its low government debt-to-GDP ratio and large economy. Research has found that countries with better credit ratings and transparent fiscal infrastructure had greater ability for central banks to lower interest rates in response to the crisis. Sign of the Times Policy rate changes, a key central bank maneuver, have been an important tool in response to COVID-19. As economic activity in some countries picks up, interest rates could rise. However, progress in vaccination distribution remains uncertain, especially in emerging markets. In tandem with this, global central banks are applying unproven monetary policy frameworks, including money creation and large-scale bond purchases. While studies show that interest rates have been falling over the past several centuries, the confluence of these factors will be revealing in the years that follow. Source:  https://advisor.visualcapitalist.com/interest-rates-by-country-2021/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on April 2, 2021
U.S. Stock Ownership Over Time (1965-2019) The U.S. stock market is the largest in the world, with total U.S. stock ownership amounting to almost $40 trillion in 2019. But who owns all these equities? In this Markets in a Minute from New York Life Investments, we show the percentage of U.S. stock owned by various groups, and how the proportions have changed over time. The Groups Who Own U.S. Stock Based on calculations from the Tax Policy Center, here is the breakdown of U.S. stock ownership as of the year 2019. Category Share of U.S. Stock Value Foreigners 40% $16.0T Retirement accounts 30% $12.0T Taxable accounts 24% $9.5T Non-profits 5% $2.0T Government 1% $368B   Foreigners own the most U.S. stock. Their portion of ownership has grown rapidly, climbing from about 5% in 1965 to 40% in 2019. Foreign ownership exists in two forms: portfolio holdings and foreign direct investment. The former includes holdings with less than 10% of voting stock, while the latter refers to voting stock of 10% or more. Why has foreign ownership increased so substantially? According to the Tax Policy Center, the growth appears unrelated to U.S. corporate tax rates. Instead, the increase is likely a result of globalization, as U.S. holdings of foreign stock climbed at a similar rate over the same timeframe. Outside of foreigners, the largest domestic ownership groups are retirement accounts and taxable accounts. Stock ownership within taxable accounts has decreased by 56 percentage points since 1965. On the flip side, U.S. households have increased stock ownership within tax-advantaged retirement accounts, which now amounts to 30% of all U.S. stock holdings. Retirement Accounts: A Closer Look The proportion of U.S. stock held in defined benefit plans has decreased substantially since 1965. Note: life insurance separate accounts are reserves that fund annuities or life insurance policies. This drop is partly due to the general decline in private employers offering defined benefit plans. Since these pension plans guarantee employees a set amount in retirement, they present a large long-term funding burden. At the same time, there has been a corresponding increase in U.S. stock ownership within defined contribution plans and individual retirement accounts (IRAs). This reflects the fact that many investors are facing more responsibility, as they must take charge of their portfolios in order to build a sufficient nest egg for retirement. The Future of U.S. Stock Ownership Compared to 50 years ago, the composition of U.S. stock ownership today looks very different. Foreign ownership has increased as globalization took hold, though it’s hard to say if this rise will continue. Since 2017, foreign direct investment in the U.S. has decreased. Not only that, China surpassed the U.S. as the top destination for foreign direct investment in 2020. In addition, the shift to particular tax-advantaged retirement accounts has been a relatively recent one. For instance, IRAs didn’t exist before 1978, and defined contribution plans started becoming popular in 1980. As circumstances continue to evolve, how will U.S. stock ownership change over the next 50 years? Source:  https://advisor.visualcapitalist.com/u-s-stock-ownership-over-time/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on March 15, 2021
The Briefing The U.S. and China contain the most ultra high net worth (UHNW) individuals in the world Asia is expected to see the fastest growth in UHNW population over the next five years The Top 20 Countries for Ultra High Net Worth Individuals Despite the global hardships of the COVID-19 pandemic, the world’s ultra high net worth (UHNW) population increased by 2.4% in 2020, reaching an all-time high of 521,653. In this chart, we’ve used data from The Wealth Report 2021 by Knight Frank to list the 20 countries with the most UHNW individuals. What is Considered Ultra High Net Worth? To be considered an UHNW individual, one must have a net worth of at least $30 million. Net worth is a measure of someone’s current financial position, and is calculated as the value of their assets minus their liabilities. The following table lists examples of each: Assets Liabilities Primary residence Investment portfolio (stocks, bonds, etc.) Cars, boats, and other physical assets Mortgages Credit card balances Loans In short, assets are anything that can be sold for money, while liabilities are any debts or financial obligations that one may have. The Top 20 Countries Out of the 521,653 UHNW individuals in the world, 414,308 were located in the countries below. This means that almost 80% of the world’s UHNW individuals live in just 20 countries. Rank Country Number of Ultra Wealthy Growth Since 2015 #1 U.S. 180,060 16% #2 China (Mainland) 70,426 137% #3 Germany 28,396 43% #4 UK 16,370 -8% #5 France 15,503 22% #6 Japan 14,755 36% #7 Italy 10,441 -4% #8 Canada 10,025 27% #9 Russia 8,015 19% #10 Switzerland 7,553 12% #11 South Korea 7,354 16% #12 Saudi Arabia 7,020 227% #13 India 6,884 27% #14 Spain 5,938 9% #15 Sweden 5,243 27% #16 Brazil 5,140 -9% #17 Hong Kong SAR 5,042 48% #18 Singapore 3,732 37% #19 Mexico 3,287 -4% #20 Australia 3,124 57% With just over 180,000 UHNW individuals within its borders, the U.S. continues to be the long-standing leader in this metric. Its five-year growth rate of 16%, however, falls far behind the Chinese Mainland’s impressive 137%. Whether China can overtake the U.S. as the leader in UHNW population remains to be seen, but momentum appears to be in the Asian nation’s favor. Recently, China became the world’s dominant trading partner, and was one of few countries to report positive GDP growth for 2020. By Marcus Lu »Like this? Then you might enjoy this article on the world’s richest families. Where does this data come from? Source: Knight Frank Note: Knight Frank’s dataset lists Hong Kong separately from China Source:  https://www.visualcapitalist.com/top-20-countries-for-ultra-high-net-worth-individuals/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on March 5, 2021
The Briefing Since 1980, college tuition and fees in the U.S. have increased by 1,200% Because of the shift to online classes, 2020 saw the lowest tuition increase in the last four decades The Rising Cost of College in America The average cost of getting a college degree has soared relative to overall inflation over the last few decades. Since 1980, college tuition and fees are up 1,200%, while the Consumer Price Index (CPI) for all items has risen by only 236%. The Average Cost of College Over Time Back in 1980, it cost $1,856 to attend a degree-granting public school in the U.S., and $10,227 to attend a private school after adjusting for inflation. Since then, the figures have skyrocketed. Here’s how college tuition and the CPI have both changed since 1980: Year Avg. Undergrad Tuition and Fees (Public) Avg. Undergrad Tuition and Fees (Private) CPI % Change (College Tuition and Fees) CPI % Change (All Items) 1980 $1,856 $10,227 0% 0% 1990 $2,750 $16,590 150.2% 63.5% 2000 $3,706 $21,698 382.5% 117% 2010 $5,814 $25,250 828.6% 178.8% 2020 $9,403 $34,059 1198.9% 231.82% Source: National Center for Education Statistics, U.S. News Note: Tuition and fees are in constant 2018-19 dollars. For public schools, in-state tuition and fees are used. All CPI % change values calculated for the month of January. According to the Bureau of Labor Statistics, the highest year-over-year change in college tuition and fees was recorded in June 1982 at 14.2%— and over that same time period, overall inflation was up 6.6%. On the other hand, November 2020 saw the lowest year-over-year change in the average cost of college at 0.6%, mainly as a result of the shift to online classes amid the COVID-19 pandemic. In fact, some schools are offering discounts to students, and some are even canceling scheduled tuition increases entirely in a bid to remain attractive. Why is the Cost of College Rising? While it’s difficult to pinpoint the exact reasons behind the rapid surge in the cost of education, a few factors could help explain why U.S. colleges hike their prices. Decrease in State Funding State funding per student fell from $8,800 (2007-08) to $8,200 (2018-19), while the share of tuition in college revenues increased. Increase in Demand The demand for a college education has increased over time. Between 2000-2018, undergraduate enrollment in degree-granting institutions increased by 26%. Increase in Federal Aid According to a study from the New York Fed, every $1 in subsidized federal student loans increases college tuition by $0.60. Student loan debt has doubled since the 2008 recession. Furthermore, the costs of providing education, known as institutional expenditures, have also escalated over time. These include spending on instruction, student services, administrative support, operations, and maintenance—all of which are critical to the student experience. With student debt at unprecedented levels and ongoing public debates surrounding the rising costs of education, it’s uncertain how college tuition will evolve. However, given the onset of virtual classes, further hikes to college tuitions may be on hold for the foreseeable future. By Govind Bhutada Where does this data come from? Source: U.S. Bureau of Labor Statistics Details: Data for the average cost of college comes from the Consumer Price Index (CPI) for College Tuition and Fees. Overall inflation is measured by the CPI for all items (CPI-U). Data is seasonally adjusted and the reference base for the indices is 1982-84 = 100. Source:  https://www.visualcapitalist.com/rising-cost-of-college-in-u-s/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on March 2, 2021
The Briefing Previous research has indicated that money stops buying happiness after $75,000/year However, new research finds a strong correlation between income and happiness, trending upwards even after $80,000/year In One Chart: Money Can Buy Happiness After All What’s the relationship between money and happiness? Previous studies have indicated that, while money can in fact buy happiness, it plateaus at approximately $75,000/year. However, new research suggests otherwise. Using over a million real-time reports from a large U.S. sample group, a recent study found that happiness increases linearly with reported income (logarithmic), and continues to rise beyond the $80,000/year mark. Below, we’ll provide more details on the research methodology, while touching on a few possible reasons why higher incomes may improve people’s happiness levels. How is Happiness Measured? Past research on happiness relative to income has relied on retrospective data, which leaves room for human memory errors. In contrast, this new study uses real-time, logged data from a mood tracking app, allowing for a more accurate representation of respondents’ experienced well-being. Data was also collected by random prompts over a period of time, with dozens of entries logged for each single respondent. This provides a more well-rounded representation of a person’s overall well-being. Two forms of well-being were measured in this study: Experienced well-being A person’s mood and feeling throughout daily life. Evaluative well-being: Someone’s perception of their life upon reflection. Both forms of well-being increased with higher incomes, but evaluative well-being showed a more drastic split between the lower and higher income groups. The Results (Measured in Standard Deviations from Mean) Annual Income Well-Being (Experienced) Well-Being (Evaluative) $15,000 -0.21 -0.34 $25,000 -0.11 -0.32 $35,000 -0.09 -0.19 $45,000 -0.06 -0.15 $55,000 -0.05 -0.07 $65,000 -0.03 -0.04 $75,000 -0.01 -0.02 $85,000 0.01 0.03 $95,000 0.03 0.01 $112,500 0.04 0.08 PreviousNext   Why Does Money Buy Happiness? The report warns that any theories behind why happiness increases with income are purely speculative. However, it does list a few possibilities: Increased comfort As someone earns more, they may have the ability to purchase things that reduce suffering. This is particularly true when comparing low to moderate income groups—larger incomes below $80,000/year still showed a strong association with reduced negative feelings. More control Control seems to be tied to respondents’ happiness levels. In fact, having a sense of control accounted for 74% of the association between income and well-being. Money matters Not all respondents cared about money. But for those who did, it had a significant impact on their perceived well-being. In general, lower income earners were happier if they didn’t value money, while higher income earners were happier if they thought money mattered. Whatever the cause may be, one thing is clear—Biggie Smalls was wrong. Looks like more money doesn’t necessarily mean more problems. »Like this? Then you might enjoy this article, Which Countries are the Most (and Least) Happy? Where does this data come from? Source: Proceedings of the National Academy of Sciences Details: Participants were 33,391 employed adults living in the United States; median age was 33; median household income was $85,000/y (25th percentile = $45,000; 75th percentile = $137,500; mean = $106,548; SD = $95,393); 36% were male; and 37% were married Published March 1, 2021 By Carmen Ang Source:  https://www.visualcapitalist.com/chart-money-can-buy-happiness-after-all/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on February 20, 2021
How People Make Investment Decisions When you’re making investment decisions, there can be a lot of different things to consider. Which types of asset classes should you hold? How much risk are you comfortable with? How much will you need to retire? It’s no surprise, then, that few Americans make these decisions on their own. This Markets in a Minute from New York Life Investments shows which sources of information families rely on for investment decisions, and how their popularity has changed over time. The Main Sources of Investment Information Over Time According to data from the U.S. Federal Reserve Survey of Consumer Finances, here is the percentage of families who reported using each source. Source 2001 2010 2019 Business professionals 49% 57% 57% Internet 15% 33% 45% Friends, relatives, associates 36% 40% 44% Advertisements and media 27% 26% 20% Calling around 19% 16% 13% Other 15% 8% 9% Does not invest 9% 12% 8%   Other consists of nine options: don’t shop, material from work, past experience, personal research, other institution, self or spouse, shop around, store or dealer, and telemarketer. Business professionals, such as financial planners, accountants, and lawyers, remain the most relied upon source. Their popularity has remained stable since 2010. Traditional advertisements and media, such as through TV and radio, have dropped in overall popularity. The percentage of Americans who call around to financial institutions for investment information has also declined. Conversely, friends, relatives, and associates have grown in popularity as an information source. Meanwhile, the internet has been the fastest-growing source, used by three times more families in 2019 compared to 2001. Digital Investment Decisions A separate survey conducted by consulting firm Brunswick revealed the specific places people go online when making investment decisions. Search engines, blogs, and specialist email newsletters are the most popular sources. Among blogs, Seeking Alpha is the most popular, used by 34% of those surveyed. Twitter and LinkedIn are the most commonly-used social media platforms. The proportion of investors using Twitter for information has grown by 36 percentage points since 2014. Implications for Investors and Advisors If you’re an investor, this information can help you gauge how your research process compares to the general American population. Is your preferred information source popular with others, or is it less common? For those who have yet to get started investing, this may give you some ideas on where you can start looking for information. If you’re an advisor, these research trends can have important implications for your business. While business professionals remain the most-used source, other sources of information are shifting. Traditional advertising and inbound calls from potential clients continue to be less common. Instead, advisors may want to shift their focus to building an online presence and increasing referrals from existing clients. Source:  https://advisor.visualcapitalist.com/sources-americans-use-investment-decisions/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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by on February 12, 2021
How Top Gold Mining Stocks Performed in 2020 Gold mining stocks and the GDX saw strong returns in 2020 as gold was one of the most resilient and best performing assets in a highly volatile year. But picking gold mining stocks isn’t easy, as each company has a variety of individual projects and risks worth assessing. This is why the GDX (VanEck Vectors Gold Miners ETF), is one of the most popular methods investors choose to get exposure to players in the gold mining industry. While the GDX and gold miners can generally offer leveraged upside compared to gold during bull markets, in 2020 the GDX returned 23%, just a couple of points shy from spot gold’s 25.1% return. This graphic compares the returns of gold, the GDX, and the best and worst performing gold mining equities in the index. Understanding the GDX ETF and its Value The GDX is one of many index ETFs created by investment management firm VanEck and offers exposure to 52 of the top gold mining stocks. It provides a straightforward way to invest in the largest names in the gold mining industry, while cutting down on some of the individual risks that many mining companies are exposed to. The GDX is VanEck’s largest and most popular ETF averaging ~$25M in volume every day, with the largest amount of total net assets at $15.3B. In terms of its holdings, the GDX attempts to replicate the returns of the NYSE Arca Gold Miners Index (GDM), which tracks the overall performance of companies in the gold mining industry. How the Largest Gold Miners Performed in 2020 As a market-cap weighted ETF, the GDX allocates more assets towards constituents with a higher market cap, resulting in larger gold mining companies making up more of the index’s holdings. This results in the five largest companies in the GDX making up 39.5% of the index’s holdings, and the top 10 making up 59.3%. An equally-weighted index of the top five GDX constituents returned 27.3% for the year, outperforming gold and the index by a few points. Meanwhile, an equally-weighted index of the top 10 constituents significantly underperformed, only returning 18.4%. Newmont was the only company of the top five which outperformed gold and the overall index, returning 37.8% for the year. Wheaton Precious Metals (40.3%) and Kinross Gold (54.9%) were the only other companies in the top 10 that managed to outperform. Kinross Gold was the best performer among the top constituents largely due to its strong Q3 results, where the company generated significant free cash flow while quadrupling reported net earnings. Along with these positive results, the company also announced its expectation to increase gold production by 20% over the next three years. The Best and Worst Performers in 2020 Among the best and worst performers of the GDX, it was the smaller-sized companies in the bottom half of the ranking which either significantly over- or underperformed. K92 Mining’s record gold production from their Kainantu gold mine, along with a significant resource increase at their high-grade Kora deposit nearby saw a return of 164.2%, with the company graduating from the TSX-V to the TSX at the end of 2020. Four of the five worst performers for 2020 were Australian mining companies as the country entered its first recession in 30 years after severe COVID-19 lockdowns and restrictions. Bushfires early in the year disrupted shipments from Newcrest’s Cadia mine, and rising tensions with China (Australia’s largest trading partner) also contributed to double-digit drawdowns for some Australian gold miners. The worst performer and last-ranked company in the index, Resolute Mining (-36.9%), had further disruptions in H2’2020 at their Syama gold mine in Mali. The military coup and resignation of Mali’s president Ibrahim Keïta in August was followed by unionized workers threatening strikes in September, slowing operations at Syama gold mine. Outright strikes eventually occurred before year’s end. How Gold Mining Stocks are Chosen for the GDX There are some ground rules which dictate how the index is weighted to ensure the GDM and GDX properly reflect the gold mining industry. Along with the rules on the index’s weighting, there are company-specific requirements for inclusion into the GDM, and as a result the GDX: Derive >50% of revenues from gold mining and related activities Market capitalization >$750M Average daily volume >50,000 shares over the past three months Average daily value traded >$1M over the past three months Gold mining stocks already in the index have some leeway regarding these requirements, and ultimately inclusion or exclusion from the index us up to the Index Administrator. What 2021 Will Bring for Gold Mining Stocks The GDX has had a muted start to the new year, with the index at -2.3% as it has mostly followed spot gold’s price. Gold and gold mining stocks cooled off significantly following their strong rally Q1-Q3’2020, as positive developments regarding the COVID-19 vaccine have resulted in a stronger-than-expected U.S. dollar and a rise in treasury yields. This being said, the arrival of new monetary stimulus in the U.S. could spur inflation-fearing investors towards gold and gold mining stocks as the year progresses. Source:  https://www.visualcapitalist.com/top-gold-mining-stocks-performed-gdx-2020/ For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/  
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by on February 6, 2021
You’ve likely heard about the recent drama involving GameStop, but unless you’re familiar with how the stock market works, the intricacies of what’s going on may have been lost on you. And if that’s the case, we don’t blame you—the world of investing can feel like an intimidating place, especially if you’re relatively new to the scene. So for those looking to learn the basics of stock trading, this video by TED-Ed is a good place to start. We touch on some key takeaways from the video below, like why stock prices fluctuate, how investors choose which stocks to purchase, and differences between active and passive investing. Stocks, and Why Prices Fluctuate If you’re still reading this, we’re going to assume you’re fairly unfamiliar with the world of stocks. So let’s start with the basics—what even is a stock? A stock is a partial share of ownership in a company. Units of stock are called “shares,” and these are mostly traded on stock exchanges, like the New York Stock Exchange (NYSE) or Nasdaq. The price of a stock is determined by supply and demand, or the number of buyers versus sellers. When there are more buyers than sellers, the price increases. On the flipside, if there are more sellers than buyers, the price goes down. Essentially, a company’s stock price is a reflection of how much investors think a company (or a portion of a company) is worth. That’s why a company doesn’t actually need to make profit to be valued by the market—investors simply need to have faith that it’ll become profitable eventually. Because of the speculative nature of stocks, prices can fluctuate quickly and drastically, depending on public perceptions. Passive Investors vs. Active Investors So how do investors choose which stocks to purchase? Well, there are two main styles of investing—active and passive:     Active investors try to beat the market by purchasing shares they believe are undervalued, with the intent to sell once price goes up     Passive investors track the market, and tend to hold onto their stocks with the belief that over time, their value will increase In the U.S., there’s a fairly even number of passive versus active investors—in 2019, about 45% of assets in U.S. stock funds were managed passively. And while active investors have the potential to make a lot more money, passive investments have generally shown higher returns in the last decade. Active Investors: Picking a Stock Despite the risk involved (or perhaps because of it) many investors choose to actively manage their stocks. To assess a company’s potential value, and ultimately find undervalued stocks, an active investor may:     Investigate a company’s business operations     Review its financial statements     Track price trends, with the goal of finding a company that’s undervalued An active investor may also choose to put money in one or more actively-managed funds, or simply hire a financial planner to do the work on their behalf. Finding your Comfort Zone Since there are pros and cons to both styles of investing, how you decide to invest, and where you fall on the investment continuum, ultimately depends on your expectations, risk tolerance, and long-term goals. It’s also worth noting that these investment styles aren’t mutually exclusive—a combination of both can be used in order to cover all your bases. Source:  https://player.vimeo.com/video/508148262 For more postings by Virtual Capitalist, click Here Website:  https://www.visualcapitalist.com/
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