IC: Introvert Channels #1
IC: Introvert Channels #1
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This is article #1 of Introvert Channels, the GSS channel of interesting finds in the quiet corners of the internet and the real world. Picture the virtual equivalent of walking through your local farmer’s market.
A bit of housekeeping: some of you let me know that it was not clear where you could like or comment on my posts. I linked the site below, where you can interact! You can also share it through the link at the end of the post.
Fashion: A.P.C. Surplus
Although I live on 2nd Street, I often describe my apartment’s location as “where Bond Street turns into 2nd.” The 1-minute walk from my apartment on 2nd Street into Bond Street is analogous to the transformation that occurs when Lucy crosses through the wardrobe into Narnia. If you’re not from New York below is Bond Street:
And below is 2nd Street:
A.P.C Surplus, unlike my apartment, actually resides on Bond Street.
The store: a discounted version of Atelier de Production et de Creation (A.P.C.), which was founded by this guy:
Music: Mac Miller’s remix of Temper Trap’s Love Lost
As you might remember the 500 Days of Summer soundtrack way outshined the movie and was easily THE album for people that were in middle school/high school between 2009-2015… Mac Miller + Temper Trap = High School Nostalgia
Book: Everything I Know About Love
My friend recommended it to me a year ago while we chatted about best friendships lost and found over the years
I read it at over 100 ppn (pages per night - lol nerdy)
Show: What’s in A Name?
Dave Chappelle speaking at his alma mater, Duke Ellington School of Arts and addresses The Closer controversy.
“Artist should never behave as a commodity”
Definition of commodity: raw material or primary agricultural product that can be bought and sold, such as copper or coffee. In other words, don’t behave as an input, be the end product.
Stay tuned for the twist at the end of show
Favorite quote from a friend: “Ok, so disco is back and I’m here for it!”
Said by my friend Hannah Gilliam, who’ve I’ve been friends with since high school
In tandem with this quote, she suggested listening to the new Beyoncé’s new album, which as you can imagine, hearkens back to disco beats
The “Eat Your Vegetables” portion of the blog post that I assume no one reads a.k.a thoughts on finance:
Why is everyone talking about a recession? What does it mean for you?
During COVID the government gave out subsidies to everyone who lost work.
People who received subsidies stopped working and also made more money, causing productivity to decline and income to remain the same.
Simultaneously, supply chains were backed up due to COVID closures and Russia declared war on Ukraine.
As a result, the United States and many other countries placed a trade embargo on Russian goods and services.
Trade embargoes caused a lower supply of goods and services. Supply chain issues cause a lower supply of goods and services.
The lack of available workers due to subsidies caused higher wages and companies, when they can, pass the higher wage costs to the customers. Therefore prices increase. When workers continue to receive subsidies or higher wages but do not have jobs, demand for goods continues at the same level.
When demand remains the same, but supply declines, prices increase. When supply continues to be forced down and demand continues to increase or remain the same inflation occurs.
When inflation occurs, two things happen: (i) normal people cut back their spending; (ii) businesses continue to raise their prices because the prices for the raw materials increase due to inflation; (iii) arguably the most important thing that happens is that investors cut their valuations of public market investments.
Let’s dig into the third point: why do investors cut their valuations of public market investments?
First, what is a valuation? A valuation is a price that an investor thinks a company or asset is worth. In female insecurity mnemonics, if you’re happily dating a guy and one of your biggest assumptions is that he will continue living in NYC (or whatever city you’re living in), the relationship will likely continue. However, in the case that he decides to move to L.A., you’re uninterested in a long-distance relationship, so you break up and pursue people that are living in NYC. Investors think the same way about their investments. They value an asset based on underlying assumptions about the company and establish a price at which they think each stock of the company is worth and have a price at which they would no longer buy the stock. Underlying assumptions could be the management team, the comparative worth of the company’s service or good compared to other services and goods, how consumer demand for a product will change in different market environments… or the L.A. versus NYC: am I getting better returns on my money by holding this stock or could I get a better comparative return in a different investment, such as in the bond market?
What is a public market investment? A publicly traded stock a.k.a. a company that has IPO’d and is trading on a public exchange a.k.a. is not privately held by a family, founder, VC, a private equity firm, a.k.a. you could own it.
When and why do investors cut their valuations?
For a variety of reasons, but for the purposes of this universal cut in valuations, the below:
In an inflationary and rising interest rate period, investors cut their valuations because the boyfriend moved to L.A. In other words, investors were using an underlying assumption that investing in stocks would provide better returns than the bond market because interest rates were low and inflation moderate to low.
However, when the feds increase interest rates, the WACC (cost of capital) increased.
When inflation rises, the cost of inputs increases, and sales (of non-inferior goods) decline to lead to a decline in profitability.
Therefore, investors cut the valuations of companies, and sell their investments, which further increases companies’ cost of capital.
Why does this affect you?
If public valuations are cut, your 401k, IRA, and Vanguard account will likely be affected if they are invested in stocks, which they guaranteed are partially invested in.
If the cost of capital increases, companies will find it more expensive and difficult to raise money to finance new projects and pay their staff.
They will expect lower future growth and will cut employees.
How to think about recessions as an individual?
Recessions, just like all bad things, are caused by fear and groupthink. If you assume the worst in the world, you will end up surrounded by people doing bad things because that’s all yout imagination lets you see. If you assume that people are going to do good things around you, you will start to sniff out the bad people and either stop associating with them or learn their patterns of bad behavior and work around them. It might sound cliche, but if somehow we could all keep the stamina to picture an optimistic future, the good would never need to end. Do not close off from the world and stop taking risks because you hear a recession is coming. If you have a sound idea, then keep pursuing it and taking risks to execute it. If you have a bad idea, it’s a bad idea regardless of the market conditions. The only difference is that someone will give you money to fund your bad idea in a good market, which only delays your realizing it was a bad idea. Stay optimistic and keep working hard - there is nothing better in this world than a little bit of self-reliance!