The StockDr & Team are back to discuss the unpredictable impulses within the market this week. The news of crypto crackdowns and shrinkflation take center stage.
For the first time in months, crypto stocks took a hit in value, based on more than just a tweet by the self-proclaimed “Dogefather”, Elon Musk.
Bitcoin (BTC) dropped below $30,000 for the first time since the new year. That’s half of what it was worth just three months ago, and it is coming amid fears that China, where 65% of global BTC is mined, is trying to ban cryptocurrencies outright. The drop has wiped out nearly $400 million in value since last Friday, June 18th, which is when authorities in China’s Sichuan province ordered the crypto miners to shut down operations. Concurrently, with the Chinese Government, The Peoples Bank of China urged financial institutions not to provide services related to crypto activities.
90% of China’s crypto mining has been shut down and crypto mining takes up .5% of the world’s electricity annually. This means if BTC was a country, it would be #33 in power consumption. Power consumption for BTC mining numbers: United States 7.2% | Russia 6.9% | Kazakhstan 6.2% | Malaysia 4.3%
The Millennial Moment presented by our Mega-llennial, explored the concept of Shrinkflation, albeit not new to the marketplace but rearing its ugly head.
Shrinkflation, by definition, is the practice of reducing the size of a product while maintaining the sticker price. This is a strategy companies use to stealthily boost profit margins.
The price of raw materials has increased dramatically, and companies are passing the increased cost on to consumers by giving them less product. The United Nation's FAO Food Price Index reported global food prices jumped in May, marking the biggest month-on-month gain since October 2010, and bringing the index to its highest point since September 2011.
The dramatic increase in the price of raw materials is placing food producers and grocery stores in a bind. The rising rates place them in a dilemma, to decide whether to increase the consumer's sticker price or to charge the same amount but shrink the package size. Because many shoppers tend to base their purchasing decisions on price, rather than examining the weight of the package, most producers and grocers are opting for the latter. Popular brand examples:
Lay’s potato chips: party size bag reduced from 15.25 oz. to 13 oz.
orange juice: decreased by 7.8% to 69 ounces. Now it is down to 52 ounces, another 11.9% reduction.
Charmin Ultra Strong: reduced from 286 sheets to 264.
Great Value paper towels: selling for $14.97 for 30 rolls, but rolls have gone from 168 2-ply sheets per roll to 120. Effectively a nearly 29% price increase.
Double Stuffed Oreos: reduced from 16.6 oz. to 15.35 oz. Goldman Sachs thinks this bull market has more room to run. Their estimate is that the current household has 44% in equity slightly below the all-time high of 46% in 2007. But they see high cash balances and continued retail participation will as bolstering demand.
This week’s meeting of the minds was brought to you by the Team @ Siler Wealth Management
Listen live on Wednesdays at 3 pm EST at MoneyRadio1510
Stay in the loop by subscribing to The StockDr's Prescription email