Hey Snackers,
Taco Bell is the latest fast-food chain to enter the fried chicken sandwich wars, but it's thinking outside the bun. Behold: a chicken sandwich taco.
Bitcoin had a rough few days, tumbling from its record highs. Meanwhile, tech stocks rebounded yesterday after Fed Chairman Jerome Powell eased concerns on rising interest rates. Speaking of...
Falling tech stocks, rising interest rates, and inflation fears — how they’re connected
New haircut?... Markets look a little different recently. The tech-stock heavy Nasdaq index is down nearly 5% for the week: strange, since Big Tech has been on a tear over the past year. Also: interest rates are rising from historic pandemic lows. The 10-year Treasury yield (basically: the interest rate the US government pays to borrow money) has risen to its highest level since February 2020. The average interest on a 30-year-fixed-rate mortgage also rose.
What's going on?... Falling tech stocks and rising interest rates are likely related to one thing: inflation fears. Investors are scared that the purchasing power of the dollar will decrease and prices will rise — or, that a $4 coffee today could cost $6 in a year. To help the economy, the Fed has added trillions to the money supply through stimulus packages and bond-buying sprees. And we could get another $1.9T stimulus package soon. That increases cash in circulation, which could boost inflation risk.
- Why interest rates are rising: With so much cash in the system, people are worried that the money they receive in exchange for lending could be worth less in the future. So they’re “demanding” higher rates from bonds.
- Why tech stocks are falling: Rising interest rates can make bonds and savings accounts more attractive compared to riskier assets (like tech stocks). They also increase the cost of borrowing. That can curb profits, growth, and hiring for companies — and result in less consumer spending, which is generally bad for the economy.
Inflation is the Godzilla of finance... But we might not have to fear it just yet. Yesterday morning, Jerome Powell said the Fed is committed to its current policy of keeping interest rates low. He’s not immediately concerned about inflation levels, which have stayed relatively low for a decade — he is concerned about getting the economy back on its feet. JP's announcement helped calm inflation worries, so tech shares mostly rebounded for the day.
The RealReal is still deeply unprofitable, but it's splurging on physical retail
Say it twice so it sounds cool... The RealReal is the online luxury consignment company that can smell a knockoff Birkin from a mile away. It verifies your fancy second-hand items, prices them, and sells them. But TRR isn't helping you pawn off those $900 Louboutins for free — it takes a big cut of the sale. Despite that...
- TRR shares plunged 13% yesterday after it dropped disappointing quarterly earnings. Sales dipped 10% from 2019, and its quarterly loss more than doubled.
Now TRR is doubling down... on brick-and-mortar stores. The exodus from cities has slashed rent prices, making physical locations more profit-friendly. Last quarter, TRR launched an "innovative neighborhood store format" in Palo Alto, Newport Beach, and Brooklyn. The luxurious locations look like WeWorks merged with airline lounges. TRR is aiming to launch 10 by this summer. But why is an unprofitable, online-focused company splurging on fancy stores?
Wear the trend, don’t let the trend wear you... With the rise of delivery-everything, it's easy to get sucked into pure ecommerce. But TRR knows its customers — and doesn’t think 100% online is their style. TRR is realizing that pairing digital with physical is better: Buyers who shop in stores and online spend 3X more compared to online-only shoppers. And consignors who step into stores bring in 1.5X more product value.
What else we’re Snackin’
- Stim: The House is set to pass President Biden’s $1.9T stimulus package this week. Then it would go to the Senate.
- NailedIt: Home Depot had blowout sales last quarter, but the stock fell because investors aren’t sure the House Hype will last.
- NVM: Facebook reached a deal with the Australian government to restore news in the country after a five-day suspension.
- Barista: Plant-based milk company Oatly filed to go public at a reported ~$5B valuation.
- Bagged: Macy’s had its first profitable quarter in a year thanks to strong holiday sales and inventory cutbacks.
- Canny: Ardagh, the company that makes White Claw and LaCroix cans, will go public via SPAC-quisition.
Wednesday
- Earnings expected from Lowe's
ID: 1537872