💰

Money

71 STASHED IDEAS

  • Inflation leads to a decline in the value of money. “Inflation means that your money won’t buy as much today as you could yesterday.”
  • If the prices of goods rise. the same amount of money will purchase a smaller quantity of goods.
Lucy  (@lucy_d72) - Profile Photo

@lucy_d72

💰

Money

  • Inflation is a situation of rising prices in the economy.
  • Inflation is a sustained increase in the general price level in an economy. Inflation means an increase in the cost of living as the price of goods and services rise.
  • The rate of inflation measures the annual percentage change in the general price level.
  • Cost-push inflation – when a rise in prices is caused by a rise in the cost of production, such as higher oil prices
  • Demand-pull inflation – when a rise in prices is caused by rising aggregate demand and firms pushing up prices due to the shortage of goods

Hyperinflation is generally considered to occur when inflation is greater than 1000%. 

With hyperinflation, money loses its value so rapidly that nobody wants to use it as a medium of exchange.

The comfortingly handy corner shop
  • The British corner shop dates back to Victorian times and represents a humble but steady trade.
  • While there are obviously national/regional variations in set-up, the corner shop surely serves a universal, relatable need. Most of us have grown up around the comfortingly handy corner shop. These family-run shops are good for impromptu ingredients or sweets.
  • When so much suddenly changes about everyday life, we’re still innately drawn to whatever seems most familiar. The ubiquitous local store has emerged as a comforting landmark amid the chaos of the pandemic.

The corner shop is also a cornerstone of pop culture: The cosy setting of a corner shop is often part of soap operas, sitcoms and movies as the centre spot for gossip.

The corner shop also shows the vital role of immigrant shopkeepers. TV newsreader Babita Sharma's book, The Corner Shop, is a real account of her own British Asian family owning and running a Reading shop.

Under 'normal' circumstances, the family-run corner shop often provides groceries, hardware supplies, a deli, a video rental, and a newsagent. When the pandemic began, these mom and pop stores were part of organising supplies and provisions for those in need.

"The things you see behind the cash register encompass the whole human spectrum, from absolute generosity to plain greed" – Amna Saleem

The ideas in "The wealth of nations"(Adam Smith) provided the seed for the concept of GDP and altered the importing and exporting business.

Before, countries declared their wealth based on the value of their gold and silver. Smith argued that countries should instead be evaluated based on their levels of production and commerce. This concept was the foundation for creating the GDP metric for measuring the wealth of a country.

  • In his first book, "The Theory of Moral Sentiments", Smith proposed the idea of an invisible hand - the tendency of free markets to regulate themselves through competition, supply and demand, and self-interest.
  • He is known for creating the gross domestic product (GDP) concept and his theory of compensating wage differentials.
  • In 1776, Smith published "An inquiry into the nature and causes of the wealth of nations" shortened to "The wealth of nations."
  • In "The Wealth of Nations", Smith popularised many ideas that form the basis for classical economics.
  • Adam Smith advocated for reducing the role of government intervention and taxation in free markets, but he saw the government as responsible for a country's education and defence sectors.
  • From Smith comes the idea of the "invisible hand" that guides the forces of supply and demand and competition in an economy.
  • For Smith, an institutional framework is necessary to steer humans toward productive pursuits that benefit society. The framework consists of institutions like a justice system that protect and promote free and fair competition.
Adam Smith: the father of modern economics

Adam Smith was an 18th-century Scottish economist, philosopher, and author. He is considered the father of modern economics.

  • Smith was born in 1723 in Scotland. He studied moral philosophy at the University of Glasgow and enrolled in postgraduate studies at the Balliol College at Oxford University.
  • After returning to Scotland, Smith held a series of public lectures at the University of Edinburgh and earned a professorship at Glasgow University in 1751. Later he earned the position of Chair of Moral Philosophy.
  • In 1763, he accepted a more remunerative position in France. There, Smith counted philosophers David Hume and Voltaire as contemporaries.

Adam Smith's work discusses the evolution of human society.

  • First, he presents the hunter stage without property rights or fixed residences to nomadic agriculture with shifting residences.
  • The next stage is a feudal society where laws and property rights are established to guard privileged classes.
  • Finally, modern society is characterised by free markets where new organisations conduct market transactions.

Adam Smiths' ideas in "The wealth of nations" were a motivating factor in the evolution from land-based wealth to wealth created by assembly-line production methods that included labour division.

Smith argued that the division of labour and the associated specialisation creates prosperity.

Besides tax-loss harvesting and repurchases, and investors putting cash bonuses into the market, the January Effect is affected by investor psychology.

  • Some investors feel that January is the best month to begin an investment program.
  • Others think that mutual fund managers buy top performers' stocks at the end of the year and dispense questionable losers for appearance sake in the year-end reports.
  • Year-end sell-offs attract buyers interested in the lower prices.
  • A study analysing data between 1904 and 1974 revealed that the average return for stocks during January was five times higher than any other month, particularly in small-capitalisation stocks.
  • Another study from 1972 to 2002 found that the Russell 2000 index stock outperformed stocks in the Russell 1000 index in January.
  • The stocks outperformed by 0,82% and underperformed during the rest of the year.

But it is suggested that too many people now time for the January Effect so that it becomes priced into the market, levelling out the effect.

The January effect was first noticed in 1942 but has been less pronounced in recent years. The hypothesis suggests that markets as a whole are inefficient. Efficient markets would not follow this effect.

Small caps - companies with a relatively small market capitalisation - are more affected by the January Effect than mid or large caps because they are less liquid.

The January Effect

It is defined as a perceived seasonal increase in stock prices during January.

Analysts generally attribute this rally (a period of sustained increases in the prices of stocks, bonds, or related indexes) to two factors.

  1. A price drop happens in December - when investors prompt a sell-off due to tax-loss harvesting to offset realized capital gains - followed by an increase in buying in January.
  2. Investors use year-end cash bonuses to purchase investments in January.

There are many types of business models for every kind of business.

  • Traditional business models include direct sales, franchising, advertising-based, and brick-and-mortar stores.
  • Hybrid models include businesses that combine internet retail with brick-and-mortar stores or sporting organizations.

There are two critical factors in judging business models. When business models don't work, it is because

  1. the story doesn't make sense anymore, for example, the airline industry;
  2. the numbers don't add up to profits, that is companies that suffered heavy losses or bankruptcy.
  • The primary component of the business model is the value proposition. A value proposition is a description of the goods or services a company offers and why they are desirable to customers or clients.
  • A new enterprise's business model also covers projected startup costs, financing sources, the target customer base, marketing strategy, a review of the competition, and projections of income and expenses.
  • When evaluating a company as a possible investment, the investor should find out exactly how it makes money by looking through the company's business model.

A common mistake companies make in their business model is that they often underestimate the costs of funding the business until it becomes profitable.

Many analysts believe that companies that run on the best business models can run themselves.

  • One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit - the total revenue minus the cost of goods sold.
  • Analysts also want to see cash flow or net income - the gross profit minus operating expenses.
The Business Model

A business model refers to a company's plan for making a profit.

  • It identifies the product or service
  • The target market
  • Anticipated expenses

A business model helps developing companies to attract investment, recruit talent, and motivate management and staff. Established businesses should regularly update their business plans to help anticipate trends and challenges ahead.

© Brainstash, Inc

AboutCuratorsJobsPress KitTopicsTerms of ServicePrivacy PolicySitemap