Updated June 13, 2023
Bill Chen, CFA
The Piggy Bank
📈 Equity markets finished the week up half a percent despite some intraweek volatility as the AI rally continues.
The number of Americans applying for unemployment benefits, a metric used to gauge the strength of the job market, just hit 261,000 for the week ended June 3. This marks the highest unemployment level seen since October 2021. However, historically, the job market is still quite strong. The economy added 339,000 jobs last month.
Additionally, according to Cox Automotive, the average price of vehicles sold at wholesale dealership auctions dipped 2.7% from April to May. This could be a sign that used car prices are set to drop in the coming weeks.
👀 What to Be on the Lookout for This Week
This week will be particularly busy in terms of economic reports.
Most notably, the core inflation update for May will be released on Tuesday. As of April, the core inflation rate sat at 5.5% a 0.1% decrease from the month before.
This inflation report will surely influence the Federal Reserve’s meeting on Wednesday, at which the Fed is set to announce its latest decision regarding whether to raise interest rates or keep them the same. After raising interest rates for 10 months straight, Wall Street believes there’s about a 70% chance the Fed will hold off on hiking rates in June.
We’ll also get a look at May data for the US government monthly budget, which operated at a surplus of $176 billion in April.
On top of that, investors can expect economic reports for:
In addition to this flurry of economic data, look out for earnings releases from the likes of Oracle, Adobe, and Kroger.
📰 In Other News
Apple finally released its long-awaited virtual reality headset, Vision Pro. And, just like the reality that this headset offers, the results were a little mixed. On one hand, the technology appears to work beautifully and Apple’s headset seems smaller and less clunky than other options. But, with a starting price of $3499, it’s unclear how strong consumer demand for the new product will be.
In other big tech news, Google announced it will start tracking office attendance and considering it in performance reviews. The company currently requires employees to work at least 3 days in the office per week. This is the latest update on the remote work standoff between employers and employees, following return-to-work mandates from fellow tech giants Meta Platforms and Twitter.
A new report from the New York Times showed that, as energy drinks rise in popularity, so does their caffeine content. Many of today’s most popular drinks have at least 200mg of caffeine, equivalent to two cups of coffee or six cans of soda. Research shows a healthy adult should not exceed 400mg of caffeine per day.
Finally, in a one-two punch, the SEC announced it’s suing the two crypto exchange market leaders, Coinbase and Binance. The US regulator is accusing both companies of operating as securities exchanges without properly registering their business with the SEC. This news comes at a tough time for the industry, which has been experiencing a “crypto winter” following the collapse of once-popular crypto exchange FTX.
Reflects performance at market close 6/9/23
💰 Americans Tipping More Thanks to Tablets
During the pandemic, tipping generously became commonplace as a way to help support local businesses struggling to stay afloat during lockdowns. However, while the days of surgical masks and social distancing are behind us, it seems like the expectation of tipping generously has stayed.
Tipping used to be reserved for select service industries like restaurants or hair stylists. But today it has become so prevalent, it feels like even automated grocery store kiosks might ask you for a tip after you self-checkout.
At the same time, not only are consumers being asked to tip more frequently, but the average percentage they’re being asked to tip has crept up. For a long time, 18% to 20% was the norm for good service. But these days, 20% is usually on the lower end, with options for 25%, 30%, or more.
These changes have as much to do with pandemic-era changes as they do with the rise of payment apps like Stripe and Square, which make it easier than ever for companies to solicit tips.
Active vs. Passive
There are two main reasons why being more aggressive with tips is paying off for businesses.
First, businesses’ routine use of technology prompting consumers to choose a tip size has turned tipping from a passive choice into an active one. In the past, many companies simply set a tip jar out to collect extra cash without actively soliciting from customers. In these cases, most people will probably choose not to tip. However, when consumers are specifically prompted to leave a tip, they are more likely to leave one.
On top of that, once customers have decided to tip, payment tablets make it simple to suggest higher tip sizes. By increasing the range of the suggested tip options, many consumers will naturally leave bigger tips. This ultimately leads to a larger average size tip per customer. Sure, some customers will get turned off by this practice and not leave a tip at all. But many companies have seen an increase in overall tip revenue by setting suggestions above the typical norm.
To Tip or Not to Tip?
Although it can be frustrating for customers, the success of this strategy means iPads prompting you to tip 30% or more are likely here to stay for the immediate future.
With that said, it’s important to keep in mind tipping is a voluntary act for exceptional service. It’s never something required of you. To adjust to this new tipping environment, many financial etiquette coaches recommend setting your own personal guidelines for when to tip and when to hold back.
For example, a good rule when eating out is that if you get seated and have someone wait on you, you should leave a tip. But you shouldn’t necessarily feel guilty about not leaving a tip for fast casual or Chipotle-style meals. A similar rule can apply to your morning coffee. For example, if you order a drink that needs to be specially prepared, you might consider tipping your barista. But, if you just want a regular cup of coffee, no tip.
Establishing your own internal criteria can help you avoid feeling stingy — and avoid turning your bank account into a charity for businesses.
🤔 CFPB Warns Against Keeping Cash In Venmo
No FDIC Protection
The Consumer Financial Protection Bureau (CFPB) recently issued a warning to all Americans about the risks of treating money-sending apps like a second bank account. These payment apps, including services such as Cash App, PayPal, Venmo, or Apple Pay, have risen in popularity over the past few years. In fact, at least one-third of adults have reportedly used one.
Apps like Venmo and Cash App started out as an easy way to pay friends or split the bill while eating out. But these days it’s fairly common for freelancers or contractors to receive paychecks through money-sending apps. While there’s nothing wrong with using them, the real risk lies in storing money in them long-term, according to the CFPB.
Since Venmo, Cash App, and other apps are not official banks, they are not protected by the Federal Deposit Insurance Corporation (FDIC). At a traditional bank, consumer deposits are protected by the FDIC up to $250,000, meaning the organization will reimburse your deposits if the bank fails or closes. But the same isn’t true for most money-sending apps. This means that if you are keeping a few thousand dollars in Cash App and the company goes under, you’ll lose that money forever.
Under normal circumstances, there’s little reason to believe a certified, registered financial corporation like Block Inc or PayPal would be at risk of collapsing. And there’s currently no material reason to believe they will. However, it’s important to note these past few months have been anything but normal.
During the past ten months, the Federal Reserve has aggressively ratcheted up the federal funds rate, raising the rate each month to reach a range of 5-5.25%. This has made it significantly more expensive to borrow money, which can have a negative impact on overleveraged banks. In the wake of these interest rate increases, as well as general economic turmoil, a number of regional banks have closed, including Silicon Valley Bank, Signature Bank, and First Republic Bank.Regulators and other banks rushed in to acquire the failing banks, provide solvency, and protect consumers. Subsequently, things appear to have steadied in the past few months. However, it’s nearly impossible to predict if and when the next bank run will come.
Back to You
This isn’t to say that major payment processors like PayPal, Square, or Apple Pay are on the brink of collapse. In fact, there’s a chance you could keep your life savings in these apps and nothing bad would ever happen. The CFPB is simply emphasizing that, if something bad were to happen, your money would be protected by a traditional, federally-insured bank in a way it would not be by a payment app.
At a certain point you have to ask, is the ease of marginal convenience worth the assumption of potentially life-changing risk? When it comes to protecting your money, it’s probably better to be safe than sorry.
More than 800,000 first-time boat buyers entered the market during the pandemic. Unlike other pandemic-era hobbies, the water sport remains popular across the country, with 2022 new boat sales surging past 260,000
76 million workers rely on hourly wages as their main form of income. Many startups have taken notice and are making it easier for companies to find and hire hourly employees.
The big tech coalition known as the FIDO Alliance believes “passkeys” could replace online passwords. The technology works by using your biometric data (i.e. face or fingerprint) to login to websites or apps.
In the wake of dramatic layoffs, knowledge workers are showing less preference for the tech sector. Instead, they’re expanding their job searches to include companies in government, nonprofit, and retail sectors.
Swimply, a company enabling homeowners to rent out private pools, has started letting users post pickleball courts for rent. Swimply’s CEO expects rental revenue from pickleball to outpace pools in the next 2 to 3 years.
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