Month: September 2017

The stock market has been at an all-time high and it still continuing to grow. Investors have never witnessed this much growth in an investment before. Personal investors, sales and trading analysts, and many more are making fabulous returns and money in the stock market. You may have even heard multiple financial commentators describing the stock market as a bull market. Wondering what that means? Continue reading to find out!

The bull market describes a financial market of securities in which prices are rising or expected to rise. Securities is just a broad term used to describe the type of investment a person is making. Examples of securities range from Treasury bills to corporate bonds to stocks. The term bull is used when stock prices are going up because it displays how a bull thrusts its horns up into the air. Bull markets characterized by high market optimism, solid investor confidence, and positive expectations that a strong result should continue. With these attitudes in mind, investing in the stock market can easily increase your wealth. You can increase your investing portfolio by 10, 20, or even 30 percent!

However, they are many critics of the market and believe these strong growth rates will be coming to an end and we will witness a period of falling stock prices. These critics describe these conditions as a bear market. The bear market describes the widespread pessimism and the falling prices of securities. Bear market are usually associated with recessions in the economy. The term bear is used to to describe a bear swiping its paws downward.

Now you know when to buy stocks when hearing the terms bull and bear. With just listening to these terms, you can make a lot of money and become rich! So what are you waiting for? Invest your money in the bull market now

OMG the FOMC had a meeting today! Did you hear the latest gossip from the Fed?! They are finally raising the federal funds rate

This is the most exciting gossip you will ever hear in the business world. This may sound boring and meaningless, but I promise you this is very important and will impact your life directly.

First, let me explain the Federal Reserve. They are the central banking system of the United States, in charge of running the monetary aspect of this country’s economy. Basically, the Fed is a tier-one frat for economic nerds like me. Their primary responsibilities are controlling interest rates, minimizing unemployment, and stabilizing prices. To put it another way, the Federal Reserve decides how much interest we pay on loans, how many people work in our labor force, and how much consumers pay for goods and services.

Still think it’s just an elite club of dorks talking about money? Let me next explain the significance of this headline. The Federal Open Market Committee (FOMC) approximately meets about once every six weeks to discuss the state of the economy. During this meeting, they decide what the federal funds rate should be.

The federal funds rate is the most influential parameter of the world economy, since it affects the entire monetary and financial landscape. It determines how much interest someone pays on a mortgage, how costly will it be for businesses to invest and grow, how high prices are, how much households decide to consume and save their disposable income, and many more.

In simple terms, the federal funds rate affects EVERY business transaction you make.

Back to the topic at hand: Early this week, the FOMC announced a decision to raise the federal funds rate later this year. As a result, consumers will have to pay more interest on their credit card bills, businesses will reduce spending and investing due to high costs, and families will be forced to make more wiser purchases.

Wondering how the Federal Reserve boost the federal funds rate? Open market operations (OMO). OMO refers to the buying and selling of government securities in order to expand or contract the supply of the US dollar. Government securities can range from treasury bills to savings bonds. If the Federal Reserve decides to raise interest rates, they would have to sell government securities, while if they decide to lower the interest rates, they would have to buy them. In the current situation, the Federal Reserve will sell government securities, which reduces the supply of the dollar to increase the federal funds rate. This graph demonstrates this procedure

If you haven’t heard, Apple recently released not one, but THREE new iPhones: the iPhone 8, 8 Plus, X. Let the craze begin with everyone rushing into stores intending to be the first to try out the fancy new gadgets. Initial buyers can show off to their friends the high-definition retina display, faster processors, and the state-of-the-art facial recognition platform.

Although happiness and style is at an all-time high, bank accounts will take a tremendous hit. The iPhone 8 starts at $699, while the iPhone X is absurdly priced at $999. Many wonder how Apple can charge these ridiculously high prices. The science of economics can explain this topic simply.

The demand for Apple’s most profitable item is highly inelastic. Confused over the last sentence? Let’s dissect it.

Demand is the underlying force that drives everything in the economy. It’s the amount of goods and services bought at various prices during a certain period of time. The demand for a product or service is dependent on the price, competitors’ prices, and consumers’ incomes, tastes, and expectations. It can be graphically represented as a line in a price versus quantity graph. The slope of the line is determined by the elasticity of the product.

Elasticity? This fancy word, arguably jargon, is the main aspect deciding over the prices we pay for goods and services. Elasticity measures how responsive demand is to changes in prices. Price, substitutes, and income greatly impact the elasticity of the demand curve. The iPhone is considered an inelastic product, which means there are very few substitutes and changes in price does not really alter the number of iPhones demanded by customers. Other common examples of inelastic products are gasoline, tobacco, and luxury items.

The graph below displays the difference between elastic and inelastic demand curves:

Ultimately, Apple has the right to charge outrageous prices for its gadgets. In the eyes of businesses, the best option is to charge customers exactly as they’re willing to pay, however absurd the price seems.  The only people we can blame for the iPhone costing almost ONE GRAND is ourselves. If the demand was not there for a luxury item, the company would have no choice, but to lower the price of the item.