🍨 Daily Scoop: Negative interest rate!
By Thu, Sep 12, 2019
Happy Wednesday Scoopers,
All stock market sectors finished yesterday in the green zone. And, one American, in particular, wants the Fed to cut the interest rate below zero. We’ve got that story covered in the “Overall Market” section. Also, don’t forget to scroll down to the “What’s Up?” and “What’s Down?” sections to get to know one tech IPO that is disappointing investors and another one that is delighting them.
P.S. The word of the day is “verbicorn.”
MARKETS
- U.S. markets:All three indices agreed on the direction of the market and finished Wednesday higher than where they started the day. Scroll to the Overall Market section to learn more.
- Cryptocurrency: Bitcoin’s price didn’t move that much. However, an interesting study of the Bitcoin price cycle predicts the price per coin to grow to as high as $31,000 per coin. In summary, historically, every time it got more difficult to mine a coin, the price shot up. Apparently, we are in the early days of another such cycle.
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OVERALL MARKET
We are back in the green.
What happened on Wednesday?
The stock market broke away from the 2-day flat line and ended Wednesday in the green zone. Across the board, all sectors were up, and the Nasdaq led the pack by more than 1% growth.
What drove the market?
Typically these days, two primary topics move the market. President Trump asked the Fed to cut the interest rate to below zero to boost the economy even if the Fed doesn’t believe that the economy needs any boosting now. Also, the Chinese trade officials waived previously announced tariffs on 16 consumer products.
As the high-level trade negotiations between the U.S. and China continue and the Feds get ready for their September meeting, we all should be expecting more volatility. We warn you about the volatility not to scare you, rather help you manage your expectations. After all, the best investors are those who prepare for the worst but continue to invest optimistically.
WHAT’S UP
What analysts love to see!
So, what happened?
Shares of Elastic (Ticker: ESTC) — a search platform for enterprises’ large data volume — were up more than 10% on Wednesday. The company reported excellent quarterly earnings. Revenue was up more than 50%. Also, the company’s customers expanded their relationship with Elastic, creating a 130% net retention rate. Overall, the company exceeded analysts’ expectations. We all know what investors like more than a company that meets their expectations is a company that exceeds them.
What’s down?
Not as hot as people assumed!
So, what happened?
Some tech unicorns create such strong brands that their name becomes a verb. Let’s call them verbicorns (verb + unicorns). Slack (Ticker: WORK) is one of the recent tech IPO has achieved such status. Despite Slack’s rapid growth from zero to IPO, the stock is not as hot as investors had hoped. Shares of Slack have been declining steadily since the IPO. After the company’s recent quarterly earnings report, investors are selling the stock. And the decline continued on Wednesday as the stock price fell another 5%. The main concern is the company’s warning about the competitive pressure from the likes of Microsoft and the declining rate of customer acquisition growth. This verbicorn is not as hot as people assumed.
WATER COOLER
The strange case of a negative interest rate
Most of us are used to borrowing some money and pay back more than what we borrowed because of interest. The concept of interest is so entrenched in our lives that it is tough to imagine the interest rate can be negative. Imagine you borrow $100K to purchase your house, and only pay $99K to your bank. It’s absurd but possible.
Take Denmark, as an example. A Danish bank is offering mortgages with a negative interest rate. Don’t you just wish to transfer your mortgage to this bank? It’s a strange new world out there.
In addition to that Danish bank, several central banks are now looking into cutting down the countries’ interest to below zero to encourage borrowing, spending, and economic activities. Let us know if you have any questions about the concept of negative interest rate, by replying to this email. We will answer them in our next special series.
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
