Would You Like to be Fluent in “Economy"?

November 22, 2023

Hello ladies and gents, it's The Female Gap, your weekly boost of financial knowledge that you can read over your afternoon coffee (or matcha latte, whatever works 🍵).

Here’s what we have prepared for you this week:

  • 10 words you should know to understand economy talks

  • Closing the Gap - Taylor Swift

  • Book of the month - Psychology of Money - part IV

LET’S COVER THE BASICS

ABCs of economy talk

This week’s topic was inspired by the trip that I took last week. Like I mentioned last week I attended Web Summit Lisbon, which is a tech and media conference that each year brings together around 70.000 people from around the world. I met a lot of great people there, listened to a couple of interesting people and also learned a lot about where the tech industry is going.

Speaking of interesting people that were there - among the speakers was also actress Kelly Rutherford that is mostly known for playing Lily van der Woodsen/Bass/Humphrey in series Gossip Girl. Since the audience at her talk was mostly female, I am sure that I wasn’t the only GG fan there #xoxo

She was there to talk about a new app called Whyzzer (she is the co-founder), which is a new app for sharing knowledge, experiences and helps you get wiser (great play on words btw). I haven’t tried it yet myself, but it sounds interesting so I will definitely do that in the future.

But she was not the one that inspired today’s edition. Even though I have been working in tech industry for a couple of years now, I still sometimes have problem understanding the tech lingo. The same goes for some money talks.

So today we are going to dive into 10 words that every future-Hermes-carrying GG fan should know.

  1. Economics - is the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively. It essentially means a study about how money is being made and used. We divide economics in two branches.

  2. Macroeconomics - imagine a forest. In the forest you have trees, bushes, animals, mushrooms (the markets, businesses, consumers, and governments) and macroeconomics studies the entire forest and how it lives and works together.

  3. Microeconomics = tree. In the forest you have pine, oak, maple trees and various others. These trees would be specific markets, products and individuals. Microeconomics is studying those individual trees.

  4. Inflation - is a rise in prices, which can be translated as the decline of purchasing power over time. It essentially means that your already overpriced matcha latte will be even more expensive. When you read in media about the “increasing price of basket of goods”, they are talking about inflation.
    We already mentioned inflation in previous editions, but it never hurts to repeat.

  5. Recession - is a significant, widespread, and prolonged downturn in economic activity.

    Think of a recession as the "low battery" warning on your economic device – everything starts running out of juice. Once you are on low battery you need to find a charger to get it going again. In the same way that the governments try to increase spending by lowering taxes and start spending themselves to get the economy machine going again.

  6. Liquidity - The ease with which an asset can be converted into cash or a similar liquid asset without significant loss of value.

    Do you remember when we spoke about art not being a very liquid asset? It means that you will have problem selling it overnight and getting your cash out.

  7. Fiscal Policy - Government policies related to taxation and spending that influence the economy.
    It’s the government's game plan for money. It's all about how much they tax people and how much they spend. This plan has a big impact on how the economy works so you should do some reading on that topic.

  8. Monetary Policy - Actions taken by a country's central bank to control the money supply and achieve economic goals.
    Lately we have been hearing a lot about central banks increasing the interest rates. That is one of the actions the banks take to apply monetary policy.

  9. Bull Market - A financial market characterized by rising prices and positive investor sentiment. 
    No worries, no bulls running up and down the street. It means that markets are performing well and things are looking good 😏 

  10. Bear Market - A financial market characterized by falling prices and a pessimistic outlook among investors.

    Imagine a grumpy bear (unhappy investor) because things are not going well on the stock market.

I think we all remember the amount of Hermes bags that Lily was carrying in the series and I would not mind a single bit if I had at least one of them (preferably more #alwayshumble). I am sure that she knew all the words above and more to get those bags. I’ll try to do more of these in the future so we can expand our finance vocabulary even more.

CLOSING THE GAP

Taylor Swift

This week’s woman that is closing the gap probably needs no introduction, but she deserves one anyways.

Ladies and gentlemen - Taylor Alison Swift a.k.a. the powerhouse of the music industry.

I myself am not a so called “Swiftie” but I am a fan of women earning their money, closing the gap and showing other women that it can be done! But I am a fan of the new relationship with Travis Kelce. They are just cute 😊 

It is also interesting for me to read such news from a more economic perspective.
Her career, not the relationship 😆 

Let’s look at some stats.

  • Her 53 US concerts this year added $4.3 billion to the country’s GDP according to estimations. That is bigger than some country’s GDP.

  • It is estimated that her tour ticket sales should be around $1.4 billion dollars in gross revenue.

  • She also released a movie about the US leg of the tour and sold $93 million of tickets on the opening weekend.

Not too shabby I would say.

Some even call her an economic phenomenon, because her concerts amassed so much revenue to the cities where she toured, because of the concert goers that spend their money for hotels, planes and in restaurants.

If you would like to read more on her economy/business impact I highly recommend reading this article in Bloomberg.

BOOK OF THE MONTH

The Psychology of Money - part IV

by Morgan Housel

Chapter 16 starts with a quote:

Beware taking financial cues from people playing a different game than you are.

It continues to talk about the bubbles that happen in the market. Author says that a very psychological answer as to why they happen is, because people are greedy, which ties to the quote above. Investors are striving for different things in life and therefore should use different strategies on the market. Daily traders only need that the stock price is higher at the end of the day, than it was in the morning. Someone who is investing for the retirement, should definitely use different plan for their investing.

People have problem realising, that rational people can see the world through a different lens than your own and therefore it is hard to grasp that other investors have different goals than us.

And this also applies to spending. So much consumer spending is socially driven - influenced by people you admire and done because you subtly want other people to admire you. The problem is that we only see what people buy - clothes, cars, houses - but we are not able to see what their goals, worries and aspirations are.

This next quote is not from the book but fits right in.

❝

The best thing is to learn to think for yourself and treat it like a muscle.

And that is the best thing you can do for yourself, because what you want in life is probably not what your bestie wants, so you should not walk the same road. You need to identify what your wishes in life are and act in line with those, not looking left and right what other people are doing.

Let’s talk about pessimism and optimism a bit. Optimism is the best bet for most people because the world tends to get better for most people most of the time. But for some reason pessimism holds a special place in our heart. Housel says that it sounds smarter and intellectually captivating.

Tell someone that everything will be great and they are likely to either shrug you off or offer a skeptical eye. Tell someone they’re in danger and you have their undivided attention. It is the basis for loss aversion theory, which say that the pain of losing is psychologically twice as powerful as the pleasure of gaining.

Another reason why at least in finance people pay more attention to bad news is, that in such connected system we live in, where one person’s decision can affect everyone else, it is very hard for us to imagine that we are the only ones that will not be affected.

It is very hard to convey the lessons from these chapters, so I highly recommend buying this book. Or, if you prefer listening/watching instead of reading - Morgan Housel was recently a guest on a podcast that I love listening to called The Diary of a CEO. You can find it on Youtube or wherever you listen your podcasts to (Apple or Spotify).

SOME NEWS

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