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Weekly Market Recap: Amazon Stock Splits 20:1...

JUNE 10, 2022


Alexis Buchholz here with BFG Wealth Management for your end of week market update, today is Friday June 10th, 2022. The markets are not happy at all, thanks to the record high inflation report that just came out this morning. Now we’re at 8.6%, and we’ll keep going up, so that means more interest rate hikes are coming…


We’ll also cover Amazon's 20 to 1 stock split, the World Bank's warning about stagflation, President Biden's latest round of student debt cancellation, and an amazing development in medical technology involving stem cells and 3D printing!


If you owned Amazon before this week, on Monday you might have been shocked to see your stock price go down from over $2000 to only $125. This wasn't a loss of over 90% in one day, it was only Amazon’s 20 to 1 stock split taking effect. Now, stock splits are very common and it means that when a company splits its stock it divides each existing share into multiple new shares. In other words if you owned one share of Amazon last Friday, now you own 20 shares, but the value stays the same.


Amazon board stated the split would:


“give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for people looking to invest”


Basically they lowered their stock so more retail investors can buy in and hopefully bring up the value from its recent sell off in the end of March of this year when its stock crashed almost 40%.


Did it work? So far not so good, the stock price went from 124 on Monday closing down to 109 at the end of this week. Options on the stock now definitely cost less too, but this is a two way street – since calls are cheaper, it also means puts are cheaper too. And the bears -the investors buying puts- are winning so far.


It's not a surprise that stocks continue to go down. This week the World Bank has warned the global economy may suffer 1970s style stagflation. What is stagflation? Stagflation is when there is a period of slow economic growth as well as high inflation.


The challenge with stagflation is that it's difficult to fix by government intervention - for example, raising interest rates are used to combat inflation but it would slow the economy down even more; and increasing government spending usually jumpstarts an economy but it tends to increase inflation. during times of stagflation both stocks and bonds did not do well at all. The only asset class that outperformed everything was commodities.


So far this has been true, as our Metals and Commodities portfolio is currently beating the market by almost 30% year to date. Real estate as an asset class also deserves an honorable mention, since back in the 70s real estate prices did keep pace with inflation, and when leveraging from mortgages are factored in, people who owned real estate during that time also outperformed stocks and bonds. Thankfully, we also have a real estate income portfolio in our strategies.


Speaking of being thankful, over 500,000 college students who attended the now bankrupt Corinthian Colleges, just got all of their federal student loans cancelled automatically. This wasn't free though - it cost taxpayers (that's us) $5.8 billion. It doesn't end there though, the Biden administration so far has approved $25 billion for roughly 1.3 million borrowers.


Remember we just talked about how government spending wouldn't help get us out of a "stagflationary" environment? What about everyone else who paid for college without student loans? No relief there. As taxpayers are we going to have to bail out every college student that made bad decisions and got too much in debt? I really hope not.

Ok I need some good news. Now listen to this, it's really cool. In collaboration with the microtia congenital ear institute in San Antonio Texas and 3DBio therapeutics, the first 3D printed ear made out of a patient's own stem cells has successfully been transplanted.


Think of the possibilities that this opens up! 3D printed hands? 3D printed limbs? 3D printed other organs? no of course different parts of the body are more complicated than others, and I'm no doctor, but I'm pretty sure an ear is less complicated than a heart. but this breakthrough really seems like the beginning of a new age of medical technology. I'm super excited to see what comes next in this space!





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