Online Purchases Tax

I will be the first to tell you that I am OBSESSED with Amazon. I do not care that they are increasing the cost of my Prime membership because I get packages at least once a week. Living in a city it is sometimes easier to just order something and have it show up at my door a couple of days later, then to go to the store and lug it across the city. 

As well, I have little patience for malls these days and tend to just order clothes online and return them as necessary. I feel like in this day and age many people can relate to these activities. 

What you need to know is...

Last week the Supreme Court made a ruling that allows states to collect sales tax from online purchases. Before if you bought a product from a company without a physical location in a state with sales tax you could order items online and not have to pay tax. However, a lot of the companies shipping these products are located in places with sales tax, which made an unfair advantage for the ones not having to charge sales tax. This will take more regulation and oversight which will make the change slow but inevitable. 

This may negatively affect businesses like Amazon where people were searching for sellers that did not charge tax in order to get big ticket items at a discount. For cheap products the sales tax should only make a small difference. How is this affecting Amazon? Their share price is down 2% already today, Monday June 25th, upon the news of this decision. We can probably expect a rebound of their stock price after the dust has settled. 

Mergers and Acquisitions

Disney is buying Fox and CVS is buying Aetna and what does this all mean?! Why does one company decided to buy another? Most times one company will buy another because it makes the most sense for their business.  A lot of times they believe that by combining two businesses they will do one of two things:

  1. Create Cost Efficiencies. Meaning that by combining the two they may be able to use the same machines or people and create the same product or more and that overall this will be cheaper
  2. Grow their business. A lot of times one company wants to grow to remain competitive and instead of creating their own new division of the company will just acquire one. 

Obviously there are other reasons why companies may merge but these are some big reasons.

Why do you care? When two companies merge it can affect the economy. That is why the government will regulate it. They do not want a company to get too big and have the ability to "overcharge" for their products. 

And THAT is your fun Finance fact of the day. What Mergers and Acquisitions have you heard about lately??

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Overalls and Faux Leather

The Market Drop

We have recently heard that the stock markets are killing it, rising up and up and up. However, it was only a matter of time before it made a correction and went back down. Last week we saw this. With the stock market being at an all time high and the economy doing well what caused this market drop and what does it mean?

Interest Rates:

Interest rates are rising. They rise in periods of Inflation. Therefore, if you can get less for a dollar the Lenders must adjust accordingly and take more. If you remember, during periods of inflation the Federal Reserve will raise the interest rates. Therefore, it will be more expensive to borrow money, which can negatively impact the economy, sparking fear in consumers. 

Inflation: 

Inflation is rising prices right? Well why do we think inflation is occuring? GDP growth is estimated to be 5.4%. This means the economy is growing 5.4%, compared to the normal GDP that is around 3%. This indicates that inflation could be occurring. GDP Growth = Increasing Prices. Another indicator that inflation may be occurring is the employment statistics...

Employment:

Great News, unemployment is low, with reports at 4.1%. What this means is that most people have jobs and therefore consumer spending will increase. When consumer spending increases, demand increases, and therefore companies can increase prices. Hence, fears of inflation. 

Bonds:

What is a Bond? Read my other blog post. But as interest rates go up Bonds become more attractive. You can make more return on your money. As well, they are safer so people start selling off their stocks, causing a dip in the stock market. 

What Does this Mean?

Honestly, not the worse thing ever. Stocks were SO high that this is just setting them back to "normal" a little. We will just have to wait and see but this is not necessarily a bad thing. What goes up must come down right??

 

 

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