The Weekly Scan November 8, 2021

Welcome to the Weekly Scan. Here’s what we’re following for the week of November 8, 2021.

Flipping the script. Online real estate platform Zillow announced last week that it will close down its house-flipping business known as Offers, and lay off 25% of its workforce. Zillow used Offers to purchase homes and handle repairs, such as painting and servicing HVAC units, before reselling the properties. The company cited the unpredictability of housing prices as the reason for exiting house flipping. The announcement followed Zillow’s third-quarter earnings report, which fell short of expectations. Zillow reported $1.74 billion in revenue, compared to a projection of $2.01 billion. That translates to a loss of $0.95 per share, compared to an expected gain of $0.16 per share. 

• The takeaway: Zillow’s overhaul comes at a time when demand for housing continues to increase in a pandemic-stricken economy. In early 2020, the Federal Reserve slashed interest rates to counteract damage from widespread business shutdowns. As a result, mortgage rates fell to record lows, making home sales potentially more affordable. And with more people leaving cities for remote work life, demand for houses has continued to surge. The average price of a home in the U.S. is currently more than $308,000, a 13% increase year-over-year. 

CNBC

Game over. A new cryptocurrency called Squid is the latest to be caught up in digital currency fraud. The Squid coin, launched in late October, 2021, was inspired by the popular South Korean Netflix show “Squid Game,” which depicts debt-ridden people competing to death in children’s games for a big cash prize. The coin reportedly increased in value by 23 million percent to $2,861.80, up from a little more than a cent when it launched. In what is called a “rug-pull,” the coin developers exchanged many of Squid’s coins for cash, rapidly depleting the value of the currency.  The makers of the Squid coin alleged that buyers could participate in so-called play-to-earn games similar to those in the show, without the violent end. 

• The takeaway: The scam demonstrates the uncertainty and volatility that can come with investing in cryptocurrency. While the Securities and Exchange Committee is exploring heavier regulation of cryptocurrency, it still trades without much government oversight. Squid is the latest “meme coin” to take off. Just weeks ago, a new cryptocurrency named Shiba Inu surged. The creators of Shiba Inu supposedly established the cryptocurrency as a challenge to Dogecoin, naming the currency for the Japanese dog breed on the face of that cryptocurrency. The value of Shiba Inu increased as much as 30% over 24 hours last week, giving it a market cap of approximately $29 billion.

Washington Post

Max it out. Last week, the Internal Revenue Service (IRS) announced an increase to contribution limits for 401(k) and other employer-sponsored retirement plans in 2022. Starting next year, people can set aside an additional $1,000 a year to such plans, bringing the contribution limit to $20,500 annually. The increase will also apply to 403(b) plans for federal workers. Catch-up limits for people 50 and older will remain the same, at an additional $6,500, bringing the total to $27,000.The IRS will keep individual retirement account (IRA) contributions and catch-up limits the same in 2022—$6,000 and $7,000, respectively. As of 2018, roughly 8.5% of people make the maximum yearly contribution to their employer-sponsored accounts. 

• The takeaway: The IRS typically increases contribution limits every year to account for inflation, or the rate at which prices increase for consumers over time. One way inflation is measured is with something called the Consumer Price Index (CPI), which shows the percentage change in prices paid by urban consumers on goods and services. The CPI is produced by the Department of Labor’s Bureau of Labor Statistics (BLS). Inflation currently stands at 5.3%, according to the September, 2021 CPI. That’s a threefold increase compared to 2020. The increase in prices is thought to be a result of a changed economy, caused by the Covid-19 pandemic.

Wall Street Journal, IRS

Bed Bath & to the Moon. Home goods retailer Bed Bath & Beyond was one of many meme stocks to see its share price surge last week. Shares of Bed Bath & Beyond increased 15.22% last Wednesday, reaching a daily high of $25.72. The price increase came after the company announced its partnership with grocery chain Kroger, and that they plan to accelerate its $1 million stock buyback program, promising to complete it by the end of 2021. A stock buyback occurs when a company buys its own shares on the stock market, partially re-acquiring the company. 

• The takeaway: Other popular meme stocks, such as GameStop, AMC Entertainment, and BlackBerry, experienced increases last week as retail investors once again jumped on these unpopular investments. In February 2021, retail investors followed a similar path by flocking to these stocks, driving the price up and causing what’s known as a short squeeze. About twenty-nine percent of Bed Bath & Beyond’s shares are reportedly shorted, which could increase the possibility of a squeeze.  

Reuters 

Rooms without views. Billionaire Charlie Munger, the vice chairman of Warren Buffett’s conglomerate Berkshire Hathaway, is funding an unusual residence hall at the University of California Santa Barbara (UCSB). Ninety-four percent of the dorm rooms, which will be called Munger Hall, don’t contain windows. However, the rooms will have artificial windows similar to the fake portholes found on Disney’s cruise ships. Munger has alleged that the windowless rooms will encourage students to spend more time in common spaces. The 11-story hall will have eight floors, which will be called “houses,” each home to 63 students. In total, Munger Hall will be home to 4,500 students. The project will cost $1.5 billion. 

• The takeaway: Munger is using his immense wealth and influence to move the controversial project forward. The 97-year-old billionaire donated $200 million to UCSB for the construction of the residence hall, under the condition that the school follow his designs for the building. Although Munger doesn’t have formal architecture training, he reportedly considers himself an amateur architect. A consulting architect on the project, Dennis McFadden, allegedly quit over the designs. 

CNN

A win for workers? Maybe, maybe not. The Covid-19 pandemic has shed light that workers are seeking certain conditions in order to return to low-wage work. Employers, particularly in the hospitality industry, are reportedly struggling to find people willing to do the jobs being offered. As of August 2021, there were 1.7 million open jobs in the leisure and hospitality sector, which constitutes nearly 10% of the jobs in that sector. Still, a record 1 million people quit hospitality jobs in that month. While wages for non-managers in the hospitality sector increased 13% in September, that’s reportedly not enough to attract workers to the industry, especially when many only work part-time. The average wage for such workers is reportedly $17 an hour.

• The takeaway: Restaurants, bars, and hotels depend on relatively low-paid employees to keep running. But would-be workers are reportedly looking for jobs where they can earn more and have a clearer path to promotion. They may also be looking to spend more time at home, or with family, especially as childcare help has become difficult to find during the pandemic. Some employers are reevaluating how they can attract and prioritize service workers, by offering tuition reimbursement. Others are examining how they can automate jobs.

Vox

 Here’s what we covered in last week’s Scan: 

• Facebook is changing its name to Meta.
• Tesla becomes a trillion dollar company. 
• Cryptocurrency Shiba Inu is giving Dogecoin a run for its money. 
• Chicago and Los Angeles are exploring universal basic income.

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