Hello and happy friday! If you're struggling for motivation today, rest assured you're not alone. New data from Gallup reveals employee engagement at work has dropped for the first time in a decade. Today we're exploring:
Burgernomics
The Economist has published its bi-annual update of one of our favorite pieces of data analysis: the Big Mac Index. Apart from telling you how much a McDonalds burger will cost on your winter vacation, it’s also a lighthearted test of the economic theory of purchasing power parity (PPP) — the idea that exchange rates should settle at a place where identical goods and services cost the same in every country.
Theory vs. reality
The theory, of course, struggles to hold up in the messy real world. The $5.36 that a Big Mac costs in the US makes the American burger one of the most expensive globally. That's partly because only some of the input costs of a Big Mac are easily tradable across borders; meat, buns and cheese might travel fairly well, but property and labor — as just 2 examples — can get lost in economic translation.
Obviously, this is a rudimentary means of testing the theory, using only the Big Mac’s ingredients as the “basket of goods” rather than the hundreds used in more comprehensive PPP studies. Nevertheless, since The Economist created it in 1986, the index has become an easy measure of a currency's “real” value, providing content for Intro to Econ 101 classes globally.
If you’re an FX trader who believes in the theory of PPP, the index gives you plenty of ideas to work with. If you’re a burger trader, your move is obvious — a Big Mac sold at one of the 100+ Egyptian McDonald’s restaurants goes for less than $2 USD. Although Big Macs are perishable (maybe debatable), if you pack as many into your suitcase as you can and hop on the next 5hr flight to Geneva, where the same burger goes for more than $7, you might just come out ahead.
This week, energy giant Chevron announced plans to buy back $75bn of its shares, five times the oil giant's current buyback plan, along with an increase in dividend payouts. A prevailing theme from our 2022 in 5 charts was how 2022 was the year for stuff-that-comes-out-of-the-ground — with Chevron's oil and gas clearly no exception.
Along with dividends, buybacks are one of the two main ways that companies reward shareholders for their investment. By buying shares in the open market and then retiring them, buybacks reduce the share count in the company. So if you own a slice of Chevron — and the company does a buyback — your slice of the company gets bigger... and therefore more valuable.
Although technically illegal in the US until 1982, buybacks have become the preferred way for companies to throw off cash. That's partly because companies can be more opportunistic about them, but it's also because they essentially reward shareholders with capital gains, rather than income, which is generally more tax efficient. Apple has been the king of the buyback, splurging $500bn+ on purchasing more than one-third of its outstanding shares in the last 10 years.
The buyback blowback
At the company level, buybacks can sometimes signal a lack of imagination — suggesting that the company hasn't got any projects that it deems worth pursuing relative to just returning cash to shareholders.
More widely, buybacks have become something of a political football. Last year, after much back-and-forth, a new 1% tax on buybacks was signed into law. On 2022's figures, that would net the US treasury ~$8bn a year, which some have lauded as a victory for the non-shareholder class, while others have called it simply a "tax on savers & investors".
Worried sick
Parents fretting over what their kids are getting caught up in and going through is hardly a new phenomenon, but exactly what are modern parents most worried about?
A new study from Pew Research Center, which surveyed nearly 4,000 parents of under-18s late last year, reveals that the most common parental worry is about the mental health of their children, with some 40% of respondents “extremely/very worried” about their offspring struggling with anxiety and depression.
It’s difficult to imagine the list looking the same even 20 years ago. However, on the back of a global pandemic, and with the detrimental impact of smartphones and social media in the spotlight more than ever, the chart-topper is now almost unsurprising.
Interestingly, kids winding up in trouble with the law now worries just 14% of American parents who are altogether more concerned with the direct wellbeing of their children, mentally and physically. Bullying had 35% of those surveyed in the extremely worried camp, with 28% and 25% feeling the same way about their children being abducted/kidnapped and beaten up, respectively.
Pew also found that mothers tend to worry more than fathers about the hazards their children face, as well as feeling more judged and stressed than their male counterparts.
Go Deeper: explore the full report from Pew Research Center.
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• TikTok and YouTube: where this year’s marketing budget is going in the online world.
Off the charts: Which fashion house once again proved its fortunes aren’t fading after beating earnings expectations and announcing that it would be opening 100 new stores? Answer below.
Answer here.
