I subscribe to a multitude of stock market information services. It comes with the job, you know. Earlier this week, several of these tools sent me numerous news announcements, almost knocking this phone out of my pocket. I was about to make a revealing discovery.
A flood of bubbling surprises
According to these unexpected notifications, Netflix (NASDAQ:NFLX) just divide your stock. Oh? Maybe they announced it in that game-changing earnings report and no one noticed? I suppose that could happen.
Wait — International Business Machines (NYSE:IBM) did the same thing. Then there is Bank of America (NYSE:BAC), Apple (NASDAQ:AAPL)And Toyota engine (NYSE:TM), just to name a few. There’s no way all these giants could have done stock splits in unison, like a Gregorian chant of Wall Street accounting tricks, without generating miles and miles of headlines. Furthermore, I was unable to find the same stock split announcements through my usual sources, which focus on the American stock market.
So I looked at the notifications again, focusing on the stock symbols. And then it hit me.
These stock splits, all of which took place on Wednesday, did not actually affect U.S. stocks. Each announcement was about each company’s presence in the market. Argentine stock exchange, at the Buenos Aires Stock Exchange.
Don’t cry for me, Argentina. On the contrary, I should cry for you.
Yes, Netflix and Apple did split their shares this week, but not because their listings on the NYSE and Nasdaq exchanges were getting too expensive. Most of them might get there soon, and I wouldn’t be terribly surprised to see a normal Netflix split someday soon – but Bank of America shares are only $33 each.
Things look very different on the Buenos Aires stock exchange, where investors must battle Argentina’s incredible hyperinflation. Here, Netflix is ​​trading at around 14,700 Argentine pesos per share after Wednesday’s 3-for-1 stock split. That’s about $18 at current exchange rates. But things are changing quickly in Argentina. At the beginning of December, the same supply of pesos was worth $41. A year ago, it was $79. It is no wonder that American companies feel the need to adjust their stock prices in the face of this catastrophic exchange rate trend.
The US dollar inflation rate briefly climbed to 9.1% in June 2022. It was a painful jump that was a game-changer for business and personal finances in this country, triggering strong anti-inflationary policies at all levels of our government.
The Argentine crisis is much worse. December prices were 25.5% above November and 211% higher on the same year-over-year basis than is most commonly seen in U.S. inflation reports.
Argentina teaches me something about storing value
You might think that U.S. stock prices on the Buenos Aires Stock Exchange are not a priority in times like these. However, Argentines who have the means and foresight to invest in these stable value stores have a powerful financial tool in their hands. As the peso loses value, alternatives such as stocks, physical gold or Bitcoin (CRYPTO:BTC) become incredibly important. Other defensive options include real estate, cars, or notes and coins in foreign currencies like the dollar.
The total value of Netflix, Toyota and Apple shares in the Buenos Aires market is always in line with that of their underlying US counterparts, filtered by effective exchange rates and different number of shares. Tapping into your holdings of foreign stocks (and other stable assets) can keep food on your table when the pesos in your pocket become worthless.
This reminder of Argentina’s inflation crisis may not improve my investment strategy much, but these buzzing notifications have opened my eyes to the scale of this monetary disaster. Now I understand why Netflix highlighted the falling peso as a 3% foreign exchange hurdle to its revenue growth next quarter. And the American situation doesn’t seem likely to mirror Argentina’s crisis anytime soon, but a healthy supply of gold or Bitcoin could be a lifeline if the next local inflation crisis is worse than the recent one.
These stock splits, initially a curiosity, reveal the profound impact of global economic changes. They underscore a vital truth for investors: the importance of vigilance in an interconnected world and the wisdom of diversifying beyond the traditional stock market. Diversify, stay vigilant, and maybe keep some Bitcoin or gold on hand for a rainy day, because when it rains on the scale of a national economy, it really pours.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Anders Bylund holds positions in Bitcoin, International Business Machines and Netflix. The Motley Fool holds positions and recommends Apple, Bank of America, Bitcoin and Netflix. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.
Stock market trend: Apple, IBM and Netflix just split their shares, but it’s not what you think was originally published by The Motley Fool
