Why are big companies making big profits?

 

Big companies made record-breaking profits in 2021, yet 2022 has been a rocky year for the stock market purely because the Federal Reserve waited too long to start raising interest rates which caused inflation to occur. When they printed money during the COVID-19 pandemic, the increase in the money supply is direct correlation to this inflationary environment.

Now, the Fed raised interest rates in hopes of bringing inflation down AND slowing down the economy, which has brought further fears of a looming recession, we were in a recession in 2022 already because of 2 quarters of negative GDP. 

Tech Companies are making big profits because many of them years ago changed their business model from customers owning their software to renting it from these larger institutions. 

People are even financing cell phones, which is deducted from their monthly bill and allows people who have little in their bank accounts to afford the latest and greatest iPhone which is around $800 to zero dollars down, and pay $50/month on their cell phone bill.

Also, Apple has notoriously changed their charging ports, plugs, and everything else that forces their customers to constantly upgrade or buy “accessories” which is SUPER Smart. 

In times when consumers are worried about spending, these large organizations have taken the Planet Fitness gym model. Make the monthly payment just small enough so that people don’t worry about it or forget that their even paying it! 

All in all, the only thing consumers can really do about it is to stop paying for these services altogether, because technology plays a vital role in everyone’s everyday life, this will not happen and these companies will continue to profit! 

Now, if you think like an investor, people who use these companies can invest in their company stock if they are publicly traded and take advantage of the growth of these companies over the long run. Rather than buying the newest shoes, take that money and invest in something that can pay you dividends in the future.

Then you’re using the company’s profits they pay you in dividends and you can essentially buy their products using other people’s money.

Your Guide,

Joshua Krafchick, “Unconventional Money Guy”

 

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