The Wrap: Counting Sleep | Stake

The dollar value of a good night’s sleep, getting a real-time measure on inflation with TIPS, and a ‘shallow dive’ into your favourite companies.

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Counting Sleep

Sleep matters. While boasting about an early bedtime is on-trend nowadays, those who are able to hit the pillow early are reaping the benefits not only for themselves but for the entire economy.

While there are obvious mental and physical health benefits, we come back to the one question we always ask: how do we quantify these to find a dollar value.

Research institute Rand released a study in 2016 looking into the GDP loss due to insufficient sleep.

The US leads the world with a 2.28% loss or US$411b annually. If those who averaged 6 hours of sleep per night increased their time catching Z’s by an hour, US$226b would be added to the economy. Japan led the countries under investigation with a 2.9% loss in GDP due to insufficient sleep.

A similar study in Australia found that a lack of sleep cost Australia US$45b from 2016-2017 due to lost productivity, increased illness and absenteeism increased medical expenses, and more workplace accidents.

Off the TIPS

There’s a lot of talk about inflation recently. It arguably played a role in the market’s recent downturn as treasury yields rose in response to inflation fears. Is inflation a real threat right now? Is hyperinflation imminent? TIPS are tipping towards the answer being no.

Defined as a general increase in the price of goods and services and a subsequent decrease in the buying power of a currency, it can understandably be difficult to see inflation in real-time. Sure, the price of zoo admission may be more expensive this year but cars are generally getting cheaper. While we may not realise inflation in the moment, we can get an instant gauge on its level through financial instruments.

By now you’d be aware that the value of money erodes over time through inflation. A 1% yielding bond is losing real value if inflation is at 2%. Before we get into the nitty-gritty on bonds, here’s a quick primer.

To counteract this risk, the government offers Treasury Inflation-Protected Securities. They’re 5, 10, or 30-year bonds that increase in value as inflation rises. Given the benefit of inflation protection, they trade at a lower yield than regular bonds of the same duration.

Now, by looking at the value of these bonds we can determine what investors calculate the US inflation rate to be. The spread between a regular 10-year treasury bond and a 10-year TIPS bond indicates expected inflation.

The spread between the 10-year TIPS and 10-year sits at 2.2%. Expected US inflation is well within general global targets of 2-3% and is not unreasonably higher than inflation rates over the last decade. While this may be true, the spread (inflation expectation) is rising which may have investors spooked.

For those looking for access to TIPS through equity markets, check out these ETFs: $TIP, $SPIP, and others on Stake. Do your own research before any investments.

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Trade Teaser

How can the number four be half of five? Answer to last week: LCT

What We’re Reading | Weekly 10-K

Read about companies, not just stocks. The newsletter Weekly 10-K delivers a “shallow dive” into US-listed companies. While so much stock analysis available is based on valuations, charts, and ratios, these analysts include a wider qualitative look at the industry, the business, and its competitive advantages.

Read the analysis on two of Stake’s most popular stocks, Shopify and Digital Turbines.