I subscribe to a plethora of stock market information services. It comes with the job, you know. Earlier this week, several of these tools sent me a whole lot of news announcements, nearly buzzing that phone out of my pocket. I was in for an eye-opening discovery.
A flood of buzzing surprises
According to these unexpected notifications, Netflix (NFLX 0.68%) just split its stock. Oh? Maybe they announced it in that game-changing earnings report and nobody noticed? I guess it could happen.
Wait -- International Business Machines (IBM 2.08%) did the same thing. Then there's Bank of America (BAC 1.49%), Apple (AAPL +1.05%), and Toyota Motor (TM +0.23%), just to name a few. There's no way all of these giants could have performed stock splits in unison, like a Gregorian chant of Wall Street accounting tricks, without generating miles and miles of headlines. Besides, I couldn't find the same stock-split announcements through my usual sources, which focus on the American stock market.
So I looked at the notifications again, zeroing in on the stock tickers. And then it hit me.
These stock splits, all taking place on Wednesday, didn't actually involve the American stocks. Every single announcement was about each company's presence on the Argentinian stock market, at the Buenos Aires exchange.
Don't cry for me, Argentina. If anything, I should cry for you.
Yes, Netflix and Apple really did split their stocks this week, but not because their listings on the NYSE and Nasdaq exchanges were growing too pricey. Most of them may get there soon, and I wouldn't be terribly surprised to see a normal Netflix split someday soon -- but Bank of America's shares only cost $33 each.
Things look very different on the Buenos Aires exchange, where investors must struggle with Argentina's incredible hyperinflation. Here, Netflix trades at roughly 14,700 Argentine pesos per share after Wednesday's 3-for-1 stock split. That's about $18 at current exchange rates. But things change fast in Argentina. In early December, the same stash of pesos was worth $41. A year ago, it was $79. It's no wonder that American companies feel the need to adjust their share prices amid this catastrophic exchange-rate trend.
The U.S. dollar's inflation rate briefly soared to 9.1% in June 2022. It was a painful jump with game-changing effects on business and personal finance in this country, sparking heavy-handed anti-inflation policies from every level of our government.
The Argentine crisis is orders of magnitude worse. December's prices were 25.5% above November's and 211% higher on the same year-over-year basis you see most often in American inflation reports.
Argentina is teaching me things about value storage
You might think the prices of American stocks on the Buenos Aires exchange are a low priority in times like these. However, Argentinians with the means and foresight to invest in these stable value stores have a powerful financial tool in their hands. As the peso loses its value, alternatives such as stocks, physical gold, or Bitcoin (BTC +3.77%) become incredibly important. Other defensive options include real estate holdings, cars, or bills and coins in foreign currencies such as the dollar.
The total value of Netflix, Toyota, and Apple shares on the Buenos Aires market are always in lockstep with their underlying American counterparts, filtered through the effective currency exchange rates and different number of shares. Tapping into your foreign stock holdings (and other stable assets) can keep food on your table when the pesos in your pocket are turning worthless.
This reminder of the Argentine inflation crisis may not improve my investing strategy by much, but those buzzing notifications opened my eyes to the sheer scale of this monetary disaster. Now I understand why Netflix pointed to the falling peso as a 3% currency-exchange headwind for its top-line growth in the next quarter. And the American situation doesn't seem likely to mirror the Argentine crisis anytime soon, but a healthy reserve of gold or Bitcoin could be a life-saver if the next local inflation crisis is any worse than the recent one.
These stock splits, initially a curiosity, reveal the profound impact of global economic shifts. 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 alert, and maybe keep some Bitcoin or gold handy for a rainy day -- because when it rains on the scale of a national economy, it really pours.
