Price Gouging

Weekly Briefs
05 Feb 2022
7 min read
Price Gouging

Hyperinflation, unprecedented increase in the public debt, bullish stock prices, quantitative easing… There are too many unknowns in the equation describing the market dynamic. Moreover, the relationship between the different variables is far from being straightforward. What drives rising inflation? Is inflation artificial?

The mainstream narrative tells that the abundance of money injected into the economy is due to Covid rescue funding, Fed’s massive assets’ purchase or low-interest lending.  The excess liquidity fueled consumers’ demand and produced a rapid increase in prices. Moreover, the money inflow in equity markets boosted shares’ prices, especially in the tech sector.  

We should remember that in the early days of the pandemic, analysts were expecting a deflationary effect resulting from a lower economic turnover. But, deflation remained illusory while inflation became real.

The first year of the pandemic marked a clear switch in the real economy towards digitalisation. Companies and suppliers that could not fit into the digital world remained out of the marketplace. Therefore, tech companies such as Amazon or Alibaba gained almost a monopolistic position. Quasi-monopoly generates favourable conditions for price gouging.

Price gouging occurs when the key market suppliers have the possibility to increase the prices of goods, services, or commodities above the fair value.

Prices increased throughout the pandemic because the supply chain is under the control of a small number of global firms, with sufficient leverage to increase their margins and transfer the price jump to end consumers.

The price gouging also explains the strong rally in tech shares because price elasticity sells well to investors. The current bubble is the result of a reshaping of the global trade and supply chain. It reflects the sector consolidation and the creation of monopolies across different markets.

If this was an overall inflationary issue, we would see prices going up in relatively equal amounts across the board no matter what the good is. Things like the cost of lumber, items like cars, whether they are new or used and other sorts of items that rely on shipping and shipping containers coming in from overseas. These are very sector specific, which means that these are due to supply-chain issues. Rep. Alexandria Ocasio-Cortez, American politician

Market overview

United States Non Farm Payrolls

The US bureau of labour statistics reported that the U.S. economy created in December 2021 467,000 non-farm jobs. The numbers have beaten analysts’ expectations forecasting 150,000 jobs. The announcement underlines the strong recovery of the US economy despite the significant wage increase and the impact of the Omicron coronavirus variant. Overall unemployment increased to 4% from 3.9% in the previous month.

The market saluted the news, and the Dow Jones bounced back above 35,000 after taking significant losses in January.

Oil prices are bullish, underlining that the turnover of the real economy is on a growing path.


Standard Lithium

Hindenburg Research, the leading institution specialised in activist short-selling issued another compelling report tackling Standard Lithium,  a Vancouver-based company involved in lithium mining.

According to the reputed research firm, Standard Lithium is nothing more than a glorified hoax,  surfing on the bumpy wave of EV technology. Lithium batteries are necessary to boost the development of EV vehicles, but extracting rare metals is a complex task.

Standard Lithium claims to have a technology that revolutionises lithium mining. Nevertheless, the firm shows zero revenue and its senior management was invoiced previously in similar companies that deceived investors.



After several weeks of continuous contraction, Bitcoin ended the week in positive territory climbing above USD 40,000. The path of the leading crypto-currency is definitely impacted by the movements in the stock market. Bitcoin tends to mimic the trend of the key indices, underlying the liquidity glut or shortage.  

While in the short-term, Bitcoin’s jump is good news, in the long -run, it threatens its position as an alternative investment that should be at least in theory decorrelated from fiat-driven finance.



Uber Technologies ended the week in a flamboyant manner delivering a strong return in the last trading session amid an overall bullish sentiment. The global leader in mobility saw its booking level reaching all-time highs and ridesharing returning at pre-COVID levels. Nevertheless, its market position is still fragile, with many local competitors stepping into the game. Moreover, price inflation made Uber less affordable than in its early days.

Uber is without any doubt at a crossroads and investors need to be reassured about the foreseeable growth perspectives.


10-year U.S. Treasuries

The yield on 10-year U.S. Treasuries, notes climbed to 1.925% amid macro data showing strong recovery in the American economy.  Yields reached their highest levels since the beginning of the pandemic. The market anticipates that all conditions are in place for an interest rate hike in March. Over the past two years, the Fed opted to keep interest rates low to avoid an economic downturn and a resultant market crisis.  

The next figure to watch is the inflation estimate for January that could make or break the current trend.

Market outlook

The Dow Jones Index stopped its decline and ended the week on a bullish note, finding support at 35,000. The next figure to watch is the inflation estimate for January that could make or break the current trend.

Bitcoin ended the week above USD 41,000, delivering a strong recovery from the losses recorded in January. The interest rate kike could generate new price corrections, and Bitcoin could test the USD 30,000 level over the next month.

The Gold ounce ended the week above USD 1,800 without clear direction because the stock market was slightly more optimistic. The foreseeable market contraction and the inflationary context are good arguments for a rally in gold prices.

General Disclaimer
The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.

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