Dear Climber,
What defines a bad day? Waking up late and missing class? Eating candy when you’re on a strict no-sugar diet? Breaking the cork on a scotch bottle and having the other half fall in? Scratching your car on an aluminum signpost when backing into a parking spot? Or, is it going through a whole day without eating because you have no food or hiding in a bomb shelter at night because you live in a terrorist-occupied territory or begging on the side of the road asking anybody for anything? I used to think I wanted the whole world, or nothing. I used to think I had it bad and that my life was tough. I used to think that my stresses were unbearable and nobody felt what I feel. But, the only thing I know now is that what I used to think was ignorant, immature, silly, stupid. At the end of the day, it comes down to empathy. It’s about putting yourself in somebody else’s shoes before seeking to establish any sort of alignment. It’s about being realistic and having a diverse awareness. Don’t tell me you’re stressed out, I’ll just laugh at you. The Market. The S&P 500 ended its fourth consecutive week of gains at the close today. Some are concerned that the market is becoming overbought and is due for a consolidation. The Federal Reserve is focusing on “patience”. Existing Home Sales dipped below 5 million- coming in at 4.94 million in January- not having low numbers like this since 2015. Emerging markets, developed markets, and US markets all have seen gains since the start of the year- recovering from the mid-December correction. “More of the same and punish those who still believe in an efficient market.” The strategy is buying the most hated/shorted names while shorting the names that have the highest hedge fund and institutional ownership. This investment strategy has continued to be consistently profitable and has consistently generated alpha. The most hated stocks are Mattel, Under Armour, Nordstrom, Microchip Technology, Discovery and the least shorted names are Johnson & Johnson, Medtronic, JPMorgan, UnitedHealth Group, Exxon Mobil and Microsoft. The financial industry. Jack Bogle led the campaign for a better, fairer, more consumer-focused investing industry. Now that he’s gone, Tom Coutts is a candidate to take his place. Tom believes that the investment industry may be experiencing a peak. The financial industry “creates little of value, but it is a facilitator for the economy”. He believes that most firms have an inwardly focus on their own interests and that the industry should evolve to a model based on low fees (enough to cover costs) and a capped performance fee. Many people think that the finance industry serves no purpose with their selfish acts. That banks only care about the money going into their pockets instead of the money going into their client’s pockets. Banks, pension funds, private equity, and asset managers do more than you think. They help raise capital for start-ups that bring innovative technology into the market, they help individuals meet their goals and retire well, they help families finance homes, they help small businesses get loans, and they contribute to GDP, productivity and the growth of the economy. Reasoning logic down to its roots. What drives us? What formulates our thoughts? What makes us do what we do? It starts with nurture. How our parents raised us, taught us, punished us, rewarded us, loved us… Then nature. How community-based your family is, how close your family is, where you live, who you hang out with, where you went to school, religious beliefs, economic-political standing… Then when you leave the nest and go out into the world, it ends with individual growth and understanding, and your contribution to the world when you no longer exist. Who you make yourself out to be, the core rules and principles that you live by, the experiences and mistakes that you learn from, the relationship you have with yourself and with others, the restrictions and disciplines you impose on yourself… We now live in a world where we’ve connected to everything except ourselves. We read up on others, obsess over the latest gossip and keep up with the hourly following. We lost our courage and increased our insecurity. The secret? You will become way less concerned with what other people think if you when you realize how seldom they do. Everybody else is too worried about themselves to really care what you do. What drives portfolio performance? Does asset allocation or market timing and security selection drive portfolio performance? Answer: more than 90% of a portfolio’s long-term variation in return was explained by its asset allocation, leaving only a small amount that can be explained by an investor’s ability to time the market or successfully choose individual securities. Data privacy. As technology continues to evolve and become more available, the chances of that technology being used for unethical purposes increases. This led Bill Gates to ponder, “Should surveillance be usable for petty crimes like jaywalking or minor drug possession? Or is there a higher threshold for certain information? Those aren't easy questions.” Unfortunately, governments and private companies are answering these questions for us. Passengers aboard American Airlines and Singapore Airlines have reported front-facing cameras in their in-flight entertainment displays. The airlines responded by stating that the cameras are not in use and are automatically installed by the plane’s manufacturers to be used for things like seat to seat video calls. The issue is that the cameras were not disclosed, with passengers not being notified that during their 12 hour plus fights there is a camera pointing right at them. Meanwhile, Democratic lawmakers are calling for high-tech products to be required to disclose their specifications. This is in direct response to Google’s Nest which had an undisclosed microphone in it, and this is not the only case of this. In perhaps the most radical surveillance case known to date, China is using DNA to track its citizens. With the help of American companies, the Chinese Government is forcing members of its Muslin population into “re-education” camps. In these camps the Chinese offered “free medical checkups”, but when the check-ups were administered, they also took fingerprints, face scans, DNA, recorded the patient's voice, and refused to share medical results or findings with patients. The real purpose of these medical checkups is to better track the Muslim population in order to force them to conform to the Communist Party’s beliefs. Instead of the international backlash that should have been expected with these extremely unethical practices, many organizations have come out to talk about the benefits of these practices. American companies have played a large role in China, and currently in the US, companies like 23andMe collect DNA information and hold on to the right to distribute it at their discretion. As consumers, we need to be aware of products of this nature and voice our opinion about companies that collect data from our phones, listen to us in our houses, watch us on flights, and collect DNA from our examinations. Keep Climbing, The Alchanati Campbell and Associates Team Dear Climber,
Past, present, and future; the only time that we’re capable of knowing. They say you're supposed to learn from the past, live in the present, and plan for the future. But everybody is always looking forward to something. The present never satisfies us; it is always better one minute later or two minutes before. You keep wishing you were older until you finally realized its better to be young. The young want to be old and the old want to be young. Your mind is stuck six months in advance when you expect your diet and workout routine to payoff. But that’s only if you are actively working to better yourself in the present. Putting things off is the biggest waste of life: it snatches away each day as it comes and denies us the present by promising the future. The greatest obstacle to living is expectancy. So how do we live properly? The past is gone, and the future is impossible to predict. I can die tomorrow or live to 120. Let’s get to it: Be present. Be 100% present in body and mind in everything you do. Do whatever you’re doing in the present moment well. Yes, our current beliefs depend on realizations experienced in the past, but we are in a constant change that requires adaptation and an open mind. Live every second like it's your last, but don’t lose value or meaning in those seconds. In order to benefit yourself and the universe, you must have a higher intention in mind beyond mere self-gratification. It doesn’t mean you’ve given up on the pleasures of life; you’ve replaced them with even greater pleasures. Your brain naturally rules over your heart. You might not be able to control your urges, but with your will-power, you can prevent the urges from ever affecting your behavior. Your actions, speech, and thoughts are under your complete control. Right now, you can achieve total self-mastery if you so desire. The key to this is focusing on the “now”. Don’t obsess over how bad you were in the past. The truth is that we live in the present, and right now, your focus should be getting the most out of each day you live in. The Market. We are in a national emergency; do you feel it? Stocks surge on trade talks and consumer sentiment. Many are beginning to suspect the Administration and the Fed are purposely releasing statements to keep this market rally intact. When will they realize this will backfire in the end? A record 7 million Americans are 90 days+ behind on their auto loan payments (a million more people behind than during the financial crisis era and most are under 30 years old). US national debt tops $22 trillion. On a lighter note, the 30-year fixed mortgage rate fell since its November 2018 highs. Value, quality, low volatility, momentum, and size. These 5 factors pose as the best factors to evaluate equities. When you create a valuation model for an equity, you evaluate the equity’s internal factors like profitability, debt management, liquidity, the capital structure, and the free cash flows, and then you use these metrics and their growth to forecast the future to see if this equity has “value” or “growth”. A big part of an equity’s valuation is how it compares to its competition. Is it leading the industry? Does its sales growth beat competition? Does it have a majority of the market share? When you are creating a portfolio of equities, the best factors to go off of are these 5. Value as in price-to-book ratio. Quality as in profitability and the degree of conservative investment. Low volatility as in the lowest volatility in sector, region and global betas. Momentum as in outpacing the market in growth. Size as in large-cap versus small-cap. All of our problems are the same. You didn’t reach a goal? Don’t give up, try a different approach and remember the end result is less important than the journey it took you to get there. Somebody criticized you? You can’t please everybody. Learn from the criticism and don’t be afraid of it. You have financial troubles? If money was the purpose in life, inflation wouldn’t exist. Lack of money helps you decide on what matters and what doesn’t. You’re unhealthy? Quit feeling sick and do something about it. A relationship ended? Finding love is about understanding what love is not. You need relationships to end to find out what love really is. Keep Climbing, The Alchanati Campbell and Associates Team Dear Climber,
There is this beautiful girl in your presence. You’re amazed at her being, and her appearance is urging you to learn more about her. Her name, what she studies, what she likes, why she’s here… But you can’t seem to get yourself over there to initiate the interaction. There’s this invisible boundary between you and her. You keep imagining how the conversation will go, “Hi, I apologize for interrupting you, but I see you in here every day and I just wanted to tell you that no girl that comes in and out of here compares to you. You’re absolutely gorgeous.” But you’re still sitting across the room. You finally lose momentum and become content with the imagination before regret sets in. Let’s get to it: Relationships. Every successful interaction grows when we move further away from the environmental norms to a deeper interpersonal culture. Whether directly or indirectly, everything we do is shaped by our relationship with people. Most relationships we form remain in the introductory period, where the norms are upheld and with our defenses still in place. We remain here because we lack courage. The Market. The market tends to hear what it wants to, rather than what is really being said. If stocks rally until the central bank’s next meeting in March, we might see talk of a couple rate hikes. But Powell’s goal is not to spook investors with further hikes. The market is in late cycle and securities that are higher in quality and liquidity are preferable. “The key to a good life is not giving a fuck about more; it’s giving a fuck about less, giving a fuck about only what is true and immediate and important,” (Mark Manson). A confident man doesn’t feel a need to prove that he’s confident. The more you pursue feeling better all the time, the less satisfied you become, as pursuing something only reinforces the fact that you lack it in the first place. Being open with your insecurities paradoxically makes you more confident and charismatic around others. Who you are is defined by what you’re willing to struggle for. The question is not whether we evaluate ourselves against others; rather, the question is by what standard do we measure ourselves? It’s easier to sit in a painful certainty that nobody would find you attractive or appreciative of your talents than to actually test those beliefs and find out for sure. Rejection is an inherent and necessary part of maintaining our values. Life is about not knowing and then doing something anyway. Lessons learned from other people’s jobs. You can make a more powerful point in 10 words than you can 10,000 (Poet). The cumulative effects of small daily habits- both good and bad- add up to something enormous over time (Doctor). The winner is not always the most accurate, but the most persuasive (Politician). No argument is ever 100% airtight (Lawyer). Bet when others think the odds of success are low but be able to survive when those other people are right most of the time (Gambler). What people present to the world is a tiny fraction of what’s going on inside their head (Therapist). “The U.S. economy is growing almost twice as fast today as when I took office, and we are considered far and away the hottest economy anywhere in the world.” The State of the Union is a chance for the President to address the Nation with the hardships we have overcome and the problems we still face. But for President Trump, it was a chance to rally his troops after losing big in the midterms and facing heavy criticism for the longest government shutdown in U.S. history. Those who watched the speech noted that Trump was mellow and that the speech was uncharacteristically long and professionally presented. The theme of the State of the Union was “greatness” and in the pursuit of greatness Trump made another unusual move, he called for unity within the government. At face value, this was a very significant statement and one this country badly needed, unfortunately as Trump’s speech went on his motives became clearer. President Trump is currently the subject of no less than 18 investigations, and with strong Democratic support in the house, many of them will be able to move forward. As Trump began to recite, “if there is going to be peace and legislation, there cannot be war and investigation”, he was met with some applause that quickly faded as the implications of his words became clear. In a move paramount only to Richard Nixon’s call for Congress to stop investigations into the Watergate scandal, Trump called for a stop of the investigations into his affairs. He then threatened the economy stating, “An economic miracle is taking place in the United States and the only thing that can stop it are foolish wars, politics, or ridiculous partisan investigations," Basically saying nice economy you got here, it would be a shame if something happened to it. Keep Climbing, The Alchanati Campbell and Associates Team Dear Climber,
Gratitude and empathy: these are words for the developed world. For those who got lucky in the Ovarian Lottery. For those who live a life where food, shelter, and survival is a given. It’s handed to us and fed to us and bestowed upon us. There are no questions asking if we deserved this or earned this through hard work and sweat. To receive these is natural; we’ve become accustomed to it. Two characteristics; selfless acts that show you’re conscious of your being. Two characteristics that would balance out your ego, self-pity, inaccurate hatred and all the other nonsense noise in the background. Because there’s absolutely no reason for those. Let’s get to it: The Ovarian Lottery. “You don’t know whether you’re going to be born rich or poor, male or female, infirm or able-bodied, in the US or Afghanistan. All you know is that you get to take one ball out of 5.8 billion balls. And that’s you,” (Warren Buffett). This is called the “Ovarian Lottery”. It’s how I got so lucky to live the life I have. I won the lottery with my parents. I won the lottery with my brother and sister. I won the lottery with my extended family, friends and the opportunities and experiences I have had. But not everybody is as lucky as I am. One of the greatest challenges of this world is to appreciate and enjoy what we ourselves have- even though there are others who have more. Wealth inequality. In order to survive, any flowing system must evolve to increase its access to flow. If movement is hierarchical, then so is wealth. For example, our highway systems operate through a few large, high-capacity freeways and many small, local streets. Today, globalization continues to create an unequal distribution of wealth over the population. As time moves on, inequality cannot be avoided even with legislation. The Fed. Interest rates went unchanged on Wednesday. The Fed has committed to a more patient approach of hiking rates which means slower interest rate increases on the horizon. PG&E goes bankrupt…. again. Just a few nights ago The Pacific Gas and Electric board of directors voted to file for Chapter 11 bankruptcy. This move is not surprising since the company did the same thing after the energy crisis in 2001 and has considered it several other times. There are two main options a company can choose from if it wants to file for bankruptcy. A company can file under Chapter 7 or Chapter 11. Chapter 7 is used when a company has no viable future and their debts are so massive that they have no choice but to liquidate the company. Chapter 11 is known as a business reorganization and that allows the business to restructure their debts and present a plan of how they will pay back their creditors. California lawmakers and financial analysts have speculated that PG&E has no need to file for bankruptcy and that PG&E, one of the nation’s largest utilities would be able to pay off their debts in spite of the recent fires. Equipment owned by PG&E caused at least 17 of the 21 major wildfires that burned through California in 2017 and may be responsible for several of the fires of 2018. 98 civilians and 6 firefighters died from the 2018 fires. Liabilities for these fires cost the company $30 billion, bringing their total debt to $52 billion at the end of September. It is possible that PG&E is using their leverage as a large utility and Chapter 11 bankruptcy to avoid directly paying for the damage they caused in the recent wildfires. Whatever the case may be, California lawmakers voted to allow PG&E to take out 10 billion dollars in bank loans to continue operations through the bankruptcy. It is likely that PG&E will continue to power most of Central and Northern California and remain a major U.S. utility throughout the bankruptcy as taxpayers and customers help foot the bill. The current state of Venezuela. Over the last week, Venezuela has gone from bad to worse, as hyperinflation runs rampant in the country leaving people starving on the streets with nothing but a shattered government to turn to. An entire briefcase of money could barely buy you a pack of toilet paper as the annual inflation rate grew past 1,300,000%. Infrastructures crucial to daily life like health care and transportation are crumbling. On January 23rd, Juan Guaidó, the leader of the legislature, declared himself acting president on the grounds that the recently reelected president, Nicolás Maduro, won the presidency by using force and corruption. The US along with several other nations are recognizing Juan Guaidó as the rightful president which has only escalated political tensions. Nations all over the world continue to show interest in the situation because Venezuela has one of the largest oil reserves in the world. Keep Climbing, The Alchanati Campbell and Associates Team |
AuthorWHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now. Archives
July 2020
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