What are common beliefs that we all share? Beliefs that are universal and that apply to all. Beliefs that everybody should live by regardless of religion, origin, ethnicity and personal difference. Today we are celebrating our 1 year Anniversary! We’ve learned a lot and we’ve shared a lot. Here’s a list of some common beliefs we all share and that we all should live by: Social cooperation is our key for survival and reproduction. Always be calm and composed regardless of the situation. Never compare yourself to others, especially if they are above you. If you value who you are, you need no one to confirm your worth. Persistency leads to success. Life is unconquerable. It is not about the end, it is about the process and the adventure to get to the end. When you fail, get a bad grade or mess up, don’t be discouraged and do not give up. Money is only a byproduct, it is not the main pursuit. All of our problems are the same. Actively work on knowing your true self and being comfortable with your inner voice. Don’t fear failure. Listening is a great virtue. Increase your threshold for pain and criticism. No one is perfect and we are all learning and growing. Focus on the now and worry about future tasks later. If you do not love yourself, you will be unable to love anyone else. Stop trying to seek validation. Make people feel like they are valued and important. Most people want two things: pleasure and stability. Don’t give a fuck and never be afraid.
The Market. Modern Monetary Theory proposes that a country with its own currency doesn’t have to worry about accumulating too much debt because it can always print more money to pay interest. While any single household can dig itself out of a hole by cutting spending when its income falls, the economy as a whole cannot. Lyft went public today, surging 23% on its first day. Half of Americans approaching retirement have nothing saved in a 401(k) or other individual accounts.
Purpose unmasked. What is it that you want to achieve? Why are we always trying to create? What is true but not obvious? What if all your close-held beliefs were wrong, would your identity survive? Who are you, where is your place and what were you made for? Everybody in the world is looking for a purpose. 1) The purpose of life is not to be happy. It is to be useful, to be honorable, to be compassionate, to have your life make some difference so that you have lived and lived well. 2) The purpose of this world is choice- to give us the incredible opportunity to be independent things, to live our own lives, to be ourselves. All you hope to get out of life is that you lived for the purpose of what you were created for. 3) The purpose of life is right in front of us: it’s to create a reality we want to inhabit- to reach towards the better end of our conscious experience. Because we live, life matters. What makes a human life have meaning or significance is not the mere living of a life but reflecting on the living of a life. A life, like anything else, may be of much worth even if it is not geared toward and does not serve any ulterior purpose. I do not enjoy myself for a certain end or purpose. I just enjoy; it is worthy in itself. 4) The purpose of life: improve yourself and improve others. No one can lead a happy life if he thinks only for himself and turns everything to his own purposes. You should live for the other person if you wish to live for yourself. It is your ultimate choice to decide whether life is for a purpose, for what purpose, or for no purpose at all.
The current state of the Fed. It seems like the Fed, led by Jerome Powell, is standing by his dovish stance. After seeing the weakening economy in 2019, the Fed has held a decisive stance of not raising rates, for the first half of 2019. Currently sitting at a 2.25-2.50% Fed funds rate window, it seems the Fed has dug themselves into a tight spot, with the economy still weakening, with a heavy balance sheet, and a relatively low interest rate. In the past, it has taken over an 800 basis point move to pull us out of a recession, with 2009 taking us from a 5.25 Fed funds rate to 0. What most people don’t realize was from 2009-2010, we also employed over $1.3 trillion worth of quantitative easing (debt), bringing our Fed balance sheet to a local all-time high of $2.054T. We continued to use QE to keep our economy booming, with our balance sheet hitting $4.5t in 2014. In the last year, the Fed has been unwinding this balance sheet to around $4T. Personally, with the already low interest rate, and the massive balance sheet they weren’t unable to unwind at a fast enough velocity, they will not have any financial instruments left to stop any impending recession.
Inverted Yield Curve. An inverted yield curve is when the short term rates have a higher return than long term rates. The reason this occurs is due to capital leaving other financial markets and going into long term treasury bonds. This causes prices to increase and yield to decrease. People usually also leave short term treasuries and flock to long term, which in return decreases prices and raises rates. This has happened in the last year to the 3month - 3 year- and 5 year, but recently we saw the 3month and 10 year invert, which most people view as a sign of an impending recession. Personally, I like to look at the fed funds rate vs. 10 year, which has had a decently high rate of predicting an upcoming recession, most notably in 1981, 2000, and 2006. As of March 25th, this has inverted and has continued to stay inverted.
Productivity and Motivation. Productivity is the name we give our attempts to figure out the best uses of our energy, intellect and time as we try to seize the most meaningful rewards with the least wasted effort. It isn’t about working more or sweating harder, it is about making certain choices in certain ways. Productivity rises when people do the same kind of tasks over and over. Repetition makes us faster and more efficient because we don’t have to learn fresh skills with each new assignment. To motivate ourselves, we must feel like we are in control. When people believe they are in control, they tend to work harder and push themselves more. When we start a new task or confront an unpleasant chore, we should take a moment to ask ourselves “why”. If you can link something hard to a choice you care about, it makes the task easier. The best productivity strategies: assign a fixed period of time to a task, schedule it and stick to it. Prioritize. Politely decline (say no!) so that you can focus on the most important work. Moving around does a lot for you. Clear your desk of distracting devices and see how much more you get done with fewer distractions. Take short breaks. Eat well. Choose when to check your email. Organize your workspace. Wake up early.
The fall of the iPhone has begun. As sales peaked, Apple needed to allocate their insane amount of cash into new products and services so they could grow. The answer? Apple decided to enter not one, not two, but three overcrowded and highly competitive industries. First on the list is Apple’s new subscription service. Apple TV has been around for a while but this summer the app is getting an upgrade and will soon include providers like Hulu and HBO as well as Apple’s very own streaming service similar to Netflix. The video streaming industry is roughly valued at $30 billion annually and is expected to double by 2021. With that much potential growth at stake, it's no wonder that the industry is filled with major players like Disney, Amazon, Hulu (Disney, Comcast, AT&T), and Netflix. Together these companies represent trillions of dollars meaning that Apple may have a tough time differentiating their product and carving out a market segment. Apple then decided to give the gaming industry a shot. Since its release, the “App Store” has dominated the mobile phone gaming industry beating every other major company to the table and holding their ground for years. Apple may be poised to do it again as Apple Arcade is set to release this summer and offer a subscription-based gaming service that is similar to ones in the works by Google, Microsoft, Sony, and Amazon. Again you can see Apple is taking on a major and highly competitive market, but Apple had a definite advantage here. The gaming industry was estimated at nearly $140 billion dollars in 2018 but over half of revenues came from mobile gaming. At launch, Apple’s gaming service will be able to reach half of a market segment valued at $70 billion dollars. To top things off, Apple partnered with Goldman Sachs to offer a brand new type of credit card. This is Goldman Sachs’ very first consumer credit card and together the companies plan to enter an industry that saw $1 trillion of volume in Q4 2018 alone! There's no way to tell what the future holds, or apparently what market Apple will enter next, but one thing is for certain: Apple will face competition it hasn’t seen since taking on tech giant IBM in the early ’80s.
The Alchanati Campbell and Associates Team
Competitive edge. How is it created? Speed. Money. Power. Influence. Better physical, mental and emotional capability. Diverse connections and a wide network. Having more knowledge that is well-rounded and vast, and having better access to information. Having an edge is how you win more customers, increase your top-line (revenue/sales), beat your competition, gain status and power... making yourself a somebody in this world. Knowledge: turning data into applicable information that is then manipulated for your particular use. It’s knowing how things are connected together. How A affects B and how C can be used to avoid A and B altogether. How people behave in certain situations, and how and why they react. Knowing which market to target and knowing how much time, capital and energy to allocate in every endeavor you pursue. Knowing who to be connected to and knowing which strings to pull to make the puppet show have a standing ovation at the finale. It’s a strategy and a skill set learned from years of experience. Experience of booms and busts from working with different people with different cultures in different places all around the world.
The Market. Oil prices and Sterling affect the UK’S inflation rate. Inflation rises when demand hits a “potential level”. Companies don’t necessarily respond to higher demand by raising prices. Stock prices have shown uncommon strength. The stock market expresses the culmination of real-time money-backed decisions made each day by tens of thousands. My theory: The global economy is slowing down, debt is starting to be harder to pay off and more individuals and corporations are in debt, and the US economy’s recession is at a hold due to politics. The Feds are being controlled by the government and they are not doing their job properly. California’s drought officially ended after being in a drought for 7 years. Lyft filed to go public. Levi Strauss just became publicly traded. A quadruple Witching Day: A day on which four asset types (stock index futures, stock index options, stock options, and single stock futures) expire simultaneously. Volatility is a measure of the breadth of movement in the market, an index of an individual asset is currently experiencing. Implied Volatility is a measure of the expected volatility the market, an index or an individual asset is going to experience in the future. If investors believe a stock or an index is going to make a large move in the future, its implied volatility is high. Higher prices for oil and gold have been responsible for the outperformance in commodities. No more interest rate hikes in 2019 which means the lower interest rates will incentivize borrowing and raise the prices of stocks. The 90-day and 10-year Treasury yields are .05 basis points away from each other.
Case Study: Vietnam. Corruption is embedded into the government in dozens of countries around the world, but it happens in every single country undoubtedly. Vietnam is one of these countries. Vietnam is a developing economy and relatively a 3rd world country. It’s mostly a cash society, but the government has this almost impossible goal of making it a cashless society. Vietnam is a net exporter and specializes in tourism, manufacturing (electronics, metals, rubbers, and plastics), textiles and agriculture (fruit, coffee, pepper, rice). Total population of 95.54 million(with 70% of the population under 40 years old) and GDP of 223.9 billion USD in 2017. Forecasted, Vietnam will the second best-emerging market in regard to growth with an estimated yearly growth rate of 6-8% for the next 30 years. About 80% of the economy consists of small to medium-sized local businesses with the rest of the GDP coming from trade and foreign investors. The biggest mafia in the world is the communist party. They kill sparingly, but they are vicious all the same. Corruption in developing countries enables growth in order to compete with other nations and the economy might depend on corruption to keep themselves in the global race, but it only benefits a select few. Imagine corruption as a big spider web with thousands of different end point connected to one another. If you are having a million dollar debt issue with another individual and that individual “employs” the economic police to collect, all you would need to do is know which higher up official you need to pay off (of course for less than a million) and your problem is solved. Money starts at the bottom and is fractioned off on its climb to the top. Public officials are on pay-rolls and “envelopes” is a term that’s used not in the way you know it as. Vietnam’s industrialization was delayed due to international embargoes, countless wars, lack of trade in the past and their bad relationship with China, and in order for Vietnam to become developed they need to fix their corruption, improve their human rights, increase their education, divest from state-owned businesses and have a free-market with the support from a communist-free government.
History: Vietnam. The dispute of power and values. The influence of strength and control. The longing for freedom, safety, and peace of mind. With the hope and goal of prosperity, independence, and unity. The effects of the Vietnam War still cast a shadow on this country. It stunted its growth, scarred its citizens and left the country in a continuous recovery. Read up on history, educate yourself, remember those who lost their lives, respect the culture, but in the end, all they want is to forget and forgive.
The Alchanati Campbell and Associates Team
Ambition. What the “dreamers that can’t sleep” have. It’s a talent, a skill, an urge inside of you that never rests. Ambition keeps you up at night and it wakes you up in the morning before the sun rises. It’s for those who’d rather be impressive without acclaim than having acclaim without being impressive. They don’t need public opinion to validate who they are or what they have done. Only the fame-driven, lazy, confused, and ill-exposed go after acclaim without being impressive. It’s fake and meaningless. Ambition could also be your downfall. You’re so driven to be better than everyone else that competition becomes your life. The thought of others working and producing drives you to work and produce even harder. You become unfriendly and everything turns into a race. You look at others as competition instead of thriving individuals that are a part of your society. So how do you be ambitious without losing a sense of humanity? Don’t be afraid to follow your gut, hold onto true core values, act on your dreams and live to better yourself every single day.
The Market. Amazon plans to make all of their shipments carbon-free, with 50% of shipments achieving this by 2030. More airlines have cameras installed on their seat backs. Many Americans are managing their finances based on their monthly subscriptions and lease payments, not thinking of the total they’ll pay in the long run. Car debt has reached $1.2 trillion. The US trade deficit widened more than expected in December to $59.8 billion. 63% of the US’s $598 billion deficit is from trading with China (a total deficit with China of $375 billion). The Fed is nearing the end of its balance sheet reduction process. Employers added 20,000 jobs during the month, bringing the unemployment rate to 3.8%.
The end of the road for automobiles? “Your time is not free, right? Your time is worth more than $20 an hour. So, in my case, why not spend $15,000 to $20,000 a year on Uber and Lyft to get all of that time saved?” The dilemma is traffic and wasted time, and the solution is not owning a car and using ride-hailing apps. Auto sales are declining, 26% of US 16-year-olds earned a driver’s license in 2017, the average price of a new car in the US hit a record $37,777. Ultimately, you will start seeing a trend of people not having cars and using ride-hailing and mobility apps instead.
The relationship between financial statements. The three most well-known statements are the income statement, balance sheet, and cash flow statement. The income statement states the revenue and costs and determines the bottom-line net income. The net income is used on the top line of the cash flow statement and in retained earnings on the balance sheet. The cash flow statement uses the cash from operations, investing and financing to determine the net change in cash during the period, and the balance sheet balances liabilities and equity to assets. The net change in cash from the cash flow statement is added to the top line of the balance sheet where it is a current asset listed under the description of cash, cash equivalents, and marketable securities. Change in current assets and current liabilities on the balance sheet is represented as the changes in working capital on the cash flow statement.
What is Brexit? Brexit, in its purest essence, is the United Kingdom’s exit from the European Union. The European Union is an economic union which is comprised of a set of counties that share 4 things in common.
•No barriers to imports/exports amongst member countries
•Uniform trade agreements with non-member countries
•No barriers to labor and capital amongst member countries
•Uniform economic policies, and common institutions
The European Union will be considered a monetary union post Brexit, as all member countries will also be sharing a set currency, the euro. The big issue currently with Brexit is setting up new trade agreements which they have never had to deal with before. They must also set up restrictions on labor and capital, which once flowed freely amongst EU countries. The last issue lies into setting up an entirely different economic system, with differing policies then they once held. Luckily for the UK, they never left the sterling, so they won’t have to deal with setting up a new monetary system. All in all, their big issue lies into getting this all set up before the UK officially leaves the EU on March 29th.
The next recession. A recession is defined as two consecutive quarters of negative GDP growth. Currently, unemployment is at its lowest level in decades, employers have added jobs for eight years running, and the economy this year is on track to grow at its fastest pace since 2005. But, weakness in some major sectors (auto manufacturing, agriculture, construction, and retail), stock market declines, global economic slowing, and the fear of a worsening trade war with other countries show that a recession may be on its way. Right now, the country is in the part of the business cycle known as expansion and this expansion is currently the second-longest on record and will be the longest if it continues into summer. The effects of a recession can devastate an economy as people lose their jobs, pay is cut, and production slows. According to the Federal Reserve, 2 in 5 Americans don’t have enough money in their savings to cover a $400 emergency expense. This means that millions of American families would be unable to support themselves through even a mild recession. When a recession strikes, the economy slows down and contracts. In order to encourage borrowing and spending, the Federal Reserve lowers interest rates. When the economic outlook of a country looks poor, people begin to lose confidence in their currency. In the United States, Americans may prefer the stability of gold over the US dollar which would drive the price of gold up and may destabilize the dollar. Since production has slowed, companies lay off workers which leads to less circulating money which in turn leads to consumers spending less money and as a result companies produce less. This cycle leads companies to post low revenues, which in turn lowers the value of the stock market. The US economy is the largest economy in the world and is the largest importer in the world. When the US economy slows and imports fewer goods then the economies of other countries begin to slow. Globalization has made the economies of the world increasingly intertwined, which means as the US economy suffers, so does the rest of the world. In preparation for a recession, it is recommended to have at least 6 months of income saved up and you may also want to move some investments around since stock prices tend to decline in a recession while less risky investments like bonds offer higher relative rates.
The Alchanati Campbell and Associates Team
Dear Climber,Failure. At what point do you give up? When do you know that you’ve failed? Is it when you can’t find a viable solution? Is it when you can no longer continue forward? Is it when you’ve tried your best and didn’t succeed? Failure; a problem many don’t have because they fear it. How unfortunate. The world doesn’t lack motivated people. It lacks those with the drive to follow through. It’s better to act and fail than to have not acted and floundered. Stuck in the same place at a different time because you fear to leave. Change scares you. The possibility of success haunts you. “I can’t really be that guy in that fancy car wearing that fancy watch walking in those fancy shoes.” Or in my world: “I can’t really be that knowledgeable and that deeply in love, surrounded by loved ones who I can teach and learn from, traveling the world building my circle of competence, making a difference, finding purpose and forgetting fame.” But really, you can and I can. What you think will manifest into reality, and if you believe it, you're on your way. Let’s get to it:
The Market. “While we view current economic conditions as healthy and the economic outlook as favorable, over the past few months we have seen some crosscurrents and conflicting signals,” (Powell). Debt among 19 – 29-year-old Americans exceeded $1 trillion at the end of 2018. Student loans (with an 11.42% 90 days+ delinquency rate) made up the majority followed by mortgage debt. What drives US consumer debt? Mortgage debt, student loans, auto loans, credit cards, HE revolving and other. CBD (Cannabidiol) has the potential market value of $16 billion by 2025, with 7% of Americans already using it. The cannabis industry could reach $130 billion by 2029. Warren Buffett says he would support Mike Bloomberg as President. March 1st deadline for new tariffs to be imposed on an additional $200 billion worth of Chinese imports was waived by Trump. The 2019 healthiest countries are Spain, Italy, Iceland, Japan and Switzerland with the US ranked at #36. GDP for the 4th quarter of 2018 increased by 2.6%. There were increases in consumer spending, business investment, exports and inventory investment. GDP is projected to go down 1.3 points to 1.8 in 2019.
The Feds. Investors expect the Fed to refrain from any hikes this year. The markets have priced in a flat 2019 interest rate path and no hikes this year would please Trump. The Fed will remain patient in light of uncertain economic and market data. The probability that a slowdown turns into recession decreases if the Fed promptly eases policy, and to cause a recession, the Fed needs to over-tighten monetary policy. But now, the Feds are taking the opposite approach: they are easing policy by announcing that they are “patient” and are ready to cut rates if needed. Powell emphasized that wages have gone up, but inflation has not. So why should the Fed raise the rates now? He also said that the Fed is going to cease their balance sheet runoff by the end of 2019. However, Mr. Powell also had some discouraging things to say. Markets, in general, are more volatile right now, while U.S. economic growth is expected to slow down. On a global front, a larger economic slowdown in China presents a real risk to the global economy, which would then subsequently threaten the U.S. economy.
Tesla. Following an ominous tweet by Elon Musk, the long-awaited $35,000 Model 3 is finally here. Curiously enough the announcement came just a day before Tesla had $920 million of debt due. Investors who had been following Tesla closely, myself included, had expected that Tesla would find a way out of the nearly $1 billion dollars in debt looming over their heads. The debt was due in convertible bonds, which are certificates a company can issue that work similar to bonds except that the bondholders have the option to convert the bonds into stock. If Tesla had been able to keep the stock above $354 then most of those bonds may have been converted into stock, saving the company badly needed cash, but after losing their CFO, large layoffs, and the closure of their retail stores, they were unable to keep the stock at that crucial price point. Wall Street has been bearish on Tesla despite the company posting their first consecutive profitable quarter, but this may change in the coming months as the first truly mass-market electric vehicle is finally ready for purchase. Another important note was lost in all the Model 3 excitement but a subtle change to Tesla’s website that announced full self-driving capabilities by the end of the year.
The Alchanati Campbell and Associates Team
WHAT'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.