What does the future hold? Will it glitter with success and fulfillment? Will it be what I expect and plan for? Or will I be in the same place, or worst off from where I started. Having achieved nothing and having gone nowhere. Where will I be in 10 years? Who will I be in 10 years? Every action made today changes the outcome of your future. 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. There are billions of ways to live a life; each person dead had theirs, and each person alive still has theirs. There is no right or wrong way to live, there’s just your way. Focus on the now and worry about future tasks later. Life is a game of negotiating boundaries. Live beyond your physical, mental, cultural and emotional means. Defy the system and stray from the path. Don’t follow the crowd and be so good that they can’t ignore you.
The Market. Same-store sales grew only 4.8% year-over-year while online sales jumped 42% year-over-year. Theresa May resigned as Prime Minister of the British Conservative Party. Prime Minister Scott Morrison won a third term in office as Australia’s leader. People who buy property in Florida may value the tax-free income more than they worry about climate risk. No market can go up forever, and it always “eventually” makes a pullback. When we rush or move quickly, we stop being present and forget what we experience. So much of society is based upon narrowing people’s minds as much as possible. Family is ranked first for the domain of life that is most important for well-being. Steeply falling rates like the 2-year and 10-year are a worrying sign for stock investors, but they are great for fixed income investors. Bond interest rates and prices move inversely. Lower rates = higher bond prices.
The Yen and Swiss Franc as “safe-haven” currencies. When there is market uncertainty and volatility, investors are looking for safer, less risky investments. For Japan’s Yen, when there is global turbulence, Japanese traders bring all of their money overseas back to Japan, which will stimulate the Japanese economy. For the Swiss Franc, the Switzerland economy is very stable and secure. The Swiss government does not evolve itself with global affairs or other global risks. The Swiss franc carries the strongest safe-haven attributes. Both nations also have trade surpluses (they export more than they import).
The Fed Minutes. The Federal Open Market Committee (FOMC) holds eight meetings per year. The FOMC changes the fed funds rate which they target to be 2.25%-2.50%. If the rate is raised, expect slower growth. At the most recent meeting, the FOMC said they would be keeping rates unchanged because they see a sustained expansion of economic activity and strong labor market conditions. Markets are convinced that the trade war, the slowing down of global growth, and the pressures of the upcoming 2020 elections will force the Fed to reduce rates by the end of the year.
Maturity Extension Program. The maturity extension program is a program that the Federal Reserve implements with their quantitative easing. It’s the gradual decrease in longer-term yields; selling or redeeming shorter-term Treasuries and using the proceeds to buy longer-term Treasuries. By reducing the supply of longer-term Treasuries in the market, it will put downward pressure on longer-term interest rates which will create a broad easing in financial market conditions that will provide additional support for an economic recovery in the future. This program lowers home mortgage, corporate bonds, and other loan interest rates as well.
Our Climate. Trees are one of the world’s oldest and best carbon-capture technologies; they absorb carbon dioxide from the air, store the carbon in wood, and release oxygen. Sea ice has diminished by 40% in 40 years. Nature, through its ecological and evolutionary processes, sustains the quality of the air, fresh water, and soils on which humanity depends. Nature also distributes fresh water, regulates climate, provides pollination and pest control, and reduces the impact of natural hazards. If we save nature, we save ourselves. If you have healthy habitats, we have healthy wildlife populations with clean water. Satellites and AI will soon track carbon emissions by the world’s largest energy producers. Australia’s property market is expected to lose $571 billion in value by 2030 due to climate change and extreme weather and will continue to lose value in the coming decades if emissions remain high. By 2030, one in 19 Australian property owners face the prospect of insurance premiums that will be effectively unaffordable. Previous severe droughts have reduced Australia’s GDP by around 1%.
Book Summary. “Siddhartha” by Herman Hesse. Siddhartha had one single goal- to become empty, to become empty of thirst, desire, dreams, pleasure, and sorrow- to let the self die. No longer to be self, to experience the peace of an emptied heart, to experience pure thought- that was the goal. He killed his senses, he killed his memory, he slipped out of his self in a thousand different forms. What is meditation? What is the abandonment of the body? What is fasting? What is the holding of the breath? It is a flight of self; it is a temporary escape from the torment of self. It is a temporary palliative against the pain and folly of life. Opinions mean nothing. Through thought alone feelings become knowledge and are not lost but become real and begin to mature. The reason why I do not know about myself and anything about myself is due to one thing- I was afraid of myself. Meaning and reality were not hidden somewhere behind things, they were in them, in all of them. One can beg, buy, be presented with and find love in the streets, but it can never be stolen. Everyone takes, everyone gives. Life is like that. Everyone gives what he has. One cannot have pleasure without giving it. If he made a profit, he accepted it calmly; if he suffered a loss, he laughed and said, “Oh well, this transaction has gone badly”. Lived the life of the world without belonging to it.
The Alchanati Campbell and Associates Team
Validation, acceptance, acknowledgment, belonging, approval... all outer feelings dependent on another’s judgments and perceptions of you. The need to feel wanted. To go out of your way to please others. To seek validation to feel better knowing that what you’re doing is right. Did I do this correctly? Does this look good on me? Am I beautiful? People need to feel important. Wanted and desired. Looked up to and idolized. So they try to seek those feelings from others or from “things”. Just like how you must love yourself before you love somebody else, and just like how you need to work on yourself before helping others, you need to seek acceptance, approval, and acknowledgment from yourself. Build up your self-esteem and confidence, and know your mind and your body, so you don’t have to seek confirmation and validation externally.
The Market. As many as one million plant and animal species across the globe are at risk of extinction due to the damage from human beings. The US birth rate hit a 32-year low. China, the biggest holder of US debt, reduced its holdings of US Treasuries in March by $20.5 billion, bringing the overall ownership to $1.12 trillion. Bond yields in the US are close to their lowest since 2016. Falling bond yields often indicate declining confidence in the economy. The US ranks only slightly higher than Botswana in adult financial literacy. You need $2.3 million to be considered “wealthy” in America. Californians need to get ready for the fire season starting in June, and East Coasters need to prepare for hurricane season coming in the fall. The UK plans to reduce its greenhouse gas emissions to zero by 2050.
Book Summary. “All About Love” by Bell Hooks. It was love's absence that let me know how much love mattered. Love returns us to the promise of everlasting life. When we love we can let our hearts speak. "I am afraid that we may be raising a generation of young people who will grow up afraid to love, afraid to give themselves completely to another person because they will have seen how much it hurts to take the risk of loving and have it not work out. I am afraid that they will grow up looking for intimacy without risk, for pleasure without significant emotional investment. They will be so fearful of the pain of disappointment that they will forgo the possibilities of love and joy". To truly love we must learn to mix various ingredients- care, affection, recognition, respect, commitment, and trust, as well as honest and open communication. The heart of justice is truth-telling and seeing ourselves and the world the way it is rather than the way we want it to be. If you do not love yourself, you will be unable to love anyone else. Love is our true destiny. We do not find the meaning of life by ourselves alone- we find it with another.
The financial strength of Americans. A majority of Americans, 56%, rate their current financial situation as "excellent" (12%) or "good" (44%). Overall, just 25% of Americans say they worry "all" or "most" of the time that their family income will not meet their expenses; 37% worry "some of the time"; and 37% "almost never" worry. At the same time, 56% of Americans report that they are currently saving money (19% say "a lot" and 37% "a little"). Not having enough money for retirement and not being able to pay for medical care in the event of a serious illness or accident are the most worrisome of eight financial issues for Americans.
Cutting rates. The Federal Funds rate determines the prime interest rate, the interest rate used for mortgages, credit cards, consumer and business loans… Many individuals believe the Fed will cut rates, making it easier to borrow money. More access to money = economic stimulation by encouraging more borrowing and investing. Typically, this tool is used when the economy is doing poorly to try and force it out its slump. Many economists regard interest rate cuts as something done in a crisis. "Why doesn't rates always stay low even when the economy is doing good?" Well, think of it like this. If the rate is already low, say from 1.75-2.00%, and the booming economy starts receding, the Fed can't do much to stimulate as there isn't much room to drop the rates. That’s why they like to increase during times of economic prosperity so that when the bad times come, they have options. Now, Federal Reserve officials have been adamant about not cutting the rates. They believe that so long as inflation is near their 2% goal, and economic growth is steady and healthy, there isn't much concern. Recent data, however, might contradict these two standards, and that is a decision the Fed will have to make shortly.
Let’s talk money, power, and influence. E&P, which is better known as the oil and gas exploration industry, is big time money. What you may not know is the extent of power this industry has. E&P is worth an estimated $90 trillion dollars. To put that in perspective, the American GDP for 2017 was $19.39 trillion. That is not just big money, that is topple nations and end regimes money. One of the most strategic ways this money is used is lobbying. Oil companies lobby governments all over the world and this tactic has paid off big time. A new report by the IMF found that in 2015 the US spent more than $649 billion dollars (10 times the amount spent on education) in various oil subsidies, while the same year it spent $599 billion on its entire defense budget. That means that we spent more money on oil companies than we did funding and maintaining the most powerful military on Earth. Averaged out, the fossil fuel subsidies cost each man, woman, and child in the United States $2,028. This trend does not stop with the US. The same report found that the governments of the world spent $4.7 trillion dollars subsidizing fossil fuels. The true impact of this corruption goes further than that fact this money could have been spent on much more noble causes. Without subsidies, oil companies would face stronger competition from competitors and be forced to find more sustainable sources of energy and cleaner ways to burn their energy. Consumers would have more access to alternative options like solar panels or electric cars, but the fossil fuel industry has been so heavily subsidized that competitors are left at a fierce disadvantage. In fact, the IMF concluded that without these subsidies global carbon emissions would have been cut by 28%.
The Alchanati Campbell and Associates Team
Over the last two years, our country has grown to be the most divided it has been since the civil war. Corruption has infected Washington DC, and legal investigations have plagued the current administration. Donald Trump is still the only US President not to receive an approval rating over 50%, which means at no point in his presidency have more than half of the population approved of his actions as President of The United States. In the midst of this political distrust, nearly two dozen candidates are using this opportunity to run for president. This election may prove to be the most important in modern history as our nation and the world face evermore increasing issues. Some of these issues like climate change will require an entire generation to completely shift the foundations of our modern economy or face dire consequences. This may sound scary, but the chance to inﬂuence the course of the 21st century is in your hands. As citizens, you have a civic duty to become knowledgeable of the candidates so when election day come you can make an informed decision. To get started let us take a look at who is running separated by political party and in the order of their current polling numbers.
Joseph Biden, 76: Former vice president and senator from Delaware he is currently the most popular candidate running both nationally and internationally. Supports have embraced the chance to bring America back to Obama-era conditions. He has voiced support for restoring America’s image as a global leader and protecting low-income workers.
Bernie Sanders, 77: Senator from Vermont. Bernie has a long history in DC, ﬁrst winning his seat in Congress as a self-described democratic socialist in an area that was historically more conservative. Bernie is now known for his far-left political views, some of which he has championed for decades, including Medicare for all and free college tuition. He has received overwhelming support from small-time donors that helped him bring in $20.6 million dollars in 2019 Q1 alone.
Elizebeth Warren, 69: Senator from Massachusetts. She had received lots of support from east coast democrats and is one of the frontrunners in the campaign. Has championed many core democratic policies and focused on income inequality and providing support for the middle class. She has been able to raise an impressive $16.4 million in Q1 2019.
Kamala Harris, 54: Senator from California; former attorney general of California; former San Francisco district attorney. California is often regarded as the fundraising state for Democrats and Kamala has used her home state to her advantage bringing in $13.2 million reviving large donations from celebrities like Felicity Huffman, William H. Macy, Darren Aronofsky, Elizabeth Banks, Reese Witherspoon, Eva Longoria, Jenny Lewis, J.J. Abrams, Ben Afﬂeck, and Quincy Jones.
Pete Buttigieg, 37: Mayor of a small town in Indiana, Pete is the clear underdog among the frontrunners, but has recently been thrown into the national spotlight as the ﬁrst openly gay candidate. Pete has proven to be a stark contrast to the current administration with his notable administrative and military experience, has a degree in economics, was a Rhodes scholar at Oxford University after attending. Harvard, speaks several languages, and if elected would be the youngest US President. He has voiced his support for issues like climate change but has not yet developed clear policies. Thanks to a recent publicity boost he raised $7.1 million in Q1.
Beto O’Rourke, 46: Former congressman from Texas. He is considered a celebrity among Democrats and became wildly popular after almost beating Ted Cruz for Senate in Texas. He has received criticism for not having clearer policies and has since voiced more support for issues like immigration reform and marijuana legalization. Beto has used his popularity among young Democrats to bring in $9.3 million.
Amy Klobuchar, 58: A Senator from Minnesota she is most known for her questioning of Brett Kavanaugh during his conﬁrmation. She has worked on legislation regarding the current opioid crisis, drug addiction, and high-cost prescription medications. Has raised $8.8 million.
Tulsi Gabbard, 38: Congresswoman from Hawaii and Army National Guard Veteran. Early in her campaign, she received criticism for her meeting with Syria’s President, and former anti-gay statements while working for an anti-gay advocacy group. She is known to oppose US military intervention overseas.
Julian Castro, 44: Former housing secretary and mayor of San Antonio, Castro was once a rising start but is now mostly overshadowed by Beto O’Rourke. He has voiced support for a universal prekindergarten program, Medicare for all, and immigration reform. Has raised $1.1 million.
Andrew Yang, 44: Former tech executive who founded a nonproﬁt to help economic development. His campaign is centered around providing a universal basic income of $1,000 a month for all Americas. While he is largely unknown his online campaigning presence is one of the most effective out of all the candidates. Has raised $1.7 million.
Tim Ryan, 45: Congressman from Ohio. Has been in Congress since he was 29. Has received support from blue-collar voters in the Midwest that may help him gain support form people who previously voted for Trump. Supports renegotiating and enforcing Trade deals, as well as key issues for blue-collar workers like unions rights.
The Democrats listed below have consistently polled far below 1% and are listed in no particular order.
Michael Bennet, 54: A senator from Colorado who is commended for his ability to compromise. He has voiced support modernizing the economy with artiﬁcial intelligence, increasing infrastructure spending, and in 2013 he co-authored a comprehensive immigration bill.
Cory Booker, 50: Former senator and mayor of Newark, and of one the most well-spoken candidates. He is regarded as a leader in criminal justice reform. Has raised $7.9 million.
John Delaney, 56: Former Congressman from Maryland and business owner. He has been campaigning since 2017. He supports universal health care, but also try to appeal as a bipartisan problem solver. He has raised $12.1 million in Q1 but it should be noted that he has loaned himself $16.3 million since July 2017.
Kristen Gillibrand, 52: Senator from New York and former congresswomen. She previously held conservative policies and position, she has now faced on equality for women which may isolate many voters. Has raised $4.5 million.
John Hickenlooper, 67: Former governor of Colorado and former mayor of Denver. He has had a successful career in Colorado supporting issues like climate change, gay rights, and gun control. Colorado is a purple state or a state that is evenly split between Republican and Democratic support. If he can appeal to other Purple states he will have an advantage over many of his peers. Has raised $2 million.
Jay Inslee, 68: Governor of Washington and a former congressman he had shown immense support for green-energy programs in both positions.Has raised $2.2 million.
Wayne Messam, 44: Mayor of Miramar, Florida. Is known for his proposal to cancel more than $1.5 Trillion in student debt. Has raised $45,000.
Seth Moulton, 40: Congressman from Massachusetts. Mostly known for his military service and his signature policies have to do with forgiven policy, and defense.
Eric Swalwell, 38: Congressman from California. Has a growing national proﬁle, thanks to his popularity as a cable news guest.
Marianne Williamson, 66: A self-help and spirituality author who has written more than a dozen books. She has proposed a $100 billion slavery reparations package. Has raised $1.5 million.
Donald J. Trump, 72: Current President. His tenure so far has focused on undoing policies from the Obama administration especially relating to healthcare, environmental regulation, and immigration. He is currently the center of more than 18 separate legal investigations. Has raised $30.3 million, largely in traders from PACs and the Republican National Committee.
William F. Feld, 73: Former governor of Massachusetts and former federal prosecutor. He ran for Vice President on the Libertarian Party ticket in 2016. He is currently the only Republican running against Trump and is targeting moderates and centered conservatives that Trump has alienated with his policies.
The Alchanati Campbell and Associates Team
Greatness, more tariffs on China, learning how to buy stocks the smart way, and creating habits to change the way you think.
Strive for greatness. The level of proficiency in your specialty or talent or niche that puts you above all the rest. The feeling of being more than you can comprehend. The truly great cannot be defined or categorized. They are well-known in their space, looked up to for their contributions, and valued for their presence and being. They don’t need to prove anything. Their work says it all. There is nothing comparable. Greatness is something of dreams, aspirations, goals, and objectives. It’s an achievement of its highest kind. How does one become great? If you want to be really great, work on the details. Focus on one thing and master it. “Anybody could do that, but I did.” “If you can’t, you must.” Face adversity head-on and overcome it.
The Market. Trump raises tariffs on more than $200 billion worth of Chinese goods. Uber went public today at a $75.5 billion valuation but decreased 7% in its opening debut which caused its most recent private investors to be underwater. In the past two trading days, the S&P 500 lost $528 billion in total market value due to fears from the trade war. New immigration reform has caused international student enrollment to decrease. Delays in tackling climate change could cost companies about $1.2 trillion worldwide in the next 15 years. Investors have a pivotal role to play in moving the world to a low-carbon future. World anger levels are at a new high. The 3-month and 10-year yields inverted again. Curve inversions are leading indicators of recessions because they imply the market expects central bank easing to offset a looming slowdown.
Customer utility. The goal: Maximizing utility and giving people what they desire. People seem to reliably seek out a few things that make them unhappy. People are either addicted or seek other things besides happiness. As consumption of a good or service increases, the marginal utility obtained from each additional unit of a good or service decreases. Utility is the satisfaction one gets from consuming a good or service. Total utility is the total amount of satisfaction. Marginal utility is the extra satisfaction from an additional unit of the good. Customer utility changes in trends and generational shifts, but the same basics of microeconomic theory will be used.
How do investors determine which company to invest in? How do they determine if they should buy a certain stock? The answer is NOT one size fits all and requires intense critical thinking to be as effective as possible. That being said, most decisions usually incorporate some analysis of financial data, and many use that data to forecast the value of the firm. How do they do this? A common method is a Discounted Cash Flow. Essentially, you determine all future cash flows for a company and discount them back to the present day (money is worth more today than it is tomorrow).
The art of thinking. There is no real structure that you are forced to operate within unless your life depends on it. You can create your own rules if you build the right supporting systems. Our environment controls far more of our behavior than we realize. Creating better habits and opportunities begins with deliberately shaping your surroundings. The real purpose of life is to create a story in which you can constantly define what it means to be better tomorrow than you are today. That’s what we are programmed for. Happiness, productivity, presence, and fulfillment all find their roots in your ability to proactively control where you direct your mental energy. Take control of your attention. You don’t have to be an expert scientist, artist or psychologist, but you should know the fundamentals in all of the major disciplines if you want to optimize your thinking. Over a long enough timeline, if you seek to reduce uncertainty, you can optimize your exposure to luck. Success is often random, but that doesn’t mean it can't be designed.
The Alchanati Campbell and Associates Team
Humans being animals, California as a country, employment for the near-graduates, the current economy, politics, finance, and M&A.
The older I get, the more fucked up I realize this world is. It’s like a rush of ocean water from a wave pounding you down over and over again. It’s like discovering the girl you are dating was born a guy. (Not a personal experience) I’ve been tricked. Censored. Protected from the society I live in. I didn’t know death, I didn’t know fear, I didn’t know the outrageous acts caused by humans. I was an ignorant, dependent child focused on self-gratification, my needs, and my wants. Now, I wake up every morning to notifications of chaos and misfortune. Bad luck and destruction. Hatred spoken and expressed. Would I have been scarred if I would have learned this at an earlier age? Would I have matured more quickly? Would I be too afraid to leave the house every day? Does my maturity and age now give me the allowance to view this content? Is it an obligation to know what’s happening around the world? Or can I hide away from it all? All I know is, even with the advancements of technology, medication, standard of living, communication... there will always be inequality and we will always be animals. The only thing you can do is fear something that is greater than you, society, and the universe.
The Market. The effective minimum wage has risen to $11.80 an hour. China produces about half of the world’s pork. Due to African swine fever, the output will fall 20-30%. Based on margin debt numbers, traders don’t seem to be as willing to increase the leverage in their portfolios today as they were in 2018. Traders are being more cautious in 2019 than they were in 2018. Two out of the three major US markets are at record highs… investor optimism is starting to fade. The physician’s industry has a surprisingly high rate of sexual harassment, assault, and retaliation. A report states that 20-50% of women students said they had experienced sexually harassing behavior by a faculty or staff member. Japan will be having its first abdication since 1817 when Emperor Akihito resigns, and Naruhito takes the throne. The less volatile and the less risky stocks are overperforming the riskier stocks in this current market. The Consumer Confidence Index grew 5 points from 124 to 129 in April. Home prices in 20 US cities saw slowest price gain since 2012. A study shows that the same brain circuits that are triggered when eating chocolate and winning money are also activated when teenagers see a large number of likes on their social media. Central bankers continue their effort of holding interest rates low while trying to lift inflation. The sleep aids’ market is expected to hit $100 billion by 2023.
Why California is the best state economically. California is 1/8 of the US population. California has an annual growth rate of 3% and is the 5th biggest economy in the world behind Germany and in front of the UK. 17% of the 5,440 corporate locations in California are research and development facilities, and that ratio beats China’s 13%. In the last 10 years, California’s publicly traded companies returned 420% while the S&P 500 returned 239% during the same time period. With more growth and earnings, the state is able to employ more people and continue to stimulate its economy.
Recession affects on employment. College graduates who start working during a recession earn less for 10-15 years than those who graduate during a boom. High school graduates and dropouts earn even less. Recession graduates also had higher death rates when they reached middle age. “Our results demonstrate that health, mortality, and economic and personal well-being in midlife can bear the lasting scars of disadvantages that come during young adulthood.” Best of luck 2020 graduates!
The current economy. The Federal Open Market Committee, the branch of the government responsible for the monetary policy (cutting/hiking rates, increasing/decreasing monetary supply), does not see a need to cut rates to increase inflation. The Feds target for inflation is 2% and they held interest rates at 2.25-2.50%. The price of gold has dropped 2% month-to-month. Gold has been dropping because of the strong dollar and reduced appeal for the metal. The stock market has been dropping because investors expected the Feds to cut rates, which would stimulate growth and strength. According to Bank of America’s survey, investors are “bearishness” and it’s a six-month high.
M&A. If you delve into the business world, you will hear these two words repeated quite a lot, Acquisitions and Mergers. This is a pretty general term which is the ‘consolidation of companies or assets through various types of financial transactions’ (Bloomberg). This broad term involves mergers, acquisitions, consolidations, tender offers, purchase of assets and management acquisitions. In their briefest definitions, mergers involve two companies combining, with the end result being a single company. Acquisitions involve a company purchasing a majority stake in a separate company, which does not result in a change in name or legal structure. Consolidation is creating a new company from 2 separate companies. A tender offer is when a company purchases the outstanding stock of another company at a specific price. What do acquiring companies look for in potential acquisition companies? Well, they are usually looking for a reasonable price in comparison to book value, a steady cash flow that can cover interest expenses, and a potential synergy between management teams. Acquiring companies value potential target companies by using comparative ratios, replacement costs, M&A models, and discounted cash flow models.
Modern Policy 3. The problem: how to get the economic machine of markets (buyers and sellers, businesses and consumers), and stimulants like banks and the government to produce economic well-being for most people when monetary policy does not work. The current practices of monetary policy like rate cuts and quantitative easing might not work for the future. In the future. Some believe that fiscal policy (adjusting spending, tax rates, and employment) and monetary policy will have to be closely connected to be able to squeeze the economy out of a recession.
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.