Alchanati Campbell & Associates
Dear Reader,Emotions. The thoughts that turn into an overbearing exaggeration that alters our sense of reality. Emotions do not tell us what’s true. About half of our emotional judgments are fully in conflict with our understanding of reality and lead us astray. Leads us far from the truth to a bad place where mistakes are made, and regret is forged. The other half are gut instincts; insights that are far sturdier than anything we can reason. The effective mind is one that has learned to distinguish the two. Rule over oneself and never be “carried away” by anything. The struggle not to be overthrown by our emotions. Conduct oneself in a gentle and dignified way. The accomplishment of necessary duties without complaint. Nor can I be angry with my fellow man or hate him, for we have been made for cooperation. Perform every action in your life as if it were your last, putting aside all aimlessness and emotional resistance to the choices of reason. People are ignorant of what is good and what is bad, which is no less a disability than the inability to distinguish white from black. Our lives are but a series of choices. If something noble is to be done or said, do not judge yourself unworthy of doing or saying it. It is not the actions of others that trouble us but rather it is our own judgments.
How to control your emotions. I can control my emotions because what I feel is always an outcome of what I think. Your whole experience of existence is really what’s going on in your mind. Don’t involve emotions with rational decision making. All of our emotions are created by our thoughts. Change your thoughts to change your emotions. Your whole life is your attitude towards life, and your whole experience of existence is really what’s going on in your mind. 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. Don’t look back unless you plan on going back and remember: everything in your life is there to test you and make you better and stronger.
The Market. New York will become the second state after California to ban single-use plastic bags starting in March 2020. Boeing cuts output of its 737 jetliners to 42 airplanes a month from 52. Each jet is assembled with 600,000 parts. The USD is becoming more valuable. The EURO-USD rate dropped 2.19% year to date. The dollar is a drag on average earnings because it reduces the value of profits made overseas and makes US exporters less competitive. Prices of avocados imported from Mexico spiked 34% on Tuesday. The US economy created 196,000 new jobs in March and the unemployment rate is unchanged at 3.8%. The US, UK, and China all released better than expected manufacturing data. Generation Z becomes the biggest consumer cohort globally.
Credit cards/debt. Americans owe a record $1.04 trillion in credit card debt- up from $854 billion 5 years ago. Only 60% of borrowers pay their balance in full every month. The average APR is 17.67% and on average Americans owe $6,354 on bank-issued credit cards. What caused this? Lack of education and how easy it is to obtain a credit card.
Financial illiteracy. 40% of US adults don’t have enough savings to cover a $400 emergency. The median retirement savings for Americans between ages 55 and 64 is $104,000, $310 per month if it was invested in an annuity. Average household credit card debt rose to $8,284, 25% higher than in 2011. The average student loan is $6,600 per student, annually. Students with loans leave college with an average debt of $22,000.
Leadership. For any leader, it’s important to know how your risk tolerance can bias your decisions. Surround yourself with a leadership team of people with different dispositions who can serve as a sounding board. Controlling emotion is essential to handling risk. Anger makes men more willing to gamble. For many CEOs, one of the most important aspects of personality is narcissism. Risk-taking can be inappropriate and so can risk aversion. Strive for somewhere in the middle. Adaptability to new cultures and ways of doing things are some of the keys to success. Listen to the concerns and ideas of employees first and focus early on in areas in which they need help. Communicate openly about your goals and reasons for them.
What led this latest 24% increase in BTC? The short answer, someone market bought around 100m worth of BTC across three different exchanges. Over the last 4 months, we have been ranging from 3,200 to 4,000, with this last push breaking 5,000. It seems that this current price is holding, with momentary dips below 5,000. Is this an outbreak to new recent highs? Flip a coin and that will give you a better answer than I could give.
The current state of the market, Bull or Bear? I believe the consensus currently lies that we are still in a bull market, although opinions differ in what stage of the business cycle we currently are in, and how much longer this 10-year run will last. Although many people believe we are in the late stages of the business cycle, and will most likely see an economic downturn, new data came out today supporting the contrast, with new job additions to the US economy increasing to 196,000, from the previous month of 33,000. It also seems that a China trade deal is priced into the current market, with a majority of Chinese ADR’s being up 10% YTD, and the major ones being up over 20%. The question we could ask is, how much more good news will keep this rally going, and what will be the major event that eventually leads to the downturn. Past bull runs have seen 226%, and 87% gains, while this run has toppled both of these at 262% over the past 10 years.
IPOs. An IPO is an Initial Public Offering, and it is the first time that company issues shares of stock on the public market, allowing investors like you and me to buy ownership within the company. Prior to an IPO, a company is private. It still has investors, but it is immensely more difficult to invest. Going public allows the company to raise tremendous amounts of capital by selling shares and bonds. This capital allows the company to invest more in its own operations, which theoretically should lead to increased growth. Furthermore, public companies are much more liquid in the eyes of the shareholder, as a shareholder can sell their share in the company virtually whenever they want. This ability to increase or decrease your stake in the company on a whim is hugely important.
So, you might be wondering, why doesn’t every company go public? Well, going public also requires disclosing financial information and details. Public companies also face tighter regulations from governing bodies (SEC). Also, by the nature of stock, going public reduces ownership of the company, from the firm's perspective. By allowing investors to buy shares, they are also buying ownership in the company.
We have Lyft Off! Lyft, the ridesharing service company, went public just over a week ago. Their initial IPO price was $72. However, you and I could not purchase at this price. This is for institutional investors (Hedge Funds, banks, etc.). Once they bought, retail investors (you and me) could then buy from them. On the first day, Lyft stock jumped nearly 9%. This was particularly interesting because Lyft ended up pricing their IPO higher than they expected due to interest levels. (IPOs tend to be underpriced roughly 15% so that the first week experiences an increase in price) However, after that, the price kept dropping below the IPO price, and people were calling it an example of what not to do in an IPO. Some people blamed Lyft’s financials, which reported tremendous losses. Some people blamed the fact that Lyft just isn't a household name like Uber, its prime competitor that is going public later this year. Some people are blaming the investment bank, saying they screwed up gauging interest. Some people are blaming the fact that the ridesharing business has very low barriers to entry, meaning new companies can come in easily and take away some of Lyft's market share. Truth is, nobody truly knows.
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.