Alchanati Campbell & Associates
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.