Don't Sweat about the Election
The Markets Love Election Years
Experienced investors are not surprised by the quick jump in the stock market post-election. This has been a historic anomaly for several elections. It seems every year that all investment decisions are put on hold until the next President is elected. But that didn't happen yet.
Which is odd to say the least. But this is not the first surprise in 2020.
Middle America is in Distress
New York City was boarded up this week due to the riot concerns related to the election. Residents can't walk down major avenues because of the blockades. I can't imagine what retailers are experiencing this week from all this uncertainty.
Even with trillions pumped into the economy, money was not evenly distributed across America. So don't use the stock market as your indicator for economic health. Bankruptcies are at their highest level since the recession. Last month, several mid-size investment banks stated that Restructuring Advisory Services has surpassed all other revenue streams in terms of growth for 2020. Even at Golden Door, we've been retained to work on a few bankruptcy engagements as well.
But the next President's stimulus plan wont solve all of our problems either. Former Treasury Secretary, Larry Summers, was quoted saying “I think we’re looking at an economy that is going to be problematic in terms of growth with normal budges and with even interest rates near zero...are going to be an ongoing challenge to financial stability because they’re going to blow up asset prices to potential bubble levels.“
Future asset bubbles will happen and the risk/reward ratios won't favor lenders. And the biggest lender in our economy is the U.S. Government. I'm not sure how this will play out but I foresee low economic growth for the next several years.
The Devil is in Every Earnings Call
Square announced third quarter results yesterday. Third quarter revenue topped estimates by 50%. But its top-line growth is very leading.
As a major fintech business, Square, invested in $50 million of Bitcoin last month. This would be booked as an asset on the balance sheet. At the same time, the company is a market maker in Bitcoin for CashApp customers.
Now in the third quarter of 2020, total net revenue was $3.03 billion, up 140% year over year, but excluding bitcoin revenue, total net revenue was only $1.40 billion, or up 25% year over year. This is a BIG difference if you exclude Bitcoin.
Investors need to be careful about financial and technology companies. They book revenue differently than the average business. And Bitcoin will be a short-term asset on Square's balance sheet, creating a very volatile future earnings.
This is one example where Buyer's must beware of the story being sold to them.
The Election is a Non-Event
Don't lose sleep over the next President. Whoever is the winner, will be in office for ~4 years. You need to focus on the outcome of the next Presidency.
Senator Mitch McConnell has made the next stimulus plan the highest priority for the U.S. economy. But without a President-Elect, we don't know if the plan will be a fiscal or monetary plan.
You see, our economy is near its limit with a high Debt to GDP ratio. We can't keep issuing debt forever. This will eat future GDP growth when the government needs to paydown the debt. But a fiscal plan will be jobs related.
Here's a quick explainer if you don't know the difference between fiscal and monetary policies: Trump's $2 Trillion Stimulus Plan was a monetary policy that gave hard money to people and businesses. He would repeat this plan if necessary. Biden's stimulus plan would focus on state and local government to provide fiscal benefits. Today the problem is both public and private sectors need money but we don't have enough for everybody.
Foreign Interest in Our Election
I’m surprised by the global interest for the U.S. elections. I know very little about U.S. politics. But I know even less about foreign politics. It is difficult to have a strong opinion about anything if you don’t understand both sides of an argument.
In the past 4 years, it has become clear that other countries have a strong interest in the outcome of our elections. Canadians, Indians, and Europeans have asked me what the state of our nation will be. It has become a form of entertainment more than anything else.
But if you asked me about the political outcome of China or Brazil, I would have no opinion. I don’t know much about foreign political leaders and who their opposing parties were. So it's very interesting to observe how much weight the U.S. election carries across borders.
Either way, it's best if everybody stays focused in their own political lane.
It's Time to Upgrade Voting Systems
All I know is the entire ballot system needs to be overhauled. No voting system should take days to track anymore. Today we can book flights, pay bills, and do much more online. Voting is a simple electronic process that can be tracked to the end user.
For the past few months, I've been using polling features on Twitter, Facebook and LinkedIn for real-time results. We have the tools to make real-time voting work today. And it needs to be available before the next election.
This is a MULTI-BILLION dollar opportunity. If you're looking for a new business idea, this is a good place to start.
P.S. Watch this YouTube video if you want a breakdown on the $200 million spent on Facebook Ads during this election. Noah compares Biden and Trump's ads to find out who is the better marketer.
The Homeless Can't Go Virtual
In less than 30 days, we've raised $382,383 for the homeless youth in Newark, NJ. The Virtual Sleep Out this year has 26 teams and 143 participants.
Seton Hall's Executive Team is carrying the lead once again with $82,490 raised! You see, right now I'm $2,110 away from my fundraising goal. And in last place on my team! But last year I raised over $6,000 and plan to beat that this year.
With your help, I can beat my fundraising goal and help the homeless on November 19th. Even a $20 donation will help move the needle forward. Donations are a tax write-off and your company may be able to match donations as well. Every dollar counts. Please donate today.
10 Questions to Take on a Long Walk
Everyday, I walk for an hour outside to clear my thoughts and work through problems. This week I came across a refreshing set of questions to ask on my next walk. I hope you enjoy them too.
- What are you doing when you come alive?
- What Does the world ask of you?
- What is something you care about and feel angry about?
- What do you know that your customers don't that would change their lives?
- What can you do to that other can't?
- What do you do that others don't?
- If you designed a good day or week, what are you doing, where, and with whom?
- what do you want?
- What is in your way?
- What do you need to do to make it happen? What is your first step?
P.S. Don't have to rush your answers. They can emerge overtime.